Hoya—Originating and developing world-class business enterprises

A Message to Our Stakeholders
Hoya at a Glance
Information Technology
Electro-Optics Division
Photonics Division
Eye Care
Vision Care Division
Health Care Division
R&D and New Businesses
Intellectual Property Management
Environmental Initiatives
Note on segment data:

Corporate GovernanceIn addition to the review of operations by segment found on pages 6 to 18 of this annual report,segment-specific data can be found on pages 32 through 43, in the financial section.

Financial Section and Corporate DataIn all the compelling businesses Hoya develops, the goal is to lead the way by meeting or exceeding
global standards.
In the Information Technology field, Hoya has consistently maintained a high share of the global market
for such products as mask blanks, large-sized photomasks for LCD production, glass disks for hard disk
drives, and optical lenses.
In the Eye Care field, Hoya’s eyeglass lenses, contact lenses and intraocular lenses are enjoying a
growing presence around the globe, thanks to a differentiated market strategy that makes the most of theunique characteristics of each country and region.
Hoya’s R&D and product development efforts are driven by a powerful vision of the future. Hoya’s
constant exploration of the potential of leading-edge technologies has made it an industry leader.
In today’s world of dynamic, borderless business and investment, Hoya’s commitment to thedevelopment of world-class business enterprises perfectly positions the company for continued success.

Consolidated Financial Highlights
2006

2007

Net sales（Millions of Yen）

¥344,228¥390,093

Operating income（Millions of Yen）

101,096

Ordinary income（Millions of Yen）

Per share data（Yen）＊2

2006

2007

Net income¥171.71¥193.50

107,213

Diluted net income

171.08

192.78103,638

102,909

Cash dividends applicable to the year

60.00※365.00

Net income（Millions of Yen）

75,62083,391Price earnings ratio（Times）

27.7

20.2

Total assets（Millions of Yen）

361,538

447,644

Price cash flow ratio（Times）

19.7

17.1

Net assets（Millions of Yen）＊1

279,481

367,145

Price book value ratio（Times）

7.3

4.6

Stock price at year-end（Yen）

4,750

3,910

*1. From the fiscal year ended March 31, 2007, the Company has applied “Accounting Standard for Presentation of Net Assets in the Balance Sheet” (Statement No.5 issued by the AccountingStandards Board of Japan on December 9, 2005) and “Guidance on Accounting Standard for Presentation of Net Assets in the Balance Sheet” (Guidance No.8 issued by the AccountingStandards Board of Japan on December 9, 2005). The figure for “Net assets” of the fiscal year ended March 31, 2006, corresponds to the total of the former “Shareholders’ equity.”*2. Indicates per share data are all retroactive adjustments reflecting the four-for-one stock split that was effective from November 15, 2005.
*3. The cash dividend of ¥60 indicates the sum of the ¥30 year-end dividend per share, and the ¥30 retroactive adjustment reflecting the stock split implemented November 2005 relating to
the interim dividend (¥120 period share) prior to the split.

Cautionary Statements with Respect to Forward-Looking Statements
Statements made in this annual report with respect to plans and future performance that are not historical fact are forward-looking statements. These statements are based on
management’s assumptions and beliefs in light of the information currently available to it. Hoya cautions that a number of factors could cause actual results to differ materially from those
discussed in the forward-looking statements. Such factors include but are not limited to foreign exchange rates, market trends and economic conditions.
Note: Hoya’s fiscal year ends on March 31. In this annual report, references to years indicate the period ended March 31 of the year indicated. In this annual report, “the previous fiscal year,”“the fiscal year under review,” and “the year ahead” indicate the period ended March 31, 2006, March 31, 2007, and March 31, 2008, respectively.

1

A Message
to OurStakeholders

Hiroshi Suzuki,
President and CEO2

I am delighted to have the opportunity to report on Hoya’s businessIn the Information Technology field, the trend toward higher

results for the fiscal year ended March 31, 2007, and to offer an

performance in the end products which use Hoya components

overview of our future business direction.

continued, and we were able to achieve good results byManaging the Business Portfolio for
Sustained Growth

leveraging Hoya’s technological strengths. However, while overall
results were good, some sectors faced an extremely competitiveenvironment and there were arenas in which the battle was very

Hoya manages its business based on the philosophy that every

intense. The Eye Care business, which handles general consumer

undertaking has a predetermined lifespan, so we aim to ensure

goods, achieved steady growth in profit thanks to strategies

sustained growth over time by pursuing a thoughtful balance ofdesigned to match the circumstances in each market as well asenterprises that precisely meet the needs of their times. Hoya’s

our commitment to offering high-value-added products

business portfolio continues to be adjusted in careful reflection ofand services.

the changing times and the evolving business environment.
Currently, Information Technology and Eye Care are the two

We are managing Hoya’s business portfolio to ensure that thetwo fields of Information Technology and Eye Care—each ofmain fields of Hoya’s business. I would imagine that many readerswhich possesses very different characteristics—work together inare most familiar with our Eye Care business, which includes

a well-balanced way to meet the needs of the times, thus

eyeglass lenses and contact lenses. Our flagship product in this

supporting the overall growth of the Hoya Group. This year gave

field is eyeglass lenses, for which Hoya is the largest manufacturer

us opportunity to renew our appreciation of this balance.

in the Japanese domestic market. On the global stage, too, oureyeglass lenses have been very well received.
The Information Technology business has been making a great

Information Technology
Net sales in the Electro-Optics division grew 15.1% over thecontribution to Hoya’s growing profitability, thanks to the current

previous year, and operating income rose 7.0%. Demand for digitaltrend toward greater functionality and reliance on digital technology

consumer electronic products remained strong, and thefor home electrical products and IT devices. It would be rare forinvestments in increased production we made to respond

most people to get a chance to see the products Hoya offers in

produced good results.

the Information Technology field, even though they are hidden away

As devices continued to shrink in the semiconductor industry,

inside devices they use every day. The fact is that the materials

it led to growth in sales of Hoya’s mask blanks, which are used inand products Hoya makes are all indispensable to the manufacture

semiconductor production. Hoya’s mask blanks command aof such ubiquitous goods as notebook computers, digital cameras

strong share of the global market, thanks to our ability to respondand LCD televisions.

to the needs of semiconductor manufacturers operating at the

Review of Fiscal 2007 Results:
Sales and Income Both at Record Highs

leading edge of technological development by supplying
high-precision products. Our strength in this area grew even more
prominent in the fiscal year under review, with high-end products

Hoya’s consolidated results for fiscal 2007 were very favorable.

accounting for a higher proportion of sales and driving growth. In

Net sales rose 13.3% on the previous year to reach ¥390,093

the area of photomasks for semiconductor manufacturing, wemillion. Operating income was up 6.1% year-on-year to ¥107,213

have been making considerable investments in cutting-edge

million. Ordinary income fell 0.7% to ¥102,909 million. Net income

technologies in the field of production development in recent

was ¥83,391 million, up 10.3%. Summarizing the year as a whole,

years. Our photomask products have been well received byin the first half results were bullish, riding a wave of strong

clients, and sales have exceeded expectations. The success ofdemand. In the second half, however, we were busy accelerating

our mask blank and photomask businesses is the result of how

investment in the extra productive capacity needed to respond to

we leverage the strengths of our proprietary technologies inswiftly increasing demand. Unfortunately, it was not possible toleading-edge fields to meet the high expectations of ourgive adequate attention to further development of each individual

customers. I can say without reservation that this strategy has

product because of the energy we had to devote to thebeen the right one.

establishment of expanded production lines. I cannot, therefore,

In the market for Hoya’s glass disks for hard disk drives,

say that the second half produced the results we had hoped for.

demand for notebook computers kept growing around the globe.

3We also saw a technological

Eye Carechange during the year, with

Net sales in the Vision Care division grew 14.7% on the previous

hard disk drive manufacturers

year, and operating income rose 3.9%. The global eyeglass lensintroducing the newmarket is growing at a leisurely 2-3% each year, but Hoya was able

perpendicular recording

to achieve growth at a rate that exceeded overall market growth. I

method. To respond to thethink it is fair to say that Hoya’s value-added product strategy

vigorous demand driven by

together with its region-specific business approach were the keys

the growing shift from desktop computers to notebooks, weto this achievement. The Japanese domestic market, which has

boosted the capacity of our Vietnam plant, which came online inhitherto been the cornerstone of Hoya’s eyeglass business, is2005, and also added new lines to existing plants. At the same

showing signs of contracting as a result of the decrease in thetime, we pushed forward with preparations for the transition tocountry’s population and an influx of budget product from Asia.

new technologies. Our all-out effort to increase production

Despite the difficult market, however, Hoya maintained sales at thecapacity helped to generate outstanding growth in sales, but on

same level as the previous year by introducing new products andthe other hand, technology development related to the newstrengthening marketing of high-value-added lines.

perpendicular recording method did not proceed in a timely

using localization strategies, under which each product is

production cost overages.

developed and sold to suit local tastes. In the Asian region, clients

In a favorable development for Hoya’s optical lens business,favoring low-cost products still make up the bulk of the market.

digital camera functionality continued to heighten added value,

However, there is a growing trend toward recognition of the value

with higher resolution and zoom ratios. This led to greater demandof high-end eyeglass lenses, and Hoya’s results improved. In thefor Hoya’s aspherical molded lenses. Demand also rose swiftly for

United States, too, the Hoya brand is steadily gaining ground.

lenses for camera-equipped mobile phones, which Hoya first

In the Health Care division, net sales grew 15.1% over thestarted shipping in 2004, and production continued at full capacity,

previous year, and operating income rose 34.3%. In the previous

so as a result we were able to increase profitability this fiscal year.

fiscal year, there were temporary research and development

The LCD industry is approaching a situation where supply may

expenses, and expenses related to a change in the Eye City

vastly exceed demand for LCD panels, which presented achain’s bonus points scheme, so in the current fiscal year profit

challenge to Hoya’s business in photomasks for LCD panel

recovered dramatically. It was a year of change in market

manufacturers. During the fiscal year, intense competition led toconditions for contact lenses, including modified fee standards for

declining prices, which also impacted Hoya as a mask

medical examinations in Japan. However, thanks to the strategic

manufacturer. We continue to pursue a product differentiation

marketing and high-quality services provided by our Eye City chain

strategy based on technological innovation. We also strove toof contact lens specialty stores, Hoya secured an even more

overcome the year’s difficult business environment by further

competitive position in the market. Both sales and income grew,

improving product quality and enhancing cost competitiveness

continuing the growth reported a year earlier.

through adopting integrated production systems, starting with themask blanks that are base plate materials for photomasks.
In the Photonics division, Hoya’s pattern defect correction

Thanks to the well-known quality of Hoya’s intraocular lenses(IOLs) for cataract surgery, Hoya’s market share in Japan
increased during the fiscal year. Although it has been less than two

equipment, which is used in the production of LCD panels, isyears since IOLs went on sale in Europe, our market presence

responsible for the largest proportion of sales. Sales for the fiscal

there is steadily growing. In order to further expand market shareyear, however, were greatly affected by market conditions in thegoing forward, we will continue both to improve existing products

LCD panel industry. We are working on the product mix, cost

and to introduce new products.

reduction, and new product development with the primary objectiveof improving profitability, but still, due to the strong competition
that characterizes this segment, net sales and operating income
decreased year-on-year.

4

In our European markets, we achieved double-digit growthmanner, and there were some temporary shipping delays andA Message
to OurStakeholders
Current Issues and Future Prospects

dramatically to reach almost 100,000. It gives me great joy to have

In my view, our slogan for the current fiscal year (ending Marchso many of you as joint owners of Hoya, but it also gives me pause2008) should be “further sharpening Hoya’s competitive edge.”when I consider the weighty management responsibility that you

This is the issue that each business division needs to address. As

have entrusted to me.

you may recall, we used the same phrase a year ago, but in the

In a world in which the movement of people, goods and money

fiscal year ended March 2007 we again faced pressure to increaseis increasingly borderless, we live in an age which expects

investment in mass production capacity, despite having thoughtbusinesses to be administered according to global standards. Fromlast year that we had reached a plateau. Looking back over thebusiness management to environmental responsiveness andpast three years, we have invested an annual amount of aroundcorporate compliance, everything needs to be seen from a global¥50,000 million in plant and equipment, putting a great deal ofperspective. Similarly, all of Hoya’s stakeholders—including

effort into boosting the capabilities of existing plants and opening

shareholders, trading partners and employees—are becoming

new plants overseas. It cannot be denied, however, that thesediversified around the globe, and their very diverse values

efforts took a certain toll. As human resources, particularlyintermingle and coexist with each other. In the midst of thisengineers, were devoted to the increase in production capacity,

globalization of the business environment and the emergence ofother tasks had to take a back seat, including new productwidely differing values, I look back to the basics—“Hoya’s raison

development, the refining of production processes, and work tod’être”—and I want to see Hoya create the kind of value forachieve greater productive efficiency. In the current fiscal year, we

society that only Hoya can create. My hope is that every

will continue to strive to sharpen Hoya’s “innate” competitive

shareholder would look forward to Hoya’s creation of new value foredge. This means developing

the future.

products that are ahead of the

In order to foster Hoya’s ongoing growth and development, we

competition, achieving stable

have for some time now been examining the potential ofmass production of high-quality

incorporating a new business into our portfolio. In December 2006,

product, implementing firm costa basic understanding was reached with Pentax Corporation on a

structures, and ensuring

management integration of the two companies, with a merger to beon-time delivery. Although all ofcompleted on October 1, 2007. After the initial agreement, thethese are natural extensions of current projects, I believe the pathform the merger was to take changed from a management

to continued success is paved by layering such solid achievements

integration through share swap merger to a tender offer, and a newone on top of another.

agreement was reached to proceed with this in July 2007. Hoya

Touching now on a mid- to long-term issue, I believe that it ishas been providing updates on the merger on its website and inimportant that we should cultivate and develop a new field ofother media, and we will continue to make new information

business that, in addition to the two current areas of Information

available to the public as appropriate. I look forward to theTechnology and Eye Care, can play a leading role in Hoya’s growthcontinuing understanding and support of our shareholders as we

into a new era. Not wishing to rely too heavily on existing products

move forward with this exciting new step.

and proprietary technologies, we are currently seeking to broaden
Hoya’s business portfolio, giving due consideration to fields thatwill foster growth while also making effective use of all of Hoya’s
management corporate resources.

A Final Word

I am always careful to set Hoya’s course with the wishes of ourHiroshi Suzuki, President and CEOshareholders in mind. I am sure that you have heard me say, “Thecompany belongs to its shareholders.” My thinking on this matter
will not change. In the fiscal year under review, which saw a morerobust stock market, shareholder interest in Hoya grew: by the endof March 2007 the number of individual shareholders had grown5Hoya at a Glance
Percentage of Net Sales (Year ended March 31, 2007)

Information Technology

Electro-Optics Division

56.2%
Photonics Division

Eye Care2.3%

6

Vision Care Division

30.7%
Health Care Division

10.5%
0.3%

Other Businesses

The main products in this division include mask blanks and photomasks used in the
production of semiconductors, photomasks for the manufacture of LCD panels, glass
disks used in hard disk drives, and optical lenses for digital cameras. Functional
standards continue to rise for the end products made with these components, which
include semiconductors, LCD televisions, personal computers and digital cameras.
Hoya’s products, which are intimately involved in the production of these goods, areexpected to have ever-higher product quality and functionality. Hoya enjoys the top
market share for its flagship products in these fields. The Electro-Optics Division is amajor driver of both overall sales and profitability for the group thanks to its ability toaccurately assess the wide-ranging needs of the market and to respond to them withthe requisite high technical standards and production systems.
●Mask blanks for the production of semiconductors●Photomasks for the production of semiconductors●Large-sized LCD photomasks

Net sales (Millions of yen)

Operating income ratio (%)

250,000

40

200,00030

150,000

20

100,000

10

50,000
0

2004

2005

2006

2007

0

●Glass disks for HDD●Optical lenses, glass materials

The Photonics Division is engaged in the development and sale of devices andequipment that utilize lasers and UV. This industrial equipment is used to manufacture
semiconductors, LCD panels and digital cameras, and Hoya anticipates that theDivision’s business will benefit from positive synergies with the Electro-Optics
Division. Medical equipment is used in the fields of dentistry, dermatology, and plastic
and reconstructive surgery.
●UV light sources and excimer light sources●Industrial and medical laser oscillators

The Vision Care Division is engaged in the manufacture and sale of eyeglass lenses in
global markets with a focus on four regions: Japan, Europe, North America, andAsia-Pacific. Hoya develops its businesses in this field in ways that best reflect thevarying commercial practices, laws, government regulations and consumer
preferences in each region. The company holds the top market share in Japan, andthe high quality and unquestionable value of its products continue to enhance thepresence of the Hoya brand. In Europe, and also in the Asia-Pacific region where
consumer purchasing power has grown, both sales and profits are continuing to rise
thanks to increasing demand for high-value-added products such as Hoya’s excellent
progressive and high index lenses.

Net sales (Millions of yen)

Operating income ratio (%)

10

12,000

8
6

8,000

4
4,000

2

0

-2

0
2004

2005

2006

Net sales (Millions of yen)

2007

Operating income ratio (%)

20

120,000
100,000

15

80,00010

60,00040,0005

20,000

0

0
2004

2005

2006

2007

●Eyeglass lenses

The Health Care Division is responsible for the development of the Eye City chain of
directly managed contact lens specialty stores, and it also produces and sells intraocularlenses (IOLs) used in the treatment of cataracts. Eye City’s sales in Japan are the largest in
its market segment. The Eye City business continues to grow, thanks to the broad range of
excellent products sourced from Japan and overseas to meet the needs of its diverse
customers, not to mention its superior client consultation service and full range ofafter-sales services. Against a background of an aging global society, Hoya continues toinvest in the development of IOL markets both in Japan and other countries. These steadyefforts are generating a good deal of success.
●Contact lenses

Net sales (Millions of yen)

Operating income ratio (%)

50,00025

40,00020

30,00015

20,00010

10,000

5

0
2004

2005

2006

2007

0

●Intraocular lenses (IOLs)

Under a new concept, the Crystal Division is in the process of developing newmarkets. The Service Division is mainly engaged in the development and operation of
information systems for the companies in the Hoya Group.

7

People today live their daily lives surrounded by all kinds of electrical devices,
including home electric appliances and other communication equipment. The carefulobserver today would notice that analog is being replaced by digital for most of thethings that people own, bringing greater convenience and abundance to their lives.
Hoya’s Information Technology business is contributing greatly to the continuing
evolution of flat screen televisions, digital cameras and notebook computers, all ofwhich are representative of these new digital products.

Information
Technology

Mask Division, Hachioji Plant, Japan

Hoya s Global Network●Electro-Optics

8Electro-Optics Division

Aiming for the ultimate in performance and functionality,
Hoya is committed to developing new leading-edge technologies
Mask Blanks and Photomasks for Producing Semiconductors
Mask blanks and photomasks are essential in the production ofTransfer image of circuit pattern in the exposure process

Mask Blanks and Photomasks for Producing Semiconductors

semiconductor chips. They are the master plates used to transfer
the minute, highly complex circuit patterns for semiconductors

Light source

onto the wafers that become IC chips. A photomask is a
six-inch-wide glass plate onto which an electron beam or laser

Condenser lenswriting device has drawn a circuit pattern. A mask blank is thesame plate before it has been written with a circuit pattern. Hoya
has several strengths in this field, including: (1) the superb

Photomask

technologies it uses to precisely polish glass substrates and then
Reduced projectionlens unit

lay down homogeneous metallic films and photosensitizing agentson those substrates; (2) the ability to develop new products thatexactly meet client needs, thanks to a collaborative development
project model: and (3) excellent production capabilities, which allow

Wafer(Semiconductor chip)

the company to offer a stable supply of finished mask blanks andphotomasks to the market.
As semiconductors have evolved to offer ever greater
performance, and as circuit patterns have become increasingly

and shipments of photomasks for use in development of next-complex, semiconductor design rules*1 are steadily changing to

generation 45 nm node production were also rolled out. The lightrequire ever more precise line width, from 90 nm* through 65 nm

source used for the lithographic exposure of circuit patterns onto

to 45-32 nm. During the fiscal year ended March 31, 2007,

semiconductor wafers is in the process of moving from krypton

demand for Hoya’s high-end products continued to expand. In

fluoride (KrF) with a wavelength of 248 nm, to the argon fluoride

particular, very strong growth was seen in sales of phase-shift(ArF) excimer laser, with a wavelength of 193 nm. Additionally,mask blanks, which are produced by taking advantage of the phasethrough the use of immersion technology*3 and ArF light sources, it

difference of light rays to realize higher resolution on thehas been possible to achieve line widths of 32 nm and below. For

semiconductor wafer. Hoya will continue to develop leading-edge

leading-edge applications, not only semiconductor manufacturers,

technologies through its collaborative development programs with

but also photomask makers, require high level technologies, andmanufacturers of semiconductors and masks. It will also further

there are only a limited number of mask suppliers that are able toenhance its production systems to ensure that client expectations

meet those needs. Given this situation, Hoya’s engineering andare met, and will endeavor to further reduce production costs.

production divisions will work as one, doing their utmost for the2

In the photomask business, Hoya is devoting its efforts to thefurther development of high-precision photomasks that meetdevelopment and production of high-precision products, focusing

market needs, all the while keeping a close watch on futureon high-end items. During the year, Hoya shipped increasing

technological developments.

quantities of photomasks compatible with 65 nm node production,

Mask blank (left) and photomask (right)*1. Design rules are constraints placed on the design of LSIs to ensure that
production processes can successfully meet the design intent.
*2. A nanometer (nm) is one billionth of a meter.
*3. With immersion technology, the gap between the projection lens and the wafer isfilled with a liquid to improve resolution.

9Electro-Optics Division

Hoya’s photomasks are at work behind the scenes,
helping to bring the world larger, higher definition LCD televisions
LCD Photomasks

LCD Photomasks

LCD photomasks are the master plates that are used in the

production capacity. As a result, declining prices due to growing

manufacture of the LCD panels found in large flat televisions andcompetition between manufacturers were clearly witnessed in thecomputer monitors. Hoya is the world’s leading producer of LCD

photomask market. Despite this environment, Hoya, by

photomasks, and it has special strengths in the production of

introducing further improvements to photomask quality, helped

large-scale LCD photomasks.

LCD panel manufacturers not only to improve the quality of their

The major factor in today’s demand for LCDs is the constantproducts but also to lower their production costs. Of special note

increase in the size of LCD televisions. There is a correspondingis the multi-tone mask*2 that Hoya has been able to bring to

demand for ever larger LCD photomasks. LCD panels arefruition through the application of its advanced engineeringclassified according to their size as fifth-generation,

strengths. These masks make it possible for panel manufacturers

sixth-generation and so on*1, depending on the size of theto reduce costs by realizing around a 20% reduction in the number“mother glass” panels used in their mass production. Duringof production processes. As another way of differentiating its

2006, LCD panel manufacturers were active in the production of

products in the market, Hoya is contemplating applying thesixth- and seventh-generation panels, responding to the demand

technologies it has developed for its higher-precision

for larger LCD panels and aiming for greater production efficiency.

semiconductor photomasks in the quality assessment of its

There was also a move by some manufacturers to the production

LCD masks.

of eighth-generation panels.
In response to the large-scale increase in production by panel
manufacturers, photomask producers also boosted their

In the fiscal year ended March 31, 2007, the respectivefunctions of the Kumamoto (Japan), Taiwan and South Korea
plants were delineated, and Hoya worked to solidify a tripolar
production system. Each plant is located in close proximity to its
client LCD panel manufacturers, enabling Hoya to develop
products that meet the needs of each respective market, and to
shorten delivery times. Hoya is also working to realize further
efficiencies in production processes. These strategies position
Hoya to continue to enhance its competitiveness. Also during theyear, Hoya’s plant in Malaysia commenced production of the mask
blanks that are the substrates for photomasks. Hoya believes thatthe application of an integrated manufacturing process—frommask blanks to photomasks—will add further value to
Hoya’s products.

Large-sized LCD photomask (1,220mm x 1,400 mm) used for eighth-generation LCD panels.

*1. Panel manufacturers’ mother glass plate sizes:
Fifth-generation: 1,100 mm x 1,300 mm (yielding three 32-inch wide LCD television panels).
Sixth-generation: 1,500 mm x 1,850 mm (yielding eight 32-inch wide LCD television panels).
Seventh-generation: 1,870 mm x 2,200 mm (yielding three 50-inch wide LCD television panels).
Eighth-generation: 2,160 mm x 2,400 mm (yielding six 50-inch wide LCD television panels).
*2. A photomask that allows for mid-range light penetration through pattern shrinkage and semitransparent film.

10Electro-Optics Division

Thanks to their excellent shock resistance characteristics andlarge data storage capacity, Hoya’s memory disks have become
indispensable in notebook computers
Glass Memory Disks for Hard Disk Drives
The production of glass disks is divided into two main

Glass Memory Disks for Hard Disk Drives

processes: (1) the substrate is produced by polishing the glass
plate; and (2) the media—a magnetic recording film—is applied tothe substrate. Hoya produces disk substrates in Thailand, thePhilippines and Vietnam, and the magnetic media is applied in
Singapore. In the fiscal year ended March 31, 2007, notebook
computers shipments saw global growth, and Hoya was able torespond to the increasing demand thanks to its recent investment
in a new plant in Vietnam and new production lines in Singapore.
The market continues to demand ever greater data recording
capacity for movies, music, and other content. This trend is driving
Apart from their well-known use in notebook computers, hard disk

the continuing shift from the conventional longitudinal recording

drives (HDDs) are also found in car navigation systems and portable

method to the new perpendicular recording method,*1 whichmusic players, and more recently, even in digital video cameras. The

enables a greater data storage volume. Hoya has alreadyrecording media for hard disk drives used in such mobile devices hascommenced shipment of disks that use the new method, and is

to be able to prevent data loss, which means it must have the ability

working to produce media with even greater storage capacity.
As HDDs increase in storage capacity, competition among HDD

to withstand vibration and shock. Glass memory disks have superior
shock-resistance characteristics in comparison to the aluminum

manufacturers is intensifying. With the resulting decline in HDD

disks that are used in non-portable equipment.

prices, there is more demand for lower prices on both substrates
and media. In this environment, Hoya is taking full advantage of its

The glass disks produced by Hoya can be broadly classified
into 3.0-inch, 2.5-inch and smaller diameter sizes (1.8-inch andintegrated HDD production capability—from raw materials to

1.0-inch). The majority of Hoya’s disks are of the 2.5-inch size, andsubstrate production and application of media—to deliver

these are widely used in notebook computers. Some are also

high-quality products at low cost to meet the evolving needs of theused in car navigation systems and game machines. The 3.0-inch

market. With a close watch on the future, Hoya is also actively

disks are used in servers and other high-performance computing

engaged in development of next-generation technologies and theequipment that requires a high degree of reliability. Hoya’s smaller

technologies that will follow the next generation, such as discrete

diameter disks are used in portable music players and digital video

track recording technology*2 and bit-patterned media technology,*3

cameras, though not in great numbers.

which are anticipated to increase recording capacities dramatically.

*1. This technology increases data recording density on the HDD by magnetizing the media in a direction perpendicular to the disk’s surface, as opposed to the horizontal direction conventionally used.
*2. By making a groove between recording tracks, it is possible to reduce the magnetic interference between neighboring tracks. It is anticipated that this will make possible further
miniaturization and greater recording density.
*3. Recording media in which magnetic particles are physically isolated from each other in a regular pattern. Neighboring magnetic particles are not affected by each other, and it isanticipated that this will make it possible to achieve much higher recording density.

How does the perpendicular recording method reduce
the size of disk drives while increasing their data
storage capacity?
When data are written to an HDD, the head magnetizes the disk
as it moves across its surface, and this process allows data to be
written and read. In the conventional longitudinal recording
method, the magnetic surface of the disk was magnetized in ahorizontal direction, but with the perpendicular recording method,
the disk is magnetized in a perpendicular direction. Using theperpendicular recording method makes it possible to write much
more data on the same surface area. Further, the neighboringminutely sized magnetic domains exert a mutually attracting
magnetic force, and this makes it harder for recorded data to belost unintentionally.

Longitudinal recording method

Perpendicular recording method(conventional method)

Disk magnetic layer image

Recording layer

S

N

N

S

S

N

Glass substrate

N

S

S

N

S

N

S

N

S

N

S

N

S

N

S

N

S

N

S

N

Soft magnetic layer
Glass substrate
More data
can be written11An excellent track record built on years of expertiseElectro-Optics Division

Optical Lenses
Hoya’s optical lenses can be categorized into two basic types:

Optical Lenses

polished glass lenses (spherical lenses) and molded glass lenses(aspherical lenses). Hoya’s aspherical lenses are formed at hightemperatures in metal molds from molten optical glass. Hoya
makes full use of its proprietary technologies and long years ofexperience in their production—from glass formation to lensmolding. Because of their sophisticated shapes, aspherical lenses
offer excellent correction for aberrations, making it possible toAspherical glass lenses

shorten focal distances and reduce the number of lens elements.
This contributes to higher functionality for optical devices like

Market demand for high-precision lenses continues to grow.

digital cameras, as well as to the smaller size and lower weight ofWith the increasing resolution of digital cameras and mobile phonesuch devices.

cameras and their new zoom function, they need glass molded

In the fiscal year, sales of digital camera lenses rose

lenses, which have better optical performance. Digital video

dramatically. In Japan, the introduction of compact digital

cameras also are now mainly of the HD (high definition) type, andcameras with greater functionality drove increased demandthese products also use high-precision aspherical lenses. In

among people who wanted to replace their camera with a new

addition, digital SLRs have been enjoying great popularity of late,one. Another reason for growing sales was the new demand fromand demand for the polished glass used for interchangeable

Asia and other regions experiencing pronounced economic

lenses is also growing.

growth. In the mobile phone market, rising sales of camera

Optical lenses have served as the cornerstone of Hoya’sphones offering two megapixel image resolution or better also

business since its founding in 1941, and the technologicalcontributed to demand. Hoya invested new funds in its miniatureexpertise Hoya has amassed over the years has won constantlens plant in Suzhou, China, to boost its productive capacity, andacclaim from customers. Hoya will continue to support thedespite the capacity expansion, the plant ran at a high rate ofevolution of optical lenses by developing high-performance glass

utilization throughout the year.

materials and fully utilizing the strengths inherent in its end-to-end
production model, which integrates everything from the glassmaterials to the optical lenses themselves.

Hoya’s glass molded aspherical lenses used for thecamera lens module for mobile phones

Comparison between aspherical and spherical glass lenses(Aspherical lens)
Focal plane
Light axis

(Spherical lens)
Focal plane
Light axis

12Outstanding optical technologies
for the industrial and medical fields
Photonics Division

Photonics
Hoya’s photonics business develops practical applications for the

Photonics

optical technologies that the company has amassed over theyears, mostly for equipment such as laser oscillators and UV lightsource devices. These devices are used in the production ofdigital equipment and in dental and dermatological treatment.
In the industrial field, the Photonics Division offers products
such as defect correction equipment used in the production of flat
panel displays and laser oscillators used in highly precise
processing, such as analysis aid processing, in semiconductor
production. Other key products include the ultraviolet lightsources used to cure UV resins in the bonding of optical parts,
such as those found in optical pickups and camera modules.
Additional products include glass for electronic materials,
such as the color filters and other specialty glasses used in a wide

and a branch office in Taiwan as part of its strategy to build

variety of products and fields—cameras, optical parts, industrial

capacity to offer thoroughgoing after-sales support near clients

production, medical equipment and instructional materials. Hoya

with Asian production bases. Hoya is also working to develop

provides many kinds of specialty glasses for different applications.

products that even more precisely meet these users’ needs.

Hoya seeks to boost the competitive standing of each ofInto the future, Hoya will continue to offer its clients greaterits products through its technological development efforts, andvalue by improving equipment functionality, and introducing

also devotes its energies to market research that allows thenew, client-driven products.
The equipment that Hoya supplies for medical use includes acompany to offer appropriate solutions to each and every
client. Hoya has established a local subsidiary in South Korea

laser device that permits dental treatment with little pain, andanother laser device that is used by dermatologists and plastic
surgeons to remove birthmarks and spots. Hoya strives todevelop minimally invasive laser-based medical equipment, withthe objectives of facilitating major progress in medical treatment
and an improvement in the quality of life of those being treated.

Color filter

Electro-optical glasses

Laser oscillator (LASER SYSTEM HSL-5500)

Spot UV light source equipment (EXECURE 4000)

13

In the Eye Care business, the Vision Care Division offers high-value-added eyeglass lenses in many countries
across the globe. The Division’s overseas business is expanding, and its base is now becoming truly global.
In addition to managing Hoya’s Eye City chain of contact lens specialty stores throughout Japan, the HealthCare Division is also engaged in the global development of intraocular lenses (IOLs) for the treatment ofcataracts. It is also working to accelerate the development of Hoya’s business activities in the medical field.
Because the Eye Care business is so closely connected with the eye—perhaps the most important sensory
organ—Hoya always strives to offer the safest and highest possible quality in both products and services.

Eye CareSales representatives and a marketer from Germany and Austria(at OPTI-MÜNCHEN international optics and eyewear exhibition)

Hoya s Global Network●Eye Care

14

Vision Care Division

Hoya is developing its eyeglass lens business withstrategies tailored to suit individual market environments,
introducing high-value-added products and new brands
Eyeglass Lenses
The global eyeglass lens market continues to show moderate

Eyeglass Lenses

growth on the whole, but a closer look reveals a rather complex
picture. In certain countries and regions, the demand is forhigh-end lenses, while in other areas the price competition for
low-priced lenses is intense. Despite the nuances of this market

that was made a subsidiary in 2006 recorded double-digit growth,environment, Hoya continues to record strong performance thanks

and in Saudi Arabia and other countries in the Middle Eastto growth in sales of its high-value-added products. These include

distribution networks continued to grow. Hoya has also

the Hoyalux iD multifocal lens, which features Hoya’s proprietary

established a local subsidiary in Mumbai, aiming to build a new

integrated double-surface progressive lens design, as well as

presence in the Indian market, which is set to record strong futurehigh-index lenses and superior performance lens coatings.

economic growth. Hoya predicts that, over the next 20 years,

Because distribution systems, consumer tastes and

80% of sales growth will come from Asia and other emerging

government regulations differ from country to country and region

markets. However, in order to realize this potential, Hoya must

to region, Hoya runs its eyeglass business using strategies

expand its network of clients among eyeglass retail stores andspecifically tailored for each different market. In the fiscal year

invest in training and education for these clients’ employees. This

ended March 31, 2007, Hoya commenced sales of Hoyalux FD

step will lay the foundation for sales of high-value-added products.

lenses in the Japanese, European and Asian markets. These newlenses are being produced based on a partial standardization of
the superlative designs used in the fully optioned, custom-madeHoyalux iD lenses. The objective is to offer many customers a
new series of lenses which benefit from the same superior
technologies that have been proven in iD lens designs. Also
during the year, Hoya introduced two new brands to complement
the Hoya brand in Asia and Europe, seeking to build market shareusing a multi-branding strategy.
During the year, emerging markets also showed significant
activity. Sales doubled in Russia, and set new growth records in
Poland and Hungary following the establishment of sales
subsidiaries in those countries. In South Africa, a sales company

15

Vision Care Division

Eyeglass Lenses

Japanese Market Poised to Recover Following
Introduction of New Products

Hoya Pursues Larger Share of Asia-Pacific Market with
Multi-branding Strategy

The Japanese market remains somewhat sluggish. Hoya

In the fiscal year ended March 31, 2007, sales growth in the Asianexperienced growth in its high-value-added, high-end products,

market slowed from the fast pace of growth a year earlier. This

mostly in top performance coatings and newly designed

can be attributed to intensifying competition in Korea, which

progressive lenses. However, as a result of price competition inaccounts for a high percentage of Hoya’s sales in the Asia-Pacificthe lower price brackets, the company’s total sales in Japan

market, and in China, which is set to become a huge new sales

remained practically flat year-on-year. Nonetheless, following thebase. Until recently Hoya had been developing its markets

November 2006 introduction of the Hoyalux FD lens series andconcentrating on its high-value-added products. However, in thethe series of seminars held in support of this new release, Hoya

Asian region its strategy includes both the introduction of a newsaw a return to positive figures in overall sales growth forbrand aimed at promoting progressive lenses and the launch of aeyeglass lenses in the beginning of 2007. The company

new single vision, low-cost lens brand which will combat the

anticipates that the new series will continue to contribute to

growing market share of low-cost Chinese-made products. This

sales growth.

Asia-Pacific strategy allows the company to meet the needs of awide variety of consumers, with a broad range of products offered

Strong Brand Recognition in European and RussianMarkets

across all price brackets. In Australia, on the other hand, Hoya has

Sales in Hoya’s European markets continued to show extremely

Transitions® light-sensitive lenses which cut ultraviolet lightstrong growth, in a repeat of last year’s good performance. The

transmission, further promoting high added value in its productbest-performing product was the Hoyalux iD. Following thelineup in that country.

teamed up with the U.S. firm Transitions Optical, Inc. to sell

Japanese release, the European Hoyalux FD brand, known as2007, then successively in other countries. Research in European

Planning a Global Educational Campaign on Hoya’s
Outstanding Lens Technology

and Russian markets focusing on retail stores selling both Hoya

Hoya’s iD FreeForm Design TechnologyTM, integrated

and competing products revealed that Hoya was on top in both

double-surface progressive lens design, is used in its Hoyalux iD

quality and cost performance, showing that Hoya’s brandand Hoyalux iD LifeStyle lenses. Lenses made with thisreputation is extremely high in those markets. To capitalize ontechnology are polished to a high degree of accuracy on both lensthese favorable conditions and lock in further growth, in 2006

surfaces. Making the most of Hoya’s world-first proprietary

Hoya launched the “Hoya Vision Care Center,” a training andtechnology, they offer a wide field of view and greatly reduce

sales support tool used in retail stores for patient consultation andcurvature and distortion. To ensure that this superior technology

to simulate eyeglasses on a PC. Hoya will invest additional funds

appeals effectively to latent consumer needs and thereby

in its HOYALOG on-line ordering system, which directly links retail

improves Hoya’s sales results, the company is now developing astores to its make-to-order factories. This will enable its HELP

global campaign that will clearly convey its benefits to both

system to adjust lens geometry even more precisely, and it further

consumers and sales agencies.

Hoyalux iD LifeStyle, was introduced in Germany in February

enhance the convenience of the HOTS (Hoya Open Tracer
System), which is a measurement system used for cutting lenses
to fit a wide variety of frames.

Strong Expectations from the North American Market
In comparison with the Japanese and European markets, Hoya’s
high-value-added eyeglass products still have low rates ofpenetration in North America. Imports of low cost goods continue
to rise there, as well, another factor that makes this market
difficult to navigate in terms of Hoya’s business development.
Despite that, however, in the fiscal year ended March 31, 2007,
Hoya achieved sales growth of over 10% compared to theprevious year thanks to a sales expansion strategy targeting
distributors and retail chains. A further boost was provided by thetrend toward stronger demand for high-value-added and highly
functional eyeglasses—Hoya’s particular strengths—from thebaby boom generation, which has now entered the key consumer
age bracket.
16

Supported by Hoya’s iD FreeForm Design TechnologyTM, Hoyalux iD
LifeStyle guarantees a wide intermediate segment and minimal distortion.
Taking as a basis the natural eyeball rotation, Hoyalux iD LifeStyle
guarantees an extremely natural progression.

Health Care DivisionMarketing contact lenses by appealing to
the client’s point of view
Contact Lenses and Eye City
●Hokkaido-Tohoku district 10 stores

Hoya’s Eye City chain of contact lens specialty stores boasts theContact Lenses and Eye City

largest sales volume of any such enterprise in the Japanese domestic
market. As of March 2007, the business had grown to include 153
stores in a Japan-wide network. Eye City locations can be found in all●Koshinetsu-Hokuriku district 7 storesmajor commercial areas, from the metropolis to the suburb. FollowingJapanthe opening in 2005 of the first overseas Eye City store in Shanghai,
China, Hoya is now pushing forward with expansion aimed at reaching
the globe.
Eye City strives to work in partnership with each one of its
individual clients, looking after the health their eyes. With safety●Kanto district 66 stores●Tokai-Chubu district 14 stores

China●Kansai-Chugoku-Shikoku district 40 stores●Shanghai 3 stores●Kyushu district 16 stores

uppermost, Hoya constantly strives to further improve its levels ofservice and provide an even broader product lineup.
Contact lenses are specially controlled medical devices worn on
the prescription of an ophthalmologist. Because they are in the eyes

service standards, Eye City was able to further boost its
competitiveness in the market. Both sales and profit once again
increased in comparison with the previous year.

for long periods of time, users need to be given sufficient information

The opening of a store in Shanghai was the springboard for theon their use, and they need to know how to take appropriate care of

future development of the Asian market, and there are currently threethem. Eye City stocks safe, top-quality products, and its specialist

stores open in total. All three stores are separately located and theystaff members are thoroughly familiar with correct usage requirements

differ in style, and Hoya is currently assessing which business model

as well as the latest information about every item in the range. Thisis the most appropriate. There is not as yet a great deal of publicly

allows staff to offer each client highly appropriate pre-purchase advice

available information in China on the appropriate use of contact

and after-sales service. If by any chance a customer were to have alenses, so Hoya would like to concentrate on promoting the

problem with his or her lenses, or perhaps damage a lens, highly

high-quality Eye City brand with an emphasis on complete eye

experienced staff are always on hand to provide the assistance andexamination and lens fitting services.

advice the customer needs as a contact lens wearer. Eye City is

At present, Eye City sells only certain Hoya products—highworking to further raise standards of customer service through thefunctionality contact lenses, such as toric and bifocal lenses. From

introduction of advanced information management systems, so that no

now on, however, Hoya intends to work to broaden the lineup of Hoya

matter which store a client visits, he or she will receive the same highproducts handled by Eye City, by striving to develop and manufacture

standard of attention. The high-quality, client-oriented services offered

new lenses offering greater added value, such as those made with

by Eye City have been well received by its customers, and the

new materials.

business has now served a total of more than 5 million clients.
During the fiscal year ended March 31, 2007, Hoya
experienced changes in the market environment as a result of suchmatters as the April 2006 revision to the fee standards for medical
examinations. However, thanks to sound management, strategic
marketing, and the trust afforded by clients as a result of its high

Eye City store in the mall in the Tokyo metropolitan area

17

Health Care Division

Put the sparkle back in your eyes with IOLs:
Hoya meets medical treatment needs with optical technologies
Intraocular Lenses (IOLs)
As medical treatment continues to improve, the percentage of

age-related cataracts is also on the increase. Cataract disease isan ailment that causes the eye’s lens to become cloudy with

12.5mmTogether with this “aging” phenomenon, the incidence of
6.0mm

Intraocular Lenses (IOLs)

seniors in society is increasing, especially in developed countries.

advanced age. It leads to a deterioration in vision, and if thedisease progresses, there is even a danger of blindness. An IOL isan artificial lens that is inserted after removing the clouded lens ina surgical operation. It is a revolutionary medical device that can

Foldable acrylic IOL: HOYA AF-1 (UY)

be used to restore visual acuity to people who have lost it due
to cataracts.
There are two types of IOL: the conventional hard type andthe new foldable soft type. The foldable IOL greatly reduces thelevel of patient discomfort in the cataract operation, and this typeof lens now accounts for 95% of all IOLs sold in the Japanesemarket. Hoya produces and sells a soft IOL that can be inserted
through a very small incision, as well as an injector system that
greatly simplifies the surgery. Hoya continues to improve thesedevices. Ophthalmologists have also warmly welcomed Hoya’s
yellow-type lens that, in addition to reducing UV light transmission,
also helps to protect the retina, and market share continues toexpand steadily.
Sales growth in the European market is driven mainly byGermany and France. Hoya’s market share in these countries isstill relatively low, so Hoya believes that there is plenty of potential
for further growth in sales. Hoya is investing actively in expanding
sales, by deploying sales and technical specialists to key
countries, holding seminars, and conducting surgery
demonstrations. The company is also seeking to boost recognitionof the Hoya brand by enhancing its collaboration with
ophthalmologists.
Sales are growing in Asia. In addition to its existing markets in
China and South Korea, Hoya is developing a new market in
Thailand. In the United States, Hoya is proceeding with the formal
procedures necessary for FDA approvals, and it is expecting toreceive them, including production process approvals, in 2008.
In the area of IOLs, Hoya is seeking to develop a number of
improvements so it can market next-generation products thatmeet a variety of needs. Market demands include greater
protection against post-operative infection, a benefit expectedfrom a smaller surgical incision. There is also demand for lenses
that have greater stability within the eye, and for lenses that havea smaller chance of being associated with the formation of
secondary cataracts. Hoya is tackling these issues by working todevelop products that will be even easier and safer to use, andoffer even greater functionality, such as protection for the retina.
18

IOL injector: HOYA Injector System HOYA-IS

R&D and New Businesses
Intellectual Property Management
Environmental Initiatives
Corporate Governance19

R&D and New Businesses
The Hoya Group pursues the twin objectives of achieving growth now and in the future and increasing corporate
value. The group devotes considerable effort to strategic business planning and technology R&D that are clearly
focused on the long term. Hoya has realized excellent profitability by enhancing the competitive strengths of its
key products in their respective markets, often achieving top market share. This could not have beenaccomplished in the absence of Hoya’s R&D policy—which is to create new products from the ground up. Aiming
to create highly competitive businesses driven by leading-edge proprietary technologies, Hoya actively invests inseed technologies that have the potential to become the giant “trees” of the future.

R&D Philosophy

Current Research at the R&D Center

The saying, be “a big fish in a small pond,” is one straightforward

Hoya’s R&D Center is currently engaged in three key lines of

way of expressing Hoya’s business strategy. The “big fish” refers

research: energy-efficient materials, nanotechnology and opticalto Hoya’s top market share, and the “small pond” refers to thecommunications. In each field, the center undertakes horizontal

niche markets in which Hoya is active. Those markets may not be

development of existing businesses that rely on practicalimmense, but Hoya maintains its position as an industry-leading

application of Hoya’s core technologies, while at the same timecompany in every one of them. In the field of R&D, this helps Hoya

promoting the development of new fields that differ from those

keep close relationships with its clients and contribute andwith existing businesses. The R&D Center is thus sowing theparticipate in a positive manner in leading-edge fields.

seeds of the new businesses that will support Hoya’s future

As well as undertaking industry-leading research andgrowth. More information on each of these three researchtechnology development in its niche markets, Hoya is actively

themes appears below. Also introduced are Hoya’s EUV mask

promoting the development of important new fields of business,blanks, which were under development at the R&D Center untilwith the mid- to long-term objective of “building a new pond” of its

2006, but have now been handed over to the relevant businessown. Another characteristic of Hoya’s way of doing business is its

division with the objective of putting the technology todetermination to take the best possible advantage of applied

practical use.

research that has the potential to lead to practical applications.
This focus is shaped by today’s environment of accelerating<Energy-Efficient Materials>

change, where it will become crucially important to maintain a

Increasing public recognition of the need to protect thepractical perspective on R&D, seeing it as directly linked toenvironment and formulate strategies to combat global warming

real-world application and economic performance. Hoya’s R&D

has meant ever increasing demands for energy-efficiency inphilosophy will ensure that its development efforts are efficientindustry. Hoya is engaged in the development of devices that use

and waste-free.

3C-SiC cubic monocrystal silicon carbide. There are strong
expectations for high energy efficiency semiconductor devices

20

Research and Development Structure

based on 3C-SiC, which Hoya

The Hoya Group devolves a large degree of authority andis developing. In comparison

responsibility to each of its business divisions. In the field of R&D

with ordinary silicon-based

also, each business division follows its own next-generation

devices, 3C-SiC devices aretechnological research and development as a natural extension ofcharacterized by lower powerits current activities. In addition, the R&D Center that belongs toloss and an ability to operate

Hoya’s Global Headquarters operates with a longer term viewpoint

even at high temperatures.

and is engaged in research that will lead to the development of the

When they are used in hybrid

technologies that will follow the next-generation technologies, as

vehicles and fuel cell powered

well as research in entirely new fields.

vehicles, apart from the low

3C-SiCenergy consumption, they are expected to offer lower production<Optical Communications>costs thanks to the smaller size and lower weight of cooling

Hoya is engaged in the development of optical communications

systems. The aim is to have the new technology incorporated into

parts and materials and special fiber optic cables, in anticipation ofhigh efficiency power devices across a variety of fields.

future developments in fiber optic networks. In the midst of theswift rollout of broadband internet connections, Hoya is continuing<Nanotechnology>

to push ahead with R&D on FTTH (fiber to the home). For

1. Nanoimprint technology

example, Hoya is undertaking R&D on a key part that, once a fiber

In such fields as semiconductors and data storage where theoptic cable is connected to it, would convert the optical signal tomarket expects device features to continue to shrink, thean electrical one. Another R&D topic is a module that would boost

overriding objective is to cut costs by increasing data density.

transmission speeds. In the optical communications field, Hoya is

One strategic solution on which work is proceeding involves

actively investing in overseas venture businesses and undertaking

abandoning photolithography. Printing technologies form thecollaborative development. For example, Hoya has an alliance withbasis of this new approach, and especially at the nano level,

the U.S. firm Xponent Photonics, Inc., which owns technologies

nanoimprint technologies are currently enjoying the limelight.

for highly integrated optical modules.

They involve first producing one ultra-fine mother mold, fromwhich is produced daughter and grandchild molds that can beused to transfer the pattern by stamping. It is thought that thiswill be the cheapest means of reproducing large numbers ofultra-fine patterns. Hoya has already commenced efforts to
produce nanoimprint molds using its existing photomask andOptical-waveguide type FTTH component

mask blank production
technologies. The company
expects to realize practicalapplications in such areas as
optical parts, next-generation<EUV Mask Blanks>magnetic disks andIn the semiconductor industry, the need for higher data density

semiconductors.

and low energy consumption are behind the demand that×1 nanoimprint template (mold) for
32 nm node production

circuitry shrink even further. Under the Road Map for nextgeneration lithography technology, extreme ultra violet (EUV)
light is regarded as the strongest candidate as an exposure light

2. Nanoparticles

source for semiconductor production. Hoya has alreadyOnce certain materials are made on the nano scale, theircompleted its basic R&D for EUV mask blanks, and it has started

characteristics as materials alter, and new functions such as lightoffering test blanks with a view to commencement of massemission can be brought about. As an example, when gold is

production. In 2006, the R&D Center transferred responsibility

made as fine as nanoparticles it becomes transparent to light.

for the development of EUV mask blanks to the relevantNot only that—it also becomes red. Stained glass is one

business division, which will henceforth be engaged inexample. This came about when, in ancient times, gold

development leading to practical applications.

nanoparticles were accidentally mixed with glass. Hoya iscurrently undertaking R&D on the dispersion of a variety ofConducting layer

nanoparticles and changes in their surface characteristics, andattempts are being made to develop compound materials withnew physical properties from a suitable combination of
nanoparticles. Based on work in progress, Hoya foresees
practical applications in materials for optical parts and data
storage related fields.

Electrostatic chuck

Multilayer

Low thermal expansion glass
Multilayer (Si & Mo 40 layers)* Nano is used to mean one billionth of a meter.

6.9 nmExtreme ultra-violet light (13-14 nm)
Fluorescence of nanocrystalline indium phosphorus semiconductor

Illustration of reflective EUV mask

21

Intellectual Property Management
Ever since its establishment, the Hoya Group’s drive to create innovative technologies has ensured growth for thecompany. In all areas, from the high-tech world of semiconductors and digital devices to the eye care businessbased on eyeglass lenses and intraocular lenses, Hoya strives to maximize corporate value by leveraging its
superior technical skills and competitive strengths. Starting out as a specialist manufacturer of optical lenses,
then moving onward into glass composition and molding, and later establishing and integrating polishing, coating
and minutely detailed processing technologies, Hoya now offers many leading-edge products that no othercompany can imitate. Hoya’s intellectual property strategy protects its proprietary technologies. Hoya believes
that when business strategies and technical development efforts work together as a unified whole, intellectual
property strategy also becomes a key management strategy for supporting continued growth for years to come.

1. Objectives of the Hoya Group’s Intellectual
Property Strategy

patents that are the cornerstone of the competitive position its

For the Hoya Group, a fundamental objective is to make the fullest

might assign licenses to third parties: for instance, where it ispossible use of intellectual property in order to bolster theappropriate to sign cross-licensing agreements, or where Hoya

competitive strengths of its global businesses.

can expect licensing-out to result in an expansion of the overall● Patent Prosecution for Obtaining Patent Rights

market, or when changes are witnessed in terms of Hoya’scompetitiveness in the market (e.g., where such an action is

To ensure that its patent prosecution for obtaining patent rights isbeneficial to Hoya from a strategic business perspective).

as efficient as possible, Hoya always relies on close teamwork

Strategic moves like these can enable Hoya to make the most of

between technical development managers and intellectual property

its intellectual property. Such a licensing-out, however, by

managers. It aims to secure all necessary intellectual property

regulation requires the approval of Global Headquarters and therights, from the initial stage of the development of leading-edge

strictest management.

technologies and including peripheral technology, applied
technology and alternative technology. In relation to those fields in● Prevention of Imitation and Infringement

which Hoya commands a leading position, Hoya aims to accelerate

Hoya maintains a constant watch on the market to ensure that its

the process of securing patents in leading-edge fields. In businesspatented technologies are not imitated by third parties. When its

areas that are in mature markets, Hoya concentrates on promoting

technologies are indeed being imitated, warnings are issued andefficient patent prosecution by preventing infringement of thewhere necessary, appropriate steps such as taking legal action arepatents held by other companies. To achieve these ends, careful

put in motion. Hoya also respects patents held by others. It

technical search and observation of patent information on otheraffords them appropriate value and takes pains to ensure that it

companies is implemented and Hoya promotes the patentdoes not infringe upon third-party patents, as one aspect of its

prosecution that is most appropriate for each different businessefforts to enhance the efficiency of its patent management.

environment. Additionally, given the increasing speed of theimplementation of global patent management systems that will be● Utilization of Third-Party Patents andTechnologies

coordinated with the move of its production bases in Japan andHoya does not rely excessively on its own proprietary

trading partners into international markets.

technologies and patents. If, following careful technical search andglobalization of business, Hoya is devoting itself to the● Objectives of Licensing Out

22

businesses enjoy. This means there are cases in which Hoya

consideration of the available technologies, it finds that third
parties hold superior technologies, patents, or other advantages,

The scale of each of Hoya’s individual businesses is not large, but

and when Hoya decides that it would be efficient to use them in

Hoya strives to improve its competitiveness in each respective

commercializing a product, Hoya takes steps to seek licenses tomarket. Hoya focuses on effectively and fully utilizing the technical

use third-party patents or introduce their technologies.

2. Systems Supporting Intellectual Property
Activities

3. Intellectual Property: Current Statuscompanies. There is extensive delegation of authority, from

● Number of Registered Patents and Global
Application Ratios

strategic business planning to decision making. Intellectual

Hoya held 967 registered patents and utility models in Japan as ofproperty groups have been established in each business division,

March 31, 2007. Of these, the Electro-Optics Division and Visionand they are each responsible for independently working in

Care Division held approximately 85%. Over 30% of new patent

conformity with the respective strategies of their businessapplications during the year were filed outside of Japan. Thisdivisions—for instance, by filing patent applications and otherfigure of 30% of all patent applications lodged in countries otherrights-related management activities, taking actions in relation tothan Japan will remain a target for Hoya in coming years.

patents held by others, and licensing out of Hoya’s own patents.

As of March 31, 2007, Hoya held 1,007 registered

The Hoya Group is organized according to business divisions andHoya’s Global Headquarters is under the management of thechief intellectual property officer and is responsible for working totrademarks in Japan, and 952 overseas.

improve the intellectual property functions of the group as a

● Percent of patents granted

whole. This includes such matters as establishing and promoting

In fiscal 2005, the percent of patents granted (notices of patents

the group’s overall intellectual property strategy, managing the

granted divided by the sum total of all patents granted, patentsgroup’s intellectual property assets, assisting business divisions infinally rejected by the Japanese Patent Office, applications

the establishment of patent strategies and the development ofwithdrawn after commencement of examination, and applications

patent management systems, and the training and skill

abandoned) was 49.5%, and in fiscal 2006 it was 49.1%. Hoya will

enhancement of employees. In particular, where matters

continue to undertake appropriate evaluation of its inventions, andnecessitate decision-making for the group as a whole—forwill manage its technical development and intellectual property inexample those matters requiring coordination of intellectualan efficient manner.

property issues that run across more than one business division,or those involving the bringing of a case to court or reaching anamicable settlement—they are adjudged matters requiring the●Global Applications

Domestic applications
Global applications
Global application ratios

approval of Hoya headquarters and are strictly managed under the
direction of the CEO. Because intellectual property activities are
dispersed across all business divisions, there is a need to reduce
any adverse effect from potential difficulties in information sharing.
This is accomplished by regularly holding a joint intellectual
property meeting, where all divisions exchange information.

(Number of applications)

350

50%
45%

300

40%
250

35%
30%

200

25%
150
●Hoya Group’s Intellectual Property Management Organization

20%
15%

100

10%
50

5%

Global Headquarters

0
Chief Technology Officer

Information Technology
Field

Eye Care
Field

0%
2002

2003

2004

2005

2006

(Application year)●Registered Patents and Utility Models Held as of March 31, 2007

R＆D

(967 in total)

1Intellectual Property
Management Office59
IPMO IPMO IPMO

IPMO

58 28

Chief Intellectual
Property Officer

321
Headquarters’Intellectual
Property Group500■Electro-Optics Division■Vision Care Division■New Business■Health Care Division■Photonics Division■Other Businesses

23Environmental Initiatives
The Hoya Group believes that the expanding scale of a company’s business operations must be matched by thewillingness to take on greater and greater responsibility for issues of social concern, such as environmental
protection. Hoya pursues business growth with full consideration for the earth’s precious environment, and has
stated as much in its philosophy on protecting the environment. Hoya is engaged in environmental protection
activities in many different ways. Faced with the fact of limited global resources, Hoya seeks to do what it canright now, and to achieve the things that it should, one by one.

1. Environmental Protection Support Systems
In 1976, Hoya established pollution countermeasure committees at each of its plants. In 1993, Hoya set up an environmental protection
organizational structure across the entire company. At the same time, based on the Corporate Mission and the Management Principles for the
Hoya Group, Hoya drew up the Hoya Group’s Environmental Philosophy and a set of Fundamental Environmental Principles to serve as
standards of behavior. Then, in 1997, Hoya amended the Philosophy of Environment and Fundamental Principles of Environment, and sincethen has been carrying out Group-wide environmental protection activities.

Hoya Group Environmental Philosophy
At the Hoya Group, we are united in our commitment to protect the environment, conserve resources and ensure that all of ourcorporate activities are conducted with concern for the global environment. It is our earnest desire to give the generations to come ashealthy an environment as possible.

Fundamental Environmental Principles
1. To ensure that the global environment will be passed on to the next generation in the best possible condition, we recognize that environmental
conservation is an essential aspect of all corporate activities and conduct our business activities with concern for people, societies and thenatural environment.
2. Enlisting the cooperation of all group companies around the world, we shall establish a group-wide system for promoting environmental
conservation activities.
3. We comply with all laws and regulations on environmental impacts such as waste generated by business activities, and constantly strive to reducethese environmental impacts.
4. We undertake initiatives to reduce the use of resources, such as pursuing greater efficiency in resource use, reduction of energy consumption
and recycling.
5. To maintain a keen awareness of environmental issues throughout the group, we ensure that all employees are thoroughly aware of the Hoya Group
Environmental Philosophy and Fundamental Environmental Principles by offering education programs and using internal communications.

2. Examples of Activities Aimed at Reducing
Environmental Impact

such as the introduction of ice thermal storage systems, which● Initiatives designed to reduce CO2 emissions

has been proceeding for some time, and the use of high efficiency

The fuel used at plants has been converted from Bunker A heavy

electrical transformers. Along with this, Hoya is rolling out otheroil to liquefied petroleum gas, which has a lower emission factor

energy-saving initiatives, such as encouraging rooftop greenery

per unit of heat produced. Further, plants are being converted toand introducing more efficient air-conditioning systems, with thethe use of natural gas, which has an even lower emission factor.

objective of reducing CO2 emissions.

Additional benefits from fuel conversion have included lower

24

Hoya continues to promote other energy-saving activities,

Hoya is also taking steps to manage a reduction in CO2 emissions

levels of smoke production and a reduction in storage

in areas other than production. These measures include therequirements for dangerous materials, lowering the risk of serious

introduction of light clothing in the office, more appropriate adjustment

accidents.

of room air temperatures, and the use of more efficient lighting.

● Efforts to reduce water consumption

Other steps taken have included controls for the amount of

Steps have been taken to limit the amount of water used. These

substances used or emitted in production processes, and theinclude promoting the re-use of factory waste water and theintroduction of chemical substitutions, in response to various laws

introduction of automated water faucet control in washroom

and regulations, such as Japan’s Law Concerning Reporting, etc.

hand basins.

of Releases to the Environment of Specific Chemical Substances● Steps taken to reduce waste disposal volumes

and Promoting Improvements in Their Management.

Resources have been devoted towards achieving reductions in● Improvements to waste water disposal

the volume of waste disposal. Steps taken have included

In February 2006, Hoya introduced a means of boosting thechemical recycling of polishing sludge as raw material for

removal of fluorine from factory waste water. The new method of

concrete, and thermal recycling of discarded plastics

removal by crystal growth achieved a 50% reduction in fluorineand chemicals.

levels. This new system is notable in that the crystals to which● Efforts to reduce the volume of packaging materials used

the fluorine has adhered (fluorine apatite) are valuable, saleable

Hoya has taken steps to reduce the volume of packaging

items, and it also plays a part in reducing waste volumes.

materials used, through such means as promoting the reuse of● Emergency response measures

cardboard packing boxes used to deliver products to clients,

Hoya has produced procedural manuals setting out responses toand by broadening the scope of a changeover tobe instituted in an emergency at each of its plants. Should worst

returnable containers.

come to worst, efforts would be made to limit to the smallest● Steps taken to reduce chemical usage

extent possible any environmental effects outside the plant.

Steps have been taken to reduce the amount of chemicals used

Steps have been taken to develop reliable countermeasures atin production processes. These include a collaboration between

the facilities level also. These include, for example, theJapanese and overseas plants to switch from the use of

introduction of oil/water separation equipment and oil leak

HCFC141b (1,1-dichloro-1-fluoroethane) to water for cleaning

monitoring equipment to prevent any oil leak fromprocesses, and a reduction in the amount of monomers

entering waterways.

consumed through a change in the shape of gaskets used in the
production of eyeglass lenses.

3. Introduction of Environmental Management Systems (ISO 14001 Certification)
In October 1996, Hoya announced its intention to make its environmental management systems compliant with ISO 14001 certification
standards, and in December 1997 Hoya Lens Deutschland GmbH became the first in the Hoya Group to gain such certification. Since then,
Hoya has proceeded with efforts to gain certification for its plants, including overseas production bases, and a total of 35 Hoya group sites(11 in Japan, 24 abroad) had been certified by the end of March 2007. The certification process is continuing.

Aiming for the concrete realization of the Environmental Philosophy and Fundamental Environmental Principles, an Environmental Headquarters
headed by the CEO establishes and manages environmental protection systems and structures as the most senior body responsible for theenvironment, and it oversees all of the Hoya Group’s environmental protection activities●The Hoya Group’s Environmental Management Organization
Audit Committee

Audit Department

General Manager of Hoya Group
Environmental Headquarters: CEO

Environmental
Headquarters

Environmental Headquarters
Secretariat

Environmental Headquarters
Secretariat Council

Committee on Speciﬁc
Environmental Issues

Business
Divisions/
Factories

Environmental ProtectionOﬃcers

Subsidiary Environmental
Protection Oﬃcers

Environmental Protection
Committees

Subsidiary Environmental
Protection Committees

Secretariat

Secretariat

The top managers of each business division and each factory, in their roles as Senior Environmental Protection Officers, have overall responsibility for the management ofenvironmental protection activities in each division or factory under their management. A Secretariat assists the Environmental Protection Committee, which is presided overby the Senior Environmental Protection Officer.

25

Corporate Governance
For Hoya, corporate governance is a matter of utmost import to management. Based on its fundamental
philosophy that “companies are owned by their shareholders,” Hoya conducts its corporate management withthe goal of maximizing shareholder value. To ensure it does not operate according only to internal thinking on
management, Hoya has adopted a system of outside directors who to represent shareholders. Whilestrengthening its systems of corporate governance, the Company has also separated management andexecution functions to accelerate decision-making and increase management efficiencies.

Corporate Governance Systems

the executive officers at monthly business reporting meetings, and

In June 2003, Hoya instituted a company-with-committees system.

strategies for responding to each issue are discussed. Important

By broadly devolving decision-making authority from the Board ofmatters are all reported to meetings of the Board of Directors.

Directors to executive officers, the Company has set up a system

The Nomination Committee, Compensation Committee andthat helps executive officers improve business results by allowing

Audit Committee are all composed exclusively of outsidethem to manage operations in a more timely and efficient manner.

directors. The independence of the Committees and their

At the same time, Hoya established three committees—thedownstream organizations from the executive officers is ensured

Nomination Committee, the Compensation Committee and theby their decision-making authority, including the powers of

Audit Committee—which are distinct from the Board of Directors

appointment and dismissal. All of the outside directors, who haveand are composed of outside directors. The objectives are to

been invited from outside the Hoya Group, have plenty ofprovide enhanced powers of supervision over the executive officers

experience in management and possess international outlooks. All

and to ensure overall soundness and transparency of management.

of them can be expected to offer impartial and appropriate
opinions, taking the standpoint of our shareholders. At all

The Board of Directors and the Three Committees

meetings of the Board of Directors and the three Committees,

The eight-member Board of Directors comprises five outside

they offer frank, genuine opinions.

directors and three internal directors. To guard against the potential
for stagnation in the Board of Directors system, and to ensure● Nomination Committee

lively debate, Hoya has since 1989 been gradually reducing the

The Nomination Committee decides on the selection of

number of its directors. From a total of 17 in 1989, numbers havecandidates for appointment as directors and executive officers,

fallen to the current eight. Further, to ensure that views can be
freely expressed, unconstrained by internal hierarchical structures
or personal relationships, the Company has invited outside
directors to participate in its management since 1995. Outside
directors provide managerial supervision and advice.
The Board of Directors meets every month, excluding
February and August. These meetings ensure that the outside
directors both oversee and offer advice to the executive officers intheir business activities, in an atmosphere that encourages lively
debate. Three internal directors serve concurrently as executive
officers. Authority has also been devolved from the executive
officers to the heads of each business division, who areresponsible for day-to-day business operations in their respective
areas of activity. These division heads make a detailed report to26●Transitions in the Board of Directors

Year

Internal directors

Outside directors

Total number of directors

1994

10

1995

8

1999

7

2000

6

2001

6

2003 to present

8and submits them to the Board of Directors for its decision. It also

●Corporate Governance Structure

takes decisions on the referral to Shareholders’ Meetings ofGeneral Meeting of Shareholders

proposals to relieve directors of their posts, and it takes decisions
on the referral to the Board of Directors of proposals to relieve

Internal Directors: 3(serving concurrently as
executive officers)
Outside Directors: 5

directors, and it ensures that appointments are appropriate. In
particular, in relation to the nomination of outside directors, inaddition to requiring appropriate standards of knowledge,
experience and field of specialization, the Committee also

Compensation
Committee
Secretariat

maintains the strictest standards relating to any interests
candidates may have in the Hoya group.

Collaboration andmutual monitoring
Nomination
Committee
Secretariat● Compensation Committee

was established with the objective of contributing to improved

Nomination Committee
5 outside directors
Collaboration andmutual monitoring

The Compensation Committee prepares the remuneration systemthat boosts incentives for the directors and executive officers. It

Compensation Committee
5 outside directors

Audit
Committee
Secretariat

Audit Committee
5 outside directors(Executive Officers)
President
Executive Officers(3 internal directors)

Supervision and advice(Board of Directors)

standards for the selection of candidates for appointment as

Election

Election

executive officers of their posts. The Committee lays down the

Execution ofoperations

Divisionsfinancial performance for Hoya, by undertaking fair and accurate
evaluations of results. The remuneration package of each Director
is composed of a fixed salary, results-based remuneration andInternal Control Systems

stock options. Each package is decided based on a consideration

In addition to striving to further strengthen its corporateof such factors as prevailing business conditions, financial results

governance, the Hoya Group also devotes resources toand standards adopted by other companies.

development of sound internal control systems with the objectiveof ensuring fitting and efficient business management. These● Audit Committee

internal control systems cover the day-to-day administrative

The Audit Committee, following the audit objectives and audit

processes of each business division, and the various businessplans decided upon by the same Committee, verifies the financial

divisions are mainly responsible for their implementation,statements of the Company on the basis of reports received

verification and improvement. The head of each business divisionfrom outside auditors. In addition, it conducts hearings of thehas both the authority and the responsibility for managing that

results of operational audits made by the Audit Department,

division and for improving business results. Each head is also

verifying the soundness, lawfulness and efficiency of the

responsible for seeking to further improve internal control systems,

Company’s operations. All items of significant interest arewith the objectives of maintaining compliance, the effectiveness

reported to the Board of Directors, and action is taken accordingand efficiency of work practices, the reliability of financial reporting,to need. In order to ensure the effectiveness and efficiency ofand the integrity of management assets. Each business isthe work for which the Audit Committee is responsible, an Audit

responsible not only for increasing efficiency and effectiveness to

Department with full-time staff members has been established as

improve business results, but also bears responsibility as aa support organization.

corporate citizen for the legality and propriety of its operations. By
meeting these obligations, Hoya’s value is undoubtedly raised in
the eyes of society.
Touching now upon the development of control systems
Eiko Kono
Outside Director

Yoshikazu Hanawa

Outside Director,
Chairperson of theCompensation Committee

Yukiharu Kodama
Outside Director
Chairperson of the
Audit Committee

Outside Director

Yuzaburo Mogi

within each business division, the actual operating environment●Members of theBoard of Directors

Hiroaki Tanji
Director/Executive Officer,
Chief Technology Officer

differs according to the business. Factors that can differ include
methods of improving and developing the control environment,
and the risk evaluation and response systems in the workplace.
This also extends to the ways control processes are audited andimproved. For these reasons, the control systems that operate
within each business division and each office are those that are
deemed to be the most appropriate and most effective ones for

Takeo Shiina
Outside Director,
Chairperson of theNomination Committee

Hiroshi Suzuki
Kenji Ema
Director/Executive Officer,
Chief Financial Officer

President and CEOeach environment.
The Audit Department at Hoya Group Headquarters is
responsible for the regular auditing and verification of administrative
processes for each division and business office from an independent
standpoint. It conducts operational audits, checks that internal
27

HOYA Business Conduct Guidelines is distributed to all employees

control systems are functioning as they should, ensures

Full Disclosure and Investor Relations Activities

that there is no dishonesty, and checks for possible areas

Hoya believes that fair and prompt disclosure of information andfor improvement, etc. Problem areas that come to light as aother investor relations activities are a fundamental duty of

result of audit procedures become subject of amanagement. The Company respects the rights of its

recommendation for improvement. Particularly important

shareholders concerning appropriate disclosure of information. It

matters are reported to the Audit Committee and the Board ofalso values communication with shareholders, and it continues to

Directors, as well as to the executive officers. The executive
officers decide upon and issue directives for speedy, appropriate
responses.

clearly reflect their views in its management practices.
In 1998, Hoya began the disclosure of quarterly financial
statements ahead of many other Japanese firms, and has

To achieve the best results from internal control systems, it isgradually shortened the period between the end of each quarter

important that all employees performing duties for an organizationand the disclosure, and the volume of information is the same aswork to foster greater awareness. The Hoya Group hasthat contained in the year-end financial reports. The Company

established a set of Business Conduct Guidelines that clarify thecontinues to strive to increase the speed of disclosure andguiding principles under which each employee should perform his

broaden the content. Top management actively participates inor her duties, with resolute adherence to work ethics, and Hoya is

investor relations activities. For example, the CEO attends

engaged in a wide range of employee education activities. Anotherinvestor meetings that are held each quarter to discuss quarterly

initiative, the Hoya Help Line, an internal reporting and consultative

financial reports, where he explains strategy and fields questions.

system, was established in 2003. If there is an act thatIn the fiscal year ended March 2007, Hoya devoted additional

contravenes the law or the Hoya Business Conduct Guidelines,

energies to interaction with individual shareholders and investors.

the Hoya Help Line ensures that Hoya can discover the

For example, it held seminars across Japan for individual investors.

contravention and that a report will quickly reach top management,

Since 2003 the ratio of shares held by foreign shareholders has

enabling timely and appropriate action to be

been maintained at a high 50% or so. More recently, the number

taken on the issue. This helps to preserve theof individual shareholders has also risen rapidly, and in the fall of

integrity of the Hoya Group as a whole. The

2006 Hoya conducted a survey focused on the Company of

Hoya Help Line is a dedicated system located within theJapanese shareholders, and received many valuable comments

Company’s headquarters, and it can also be used as a point ofand opinions. Respondents gave good marks to the Company forcontact with external lawyers who are available to listen toits growth, stability and technical strengths, and expectations for

employees. This preserves anonymity and works to maintain thethe future were also high in these areas. Valuable feedback was

system’s functional effectiveness. As at the end of March 2007,

also given regarding returns on shareholder investment andthe system had been introduced in Japan, the United States andinvestor relations activities. Hoya plans to refer to the results ofin group companies in Thailand, which has the largest number ofthe survey in its investor relations work in the future. Hoya will

employees on a global basis. The intention is to continue tocontinue to respond to the

expand the number of countries covered, giving the Hoya Help

increasingly diverse wishes of its

Line worldwide coverage.

shareholders, and will strive tofurther improve its investor

Building an Internal Controls Reporting System

relations activities, aiming to

Hoya has responded to the Japanese version of the Sarbanes-Oxley

achieve even higher levels oflaw (dubbed “J-SOX”)* by newly forming an Internal Controls Group

corporate transparency.

Hoya’s seminar for individual investors

and appointing full-time staff thoroughly familiar with accounting andaudit procedures. The Group has already commenced work on
documentation in order to elucidate the Hoya Group’s state of
preparedness in relation to its internal controls over financial reportingand is in the process of developing operational as well as assessment
systems for internal controls. Working towards the law coming into
effect in April 2008, the effectiveness of internal control systems will
be inspected and verified in stages, and where necessary,
improvements will be instituted.
* An internal controls reporting system required under Japan’s Financial Instruments
and Exchange Law, which was promulgated in June 2006 and which will come into
effect and apply to fiscal periods beginning in or after April 2008. Covering publicly
listed companies, it seeks to strengthen internal controls through assessments ofinternal controls relating to financial reporting by management, and audits bycertified public accountants. The law is designed to boost overall reliability and trustin corporate disclosure.

28●Number of Shareholders and Shareholding Ratio(People)100,000

Number of shareholders

(%)

60

Foreign stockholding ratio

50

80,00040

60,00030
40,00020

Individual stockholding ratio

20,000

10

0
2001

2002

2003

2004

2005

2006

0
2007 (Year)

Financial Section
andCorporate Data

Ten-Year Summary
Management’s Discussion and Analysis
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditors’ Report
Corporate Data
Investor Information
Hoya’s Timeline
Hoya’s Directory29Ten-Year Summary

1998

1999

2000

2001

¥193,473¥201,290¥201,110¥236,802

Operating income (Millions of yen)

26,39531,726

34,68845,128

Ordinary income (Millions of yen)

26,75933,61235,484

48,184

Net income (Millions of yen)

12,348

17,837

20,716

21,860

Selling, general and administrative expenses/net sales (%)

28.2

26.4

25.4

23.8

Return on assets (ROA) (%)

5.3

7.8

8.9

8.6

Return on owners’ equity (ROE) (%)

8.5

11.6

12.4

11.8

Owners’ equity ratio (%)

63.7

71.7

73.2

73.0

Inventory turnover (Months)

3.4

3.2

3.3

3.1

Capital expenditures (Millions of yen)

19,504

13,654

17,77039,673

Depreciation, amortization and other (Millions of yen)

17,57018,234

16,051

32,138

Research and development expenses (Billions of yen)

7.5

7.8

7.7

7.3

Net income

26.12

37.77

44.06

46.65

Cash dividends

7.00

7.50

8.75

12.50

Cash flow

64.41

77.65

79.15

116.24

Owners’ equity

317.67340.56376.55420.11Price earnings ratio (PER) (Times)

36.4

44.5

55.0

43.7

Price cash flow ratio (PCFR) (Times)

14.8

21.6

30.6

17.6

Price book value ratio (PBR) (Times)

3.0

4.9

6.4

4.9

Stock price at year-end (Yen) (after adjustment for stock split)

950

1,680

2,425

2,040

Aggregate market value (Billions of yen)

441.3

780.4

1,126.4

947.6

Employees (Persons)

9,320

9,414

10,651

12,966

Net sales (Millions of yen)

Per share data (Yen)(after adjustment for stock split)

Notes: 1. Effective April1, 2002, the Company adopted “Accounting Standard for Earnings Per Share” (Statement No.2 issued by the Accounting Standards Board of Japan on September
25, 2002) and “Guidance on Accounting Standard for Earnings Per Share” (Guidance No.4 issued by the Accounting Standards Board of Japan on September 25, 2002). Net
income per share and related data prior to that date are also calculated according to the standard for purposes of comparison.
2. From the fiscal year ended March 31, 2007, the Company has applied “Accounting Standard for Presentation of Net Assets in the Balance Sheet” (Statement No.5 issued by the
Accounting Standards Board of Japan on December 9, 2005) and “Guidance on Accounting Standard for Presentation of Net Assets in the Balance Sheet” (Guidance No.8
issued by the Accounting Standards Board of Japan on December 9, 2005) replacing “Shareholders’ equity” used to date with “Owners’ equity.” The figures for “Return on owners’
equity” and “Owners’ equity ratio” presented for fiscal 2006 and earlier correspond to those of the former “Return on shareholders’ equity” and “Shareholders’ equity ratio,” respectively.
3. “Owners’ equity”: “Stock subscription rights” and “Minority interests” are excluded from “Net assets.”● Return on assets (net income/average total assets x 100): An index of efficiency and profitability in terms of management of the Company’s assets.
● Return on owners’ equity (net income/average owners’ equity x 100): An index of efficiency and profitability in terms of the owners’ equity.
● Owners’ equity ratio: The ratio of owners’ equity to total assets; the higher the ratio, the higher the degree of safety.
● Inventory turnover (average of inventory assets at beginning and end of fiscal period/monthly average cost of goods sold): An index of capital efficiency. The fewer the number of months,
the better the production and sales efficiencies.

30

2002

2003

2004

2005

2006

2007

¥235,265¥246,293¥271,444¥308,172¥344,228¥390,093

43,89852,983

68,16784,920101,096

107,21345,77450,87466,55489,525

103,638

102,90923,741

20,03839,54964,13575,62083,391

24.2

24.4

22.3

21.1

20.7

21.9

8.7

7.3

14.0

20.0

21.2

20.6

11.5

9.0

17.8

25.8

27.1

25.9

78.8

81.7

75.5

79.1

77.3

81.6

3.2

2.9

2.8

2.7

2.7

2.8

19,585

15,94830,65940,17548,78654,432

20,105

19,792

25,32822,52027,48536,427

7.3

8.7

9.8

10.9

14.1

14.9

50.78

42.77

87.74

144.71

171.71

193.50

12.50

12.50

25.00

37.50

60.00

65.00

88.31

82.72

174.91

171.65240.57229.23471.55486.29491.90623.59648.87845.98

44.5

41.8

28.9

20.4

27.7

20.2

25.6

21.6

14.5

17.2

19.7

17.1

4.8

3.7

5.2

4.7

7.3

4.6

2,260

1,787

2,537

2,950

4,750

3,910

1,049.8

830.3

1,178.7

1,325.7

2,066.3

1,700.9

13,311

14,02318,092

21,23425,17628,450● Capital expenditures: Includes property, plant and equipment as well as intangible fixed assets.
● Depreciation, amortization and other: Includes the loss on impairment of long-lived assets and amortization of goodwill.
● Per share data: Per share data has been retroactively adjusted to reflect a four-for-one split of common shares implemented on November 15, 2005.
● Cash flow per share: From fiscal 2002 and after, figures for cash flow per share are shown as cash flow from operating activities divided by the average number of issued shares for the
fiscal period. Figures prior to 2002 are calculated using simple cash flow calculated by adding depreciation and other factors to net income.
● Price earnings ratio (PER; stock price at fiscal year-end/net income per share): An indicator to determine whether a company's share price is relatively high or low in comparison with
its earnings. A company's PER is compared against the market average or that of competitors to determine the standard for the share price and other data.
● Price cash flow ratio (stock price at fiscal year-end/cash flow per share): Cash flow is calculated by adding net income, depreciation, amortization and other. Depreciation indicates active
investment aiming for future growth, so the price cash flow ratio can be used to gauge the price level of a stock by taking into consideration future growth potential. It can be used
together with the price earnings ratio, the market average and comparative ratios for other companies in the same industry to judge whether the Company’s stock price is overvalued orundervalued.
● Price book value ratio (stock price at fiscal year-end/net assets per share): An index of valuation that compares the Company’s stock price to the value of its net assets. An index of lessthan one suggests that dissolving the company and selling off its assets may be more profitable than holding the Company’s stock.

31

The Hoya Group and Scope of Consolidation
The Hoya Group (the “Group”) consists of Hoya Corporation (the“Company”), 67 consolidated subsidiaries (five in Japan and 62
overseas) and four affiliates (all in Japan). One of the four affiliates
is accounted for by the equity method. Compared with the end of
the prior consolidated fiscal year, five consolidated subsidiaries
were added through establishment of new companies, and one wasadded by an acquisition. One consolidated subsidiary waseliminated through merger with another subsidiary, and the number
of affiliates was reduced by one.
The Group is managed through consolidated groupmanagement on a global basis. Each of the Group’s major businessdivisions, centered on the Information Technology and Eye Care
fields, conducts its business on its own responsibility and authority

Net Sales

2003

in accordance with the business strategies formulated by the Global
Headquarters at Hoya Corporation. By area, the regional
headquarters in North America, Europe and Asia conducts activities
such as strengthening relationships with the countries and areas intheir respective regions, providing legal support and conducting
internal audits, thereby supporting the promotion of businessactivities. The Group’s financial headquarters is located in Europe.

Net Sales
Consolidated net sales for the fiscal year ended March 31, 2007
increased 13.3% year on year to ¥390,093 million. By main
business segment, net sales for the Electro-Optics division in the
Information Technology field rose 15.1% year on year, net sales for

2004

2005

2006

2007

(Millions of yen)

400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,0000(Millions of yen)

Net sales

Sales by Business Segment

246,293

271,444

308,172

344,228

390,093

2003

2004

2005

2006

2007

100

45.3

2.2

(Millions of yen)

32

49.8

1.5

75

53.8

55.4

56.2

3.5

2.9

2.3

30.8

30.4

30.7

25

0

50

38.3

36.2

10.9
3.3

10.4
2.1

10.2
1.7

10.3
1.0

10.5
0.3

219,252

111,461

135,071

165,664

190,552

Photonics

5,485

4,116

10,74910,093

9,093

Vision Care

94,38898,203

94,971

104,457

119,808

Health Care

26,71728,381

31,40935,48440,850

Other Businesses

8,242

5,673

5,379

3,642

1,090

Electro-Optics(% of total)the Vision Care division in the Eye Care field increased 14.7%, andnet sales for the Health Care division rose 15.1%.
By customer region, net sales to customers in Japan increased
2.9% to ¥178,547 million, while net sales overseas grew 23.9% to¥211,546 million. As a result, the composition of net sales was
45.8% domestic and 54.2% overseas, the first time that overseas
sales exceeded sales in Japan. Hoya continues to further pursue
global business development, with the proportion of overseas sales
in Asia rising particularly noticeably.
Hoya calculates the effect of exchange rates on operating
results during the subject fiscal year by comparing the foreign
currency denominated financial statements of its overseas
subsidiaries when converted into yen at the average exchange rates

Sales by Region

2003

during the subject fiscal year, with the same statements whenconverted into yen at the average exchange rates prevailing during
the previous fiscal year. In currency markets during the subject fiscal
year, the yen weakened 2.7% against the U.S. dollar to ¥116.96,
9.3% against the euro to ¥150.95, and 15.3% against the Thai baht
to ¥3.24. Because the yen fell against all these main currencies, theoperating results of Group companies in the United States, Europe
and Thailand swelled compared to conversion at the rate during theprevious fiscal year. For the Group overall, the effect of exchange
rates added ¥6,823 million to net sales and ¥5,421 million to
net income.

2004

2005

2006

2007

(Based on the location of the Company’s offices)(% of total)

100

75

67.5

4.8

69.4

4.6

74.9

71.2

69.3
50

13.2

4.1
11.0

7.1

7.9

13.8

11.4

13.2

14.5

12.2

10.0

10.3

9.6

Japan

166,178

188,441

230,946244,998

270,373

Asia

11,705

12,404

12,64824,52730,928Europe32,63937,48633,80339,232

51,336

North America

35,771

33,11330,77535,47137,456

Sales to Domestic and Foreign Customers

2003

2004

2005

2006

2007

(Millions of yen)

25

0(% of total)

100(Based on the location of customers)

56.0

54.6

54.0

50.4

45.8

75

50

29.0

13.3

16.5

20.1

25.2

15.8

14.8

11.8

12.0

13.7

14.9

14.1

14.1

12.4

11.5

Japan

138,006

148,325

166,414173,506

178,547

Asia and Other Areas

32,80644,66861,80886,848113,068

Europe38,78940,16836,43041,20153,524

North America

36,69238,283

43,52042,673

44,95425(Millions of yen)

033

Net Income
nies, along with a decline in equity in earnings of affiliates from ¥1,285
million the previous fiscal year to ¥642 million for the subject fiscal year.
Other income and expenses included a ¥9,520 million increase in gainon sales of property, plant and equipment, against a ¥2,703 million
increase in loss on disposal of property, plant and equipment from theprevious fiscal year, along with a ¥2,958 million decrease in loss on
clarification of soil pollution and others, and a ¥1,145 million decrease inloss on impairment. As a result, net income for the subject fiscal year rose
10.3% year on year to ¥83,391 million.
Return on assets (ROA) declined by 0.6 percentage point to 20.6%,
and return on owners’ equity (ROE) fell by 1.2 percentage points to 25.9%.
Dividends for the subject fiscal year consisted of an interim dividend of ¥30
per share and a year-end dividend of ¥35 per share, for an aggregate ¥65
per share for the full year, an increase of ¥5 from the previous fiscal year.
Hoya paid an interim dividend during the previous fiscal year of ¥120 per
share, but if adjusted retroactively to reflect the four-for-one stock split
implemented in November 2005, it is equal to ¥30 per share, which alongwith the year-end dividend from the previous fiscal year of ¥30 per shareamounts to a full-year dividend of ¥60 per share.

As net sales expanded, the cost of sales also rose, increasing 14.8% year
on year to ¥197,410 million. Because cost of sales grew at a rate greaterthan the 13.3% increase in net sales, the gross profit margin slipped to49.4%, down 0.6 percentage point from 50.0% in the previous fiscal year.
Selling, general and administrative (SG&A) expenses rose 20.2% from theprevious fiscal year to ¥85,470 million, with the ratio of SG&A expenses to
net sales up 1.2 percentage points to 21.9% from 20.7% a year earlier. As
a result, although operating income increased 6.1% to ¥107,213 million,
the operating income ratio declined 1.9 percentage points to 27.5%. All of
the expenditures were the result of proactive spending to ensure future
growth, including capital expenditures and marketing activities, as well as
research and development, and personnel increases. By quarter, theoperating income ratio was 29.4% in the first quarter, 28.4% in the second
quarter, 27.5% in the third quarter and 24.8% in the fourth quarter.
Ordinary income for the subject fiscal year declined 0.7% year on yearto ¥102,909 million. This was due mainly to foreign exchange losses during
the subject fiscal year of ¥6,711 million, compared to a gain of ¥243 million
during the previous fiscal year, arising from the effect of exchange rate
conversions related to credit and debit of funds between Group compa-

Operating Income,Ordinary Income and Net Income

2003

2004

2005

2006

2007

(Millions of yen)

120,000
100,000
80,00060,00040,00020,0000(Millions of yen)

Operating income

52,983

68,16784,920101,096

107,213

Ordinary income

50,87466,55489,525

103,638

102,909

Net income

20,03839,54964,13575,62083,391

Quarterly Profits

1Q

2Q

2006

3Q

4Q

1Q

2Q

2007

3Q

4Q

(Millions of yen)

30,00025,00020,00015,00010,0005,000

0(Millions of yen)

34

Operating income

25,056

24,74027,25724,04327,241

28,12527,216

24,631

Ordinary income

27,466

26,974

27,161

22,03725,14025,70025,14826,921

Net income

20,38918,596

20,12016,51521,50022,89919,96419,028

Profit Ratios

2003

2004

2005

2006

2007

(%)

35
30
25
20
15
10
5
0

(%)

Operating income ratio

21.5

25.1

27.6

29.4

27.5

Ordinary income ratio

20.7

24.5

29.1

30.1

26.4

Return on sales

8.1

14.6

20.8

22.0

21.4

Quarterly Profit Ratios

1Q

2Q

2006

3Q

4Q

1Q

2Q

2007

3Q

4Q

(%)

35
30
25
20
15
10
5
0

(%)

Operating income ratio

30.6

29.1

31.2

26.7

29.4

28.4

27.5

24.8

Ordinary income ratio

33.6

31.7

31.1

24.4

27.1

25.9

25.4

27.1

Return on sales

24.9

21.9

23.1

18.3

23.2

23.1

20.2

19.1

Profitability

2003

2004

2005

2006

2007

(%)

30
25
20
15
10
5
0

(%)

Return on owners’ equity (ROE)

9.0

17.8

25.8

27.1

25.9

Ordinary income/total assets

18.4

23.6

27.9

29.1

25.4

Return on assets (ROA)

7.3

14.0

20.0

21.2

20.6

Note: From the fiscal year ended March 31, 2007, the Company has applied “Accounting Standard for Presentation of Net Assets in the Balance Sheet” (Statement No.5 issued by the
Accounting Standards Board of Japan on December 9, 2005) and “Guidance on Accounting Standard for Presentation of Net Assets in the Balance Sheet” (Guidance No.8 issued
by the Accounting Standards Board of Japan on December 9, 2005), replacing “Return on shareholders’ equity” used to date with “Return on owners’ equity.” The figures for“Return on owners’ equity” presented for the fiscal year ended March 31, 2006 and earlier correspond to those of the former “Return on shareholders’ equity.”

35

Segment Overview

Information Technology (Electro-Optics and Photonics Division)
Net sales in the Electro-Optics division rose 15.1% year on year to¥219,252 million. In mask blanks for semiconductor production, where
Hoya holds a large share of the global market, a rising proportion ofsales came from such high-precision products as phase shift mask
blanks, as semiconductor feature sizes are required further to shrink.
In photomasks for semiconductor production, an area in which Hoya
has focused on cutting-edge development, there was also a rise insales of high-precision products. In photomasks for large-sized LCD
panels, however, sales were down as a result of falling unit prices
arising from greater competition in the photomask market. In glass
disks for hard disk drives (HDDs), Hoya enhanced its production
capacity in response to robust demand in the global market arisingfrom such factors as the replacement of desktop computers withnotebooks, achieving a sharp rise in revenue. In optical glass products,
demand for aspheric molded lenses expanded as a result of higher
resolutions and enhanced zoom features in digital cameras. Demandfor camera lenses for mobile phones was also strong, and sales rose.
Operating income in the Electro-Optics division rose 7.0% to¥80,085 million. During the first half, high plant capacity utilization
rates underpinned by robust market demand kept the operating
income ratio around 38%, but the ratio declined in the second half due
to greater competition in the market for photomasks for large-sized
LCD panels, rising production costs for HDD glass disks arising fromthe shift to a new technology (perpendicular magnetic recording), andan increase in depreciation cost. By quarter, the operating income ratio
was 38.6% in the first quarter, 38.1% in the second quarter, 36.6% in
the third quarter and 32.6% in the fourth quarter.
As indicated in the graph for “Sales Growth and Profitability ofMain Business Segments” (“the segment graph”), the net sales
growth rate in the Electro-Optics division, like in the previous year, washigher than the consolidated average growth rate for net sales of
13.3% (the center of the circle is above the Consolidated Basis line),

while the operating income ratio declined slightly from the previous
fiscal year (the circle shifted to the left).
Capital expenditures in the Electro-Optics division rose 7.1% to¥39,899 million, mainly for increases in production capacity for HDD
glass disks and optical lenses, and the establishment of a new plant
for large-sized LCD mask blanks.
Net sales for the Photonics division fell 9.9% from the previous
fiscal year to ¥9,093 million, while operating income fell 47.5% to¥490 million. The main reason for the decline was a significant falloff insales of pattern defect correction equipment for LCDs.

2005

Electro-Optics Division

2006

2007

(Millions of yen)(%)

250,000

40

200,000

20

150,0000
100,000
50,0000

Net sales (Millions of yen)

165,664

190,552

219,252

Operating income (Millions of yen)

63,29074,86280,085

Operating income ratio* (%)

38.1

39.1

36.5

Assets (Millions of yen)

162,638

204,192

258,746

Depreciation (Millions of yen)

14,73018,71627,449

Capital expenditures (Millions of yen)

31,962

37,24439,899* The operating income ratio above is calculated using net sales plus intersegment
sales. Please refer to details on page 65, Segment Information.

Sales Growth and Profitability of Main Business Segments
Fiscal year ended March 31, 2007 (Compared with the previous fiscal year)

Sales Growth Ratio (%)

Consolidated Basis

17

Size of circle shows the volume of operating income.

Vision Care
15

Health Care
Consolidated Basis

13

Electro-Optics

11

Operating Income Ratio (%) 15

36

20

25

30

35

40

9

Eye Care (Vision Care Division)
Net sales of the Vision Care division rose 14.7% to ¥119,808
million. In the domestic eyeglass lens market there were signs of ashrinking of the market due to population decline and greater
prevalence of low-cost products manufactured in Asia, but Hoya
managed to keep sales to a 0.1% increase, roughly on par withthe previous fiscal year, through introduction of new products andenhanced marketing for high-value-added products. In Europe,
where demand for high-value-added lenses is strong, sales wereup 27.0% year on year, the fruit of strategies tailored to thepreferences of each region. In the Asia-Pacific region, although themarket is strongly oriented toward low-cost products, there has
been a steady increase in customers specifically requesting
Hoya’s high-value-added products. Further, a focus on marketing
activities tailored to the market characteristics of the Asia-Pacificregion, such as the introduction of new brands, led to a 14.5% risein sales. In North America as well, the market penetration of the
Hoya brand is steadily rising, and revenue rose 15.5% from theprevious fiscal year.
Operating income for the Vision Care division increased 3.9%
from the previous fiscal year to ¥21,167 million, with an operating
income ratio of 17.7%, 1.8 percentage points lower than in theprevious fiscal year. The main factor pushing down the operating
income ratio was proactive investment in marketing and sales
promotions oriented toward the future of overseas markets. Byquarter, the operating income ratio was 18.5% in the first quarter,
18.1% in the second quarter, 16.8% in the third quarter and 17.4%
in the fourth quarter. Although profit margins declined, expansion inoverseas markets allowed Hoya to achieve sales growth thatexceeded the growth rate on a consolidated basis, shifting theposition of the circles in the segment graph upward and to the left.
Capital expenditures in the Vision Care division increased
46.7% to ¥11,672 million. The main uses for this investment were
investments of funds to further develop an IT system and develop
new products, along with efforts to establish a global production
structure aimed at optimal production locations.

2005

2006

2007

(Millions of yen)(%)

120,000

40

100,000
20
80,000060,00040,00020,0000

Net sales (Millions of yen)

94,971

104,457

119,808

Operating income (Millions of yen)

17,07920,37021,167

Operating income ratio* (%)

18.0

19.5

17.7

Assets (Millions of yen)

90,76598,243

118,229

Depreciation (Millions of yen)

5,900

6,444

7,405

Capital expenditures (Millions of yen)

6,787

7,958

11,672* The operating income ratio above is calculated using net sales plus intersegment
sales. Please refer to details on page 65, Segment Information.

Sales Growth and Profitability by Geographical Segment
Fiscal year ended March 31, 2007 (Compared with the previous fiscal year)

Sales Growth Ratio (%)

Consolidated Basis

130

Size of circle shows the volume of operating income.

100

70

Asia
40

EuropeJapan
Consolidated Basis

10

North America
Operating Income Ratio (%) 0

5

10

15

20

25

30

35

40

-20

37

Segment Overview

Eye Care (Health Care Division)
Net sales for the Health Care division grew 15.1% year on year to¥40,850 million. In contact lenses, amid sweeping changes in themarket following revision of the remuneration system for medical
services, Hoya achieved revenue growth through continued openingof new locations of directly managed Eye City stores, along withcustomer appreciation of high-quality service. In intraocular lenses(IOLs) used for surgical treatment of cataracts, sales rose both inJapan and overseas as a result of Hoya’s growing share of thedomestic market, where high-quality products are valued, along withsteadily growing visibility in overseas markets.
Operating income for the Health Care division increased 34.3%
to ¥9,215 million, with an operating income ratio of 22.6%, 3.3
percentage points higher than in the previous fiscal year. During theprevious fiscal year, the Company changed the method of
accounting for expenses related to the points awarded tocustomers for product purchases at Eye City, resulting in a fullyear’s worth of point system expenses being recorded as a lumpsum in the fourth quarter of that fiscal year, which provided asignificant boost to earnings. By quarter, the operating income
margin was 21.7% in the first quarter, 23.3% in the second quarter,
20.5% in the third quarter and 24.6% in the fourth quarter.
In the segment graph on page 36, as a result of improvement inboth net sales growth rate and the profit margin, the circle shifted
upward and to the right.
Capital expenditures in the Health Care division decreased
11.4% to ¥2,119 million. Although the Company shifted IOL
production plants overseas and made other expenditures, thedecline arose from a temporary R&D investment generated in theprevious fiscal year.

2005

2006

2007

(Millions of yen)(%)

50,00040

40,00020

30,0000
20,00010,0000

Net sales (Millions of yen)

31,40935,48440,850Operating income (Millions of yen)

7,141

6,859

9,215

Operating income ratio* (%)

22.7

19.3

22.6

18,33019,927

24,410Assets (Millions of yen)
Depreciation (Millions of yen)

669

855

1,170

Capital expenditures (Millions of yen)

738

2,391

2,119

* The operating income ratio above is calculated using net sales plus intersegment
sales. Please refer to details on page 65, Segment Information.

Other Businesses
The Crystal and Services businesses used to be presented
separately as individual divisions. However, shrinking sales andoperating income brought about by restructuring has reduced theimportance of separate presentation, and from the fiscal year ended
March 31, 2007, these businesses are presented together as“Other Businesses.”
The Crystal business has been reduced in scale throughrestructuring, but is currently continuing to pioneer new markets and38

develop unique products by adhering to a concept unlike that
followed previously. The Services business provides IT systems,
outsourcing and other services to Hoya Group companies. The
division’s temporary staffing business was sold on March 1, 2006,
which resulted in the decline in both revenue and earnings of the“Other Businesses.”Capital Expenditures
Depreciation, Amortization and Other

2003

2004

2005

2006

2007

(Millions of yen)

60,00050,00040,00030,00020,00010,0000(Millions of yen)

Capital expenditures

15,94830,65940,17548,78654,432

Depreciation, amortization and other

19,792

25,32822,52027,48536,427

Note: Depreciation, amortization and other includes depreciation, amortization of goodwill, and loss on impairment of long-lived assets.

Research andDevelopment Expenses

(%)

2003

2004

2005

2006

2007

(Billions of yen)

5

15

4

12

3

9

2

6

1

3

0

0

R&D expenses (Billions of yen)

8.7

9.8

10.9

14.1

14.9

R&D expenses/net sales (%)

3.5

3.6

3.6

4.1

3.8

Group Employees by Region

2003

2004

2005

2006

2007

16.7

14.2

11.1

10.1

22.5

(% of total)

100

75

52.4

65.9

71.1

75.6

76.6

50

25

14.8
10.3

10.1
7.3

8.5
6.2

8.0
5.3

8.5
4.9

28,450(Persons)

14,02318,092

21,23425,176

Japan

3,150

3,023

3,007

2,800

2,861

Asia

7,346

11,925

15,102

19,03021,780Europe

2,082

1,821

1,809

2,009

2,429

North America

1,445

1,323

1,316

1,337

1,380

Total

0

39

Financial Position
In terms of assets, current assets increased by 29.9% from the endof the previous fiscal year to ¥275,707 million. The main factors for
this, following the increases in revenue and earnings, were a 44.3%
increase in cash and deposits to ¥120,622 million, a 20.3% rise innotes and accounts receivable—trade to ¥94,297 million, and a
20.7% increase in inventories to ¥49,722 million. The rate of growthin cash and deposits was particularly high owing to a decline in
expenditures for acquisition of treasury stock, from ¥64,032 million
in the previous fiscal year to ¥13 million during the subject fiscal
year. Total property, plant and equipment increased 18.8% year on
year to ¥143,218 million, total investment and other assets rose
0.2% to ¥28,719 million, and total noncurrent assets expanded
15.3% to ¥171,938 million. As a result, total assets at the end of thesubject fiscal year amounted to ¥447,644 million, an increase of
23.8% from the end of the previous fiscal year.
In terms of liabilities, notes and accounts payable—tradedecreased 1.2% to ¥27,733 million, while income tax payable
declined 10.6% to ¥12,821 million, with total current liabilities
decreasing 1.4% from the end of the previous fiscal year to ¥78,181
million. Noncurrent liabilities increased 26.5% from the end of theprevious fiscal year to ¥2,318 million. As a result, total liabilities atthe end of the subject fiscal year amounted to ¥80,499 million, adecrease of 0.8% from the end of the previous fiscal year.
In terms of net assets, retained earnings rose ¥56,167 million, or
21.1%, year on year to ¥322,513 million as a result of an increase in

Total Assets,
Owners’ Equity andOwners’ Equity Ratio

(%)

2003

net income to ¥83,391 million, against ¥25,843 million in dividends
paid, and a decline in other components totaling ¥1,381 million.
Treasury stock declined ¥3,528 million. Consequently, total
shareholders’ equity amounted to ¥331,924 million. Translation
adjustments were ¥33,264 million, up ¥26,122 million year on year.
As a result, total accumulated gains (losses) from revaluation andtranslation adjustments amounted to ¥33,178 million. Total net
assets were ¥367,145 million.
Also, from the fiscal year ended March 31, 2007, in accordancewith the “Accounting Standard for Presentation of Net Assets in the
Balance Sheet” (Statement No.5 issued by the AccountingStandards Board of Japan on December 9, 2005) and “Guidance on
Accounting Standard for Presentation of Net Assets in the Balance
Sheet” (Guidance No.8 issued by the Accounting Standards Boardof Japan on December 9, 2005), the “Shareholders’ equity” section
has been replaced by a “Net assets” section, to which“Accumulated gains (losses) from revaluation and translation
adjustments,” “Stock subscription rights,” and “Minority interests”
have been added to shareholders’ equity. As a replacement for theformer “Shareholders’ equity” the Company uses “Owners’ equity,”
which excludes “Stock subscription rights” and “Minority interests”
from “Net assets.” The ratio of owners’ equity to total assets(owners’ equity ratio; the former shareholders’ equity ratio) for the
subject fiscal year was 81.6%, a total of 4.3 percentage points
higher than the 77.3% in the previous fiscal year.

2004

2005

2006

2007

90

(Millions of yen)

500,000

85

400,000

80

300,000

75
200,000

70

100,000

65
60

Total assets (Millions of yen)

274,289

289,887

351,482

361,538

447,644

Owners’ equity (Millions of yen)

224,219

218,979

277,889

279,481365,102

81.7

75.5

79.1

77.3

81.6

Owners’ equity ratio (%)

400Cash Flows
Cash provided by operating activities amounted to ¥98,793 million,a decrease of ¥7,062 million from the previous fiscal year. The main
factors with a positive impact on cash were income before income
taxes and minority interests of ¥107,132 million (up ¥9,765 million
year on year) and depreciation and amortization of ¥36,339 million(up ¥10,087 million). The main factors with a negative impact on
cash were an increase in notes and accounts receivable of ¥13,801
million (up ¥9,759 million year on year), gain on sales of property,
plant and equipment of ¥9,629 million (up ¥9,520 million), an
increase in inventories of ¥4,799 million (up ¥2,252 million), andincome taxes paid of ¥23,362 million (up ¥5,115 million).
Net cash used in investing activities amounted to ¥46,652
million, a decrease of ¥5,361 million from the previous fiscal year.

Net Cash Provided by Operating Activities

Despite expenditures of ¥52,379 million for purchases of property,
plant and equipment (up ¥4,637 million year on year), the decline
stemmed mainly from proceeds from sales of property, plant andequipment of ¥10,218 million (up ¥9,951 million).
Net cash used in financing activities amounted to ¥23,891
million, a decrease of ¥61,897 million from the previous fiscal year.
Although dividends paid totaled ¥25,810 million (up ¥2,407 million
year on year), the decline stemmed mainly from payments forpurchases of treasury stock (¥64,032 million in the previous fiscal
year), which fell to just ¥13 million for the subject fiscal year.
As a result of the above, the balance of cash and cash
equivalents at the end of the subject fiscal year totaled ¥120,622
million, an increase of ¥37,048 million.

2003

2004

2005

2006

2007

(Millions of yen)

120,000
100,000
80,00060,00040,00020,0000(Millions of yen)

Net income

20,03839,54964,13575,62083,391

Net cash provided by operating activities

38,39078,74476,000105,855

98,793

Quarterly Net Cash Provided by Operating Activities

1Q

2Q

2006

3Q

4Q

1Q

2Q

2007

3Q

4Q

(Millions of yen)

50,00040,00030,00020,00010,0000(Millions of yen)

Net income

20,38918,596

20,12016,51521,50022,89919,96419,028Net cash provided by operating activities

17,75929,802

17,02541,26914,06635,017

19,95029,76041

Stock Price Data

(Times)

2003

2004

2005

2006

2007

5,000

80

4,000

60

3,000

40

2,000

20

1,000

0

0

Price earnings ratio (Times)

41.8

28.9

20.4

27.7

20.2

Price cash flow ratio (Times)

21.6

14.5

17.2

19.7

17.1

Price book value ratio (Times)

3.7

5.2

4.7

7.3

4.6

Stock price at fiscal year-end (Yen)

1,787

2,537

2,950

4,750

3,910

(after adjustment for stock split)

Stock Priceand Trading Volume

(Yen)

100

Stock price (Yen)

FY2007

FY2006

Trading volume (Thousands of shares)

100,000

5,000
80,0004,000
60,0003,000

40,0002,000

20,000

1,000

0

0

4 5 6 7 8 9 10 11 12 1 2 3

Dividend Per Share

2003

2004

4 5 6 7 8 9 10 11 12 1 2 3 (Month)

2005

2006

2007

(Yen)

80

60

40

20

0

(Yen)

Period-end dividend

6.25

12.50

22.50

30.00

35.00

Interim dividend

6.25

12.50

15.00

30.00

30.00

Total dividend

12.50

25.00

37.50

60.00

65.00

Note: Interim dividends per share for the fiscal year ended March 31, 2006 and earlier have been retroactively adjusted to reflect a four-for-one split of common shares implemented
on November 15, 2005.

42

Business Risk
The main items believed to be potential risk factors for development of the businesses of the Hoya Group are described below. Mattersconcerning forward-looking activities included in these statements are based on information evaluated by Hoya’s management as of the datethese materials were prepared.

Fluctuation of Exchange Rates

Competence for Developing New Products

As the Hoya Group develops its business on a global scale, if thecurrencies of those countries in which the Hoya Group has major
manufacturing operations appreciate, export prices of its products
would rise, which would incur an increase in costs on a consolidated
basis. If the currencies of those countries in which the Hoya Grouphas major sales operations depreciate, it would bring about a decreasein sales.

In the industrial sector to which Hoya Group belongs, technologicaladvances are swift and the Hoya Group strives at all times to develop
state-of-the-art technologies. However, if the Hoya Group fails to
sufficiently predict changes in the sector and markets or to develop new
products that meet customer needs in time, the business results andfinancial condition of Hoya Group might be adversely affected.

Competition
Influence of International Situations
At present, the situation in some countries, is extremely tense.
Hereafter, in the event that movement of people, goods or money wererestrained extraordinarily in a certain region, or if certain unexpected
events took place in those countries in which the Hoya Group hasbusiness operations—including changes in the political, economic orlegal environments, labor shortages, strikes, or natural calamities, etc.—
certain problems may arise in the execution of business operations.

The Hoya Group, which has the top market share for its many productsin their respective sectors, is constantly exposed to relentlesscompetition. There is no guarantee that the Hoya Group can maintain its
overwhelming market share and compete efficiently in future. If
customers shift allegiance due to cost pressures or inefficiency of
Hoya’s competitiveness, the business results and financial condition of
Hoya Group might be adversely affected.

Production Capacity
Our Business as in Production Goods
Every part of the Electro-Optics products range, which constitutes amajor portion of the Hoya Group revenue, involves intermediate
production goods, components or materials. Therefore, growth of thebusiness thereof is affected substantially by the market conditions ofsuch products as semiconductors, LCD panels and HDDs that are
manufactured utilizing the Hoya Group products, and by that of personal
computers and home appliances, etc. that are manufactured utilizing theresultant products.

At present, the Hoya Group reinforces its production capacity so as tomeet orders that exceed existing production capacity in multiple
business areas. However, if the setting up of such capacity were
delayed for any reason, it would affect not only the Hoya Group’s results
but also the production and sales plans of its customers, which mightbring about increased market share for its competitors, etc., andadversely affect the business results and financial condition of the
Hoya Group.

New Business
Emergence of Discounters andLowering of Prices in the Consumer Goods Sector
In recent years in the eyeglass and contact lens markets, discountshops of an unprecedented type have emerged and brought about alowering of prices. If the influence of such discount shops swells to an
extent that cannot be absorbed by the Hoya Group’s cost reduction
efforts and strategies for adding high value both in Japan and abroad,the business results and financial condition of the Hoya Group might be
adversely affected.

New business is important for future growth. In the event that nopromising new business is developed, the growth of the Hoya Groupmight not be achieved as planned. Besides, the Hoya Group may carryout mergers and acquisitions as a part of its business strategy. If
unexpected obstacles emerge after such acquisition and unscheduled
time and costs are required, the business results and financial conditionof the Hoya Group might be adversely affected.

Disclaimer
This report is provided solely for the purpose of reference to those investors making their own evaluation of theCompany at their own risk. We accept no liability whatsoever for any direct or consequential loss arising from any useof this report.

43

Consolidated Balance Sheets
Hoya Corporation and Subsidiaries
March 31, 2007 and 2006

Thousands of U.S. Dollars(Note 1)Millions of Yen

2007

2006

2007

¥ 120,622¥ 83,574$ 1,021,787   Trade

94,29778,381

798,789   Other

2,142

1,426

18,145   Allowance for doubtful receivables(1,312)(1,513)(11,114)

Inventories (Note 4)

49,722

41,178421,194

Deferred income taxes (Note 8)

7,068

7,408

59,873ASSETS

CURRENT ASSETS:
Cash and cash equivalents
Notes and accounts receivable:

Other current assets

3,168

1,820

26,836    Total current assets

275,707212,274

2,335,510

PROPERTY, PLANT AND EQUIPMENT (Note 5):
Land

9,154

8,649

77,543

Buildings and structures

70,04061,583593,308

Machinery and vehicles

245,211

193,972

2,077,179

Furniture and equipment

29,991

25,023254,053

Construction in progress

11,91813,196

100,957

366,314

302,423

3,103,040(223,096)(181,819)(1,889,843)

143,218

120,604

1,213,197

Investment securities (Note 3)

2,898

2,956

24,549Investments in non-consolidated subsidiaries and affiliated companies

11,678

11,063

98,924

Goodwill

2,243

1,875

19,000Software

2,431

3,922

20,593

Lease deposits

3,435

3,006

29,098Deferred income taxes (Note 8)

2,724

2,757

23,075

Other assets

3,632

3,377

30,768

Allowance for doubtful receivables

(322)

(296)

(2,728)    Total
Less—accumulated depreciation    Net property, plant and equipment

INVESTMENTS AND OTHER ASSETS:    Total investments and other assets
TOTAL
See notes to consolidated financial statements.

44

28,71928,660243,279¥ 447,644¥ 361,538$ 3,791,986

Thousands of U.S. Dollars(Note 1)Millions of Yen

LIABILITIES AND NET ASSETS

2007

2006

2007

¥ 27,733¥ 28,070$ 234,926

CURRENT LIABILITIES:
Notes and accounts payable:   Trade

11,857

12,950100,440

Income taxes payable (Note 8)

12,821

14,342

108,607

Accrued bonuses to employees

4,328

4,208

36,662

Accrued expenses

13,695

18,409116,010

Other current liabilities

7,747

1,326

65,625    Total current liabilities

78,18179,305662,270

890

620

7,539

   Construction and other

LONG-TERM LIABILITIES:Allowance for periodic repairs
Other long-term liabilities

1,428

1,212

12,097    Total long-term liabilities

2,318

1,832

19,636TOTAL LIABILITIES

80,49981,137

681,906

CONTINGENT LIABILITIES (Notes 10 and 11)
NET ASSETS (Notes 2.q and 7):
SHAREHOLDERS’ EQUITY (Notes 14 and 16):
 Common stock—authorized, 1,250,519,400 sharesissued, 435,017,020 shares

6,264

6,264

53,062

Capital surplus

15,89915,899134,680

Retained earnings

322,513

266,346

2,732,003

  Treasury stock, at cost—3,447,681 shares in 2007
and 4,401,607 shares in 2006

(12,752)(16,280)(108,021)    Total shareholders’ equity

331,924

272,229

2,811,724

(86)

110

(729)

33,2647,142

281,779

33,1787,252

281,050

167

—

1,415

1,876

920

15,891

ACCUMULATED GAINS (LOSSES) FROM REVALUATION AND
TRANSLATION ADJUSTMENTS
Net unrealized gain (loss) on available-for-sale securities, net of tax
Foreign currency translation adjustments   Total accumulated gains (losses) from revaluation andtranslation adjustments
Stock subscription rights (Note 15)
MINORITY INTERESTSTOTAL NET ASSETS

367,145

280,401

3,110,080

TOTAL¥447,644¥361,538$3,791,986

45

Consolidated Statements of Income
Hoya Corporation and Subsidiaries
Years Ended March 31, 2007, 2006 and 2005

Thousands of U.S. Dollars(Note 1)Millions of Yen

2007

2006

2005

2007

NET SALES¥390,093¥344,228¥308,172$3,304,473

COST OF SALES (Notes 9 and 10)

197,410172,034

158,024

1,672,258    Gross profit

192,683

172,194

150,148

1,632,215

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES(Notes 9 and 10)

85,47071,09865,228724,015    Operating income

107,213101,096

84,920908,200

2,922

1,795

1,022

24,752

(87)

(142)

(87)

(737)
(56,849)

OTHER INCOME (EXPENSES):Interest and dividend income
Interest expense(6,711)243

875

Equity in earnings of associated companies

642

1,285

3,708

5,438

Loss on clarification of soil pollution and others(767)(3,726)(1,980)(6,497)

Foreign exchange gains (losses)—net

—

(523)

(1,264)—(3,327)

(625)

(948)

(28,183)

Loss on closure of plant
Loss on disposal of property, plant and equipment(88)(1,233)

(859)

(745)

Additional retirement benefits paid to employees (Note 6)(1,055)(1,689)(843)(8,937)

Gain on sales of property, plant and equipment

9,629

109

195

81,567

—

1,656

—

—

(1,239)(879)(1,273)(10,495)(81)(3,729)(1,454)(686)

107,132

97,367

83,466

907,514

23,492

22,25018,690199,000

Loss on impairment of long-lived assets (Note 5)

Gain on transfer of business
Other income (expenses)—net    Other expenses—net
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTSINCOME TAXES (Note 8):
Current
Deferred    Total income taxes
MINORITY INTERESTS IN NET INCOME OFCONSOLIDATED SUBSIDIARIESNET INCOME

71

(512)

532

602

23,563

21,73819,222

199,602

(178)

(9)

(109)

(1,508)¥ 83,391¥ 75,620¥ 64,135$ 706,404

Yen

U.S. Dollars

2007

2006

2005

2007

Basic net income¥193.50¥171.71¥578.84$1.64

Diluted net income

192.78171.08577.52

1.63

Cash dividends applicable to the year

65.00

150.00150.000.55

PER SHARE OF COMMON STOCK (Notes 2.p and 13):

See notes to consolidated financial statements.

46

Consolidated Statements of Changes in Net Assets
Hoya Corporation and Subsidiaries
Years Ended March 31, 2007, 2006 and 2005

Millions of Yen
Outstanding
Number of
Shares ofCommonStock

BALANCE, MARCH 31, 2004

111,266,538

CommonStockCapitalSurplusRetained
Earnings

Treasury
Stock,
at Cost¥6,264¥15,899¥247,176¥(39,504)

Net income

Net Unrealized
Gain (Loss)on Availablefor-Sale
Securities,
Net of Tax¥(30)

Foreign
Stock
Currency
Subscription
Translation
RightsAdjustments

Minority
Interests¥(10,826)

¥ 722

¥ —

64,135

Appropriations:   Cash dividends, ¥110.00 per share(12,241)   Bonuses to directors(63)

Repurchase of treasury stock(3,437)

Disposal of treasury stock

118,142(38)

Retirement of treasury stock

(50)

961

(30,702)30,702 Net increase in unrealized gain on
available-for-sale securities

68 Net increase in foreign currencytranslation adjustments

6,138

Net increase in minority interests
BALANCE, MARCH 31, 2005

109
111,381,243

6,264

15,899Net income

268,255(7,879)38(4,688)—831

75,620Appropriations:   Cash dividends, ¥210.00 per share(23,398)   Bonuses to directors(65)

Stock split (Note 13)

334,143,729

Repurchase of treasury stock(15,695,711)

Disposal of treasury stock

786,152(64,032)

Retirement of treasury stock

(871)

2,450

(53,181)

53,181 Net increase in unrealized gain on
available-for-sale securities72 Net increase in foreign currencytranslation adjustments

11,830Net increase in minority interests

89

Other decreases
BALANCE, MARCH 31, 2006

(14)
430,615,413

6,264

15,899266,346(16,280)

110

7,142

—

920

83,391

Net income
Appropriations:(25,843)   Cash dividends, ¥60 per share(64)   Bonuses to directors
Repurchase of treasury stock(2,861)

Disposal of treasury stock

956,787(13)(1,607) Changes attributed to accounting changes
in overseas consolidated subsidiaries

3,539

290

 Net increase in unrealized gain on
available-for-sale securities(196) Net increase in foreign currencytranslation adjustments

26,122167 Net increase in stock subscription rights

956 Net increase in minority interests
2

Other increase
BALANCE, MARCH 31, 2007

431,569,339¥6,264¥15,899¥322,513¥(12,752)¥(86)¥ 33,264¥167¥1,87647

Thousands of U.S. Dollars (Note 1)

CommonStock

BALANCE, MARCH 31, 2006

$53,062

CapitalSurplusRetained
Earnings

Treasury
Stock,
at Cost$134,680 $2,256,213 $(137,907)

Net Unrealized
Gain (Loss)on Availablefor-Sale
Securities,
Net of Tax$ 931

Foreign
Stock
Currency
Subscription
Translation
RightsAdjustments

Minority
Interests$ 60,500$ 7,793$—

706,404

Net income
Appropriations:(218,916)   Cash dividends, $0.51 per share(542)   Bonuses to directors(110)

Repurchase of treasury stock(13,613)

Disposal of treasury stock Changes attributed to accounting changes
in overseas consolidated subsidiaries

29,9792,457 Net increase in unrealized gain on
available-for-sale securities(1,660) Net increase in foreign currencytranslation adjustments

221,279
1,415 Net increase in stock subscription rights

8,098 Net increase in minority interests
17

Other increase
BALANCE, MARCH 31, 2007
See notes to consolidated financial statements.

48$53,062$134,680 $2,732,003 $(108,021)$ (729)$281,779$1,415$15,891

Consolidated Statements of Cash Flows
Hoya Corporation and Subsidiaries
Years Ended March 31, 2007, 2006 and 2005

Thousands of U.S. Dollars(Note 1)Millions of Yen

2007

2006

2005

2007

¥107,132¥ 97,367¥ 83,466$907,514

OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments for:36,33926,252

21,661

307,827   Provision for (reversal of) allowance for doubtful receivables

(243)

235

(345)

(2,058)   Provision for accrued bonuses to employees

155

278

194

1,313

   Provision for reserve for periodic repairs

268

76

185

2,270

   Gain on sales of property, plant and equipment(9,629)

(109)

(195)

(81,567)   Loss on disposal of property, plant and equipment

3,327

625

948

28,183   Depreciation and amortization

88

1,233

859

745

4,783

(599)

(233)

40,517   Bonuses to directors

(65)

(65)

(63)

(551)

   Equity in earnings of associated companies(642)(1,285)(3,708)(5,438)—(1,656)

—

—

(700)

77

554

(5,932)    Decrease (increase) in notes and accounts receivable(13,801)(4,042)(5,393)(116,908)    Decrease (increase) in inventories(4,799)(2,547)(2,526)(40,652)    Decrease (increase) in other current assets

2,250

2,097

2,428

19,060    Increase (decrease) in notes and accounts payable(1,208)3,644(1,629)(10,233)

(781)

2,420

3,142

(6,616)(2,922)(1,795)(1,022)(24,752)

87

142

87

737

2,557

1,866

958

21,660

(41)

(112)

(110)

(347)

(23,362)(18,247)(23,588)(197,899)

—

—

330

—

     Total adjustments(8,339)8,488(7,466)(70,641)     Net cash provided by operating activities

98,793

105,855

76,000836,873   Loss on impairment of long-lived assets   Foreign exchange loss (gain)   Gain on transfer of business   Other   Changes in assets and liabilities:    Increase (decrease) in other current liabilities   Interest and dividend income   Interest expense   Interest and dividends—received   Interest—paid   Income taxes—paid   Income taxes—refunded

INVESTING ACTIVITIES:
30

—

—

254

Payments for investment securities(408)(2,070)(10)(3,456)

Acquisition of majority shares

(908)

(337)

—

(7,692)

Proceeds from sales of investment securities

Proceeds from sales of property, plant and equipment

10,218267

541

86,557

Payments for property, plant and equipment(52,379)(47,742)(33,394)(443,702)

—

2,230

—

—

Proceeds from transfer of business

654

271

532

5,541

Payments for purchases of other assets(3,859)(4,632)(3,193)(32,690)     Net cash used in investing activities(46,652)(52,013)(35,524)(395,188)

Proceeds from other assets49Thousands of U.S. Dollars(Note 1)Millions of Yen

2007

2006

2007

2005

FINANCING ACTIVITIES:Net decrease in short-term loans¥

Payments for purchases of treasury stock
Proceeds from sales of treasury stock
Dividends paid—¥   (208)

¥

(158)

$

—

(13)

(64,032)

(38)

(110)

1,934

1,855

911

16,383(25,810)(23,403)(12,246)(218,636)

(2)

0

(161)

(17)

     Net cash used in financing activities(23,891)(85,788)(11,692)(202,380)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

28,250(31,946)

28,784

239,305

Other

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQUIVALENTS

8,798

2,645

3,666

74,528

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

83,574

112,875

80,425

707,954¥120,622¥ 83,574

112,875$1,021,787¥¥ 53,181¥ 30,702$

CASH AND CASH EQUIVALENTS, END OF YEAR
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Retirement of treasury stock
See notes to consolidated financial statements.

50

—

—

Notes to Consolidated Financial Statements
Hoya Corporation and Subsidiaries

No. 1

BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated financial statements have been“Company”) prepared in accordance with Japanese GAAP and

prepared in accordance with the provisions set forth in the

filed with the appropriate Local Finance Bureau of the Ministry ofJapanese Securities and Exchange Law and its related accounting

Finance as required by the Securities and Exchange Law. Someregulations, and in conformity with accounting principles generally

supplementary information included in the statutory Japanese

accepted in Japan, “Japanese GAAP”, which are different in cer-language consolidated financial statements, but not required fortain respects as to application and disclosure requirements offair presentation, is not presented in the accompanying consolidat-

International Financial Reporting Standards.

ed financial statements.

The accounts of overseas subsidiaries are based on their

The translations of the Japanese yen amounts into U.S. dollars

accounting records maintained in conformity with generally accept-

are included solely for the convenience of readers outside Japan,

ed accounting principles prevailing in the respective ­countries ofusing the prevailing exchange rate at March 31, 2007, which was

domicile. The accompanying consolidated financial statements¥118.05 to U.S. $1. The convenience translations should not be

have been restructured and translated into English (with someconstrued as representations that the Japanese yen amounts

expanded descriptions and the inclusion of consoli­dated state-

have been, could have been, or could in the future be, converted

ments of changes in net assets for 2006 and 2005) from theinto U.S. dollars at this or any other rate of exchange.

consolidated financial statements of Hoya Corporation (theNo. 2SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIESa. Principles of Consolidation—The consolidated financial state-d. Investment Securities—All investment securities are classified

ments as of March 31, 2007 include the accounts of the Company

as available-for-sale securities. Marketable available-for-sale secu-

and its 67 (62 in 2006 and 58 in 2005) subsidiaries (together, therities are reported at fair value, with unrealized gains and losses,“Group”).

net of applicable taxes, reported in a separate component of net

Under the control or influence concept, those companies inwhich the Company, directly or indirectly, is able to exercise control over operations are fully consolidated, and those companies

assets. The cost of securities sold is determined based on themoving-average method.
Non-marketable available-for-sale securities are stated at costover which the Group has the ability to exercise significant

determined by the moving-average method. For other than tempo-­influence are accounted for by the equity method.

rary declines in fair value, investment securities are reduced to net

Investment in an affiliated company through the years is
accounted for by the equity method and remaining non-consolidated
subsidiaries and affiliated companies are stated at cost due toimmateriality.
All significant intercompany balances and transactions havebeen eliminated in consolidation. All material unrealized profits
included in assets resulting from transactions within the Groupare eliminated.

realizable value by a charge to income.
e. Property, Plant and Equipment—Property, plant and equipment
are stated at cost. Depreciation of property, plant and equipmentof the Company and its domestic subsidiaries is computed substantially by the declining-balance method at rates based on theestimated useful lives of the assets, while the straight-line method
is applied to buildings acquired on or after April 1, 1998 by theCompany and its domestic subsidiaries, and to almost all property,

b. Cash Equivalents—Cash equivalents are short-term invest-

plant and equipment of consolidated foreign subsidiaries. The net

ments that are readily convertible into cash, and are exposed tobook value of tangible fixed assets depreciated by the straight-line

insignificant risk of changes in value. Cash equivalents mature or

method was approximately 66.2% of total tangible fixed assets inbecome due ­within three months of the date of acquisition.

2007 and 66.4% in 2006. The ranges of useful lives are from 10 toc. Inventories—Inventories are stated principally at cost using the
average method.

50 years for buildings and structures and from 3 to 10 years formachinery and vehicles.

51

f. Impairment of Long-Lived Assets—The Group reviews its long-k. Income Taxes—The provision for income taxes is computed

lived assets for impairment when­ever events or changes in circum-

based on the pretax income included in the consolidated state-stance indicate the carrying amount of an asset or asset groupments of income. The asset and liability approach is used to rec-may not be recoverable. An impairment loss would be recognizedognize deferred tax assets and liabilities for the expected future

if the carrying amount of an asset or asset group exceeds the sum

tax consequences of temporary differences between the carryingof the undiscounted future cash flows expected to result from theamounts and the tax bases of assets and liabilities. Deferred taxes

continued use and even­tual disposition of the asset or asset

are measured by applying currently enacted tax laws to thegroup. The impairment loss would be measured as the amount by­temporary differences.

which the carrying amount of the asset exceeds its recoverable
amount, which is the higher of the discounted cash flows from thecontinued use and even­tual disposition of the asset or the net selling price at disposition.
g. Intangible Assets—Intangible assets are carried at cost lessaccumulated amortization, which is calculated by the straight-line
method. Amortization of software is calculated over 5 years.
Goodwill is amortized on a straight-line basis over its estimateduseful life determined for each investment, which does not exceed
20 years. However, insignificant goodwill is charged to income
when incurred.
h. Accounting for Significant Allowances and Reserves—i)	Allowance for doubtful receivables: Allowance for doubtfulreceivables is provided at an amount determined based on
the historical experience of bad debts with respect to ordinary
receivables, plus an estimate of uncollectible amounts forreceivables from companies in financial difficulty.
ii)	Accrued bonuses to employees: Accrued bonuses to employees are provided based on the estimated amount to be paid.
iii) A ccrued bonuses to directors: Accrued bonuses to directors
are provided based on the estimated amount to be paid.
iv) Reserve for periodic repairs: Reserve for periodic repairs is

retained earnings at each year end are reflected in the consolidated financial statements for the following year upon shareholders’approval or resolution of the Board of Directors.
m. Foreign Currency Translations—All short-term and long-termmonetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rates at thebalance sheet date. The foreign exchange gains and losses fromtranslation are recognized in the statements of income to theextent that they are not hedged by forward exchange contracts.
n. Foreign Currency Financial Statements—The balance sheet
accounts of the consolidated overseas subsidiaries and associated companies are translated into Japanese yen at the current
exchange rates as of the balance sheet dates except for shareholders’ equity, which is translated at historical exchange rates.
Differences arising from such translation are shown as “Foreign
currency translation adjustments” in a separate component of
net assets.
Revenue and expense accounts of the consolidated overseas
subsidiaries are translated into Japanese yen at the monthly­average exchange rates.

provided at amount estimated based on the expenses of theo. Derivatives and Hedging Activities—The Group uses deriva-

latest extensive repairs for continuous melting furnaces.

tive financial instruments to manage its exposures to fluctuations

i. Research and Development Expenses—Research and development expenses are charged to income when incurred.
j. Leases—All leases are accounted for as operating leases.

52

l. Appropriations of Retained Earnings—Appropriations ofin foreign currency exchange rates. Foreign exchange forward
contracts are utilized by the Group to reduce foreign currency
exchange risks. The Group does not enter into derivatives for
trading or speculative purposes.

Under Japanese accounting standards for leases, finance leases

Derivative financial instruments and foreign currency transac-

that deem to transfer ownership of the leased property to the les-tions are classified and accounted for as follows: (a) all derivatives

see are to be capitalized, while other finance leases are permitted

are recognized as either assets or liabilities and measured at fair

to be accounted for as operating lease transactions if certain “as if

value, and gains or losses on derivative transactions are recog-­capitalized” information is disclosed in the notes to the lessee’s

nized in the statements of income and (b) for derivatives used forconsolidated financial statements.

hedging purposes, if derivatives qualify for hedge accounting

because of high correlation and effectiveness between the hedg-r. Accounting Standard for Statement of Changes in Net

ing instruments and the hedged items, gains or losses on deriva-

Assets—Effective from the year ended March 31, 2007, thetives are deferred until maturity of the hedged transactions.

Company and its consolidated subsidiaries adopted the new

Hedging instruments and hedged items as of March 31, 2007
were as follows:

accounting standard, “Accounting Standard for Statement of
Changes in Net Assets” (Statement No.6 issued by the

Hedging instruments: Forward exchange contracts

Accounting Standards Board of Japan on December 27, 2005),

Hedged items:	Loans payable denominated inand the implementation guidance, “Guidance on Accounting

foreign currency
p. Per Share Information—Basic net income per share is­computed by dividing net income available to common share­
holders by the weighted-average number of common shares­outstanding for the period, retroactively adjusted for stock splits.
Diluted net income per share reflects the potential dilution that
could occur if the outstanding stock options were exercised into
common stock. Diluted net income per share of common stock
assumes full exercise of the outstanding stock options at the
beginning of the year (or at the time of grant).
Cash dividends per share presented in the accompanying consolidated statements of income are dividends applicable to therespective years including dividends to be paid after the end of
the year.
q. Accounting Standard for Presentation of Net Assets in the
Balance Sheet—Effective from the year ended March 31, 2007,
the Company and its consolidated subsidiaries adopted the new
accounting standard, “Accounting Standard for Presentation of
Net Assets in the Balance Sheet” (Statement No.5 issued by the
Accounting Standards Board of Japan on December 9, 2005), andthe implementation guidance “Guidance on Accounting Standard
for Presentation of Net Assets in the Balance Sheet” (Guidance
No.8 issued by the Accounting Standards Board of Japan on
December 9, 2005), (collectively, the “New AccountingStandards”).
Under the New Accounting Standards, the balance sheet comprises three sections, which are the assets, liabilities and net

Standard for Statement of Changes in Net Assets” (Guidance
No.9 issued by the Accounting Standards Board of Japan on
December 27, 2005), (collectively, the “Additional New
Accounting Standards”).
Accordingly, the Company prepared the statements of changes
in net assets for the year ended March 31, 2007 in accordancewith the Additional New Accounting Standards. Also, theCompany voluntarily prepared the consolidated statement ofchanges in net assets for 2006 in accordance with the Additional
New Accounting Standards. Previously, consolidated statementsof shareholders’ equity were prepared for the purpose of inclusionin the consolidated financial statements although such statements
were not required under Japanese GAAP.
s. Accounting Standards for Business Combinations, Etc.—
Effective April 1, 2006, the Company and its consolidated subsidiaries adopted the new accounting standards, “AccountingStandard for Business Combinations” (Business Accounting
Council Statement of Opinion, October 31, 2003) and “AccountingStandard for Business Divestitures” (Statement No.7 issued by
the Accounting Standards Board of Japan on December 27,2005), and the implementation guidance, “Guidance on
Accounting Standard for Business Combinations and AccountingStandard for Business Divestitures” (Guidance No.10 issued by
the Accounting Standards Board of Japan on December 27,2005).
Adoption of these standards has no impact on income for thecurrent fiscal year.

assets sections. Previously, the balance sheet comprised thet. Accounting Standard for Directors’ Bonus—Effective April 1,

assets, liabilities, minority interests, as applicable, and the share-

2006, the Company and its consolidated subsidiaries adopted theholders’ equity sections.

new accounting standard, “Accounting Standard for Directors’

The consolidated balance sheet as of March 31, 2006 has been
restated to conform to the 2007 presentation. There were noeffects on total assets or total liabilities from applying the New
Accounting Standards to the balance sheet as of March 31, 2006.
The adoption of the New Accounting Standards had no impact
on the consolidated statements of income for the years ended
March 31, 2007 and 2006.

Bonus” (Statement No.4 issued by the Accounting Standards
Board of Japan on November 29, 2005).
As a result, operating income and income before income taxes
and minority interests for the current fiscal year decreased by ¥68
million, respectively.
Adoption of this standard has little impact on segment
information.

53

u. Stock Option—Effective April 1, 2006, the Company and its

v. Reclassification and Restatement—Certain prior year amounts

consolidated subsidiaries adopted the new accounting standard,

have been reclassified to conform to the current year presentation.

“Accounting Standard for Share-based Payment” (Statement

Also, as described in Notes 2.q and 2.r, the consolidated balance

No.8 issued by the Accounting Standards Board of Japan on

sheet for 2006 has been adapted to conform to new presentation

December 27, 2005) and the implementation guidance, “Guidancerules of 2007. Also, in lieu of the consolidated statement of share-on Accounting Standard for Share-based Payment” (Guidance

holders’ equity for the year ended March 31, 2006, which was pre-No.11 issued by the Accounting Standards Board of Japan onpared on a voluntary basis for inclusion in the 2006 consolidated

December 27, 2005). As a result, operating income and income

financial statements, the Company prepared the consolidated state-

before income taxes and minority interests for the current fiscal

ment of changes in net assets for 2006 as well as for 2007.

year decreased by ¥167 million, respectively.

These reclassifications had no impact on previously reported
results of operations or retained earnings.

No. 3

INVESTMENT SECURITIESInvestment securities as of March 31, 2007 and 2006 consisted of the following:
Millions of Yen

Thousands of U.S. Dollars

2007

2006

2007
$13,062

Marketable equity securities¥1,542¥1,875Non-marketable equity securities

1,356

1,081

11,487

Total¥2,898¥2,956$24,549

The carrying amounts and aggregate fair values of marketable equity securities at March 31, 2007 and 2006 were as follows:
Millions of Yen
Cost

Unrealized Gains

Unrealized
LossesFair Value¥1,693¥—¥151¥1,542

1,693

182

—

1,875

March 31, 2007:
Available-for-sale—Equity securities
March 31, 2006:
Available-for-sale—Equity securities

Thousands of U.S. Dollars
Cost

Unrealized Gains

Unrealized
LossesFair Value$14,341$—$1,279$13,062

March 31, 2007:
Available-for-sale—Equity securities

Available-for-sale securities whose fair value was not readily determinable as of March 31, 2007 and 2006 were as follows:
Carrying AmountMillions of Yen

Equity securities
Investment to limited partnership and others
Total

2007

2006

2007

¥1,100¥ 802$ 9,318

256

279

2,169

¥1,356¥1,081$11,487

There were no sales of available-for-sale securities for the years ended March 31, 2007 and 2006.

54

Thousands of U.S. Dollars

No. 4INVENTORIESInventories at March 31, 2007 and 2006 consisted of the following:
Millions of Yen

Thousands of U.S. Dollars

2007

2006

2007

Finished products and merchandise¥17,453¥15,646$147,844

Semi-finished products and work in process

10,0699,446

85,294

Raw materials

9,498

6,836

80,457

Supplies

12,702

9,250

107,599

Total¥49,722¥41,178$421,194

No. 5

IMPAIRMENT OF LONG-LIVED ASSETSThe Group reviewed its long-lived assets for impairment for the

expense for a decline in value of the leased land in Machida-city,

years ended March 31, 2007, 2006 and 2005. As a result, thedue to a fall of market land prices. The carrying amount of theGroup ­recognized impairment ­losses of ¥88 million ($745 thou-­relevant land was written down to the recoverable amount, whichsand), ¥864 million and ¥92 million for the years ended March 31,

was measured at its declared value.

2007, 2006 and 2005, respectively, as other expense for a decline

The Group reviewed its long-lived assets for impairment forin value, mainly from property of certain plants including the Tokyo

the year ended March 31, 2005 and as a result, recognized an

Studio (in Akishima Plant) of the Crystal division, due to a continu-

impairment loss of ¥767 million as other expense for a decline inous operating loss of that unit. The carrying amount of the relevant

value, mainly from land of the Photonics division of the Maebashi

machinery was written down to the recoverable amount, which

Plant due to a close of that unit. The carrying amount of thewas measured at its value in use. The discount rate used for com-

relevant property, plant and equipment was written down to theputation of the present value of future cash flows was 5%.

recoverable amount, which was measured upon consultation of

The Group reviewed its long-lived assets for impairment for
the year ended March 31, 2006, and as a result recognized an

appraised value of land facing a thoroughfare and sales amount,among others.

impairment loss of ¥369 million ($3,141 thousand) as other

No. 6

RETIREMENT BENEFITS AND PENSION PLANS

The components of net periodic benefit costs for the years ended March 31, 2007, 2006 and 2005 were as follows:
Millions of Yen

Additional retirement benefits paid to employees
Net periodic benefit costs

Thousands of U.S. Dollars

2007

2006

2005

2007

¥1,055¥1,689¥843$8,937¥1,055¥1,689¥843$8,93755

No. 7NET ASSETS“Net assets” comprises four subsections, which are shareholders’Additional paid-in capital and legal earnings reserve may not be

equity, accumulated gains (losses) from revaluation and translation

distributed as dividends. Under the Code, however, on condition

adjustments, stock subscription rights and minority interests.

that the total amount of legal earnings reserve and additional paid-

The Japanese Corporate Law (“the Law”) became effective

in capital remained equal to or exceeded 25% of common stock,on May 1, 2006, replacing the Japanese Commercial Code (“thethey were available for distribution by resolution of the sharehold-Code”). The Law is generally applicable to events and transac-

ers’ meeting. Under the Law, all additional paid-in capital and alltions occurring after April 30, 2006 and for fiscal years ending

legal earnings reserve may be transferred to other capital surplus

after that date.

and retained earnings, respectively, which are potentially available

Under Japanese laws and regulations, the entire amount paid
for new shares is required to be designated as common stock.

The maximum amount that the Company can distribute as divi-

However, a company may, by a resolution of the Board ofdends is calculated based on the non-consolidated financial state-

Directors, designate an amount not exceeding one-half of thements of the Company in accordance with Japanese laws andprice of the new shares as additional paid-in capital, which isregulations.

included in capital surplus.
Under the Law, in cases where a dividend distribution of surplus

Since the Company introduced the committees system in 2003,
dividends may be paid upon resolution of the Board of Directors,

is made, the smaller of an amount equal to 10% of the dividend or

subject to certain limitations imposed by the Law. Interim divi-

the excess, if any, of 25% of common stock over the total of addi-

dends may also be paid upon resolution of the Board of Directors,

tional paid-in capital and legal earnings reserve must be set aside

subject to certain limitations imposed by the Law.

as additional paid-in capital or legal earnings reserve. Legal earn-

On May 31, 2007, the Board of directors resolved cash divi-ings reserve is included in retained earnings in the accompanying

dends amounting to ¥15,105 million ($127,954 thousand). Such

consolidated balance sheets.

appropriations have not been accrued in the consolidated financial

Under the Code, companies were required to set aside anamount equal to at least 10% of the aggregate amount of cash
dividends and other cash appropriations as legal earnings reserve56

for dividends.

statements as of March 31, 2007. Such appropriations are recognized when the Board of directors resolves them.
Both of the Code and the Law allow Japanese companies tountil the total of legal earnings reserve and additional paid-in

repurchase treasury stock and dispose of such treasury stock by

capital equaled 25% of common stock.

resolution of the Board of Directors. The repurchased amount ofUnder the Code, legal earnings reserve and additional paid-in

treasury stock cannot exceed the amount available for future divi-

capital could be used to eliminate or reduce a deficit by a resolu-

dend plus amount of common stock, additional paid-in capital ortion of the shareholders’ meeting or could be capitalized by a reso-

legal earnings reserve to be reduced in the case where suchlution of the Board of Directors. Under the Law, both of these

reduction was approved at the shareholders’ meeting. The

appropriations generally require a resolution of the shareholders’Company retired treasury stock of ¥53,181 million during the fiscal

meeting.

years ended March 31, 2006.

No. 8

INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in anormal effective statutory tax rate of approximately 40.4% for the years ended March 31, 2007, 2006 and 2005.
Significant components of deferred tax assets and liabilities as of March 31, 2007 and 2006 were as follows:
Millions of Yen

Thousands of U.S. Dollars

2007

2006

2007

   Inventories—intercompany unrealized profits¥2,647¥1,692$22,423   Accrued bonuses to employees

1,656

1,602

14,028   Accrued loss on clarification of soil pollution and others

—

1,474

—

   Accrued enterprise taxes

923

728

7,819

   Inventories—loss on write-down

78

254

661

   Other

1,764

1,658

14,942     Total¥7,068¥7,408$59,873¥1,577¥1,962$13,359

622

1,376

5,269

Current:
Deferred tax assets:

Non-current:
Deferred tax assets:   Amortization of goodwill and property, plant and equipment   Loss on impairment of long-lived assets

111

105

940

   Other

1,119

259

9,479

     Total

3,429

3,702

29,047   Reserves for special depreciation and other

540

705

4,574

   Other

165

240

1,398

     Total

705

945

5,972

¥2,724¥2,757$23,075   Allowance for doubtful receivables

Deferred tax liabilities:

Net deferred tax assets

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying­consolidated statements of income for the years ended March 31, 2007, 2006 and 2005 was as follows:
2007

2006

Normal effective statutory tax rate

40.4%

40.4%

40.4%

Lower or exemption income tax rates applicable to income in certain foreign countries(17.1)(18.2)(13.8)

0.4

0.4

0.4

Expenses not permanently deductible for income tax purposes

2005

Per capita portion

0.1

0.1

0.1

Non-taxable dividend income

(1.5)

(1.8)

(2.6)

Intercompany cash dividend and transactions

1.5

1.8

0.8

Equity in earnings of associated companies

(0.2)

(0.5)

(1.8)

Tax credit on research and development expenses

(0.7)

(0.5)

(0.8)

Other—net

(0.9)

0.6

0.3

Actual effective tax rate

22.0%

22.3%

23.0%

57

No. 9RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses charged to income for the years ended March 31, 2007, 2006 and 2005 were ¥14,920 million($127,565 thousand), ¥14,135 million and ¥10,957 million, respectively.

No. 10LEASESThe Group leases certain machinery, computer equipment, office space and other assets. Total rental expenses including lease ­payments forthe years ended March 31, 2007, 2006 and 2005 were ¥3,909 million ($33,113 thousand), ¥5,602 million and ¥5,802 million, respectively.
Pro forma information of leased property such as acquisition cost, accumulated depreciation, accumulated impairment loss, obligation
under finance lease, depreciation expense of finance leases that do not transfer ownership of the leased property to the lessee on an “as if
capitalized” basis for the years ended March 31, 2007 and 2006 was as follows:
Millions of Yen

Thousands of U.S. Dollars

2007

Acquisition cost

MachineryandVehiclesFurnitureand Equipment¥1,745658

Total

MachineryandVehiclesFurnitureand Equipment¥2,630¥4,375¥3,485

1,307

1,965

2,398

3

25

28

¥1,084¥1,298¥2,382

Accumulated depreciation
Accumulated impairment loss
Net leased property

2007

2006
Total

MachineryandVehiclesFurnitureand Equipment

Total¥2,084¥5,569$14,782$22,279$37,061

1,138

3,536

5,574

11,072

16,646

—

—

—

25

212

237

¥1,087¥ 946¥2,033$ 9,183$10,995$20,178

The imputed interest expense portion as lessee is included in the above acquisition cost.
Obligations under finance leases:
Millions of Yen

Thousands of U.S. Dollars

2007

2006

2007

Due within one year

¥ 704

¥ 833

$ 5,963

Due after one year

1,698

1,200

14,384

Total¥2,402¥2,033$20,347

Allowance for impairment loss on leased property of ¥9 million ($76 thousand) and ¥170 million as of March 31, 2007 and 2006 are notincluded in obligations under finance leases.
Depreciation expense and other information under finance leases:
Millions of Yen

Thousands of U.S. Dollars

2007

2006

2005

2007

Depreciation expense

¥718

¥726

¥959

$6,082

Lease payments

727

896

959

6,158

Reversal of allowance for impairment loss on leased property

9

170

105

76

Impairment loss

6

—

—

51

The imputed interest expense portion as lessee is included in the above obligations under finance leases.

58

Obligations under operating leases:
Millions of Yen

Due within one year

Thousands of U.S. Dollars

2007

2006

2007

¥184

¥—

$1,559Due after one year

400

—

3,388

Total

¥584

¥—

$4,947

No. 11CONTINGENT LIABILITIESAt March 31, 2007, the Group had the following contingent liabilities:
Millions of Yen

Guarantees of borrowings and lease obligations for customers
Guarantees of borrowings for the Group’s employees
Total

No. 12Thousands of U.S. Dollars

2007

2006

2007

¥2,772¥2,206$23,482

3

4

25¥2,775¥2,210$23,507

DERIVATIVESThe Group enters into foreign currency forward contracts to hedge

Derivative transactions entered into by the Group have been

foreign currency exchange risk associated with certain assets andmade in accordance with internal policies which regulate theliabilities denominated in foreign currencies.

authorization and credit limit amount.

All derivative transactions are entered into to hedge foreign

Foreign currency forward contracts which qualify for hedge

currency exposures incorporated within its business. Accordingly,

accounting for the years ended March 31, 2007 and 2006 andmarket risk in these derivatives is basically offset by opposite

such amounts which are assigned to the associated assets ormovements in the value of hedged assets or liabilities.

­liabilities and are recorded on the balance sheets at March 31,

Because the counterparties to these derivatives are limited
to major international financial institutions, the Group does not2007 and 2006, are not subject to disclosure of market value
information.

anticipate any losses arising from credit risk.

59

No. 13NET INCOME PER SHARE

Reconciliation of the differences between basic and diluted net income per share (“EPS”) for the years ended March 31, 2007, 2006 and2005 was follows:
Millions of Yen

Thousands ofSharesYen

U.S. Dollars

Net Income

Weighted-Average Shares

EPS

EPS

¥193.50

$1.64
$1.63

For the year ended March 31, 2007:¥83,391

430,968

Effect of dilutive securities—Stock options

—

1,615

Diluted EPS—Net income for computation¥83,391

432,583¥192.78¥171.71

Basic EPS—Net income available to common shareholders

For the year ended March 31, 2006:
Basic EPS—Net income available to common shareholders¥75,555

440,008

Effect of dilutive securities—Stock options

—

1,625

Diluted EPS—Net income for computation¥75,555

441,633¥171.08¥578.84

For the year ended March 31, 2005:
Basic EPS—Net income available to common shareholders¥64,072

110,690

Effect of dilutive securities—Stock options—

253

Diluted EPS—Net income for computation¥64,072

110,943¥577.52

On November 15, 2005, the Company effected four-for-one

stock in issue has increased to 449,396,020 shares. If the stock

stock split of its shares of common stock pursuant to a resolution

split had gone into effect at the beginning of the year ended March

approved at a meeting of the Board of Directors held on July 20,

31, 2005, net income per share would have been ¥144.71 in 2005.

2005. As a result, the number of shares of the Company’s common

No. 14SHAREHOLDERS’ EQUITY(For the year ended March 31, 2007)
Type and Number of Shares Issued, and Type and Number of Treasury Stock
Number of
Shares Issued
As ofMarch 31, 2006

Increases in
Number of
Shares Issued
for the Year Ended
March 31, 2007

Decreases in
Number of
Shares Issued
for the Year Ended
March 31, 2007

Number of
Shares Issued
As ofMarch 31, 2007

Shares issued
Common stock
Total

435,017,020——

435,017,020

435,017,020——

435,017,020

4,401,607

2,861

956,787

3,447,681

4,401,607

2,861

956,787

3,447,681

Treasury stock
Common stock*
Total

Note: *Details of increases and decreases are as follows:
Increase of 2,861 shares attributed to the repurchase of odd lot shares
Decrease of 387 shares attributed to the request for additional purchase of odd lot shares by shareholders
Decrease of 956,400 shares attributed to the exercise of stock options

60

No. 15

Stock Option PLANS(For the year ended March 31, 2007)
1. Description of Stock Option(1) Description of Stock Option Plans
1st stocksubscription rights
Type and number ofrecipients

2nd stocksubscription rights

3rd stocksubscription rights

Directors of the Company

6

Directors of the Company 

8Directors of subsidiaries

43

Directors of subsidiaries

14

Employees of the Company 121

Employees of the Company

1

Employees of the Company 60

Employees of subsidiaries

Employees of subsidiaries

1

Employees of subsidiaries

58

35

Number of stock options
by type of stock to beissued (Note 1)

Common stock

Grant dateNovember 1, 2002

June 9, 2003

December 12, 2003

Vesting requirements

Remain employed from the grant
date (November 1, 2002) to theend of the vesting period.

Remain employed from the grant
date (June 9, 2003) to the endof the vesting period.

Remain employed from the grant
date (December 12, 2003) tothe end of the vesting period.

Service period

From the grant date to the endof the vesting period.

From the grant date to the endof the vesting period.

From the grant date to the endof the vesting period.

Exercise period (Note 2)

From October 1, 2003 to
September 30, 2007

From October 1, 2003 to
September 30, 2007

From October 1, 2004 to
September 30, 2008

4th stocksubscription rights

5th stocksubscription rights

6th stocksubscription rights

Type and number ofrecipients 3,747,600

Directors of the Company

8

Directors of subsidiaries

5

Common stock

32,000

Directors of the Company

8

Directors of subsidiaries

13

Common stock

700,000

Directors of the Company

8

Directors of subsidiaries

73

Employees of the Company 54

Employees of the Company 85

Employees of the Company 12

Employees of subsidiaries

Employees of subsidiaries

Employees of subsidiaries

43

77

88

Number of stock options
by type of stock to beissued (Note 1)

Common stockGrant date

December 13, 2004

January 1, 2006

November 7, 2006

Vesting requirements

Remain employed from the grant
date (December 13, 2004) tothe end of the vesting period.

Remain employed from the grant
date (January 1, 2006) to theend of the vesting period.

Remain employed from the grant
date (November 7, 2006) to theend of the vesting period.

Service period

From the grant date to the endof the vesting period.

From the grant date to the endof the vesting period.

From the grant date to the endof the vesting period.

Exercise period (Note 2)

From October 1, 2005 to
September 30, 2009

From October 1, 2006 to
September 30, 2015

From October 1, 2007 to
September 30, 2016

635,600

Common stock

890,000

Common stock

780,800

Notes: 1.	Number of stock options is expressed in number of shares to be issued upon exercise. The number of shares to be issued is adjusted taking into accounta four-for-one stock split for common stock as of November 15, 2005.
2.	Exercise of stock options during the exercise period is subject to terms and conditions stipulated in the agreement of allotment of stock subscription rights
entered into with respective recipients.

61

(2) Number of Stock Options and Changes in Number of Stock Options
The following tables are based on the stock options which exist as of March 31, 2007. Number of stock options is expressed in number ofshares to be issued upon exercise.
a. Number of stock options (Note)
1st stocksubscription
rights

2nd stocksubscription
rights

3rd stocksubscription
rights

4th stocksubscription
rights

5th stocksubscription
rights

6th stocksubscription
rights

As of March 31, 2006

­—

—

—

—

890,000—

Unvested
Granted

—

—

—

—

—

780,800

Forfeited

—

—

—

—

—

—

Vested————890,000

—

—

—

—

—

—

780,800

2,304,000

16,000597,600

593,600——

Unvested
As of March 31, 2007
VestedAs of March 31, 2006

—

—

—

—

890,000—

Exercised806,800—

85,60063,200800—

Forfeited

—

—

—

—

—

—

1,497,200

16,000512,000

530,400

889,200—

VestedVestedAs of March 31, 2007

Note: Number of shares in the above table is adjusted taking into account a four-for one stock split for common stock as of November 15, 2005.

b. Per unit information
1st stocksubscription
rights

2nd stocksubscription
rights

3rd stocksubscription
rights

4th stocksubscription
rights

5th stocksubscription
rights

6th stocksubscription
rightsExercise price (yen) (Note 1)

1,918

1,673

2,438

2,713

4,150

4,750

Average stock price on
exercise (yen) (Note 1)

4,315

—

4,271

4,396

3,960

－—

Fair value per unit
(as of grant date)(yen) (Note 2)(a) 1,113
—

—

—

—

—

(b) 1,224(c) 1,289(d) 1,448

Notes: 1.	Exercise price and average stock price on exercise in the above table is adjusted taking into account a four-for one stock split for common stock as of November
15, 2005.
2.	As the 1st stock subscription rights through 5th stock subscription rights were granted before the Corporate Law of Japan became effective, fair value per unit
was not calculated.

62

2. Valuation Method for Fair Value of Stock Options
The 6th stock subscription rights granted for the year ended March 31, 2007 are valued as follows:
Fair value of stock subscription rights is valued for each of the following exercise periods.
(a) From October 1, 2007 to September 30, 2008(b) From October 1, 2007 to September 30, 2009(c) From October 1, 2007 to September 30, 2010(d) From October 1, 2007 to September 30, 2016
a. Option-pricing model used: Black–Scholes modelb. Major assumptions used:(a)
Stock price volatility(Note 1)

Estimated time to exercise (Note 2)

(b)

(c)

(d)

32.28%

33.91%

34.32%

37.19%

5.40 years

5.90 years

6.40 years

6.90 years

Estimated dividends (Note 3)

¥60

¥60

¥60

¥60

Risk free rate (Note 4)

1.32%

1.38%

1.43%

1.49%

Notes: 1.	It is based on historical volatility of stock price for the period, corresponding to the estimated time to exercise, prior to the grant date.
2. It is assumed to be exercised in the middle of the exercise period due to the lack of enough data for other reasonable estimation.
3. It is based on the actual dividends for the year ended March 31, 2006.
4. It is based on interest rates on national government bonds with maturity corresponding to the estimated time to exercise.

3. Estimation Methods for Number of Vested Stock Options
Only the actual number of stock options forfeited is reflected due to difficulty in estimating the number of stock options to be forfeited in
the future.
4.	Stock-based compensation expense is recorded on the consolidated statement of income for the year ended March 31, 2007 as follows:
Cost of sales¥ 44 million

Selling, general and administrative expenses¥123 million

No. 16

Business Combinations and Business Divestitures

1. The Outline and Purposes of Transaction

HEALTHCARE CORPORATION is a wholly-owned subsidiary of

Following the decision made by the chief executive officer of thethe Company.

Company on July 28, 2006, the Company split-up its contact lens
production function and merged it into HOYA HEALTHCARE

3. Treatment of the Company’s Stock Subscription Rights

CORPORATION, a wholly-owned subsidiary, on October 1, 2006.

Stock subscription rights of HOYA HEALTHCARE CORPORATION

The purpose of this transaction is to achieve more efficient management for the Group; HOYA HEALTHCARE CORPORATION,

will not be allocated to the holders of stock subscription rights of
the Company as substitutes.

which currently engages in retail of contact lens, is expected to
be able to reflect market needs more rapidly and effectively into

4. Summary of Accounting Treatment

development and production by combining the related production

Since the transaction is classified as “transactions underfunction.

common control” under the “Accounting Standard for Business
Combinations,” the Company does not recognize gain/loss on

2. Shares to Be Issued

the transaction, and HOYA HEALTHCARE CORPORATION is to

No shares were to be issued in connection with this transaction,

record the assets and liabilities transferred at their book value

as permitted under the Corporate Law of Japan, since HOYA

before the transaction.

63

5. Assets and Liabilities to Be Transferred
Millions of Yen

Current assets¥1,076

Fixed assets

589

Total assets¥1,665Current liabilities¥

68

Total liabilities¥

68

No. 17

SUBSEQUENT EVENTSAppropriations of Retained Earnings
The following appropriations of retained earnings for the year ended March 31, 2007 were resolved by the Company’s Board of Directors on
May 31, 2007:

Year-end cash dividends, ¥35.00 ($0.30) per share

In addition to the cash dividends described above, the Company
paid interim cash dividends of ¥12,925 million ($109,488 thousand,Millions of Yen

Thousands of U.S. Dollars¥15,105$­127,954

record as of September 30, 2006, based on a resolution of theBoard of Directors.

¥30 ($0.25) per share) on November 21, 2006 to shareholders of
Significant Subsequent Events
The Company resolved, at the meeting of its board of directors

period per share in the amount of more than ¥7, the purchaseheld on May 31, 2007, to acquire the shares of PENTAX

price will be determined to be the result obtained by deducting

Corporation (“PENTAX”) through a tender offer (the “Tender

the amount equal to the surplus dividends resolved in excess ofOffer”).
The Company resolved, at the meeting of its board of directors
held on June 15, 2007, the partial modification to Tender Offer.

¥7 per share from ¥770.
b. PENTAX bonds with share subscription warrants: ¥1,433,056
for each of the bonds (face value of each bond: ¥1,000,000)
	However, if PENTAX’s annual general meeting of shareholders

1. Purpose of Tender Offer

for the 77th period approves the surplus dividends for the 77th

The Company and PENTAX aim to establish a solid management

period per share in the amount of more than ¥7, the purchasefoundation by leveraging managerial resources of the two compa-

price for such bonds will be determined by dividing the issuenies in a mutually complementary manner and to enhance corpo-

price of each bond by ¥540 (convertible price) and multiplying

rate value by utilizing the two companies’ strength in optical andby the purchase price of common stock.

precision processing technologies to develop appealing productsc. 1st Series Share Subscription Warrants: ¥1 per warrant.

and provide them to a broader customer base. Following the(2) U pper limit of the number of shares to be purchased: None.

management integration, the Company and PENTAX aim to(3) L ower limit of the number of shares to be purchased:

optimize their business portfolios and to further strengthen
competitiveness.

67,740,000 shares.
(4) T iming of the commencement of the Tender Offer:
Planned to commence on or around three business days after

2. Terms of Tender Offer

the day on which PENTAX filed the securities report for the(1) Purchase Price

77th period with the Director-General of the Kanto Local

a. Common stock of PENTAX: ¥770 per share.

Finance Bureau.

	However, if PENTAX’s annual general meeting of shareholders
for the 77th period approves the surplus dividends for the 77th

64

No. 18

SEGMENT INFORMATION

Information about industry segments, geographical segments and sales to foreign customers of the Company and subsidiaries for the years
ended March 31, 2007, 2006 and 2005 was as follows:(1) Industry Segments
a. Sales and Operating Income
Millions of Yen

2007
Information
Technology

Eye Care

Other
Businesses

Total

Eliminations
andCorporate

Consolidated¥¥390,093

Electro-Optics

Photonics

VisionCare

Health Care

Sales to customers¥219,252¥9,093¥119,808¥40,850¥1,090¥390,093

Intersegment sales

414

248

0

0

2,766

3,428

(3,428)—219,666

9,341

119,808

40,8503,856

393,521(3,428)390,093

Operating expenses

139,581

8,851

98,641

31,635

4,206

282,914(34)

282,880

Operating income (loss)¥ 80,085¥ 490¥ 21,167¥ 9,215¥ (350)¥110,607¥(3,394)¥107,213

Other
Businesses

Total

Eliminations
andCorporate

Consolidated

Total sales—b. Assets, Depreciation, Loss on Impairment of Long-Lived Assets and Capital Expenditures
Millions of Yen

2007
Information
Technology

AssetsDepreciation

Electro-Optics

Photonics

Vision Care

Health Care

¥258,746¥7,761¥118,229¥24,410¥2,518¥411,664¥35,980¥447,644

27,449

125

7,405

1,170

45

36,194145

36,339

—

—

—

—

88

88

—

88

39,899155

11,672

2,119

90

53,935497

54,432

Impairment loss
Capital expenditures

Eye Carea. Sales and Operating Income
Thousands of U.S. Dollars

2007
Information
Technology

Eye Care

Other
Businesses

Total

Eliminations
andCorporate

Consolidated$3,304,473

Electro-Optics

Photonics

Vision Care

Health Care

Sales to customers$1,857,281$77,027$1,014,892$346,040$ 9,233$3,304,473$     —

Intersegment sales

3,507

2,101

0

0

23,431

29,039(29,039)—

1,860,788

79,1281,014,892

346,040

32,664

3,333,512(29,039)3,304,473

Operating expenses

1,182,389

74,977

835,587

267,980

35,6292,396,562(289)

2,396,273

Operating income (loss)$ 678,399$ 4,151$ 179,305$ 78,060$ (2,965)$ 936,950$(28,750)$ 908,200

Total sales

65

b. Assets, Depreciation, Loss on Impairment of Long-Lived Assets and Capital Expenditures
Thousands of U.S. Dollars

2007
Information
Technology

AssetsOther
Businesses

Total

Eliminations
andCorporate

Consolidated

Electro-Optics

Photonics

Vision Care

Health Care

$2,191,834$65,743$1,001,516$206,777$21,330$3,487,200$304,786$3,791,986

232,520

1,059

62,7289,911

381

306,599

1,228

307,827

—

—

—

—

745

745

—

745

$ 337,984$ 1,313$   98,874$ 17,950$   762$ 456,883$   4,210$ 461,093

Depreciation
Impairment loss
Capital expenditures

Eye Carea. Sales and Operating Income
Millions of Yen

2006
Information
Technology

LifestyleRefinement

Eye CareTotal

Eliminations
andCorporate

Consolidated¥¥344,228

Electro-Optics

Photonics

Vision Care

Health Care

CrystalService

Sales to customers¥190,552¥10,093¥104,457¥35,484¥1,864¥1,778¥344,228

Intersegment sales

744

246

1

0

33

4,333

5,357

(5,357)—

191,296

10,339104,458

35,484

1,897

6,111

349,585(5,357)344,228

Operating expenses

116,434

9,405

84,08828,625

2,052

5,464

246,068(2,936)

243,132

Operating income (loss)¥ 74,862¥   934¥ 20,370¥ 6,859¥ (155)¥ 647¥103,517¥(2,421)¥101,096

Total

Eliminations
andCorporate

Consolidated

Total sales—b. Assets, Depreciation, Loss on Impairment of Long-Lived Assets and Capital Expenditures
Millions of Yen

2006
Information
Technology

AssetsLifestyleRefinement

Eye Care

Electro-Optics

Photonics

Vision Care

Health Care

CrystalService¥204,192¥7,606¥98,243¥19,927¥840¥3,984¥334,792¥26,746¥361,538

18,716

109

6,444

855

—

53

26,17775

26,252

—

—

—

—

864

—

864

369

1,233

37,244

208

7,958

2,391

762

160

48,72363

48,786

Eliminations
andCorporate

Consolidated

Depreciation
Impairment loss
Capital expenditures

a. Sales and Operating Income
Millions of Yen

2005
Information
Technology

Total

Electro-Optics

Photonics

Vision Care

Health Care

CrystalService

Sales to customers¥165,664¥10,749¥94,971¥31,409¥3,672¥1,707¥308,172Intersegment sales

526

234

18

—

50

5,054

5,882

(5,882)—

166,190

10,983

94,98931,409

3,722

6,761

314,054(5,882)

308,172

Total sales

66

LifestyleRefinement

Eye Care¥—¥308,172

Operating expenses

102,900

10,09077,91024,268

4,143

6,088

225,399(2,147)223,252

Operating income (loss)¥ 63,290¥   893¥17,079¥ 7,141¥ (421)¥ 673¥ 88,655¥(3,735)¥ 84,920

b. Assets, Depreciation, Loss on Impairment of Long-Lived Assets and Capital Expenditures
Millions of Yen

2005
Information
Technology

AssetsDepreciation
Impairment loss
Capital expenditures

LifestyleRefinement

Eye CareTotal

Eliminations
andCorporate

Consolidated

Electro-Optics

Photonics

Vision Care

Health Care

CrystalService¥162,638¥7,648¥90,765¥18,330¥1,900¥3,216¥284,497¥66,985¥351,482

14,730

126

5,900

669

—

82

21,507

154

21,661

—

767

—

—

92

—

859

—

859

31,962

191

6,787

738

92

219

39,989186

40,175

Notes: 1.	The Company and subsidiaries primarily engage in the manufacture and sale of products in five major segments grouped on the basis of similarities in the types,
nature and market of the products. The five segments, namely, Electro-Optics, Photonics, Vision Care, Health Care and Other Businesses, consist primarily of thefollowing products:
		Electro-Optics:	Photomasks and mask blanks for semiconductors, masks for liquid-crystal display (LCD), parts for glass panels of LCDs, glass disks for harddisk drives (HDDs), optical lenses, optical glasses, electronic glasses, optical communication products, etc.
		 Photonics:
Laser equipment, light sources for use in the electronics industry, special optical glass, etc.
		 Vision Care:
Eyeglasses, eyeglass frames, etc.
		 Health Care:
Contact lenses and related accessories, intraocular lenses, etc.
		 Other Businesses: Crystal glass products, construction of information systems, outsourcing, etc.
2.	The Crystal and Services businesses used to be presented separately as individual divisions. However, shrinking sales and operating income brought about by
restructuring has reduced the importance of separate presentation, and from the fiscal year ended March 31, 2007, these businesses are presented together as“Other Businesses.”
3.	Corporate operating expenses consist primarily of the administration expenses of the Company and foreign holding companies, which are not allocated toindustry ­segments. Corporate operating expenses for the years ended March 31, 2007, 2006 and 2005 were ¥3,370 million ($28,547 thousand), ¥2,630 millionand ¥2,873 million, respectively.
4.	Corporate assets consist primarily of cash, time deposits, investment securities and administrative assets of the Company and the foreign holding companies.
Corporate assets as of March 31, 2007, 2006 and 2005 were ¥61,381 million ($519,958 thousand), ¥35,135 million and ¥75,076 million, respectively.
5.	Consolidated operating expenses are equal to the total of cost of sales and selling, general and administrative expenses shown in the accompanying
consolidated ­statements of income.

(2) Geographical Segments
The geographical segments of the Company and subsidiaries for the years ended March 31, 2007, 2006 and 2005 are summarized as­follows:
Millions of Yen

2007

Sales to customers

Japan

North
America

Europe

Asia

Total

¥270,373¥37,456¥ 51,336¥ 30,928¥390,093

Eliminations
and Corporate

Consolidated¥¥390,093—

Interarea transfers

26,847305

813

159,124

187,089(187,089)—

Total sales

297,220

37,761

52,149190,052

577,182(187,089)

390,093

257,02136,91644,663

135,227

473,827(190,947)

282,880

Operating expenses
Operating income
Assets40,199845

7,486

54,825

103,355

3,858

107,213¥193,390¥13,507¥107,564¥207,158¥521,619¥ (73,975)¥447,644

Thousands of U.S. Dollars

2007

Sales to customers

Japan

North
America

Europe

Asia

Total

Eliminations
and Corporate

Consolidated$2,290,326$317,289$434,867$ 261,991$3,304,473$       —

$3,304,473

Interarea transfers

227,421

2,584

6,887

1,347,937

1,584,829(1,584,829)—

Total sales

2,517,747

319,873441,754

1,609,928

4,889,302(1,584,829)

3,304,473

Operating expenses

2,177,222

312,715

378,340

1,145,506

4,013,783(1,617,510)

2,396,273

Operating income

340,525

7,158

63,414464,422875,519

32,681

908,200$1,638,204$114,418$911,173$1,754,833$4,418,628$ (626,642)$3,791,986

Assets67

Millions of Yen

2006

Sales to customers

Japan

North
America

Europe

Asia

Total

Eliminations
and Corporate¥244,998¥35,471¥39,232¥ 24,527¥344,228¥—

Consolidated¥344,228

Interarea transfers

23,901

222

683

120,813

145,619(145,619)—

Total sales

268,899

35,69339,915

145,340

489,847(145,619)

344,228

230,41434,60633,367

97,226395,613(152,481)

243,132

Operating expenses
Operating income¥ 38,485¥ 1,087¥ 6,548¥ 48,114¥ 94,234¥    6,862¥101,096

Assets¥163,840¥22,377¥63,346¥149,299¥398,862¥ (37,324)¥361,538

Eliminations
and Corporate

Consolidated

Millions of Yen

2005

Sales to customers

Japan

North
America

Europe

Asia

Total

¥230,946¥30,775¥33,803¥ 12,648¥308,172¥—¥308,172Interarea transfers

19,048200

255

89,749109,252(109,252)—

Total sales

249,994

30,97534,058102,397

417,424(109,252)

308,172

Operating expenses

204,41330,912

28,19571,004

334,524(111,272)

223,252

Operating income¥ 45,581¥  

63¥ 5,863¥ 31,393¥ 82,900¥    2,020¥ 84,920

Assets¥165,938¥17,129¥32,927¥104,191¥320,185¥ 31,297¥351,482

Notes: 1.	The Company and subsidiaries are summarized in four segments by geographic area based on the countries where the Group is located. The segments consistof the ­following countries:
		 North America: United States of America, Canada, etc.
		 Europe:
Netherlands, Germany, United Kingdom, etc. (including South Africa)
		 Asia:
Singapore, Thailand, China, Republic of Korea, Taiwan, etc. (including Australia)
2.	Corporate operating expenses consist primarily of the administration expenses of the Company, which are not allocated to segments by ­geographic area.
Corporate operating expenses for the years ended March 31, 2007, 2006 and 2005 were ¥2,993 million ($25,354 thousand), ¥2,317 million and ¥2,562 million,
respectively.
3.	Corporate assets consist primarily of cash, time deposits, investment securities and administrative assets of the Company. Corporate assets as of March 31,
2007, 2006 and 2005 were ¥59,047 million ($500,186 thousand), ¥33,959 million and ¥72,841 million, respectively.
4.	Consolidated operating expenses are equal to the total of cost of sales and selling, general and administrative expenses shown in the accompanying
consolidated statements of income.

(3) Sales to Foreign Customers
The sales to foreign customers of the Company and subsidiaries for the years ended March 31, 2007, 2006 and 2005 are summarized as­follows:
Millions of Yen

2007
Overseas sales (A)North America

Europe

Asia

Other

Total

¥44,954¥53,524¥113,060¥8¥211,546

11.5%

13.7%

29.0%

0.0%

54.2%

Other

Total

390,093

Consolidated sales (B)(A)/(B)

Thousands of U.S. Dollars

2007
Overseas sales (A)Consolidated sales (B)68North America

EuropeAsia$380,805$453,401$957,730$67$1,792,003
3,304,473

Millions of Yen

2006
Overseas sales (A)North America

Europe

Asia

Other

Total

¥42,673¥41,201¥85,988¥860¥170,722

12.4%

12.0%

25.0%

0.2%

49.6%

Consolidated sales (B)(A)/(B)

344,228

Millions of Yen

2005
Overseas sales (A)North America

Europe

Asia

Other

Total

¥43,520¥36,430¥61,798¥10¥141,758

14.1%

11.8%

20.1%

0.0%

Consolidated sales (B)(A)/(B)

308,17246.0%

Note:	The Company and subsidiaries are summarized in four segments by geographic area based on the countries where the customers are located. The segments
consist of the ­following countries:
North America:
United States of America, Canada, etc.
Europe:Netherlands, Germany, United Kingdom, etc. (including South Africa)
Asia:
Singapore, Thailand, Republic of Korea, Taiwan, etc. (including Australia)
Other:
Saudi Arabia and Brazil, etc.

69

70

Corporate Data
(As of March 31, 2007)

Established
November 1, 1941

Directors and Executive Officers (As of June 19, 2007)

Paid-in Capital¥ 6,264,201,967
State of Employees
Number of employees of HOYA Corporation:
3,049 (decreased 171 from the end of the previous fiscal year)
Average age: 41.6
Average years of service: 13.2
Total number of employees in the Hoya Group:
28,450 (increased 3,274 from the end of the previous fiscal year)
Fiscal year
From April 1 to March 31 of the following year

Directors
Takeo Shiina (General Advisor of IBM Japan, Ltd.)
Yuzaburo Mogi (Chairman & CEO of Kikkoman Corporation)
Yoshikazu Hanawa (Honorary Chairman of Nissan Motor Co., Ltd.)
Eiko Kono (Senior Advisor of Recruit Co., Ltd.)
Yukiharu Kodama (President of Japan Information Processing Development Corporation)
Hiroshi Suzuki
Kenji Ema
Hiroaki Tanji
Executive Officers
Hiroshi Suzuki (President & CEO)Kenji Ema (Chief Financial Officer)
Hiroaki Tanji (Chief Technology Officer)

General Shareholders’ Meeting
June

HOYA Group Matrix Systems by Business Segment and Area

Global Headquarters(Formulating group strategy)

Information Technology

Eye Care

Other Businesses

HOYA Corporation: Blanks Division,
Mask Division, MD Division, andOptics Division

HOYA Corporation: Vision Care
Company, Medical Division and
HOYA Healthcare Corporation

HOYA Corporation:
Crystal Company and
HOYA Service Corporation(Area)

Legal Support and Internal Audit

Japan

ASIA
（Regional Headquarters）

US（Regional Headquarters）

EU/FHQ(Regional Headquarters/
Financial Headquarters)

Global Business Expansion

71

Investor Information(As of March 31, 2007)

Listing of the Company’s SharesFirst Section of the Tokyo Stock Exchange

Breakdown of Shareholders<Ownership>

Number of Shares of Common Stock
Authorized: 1,250,519,400
Issued: 435,017,020

Individuals,
Other
19.8%

<Number of Shareholders>
Financial institutions
31.6%

Financial institutions
0.4%

Other corporate
investors
0.6%

Trading Unit
100 shares
Number of Shareholders
93,566
Foreigninvestors
46.7%

Other corporate
investors
1.9%

Individuals,
Other
98.2%

Principal Shareholders

Foreigninvestors
0.8%

Shareholders

Number of shares(Hundreds of shares)

Percentage ofvoting rights (%)

1

Japan Trustee Services Bank, Ltd. (Trust Account)

293,646

6.80

2

The Master Trust Bank of Japan, Ltd. (Trust Account)

235,087

5.45

3

The Chase Manhattan Bank, N.A. London

144,323

3.34

4State Street Bank and Trust Company 505103

119,103

2.76

5

The Dai-ichi Mutual Life Insurance Company

115,306

2.67

6State Street Bank and Trust Company

105,043

2.43

7

Nippon Life Insurance Company

100,001

2.32

8Mamoru Yamanaka

90,197

2.09

9

The Chase Manhattan Bank 385036

88,6772.05

10

Deutsche Bank Trust Company Americas

78,3401.82

1,369,723

31.73

Above total

Issuance of New Share Subscription Rights

Common Stock Price Range

Following the approval at the 68th Ordinary General Meeting of Shareholders, in2006

connection with the resolution of the Board of Directors, the Company issued new sharesubscription rights as stock option. Details are disclosed as below:

Sixth issue of new subscription rights for common stock(Resolved by the Board of Directors on October 19, 2006)
1. Number of new share subscription rights
the Company granted: 1,952 rights
2. Class and number of new shares to be issued

3. Price of a new share subscription right:

Low

High

Low

Jan.–Mar.

¥ 5,040¥ 4,100¥ 4,750¥ 3,810

Apr.–June

4,990

3,550

4,210

3,660

July–Sept.

4,480

3,540

Oct.–Dec.

4,810

4,240

Free of charge
4. Paid-in amount per share upon exercising

upon exercising of new share subscriptionof a new share subscription right: ¥4,750

rights: 780,800 shares of common stock of

5. Exercise period: From October 1, 2007 toTransfer Agent of Common Stock
Handling Office

the Company

September 30, 2016. Maximum percentage

Mitsubishi UFJ Trust and Banking Corporation(400 shares for each new shareof new share subscription rights

Corporate Agency Department

subscription right)

exercisable during each period is7-10-11 Higashisuna, Koto-ku,

fixed separately.

Tokyo 137-8081, Japan
Tel. 03-5683-5111

72

2007

High

Hoya’s Timeline(As of March 31, 2007)

1941
November

1944
August1945
October

1952
February

1960
November

1961
October

1962
May
October

1963
May

1967
April

1972
December

1973
February

1974
January

1982
October

1983
January

1984
AugustOctober

1985
April

1986
October

1987
June
November

1989
April

1991
March

1993
October

1994
April

1995
June

An optical glass production plant was established in the city of Hoya, in
metropolitan Tokyo, and production of optical glass was initiated.

1996
AugustNovember

The plant was incorporated with capital of ¥1.2 million.
Crystal products were introduced.

1997
April

The manufacture of optical glass BK7 resumed.
The Optics Division’s Showa Plant (currently Akishima Plant) wascompleted in Tokyo. The Company merged with three affiliates.
May

Hoya was listed on the Second Section of the Tokyo Stock Exchange.
The manufacture of eyeglass lenses commenced.
Hoya was listed on the Second Section of the Nagoya Stock Exchange.
The Crystal Division’s Musashi Plant was completed.

December

1998
April

The Vision Care Division launched sales of progressive multifocal
lenses.
Sales of soft contact lenses began.

1999
February
September

The Company’s listings were advanced to the First Section of the Tokyo
and Nagoya Stock Exchanges.

2000
April

The Electronics Division’s Nagasaka Plant was completed, and the
production of IC substrates began. Hoya’s on-line network to handle
eyeglass lens orders was introduced in the Vision Care Division.
Hoya Electronics Co., Ltd., merged with the parent company.

July

2001
May

The construction of the Hachioji Plant in the Electronics Division wascompleted, and the production of IC photomasks commenced.
The current Head Office was completed.
Hoya Lens Corporation and Hoya Crystal Corporation merged with theparent company.

October

2002
May

AugustThe Kodama Plant was completed for medical-related production andresearch.

January

The R&D Center was completed in the city of Akishima.

March

The production of intraocular lenses (IOLs) commenced.
The production of aspherical molded-glass lenses commenced.

June

Hoya Europe B.V. of the Netherlands (currently Hoya Holdings N.V.) andHoya Corporation USA were established.

2003

July

2004
February
March

Glass disks for HDDs were launched.
October

Hoya Group’s Environmental Philosophy was established.

2005
November

The Hoya Group was reorganized with the establishment of theElectro-Optics Division, the Vision Care Division and the Crystal
Division.

2006
March

October

Hoya introduced an outside director system.

Hoya formed an alliance with IBM to develop a next-generation glass
disk for HDDs.
Kumamoto Plant commenced operations as a photomask
manufacturing plant.
Hoya introduced its “internal company system,” reorganizing Group
operations centered on two internal companies (Electro-Optics andVision Care) and three subsidiaries (Hoya Photonics, Inc., Hoya
Healthcare Corporation, and Hoya Crystal Corporation).
Hoya implemented ERP R/3, an enterprise resource planning systemdeveloped by SAP AG of Germany.
Hoya Holdings Asia Pacific Pte Ltd. was established as the third
regional headquarters after Hoya Holdings N.V. and Hoya Holdings,
Inc., the regional headquarters for Europe and North America,
respectively.
Hoya Lens Deutschland GmbH became the first Group company toreceive ISO 14001 certification.
Hoya began the quarterly release of consolidated financial results.
The Vision Care Company’s Itsukaichi Plant became the Group’s first
domestic facility to receive ISO 14001 certification.
All major domestic plants received ISO 14001 certification.
Hoya acquired Belgian eyeglass manufacturer Buchmann OpticalIndustries N.V.
Hoya acquired Optical Resources Group, Inc. (ORI), a processor andmarketer of eyeglasses in the United States (integrated into Hoya
Corporation in March 2001).
Hoya acquired the semiconductor photomask production division of Oki
Electric Industry Co., Ltd.
Hoya began marketing HOYALUX Summit Pro and NuLux lenses thatuse EYRY, a high-index, plastic lens material.
Hoya began manufacturing soft intraocular lenses.
Hoya began manufacture and sale of 3C-SiC, a new substrate material
for semiconductors.
Technical alliance formed with Dai Nippon Printing Co., Ltd. to jointly
develop mask blanks for next-generation semiconductors.
Company delisted from the First Section of the Nagoya Stock
Exchange.
Subsidiaries Hoya Crystal Corp. and Hoya Crystal Shop Corp. mergedwith Hoya Corporation.
Hoya established a company-with-committees system.
Global financial management operations were transferred to a regional
headquarters in Europe.
Subsidiary Hoya Optics Corp. was merged with Hoya Corporation.
Hoya acquired the HDD glass disk business of Nippon Sheet GlassCo., Ltd.
Established a Level-1 American Depositary Receipt (ADR) program.
A four-for-one split of common shares was implemented.
Subsidiary Hoya Advanced Semiconductor Technologies Co., Ltd. wasmerged with Hoya Corporation.
Contact lens production sector transferred to a subsidiary, HOYA
Healthcare Corporation.

73

Hoya’s Directory

Hoya Group Companies(As of March 31, 2007)(As of March 31, 2007)

GLOBAL HEADQUARTERS

HOYA CORPORATION
2-7-5 Naka-Ochiai, Shinjuku-ku, Tokyo
161-8525, JapanTEL 03-3952-1151

R&D Center
3-3-1 Musashino, Akishima-shi,
Tokyo 196-8510, JapanTEL 042-546-2755

DOMESTIC SUBSIDIARIES AND
AFFILIATES<Information Technology>

HOYA CANDEO OPTRONICSCORPORATION
3-5-24 Hikawa-cho, Toda-shi, Saitama 335-0027,
Japan
TEL 048-447-6052

HOYA PHOTONICS CORPORATIONFINANCIAL HEADQUARTERS

NETHERLANDS BRANCH
Amsterdamseweg 29, 1422 AC Uithoorn,
The Netherlands
TEL 0297-514-356<Blanks Division>

3-5-24 Hikawa-cho, Toda-shi, Saitama 335-0027,
Japan
TEL 048-447-6065

NH TECHNO GLASS CORPORATION※
6th Floor, Keihin Tatemono Daiichi Building,
2-12-20 Shin-Yokohama, Kohoku-ku, Yokohama,
Kanagawa 222-0033, JapanTEL 045-475-2905

EUROPE BRANCH
Bilton House, 54/58 Uxbridge Road,
Ealing, London, W5 2ST, U.K.
TEL 020-8579-6939<Eye Care><Vision Care Company>

7th Floor, HOYA Marketing Building, 1-29-9
Takadanobaba, Shinjuku-ku, Tokyo 169-8661,
Japan
TEL 03-3232-7062

GLOBAL HEADQUARTERS
Amsterdamseweg 29, 1422
AC Uithoorn, The Netherlands
TEL 0297-514-350

NORTH AMERICA HEADQUARTERS
651E, Corporate Drive, Lewisville,
TX 75057-6403, U.S.A.
TEL 972-221-4141

HOYA HEALTHCARE CORPORATIONHOYA MICROELECTRONICS TAIWAN CO., LTD.
No.36, Kedung 3rd Rd., Science-Based
Industrial Park, Chunan, Miaoli County
350,Taiwan TEL 37-580-085

HOYA ELECTRONICS KOREA CO., LTD.
Hyeongok Foreign-Exclusive Industrial Complex
463-3 Hyeongok-ri, Cheongbuk-myeon,
Pyeongtaek-shi, Gyeonggi-do Republic of Korea
TEL 31-683-9400

HOYA MAGNETICS SINGAPORE PTE LTD.
3 Tuas, Link 2, Singapore 638552
TEL 6863-2911

HOYA GLASS DISK (THAILAND) LTD.
Northern Region Industrial Estate 60/26
Moo 4 Tambol Banklang, Amphur Muang,
Lamphun, 51000 Thailand TEL 053-581-314

HOYA GLASS DISK PHILIPPINES, INC
111 East Main Avenue Special Export Processing
Zone (SEPZ) Laguna Technopark Binan,
Laguna Philippines TEL 049-541-2730

HOYA GLASS DISK VIETNAM LTD.
Plot J3&4,Thang Long Industrial Park Dong AnhDistrict, Hanoi, Vietnam TEL 04-951-6399

HOYA OPTO-ELECTRONICS QINGDAO LTD.
<Other Businesses>

HOYA SERVICE CORPORATION
10th Floor, HOYA Marketing Building, 1-29-9
Takadanobaba, Shinjuku-ku, Tokyo 169-8661,
Japan
TEL 03-3232-7671

WELFARE CORPORATION
8th Floor, HOYA Marketing Building, 1-29-9
Takadanobaba, Shinjuku-ku, Tokyo 169-8661,
Japan
TEL 03-3232-1019

No.66 Songhuajiang Road,Qingdao Economic &Technological Development Zone,
Qingdao City, Shandong Province, China
TEL 532-8676-0997

HOYA OPTICS (THAILAND) LTD.
Northern Region Industrial Estate 60/31
Moo 4 Tambol Banklang, Amphur Muang,
Lamphun, 51000 Thailand TEL 053-552-413

HOYA OPTICAL TECHNOLOGY (SUZHOU) LTD.
229 Taishan Road, Suzhou New District, Jiangsu
Province, 215129, China TEL 0512-6665-0752

HOYA OPTICAL (ASIA) CO., LTD.

OVERSEAS SUBSIDIARIES● Asia and Oceania
REGIONAL HEADQUARTERS

HOYA HOLDINGS ASIA PACIFIC PTE LTD.
138 Cecil Street, #08-03 Cecil Court, Singapore
069538 TEL 6323-1151

HOYA ELECTRONICS MALAYSIA SDN. BHD.
LOT 28 & 29, Phase 1, Jalan Hi-Tech Park,
09000 Kulim, Kedah, Malaysia TEL 4-403-3118

HOYA MICROELECTRONICS (SUZHOU) LTD.
International Science & Technology Park,
rmD402, NO.328 Airport Road, Suzhou industrial
Park, Suzhou, Jiangsu Province 215021, China
TEL 512-6288-3928

74

Suite 3101-2, Tower 6, The Gateway, 9 CantonRoad, Tsim Sha Tsui, Kowloon, Hong Kong
TEL 2723-6883

HOYA CANDEO OPTRONICS KOREACORPORATION
602 Yoohwa Bldg. 955-16 Daechi-Dong,
Kangnam-ku, Seoul, 135-280, Korea
TEL 02-565-4411

HOYA CANDEO OPTRONICS TAIWANBRANCH2F, No.38-15, Wunhua 2nd Rd,. Gueishan
Township, Taoyuan County 333, Taiwan (R.O.C.)
TEL 03-327-8884

HOYA LENS TAIWAN LTD.
3rd Floor, No.146, Sung Chiang Road, Taipei, Taiwan
TEL 02-2567-3481

HOYA LENS AUSTRALIA PTY. LTD.

HOYA LENS NEDERLAND B.V.

● North America

44-54 Bourke Road, Alexandria, Sydney, N.S.W.
Australia 2015 TEL 02-9698-1577

Amsterdamseweg 27, 1422 AC Uithoorn,
The Netherlands TEL 0297-514-202

REGIONAL HEADQUARTERS

THAI HOYA LENS LTD.

HOYA LENS FRANCE S.A.S.

Payatai Plaza 23rd Floor, 128/251-256 PhyathaiRoad,Thung-Phyathai, Rajthavee, Bangkok
10400,Thailand TEL 02-219-3972

ZA Pariest Rue Willy Brandt, 77184
Emerainville, France TEL 01-6037-7253

101 Metro Drive, Suite 500, San Jose,CA 95110, U.S.A. TEL 408-441-0400

HOYA LENS FINLAND OYHOYA LENS THAILAND LTD.
853 Phaholyothin RD., Prachatipat,
Thanyaburi, Patumthani 12130, Thailand
TEL 02-901-2021

HOYA LENS HONG KONG LTD.
16/F, Unison Industrial Centre, 27-31 Au Pui Wan
Street, Fo Tan, N.T. Hong Kong
TEL 2556-5266

Mikkolantie 1, 00640 Helsinki, Finland
TEL 09-72884100

HOYA LENS SWEDEN AB
Scheelegatan 15, 212 28 Malmö, Sweden
TEL 040-680-2200

HOYA LENS U.K. LIMITED
Industrial Estate, Wrexham, LL13 9UA,
United Kingdom TEL 01978-663-150

HOYA LENS KOREA CO., LTD.
3rd Floor of Yunil Building, 1443-15 SeochoDong, Seocho-gu, Seoul, 137-865, Korea
TEL 02-585-1911

HOYA LENS IBERIA S.A. Unipersonal

HOYA LENS GUANGZHOU LTD.

HOYA LENS ITALIA S.P.A.

Zhicheng Dong Road, Guangzhou Economic &Technological Development District,
Guangzhou, 510730, China
TEL 020-8222-3999

Via Bernadino Zenale, 27, 20024 Garbagnate,
Milanese, Milan, Italy TEL 02-990-711

HOYA LENS SHANGHAI LTD.
SHANGHAI HEAD OFFICE
3F (W.), No.10 Lane 561, Nujiang Rd. (N.),
Shanghai, 200333, China TEL 021-5281-9663

Paseo de las Flores, 23, 28820-Coslada,
Madrid, Spain TEL 091-660-3511

HOYA LENS DEUTSCHLAND GMBH
Hoya-Lens Strasse 1, 79379 Müllheim/Baden,
Germany TEL 07631-1860

HOYA LENS DANMARK A/S
Hφ rskaetten 28, 2630 Taastrup, Denmark
TEL 4355-8200

MALAYSIAN HOYA LENS SDN. BHD.
No.6 Jalan 7/32A, Off 6 1/2 Miles, Jalan Kepong,
52000 Kuala Lumpur, Malaysia
TEL 03-6258-8977

HOYA LENS POLAND SP. Z O.O.

HOYA LENS (S) PTE LTD.

HOYA LENS BELGIUM N.V.

315 Outram Road, #02-05 Tan Boon Liat
Building, Singapore 169074 TEL 6221-0055

Lieven Gevaertstraat 15, 2950 Kapellen, Belgium
TEL 03-660-0100

HOYA LENS PHILIPPINES, INC.

HOYA LENS HUNGARY RT.

10th Floor, Sterling Centre, cor, Ormaza & Dela
Rosa Sts, Legaspi Village, Makati City, Philippines
TEL 02-751-7174

Telek. U. 3, 1152 Budapest, Hungary
TEL 01-30-585-19

ul. Belwederska 6a 00-762 Warsaw, Poland
TEL 022-558-8899

HOYA MEDICAL SINGAPORE PTE, LTD.

HOYA LENS MANUFACTURINGHUNGARY PRIVATE CO.

455A Jalan Ahmad lbrahim Singapore 639939
TEL 6862-3673

18, Ipari ut, 4702 Mateszalka, Hungary
TEL 044-418200

HOYA HEALTHCARE (SHANGHAI) CO., LTD.

HOYA HILL OPTICS SOUTH AFRICA (PTY) LTD.

Room 503 Ruijin Bldg,. 205 Maoming Shouth
Road Shanghai, China TEL 021-5466-6699

301 Dartfield Rord, Eastgate Ext 13, Sandton
2148 South Africa TEL 011-444-1992

HOYA MEDICAL EUROPE GMBH
● Europe
REGIONAL HEADQUARTERS

HOYA HOLDINGS N.V.
Amsterdamseweg 29, 1422 AC Uithoorn,
The Netherlands TEL 0297-514-356

Anwesen Arabella Burocenter, Lyoner Strasse
44-48, 60528 Frankfurt am Main, Germany
TEL 69-962 37 68-0

HOYA HOLDINGS, INC.

HOYA CORPORATION USA
101 Metro Drive, Suite 500, San Jose,CA 95110, U.S.A. TEL 408-441-3300

HOYA PHOTONICS, INC.
47733 Fremont Blvd., Fremont, CA 94538 U.S.A.
TEL 510-445-4500

EAGLE OPTICS, INC (ATLANTA FACILITY)
591-F Thornton Road, Lithia Springs, GA 30122, U.S.A.
TEL 770-944-1800

HOYA LENS OF AMERICA INC.
(BETHEL FACILITY)
13 Francis J. Clarke Circle Bethel, CT 06801 U.S.A.
TEL 203-790-0171

HOYA LENS OF CHICAGO, INC.
(CHICAGO FACILITY)
3531 Martens Street, Franklin Park, IL 60131, U.S.A.
TEL 847-678-4700

HOYA LENS OF NEW ORLEANS, INC.
(NEW ORLEANS FACILITY)
5039 Fairfield St. Metairie, LA 70006, U.S.A.
TEL 888-468-9445

HOYA LENS CANADA, INC.
21-3330 Ridgeway Drive, Mississauga, Ontario,
Canada L5L 5Z9 TEL 905-828-3477※Equity-method affiliate

For additional information
about this publication, contact:

Corporate Communications
2-7-5 Naka-Ochiai, Shinjuku-ku,
Tokyo 161-8525, JapanTEL (03)3952-1160
FAX (03)3952-0726
URL http://www.hoya.co.jp/75

2-7-5 Naka-Ochiai, Shinjuku-ku, Tokyo 161-8525, JAPANT h i s a n n u a l re p o r t i s p r i n t e d o n re c y c l e d p a p e r.
Printed in Japan