HOYAPENTAX

We will take advantage of our management integration
with Pentax to accelerate growth.
On March 31, 2008, Hoya merged with Pentax—the Company’s consolidated subsidiarysince August 2007—and commenced operations as a single business entity.
We will leverage the management resources of Hoya and Pentax
to realize synergies and boost our growth.

Consolidated Financial Highlights
Years Ended March 31, 2007 and 2008

(Millions of yen)

2007

2008*2

Net sales¥390,093 ¥481,631

Operating income

107,213

95,074

Ordinary income

102,909

100,175

Net income

83,391

81,725

Total assets

447,644689,444

Net assets*1

367,145394,626

Net income¥193.50¥189.01

Diluted net income

192.78188.78

Net assets

845.98903.49Cash dividends applicable to the year

65.00

Price earnings ratio (Times)C on t e n ts

Per share data (Yen)A Message to Our Stakeholders

2

Who is Pentax?

8

Hoya at a Glance

10

Information Technology

12

65.00

Electro-Optics Division

12

20.2

12.4

Photonics Division17

Price cash ﬂow ratio (Times)

17.1

8.4

Price book value ratio (Times)

4.6

2.6

Stock price at year-end (Yen)

3,910

2,340

*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 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).

2 In August 2007, Pentax Corporation and its subsidiaries were added to the Group’s scope of consolidation.

*

Therefore, performance ﬁgures shown include the results of Pentax Corporation and its subsidiaries from thesecond half of the ﬁscal year ended March 31, 2008 (the six-month period from October 1, 2007, to March 31, 2008).

18

Eye Care
Vision Care Division

18

Health Care Division

20

Pentax23

R&D and Intellectual Property
Activities

26

Environmental Initiatives

30

Corporate Governance

32

Financial and Corporate Data

35

Disclaimer Regarding Forward-Looking Statements
Statements made in this annual report with respect to Hoya’s plans and future performancethat are not historical fact are forward-looking statements. These statements are based on
management’s judgments, plans and forecasts in light of the information currently available
to it. Hoya cautions that a number of factors could cause actual events and results to diﬀermaterially from those discussed in the forward-looking statements. Such factors include but
are not limited to foreign exchange rates, market trends and economic conditions.

Notation Used in this Annual Report
Hoya’s ﬁscal year ends on March 31. In this annual report, references to years are theperiod 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 years ended March 31, 2007, March 31, 2008, and the year ending
March 31, 2009, respectively.

HOYA ANNUAL REPORT 20081

A Message to Our Stakeholders

I would like to thank all our shareholders for their continual
understanding and support of the Hoya Group’s management
activities. First, I am delighted to report that Hoya submitted atender oﬀer to acquire Pentax Corporation in July 2007, taking on
the ﬁrm as a consolidated subsidiary in August. On March 31,
2008, Hoya and Pentax merged to form a single business entity.
Looking at the ﬁscal year under review as a turning point in Hoya’s
history, I am pleased to explain our future business direction,
including the role of Pentax.

Review of Fiscal 2008
In the ﬁscal year under review, a large shadow was cast over the
global economy by ﬁnancial instability stemming from the U.S.
subprime loan problem and soaring prices for crude oil and otherraw materials. Amid such conditions, the Group’s consolidated
results showed net sales of ¥481.6 billion, operating income of¥95.0 billion, ordinary income of ¥100.1 billion and net income of¥81.7 billion. Partly thanks to the inclusion of the business resultsof Pentax Corporation and its subsidiaries into the consolidated

We aim to capitalize on our businessintegration with Pentax for sustained growthby speeding up optimization of our businessportfolio to meet the needs of the times
Hiroshi Suzuki
President and CEO

2

results from the second half of the ﬁscal year, net sales were up a

operating income came to ¥67.4 billion (down 15.8% compared

substantial 23.5% compared with the preceding ﬁscal year.

with the preceding ﬁscal year).
Mask blanks for semiconductor production sustained their

However, operating income, ordinary income and net income

robust performance, primarily in high-precision products. In

were down 11.3%, 2.7% and 2.0%, respectively.

semiconductor photomasks, focus on frontline products secured

Primary factors in the decrease in earnings included lingering
technical issues that occurred in certain products at the start ofrevenues on a par with the previous ﬁscal year, despite the small

the ﬁscal period and lower proﬁtability due to more severe pricescale of the business. Although there were no signiﬁcant changes

pressures in the midst of an overall rise in raw materials costs. The

through the year in our performance in semiconductor-related

amortization of goodwill following the acquisition of Pentax’s

products or in the business environment, the semiconductor

shares, which was carried out from July through August 2007, also

industry appears to be experiencing a structural shift. The

began in the second half of the year, further depressing earnings.

advances in technology and higher development costs required

Although Hoya takes great care in advancing each of its

for miniaturization are limiting the number of semiconductorbusinesses, in the ﬁscal year under review certain struggling

producers able to accommodate the latest technologies, while

products weighed heavily on the Company’s overall performance.

incentives to engage in cutting-edge development are

I oﬀer my sincere apologies for any concerns this may have caused.

diminishing. This is resulting in ongoing harsh business conditions
as the number of semiconductor chip development models

Information Technology

declines, thereby stiﬀening competition in the photomask market

Overall net sales in the Electro-Optics business were ¥209.8 billion

and leading to lower prices.
In the LCD panel market in the ﬁscal year under review, an(down 4.3% compared with the preceding ﬁscal year), andNet Sales

Operating Income andOperating Margin(Billions of yen)(Billions of yen)

Return on Equity, Return on Assets
and Earnings per Share
ROE

140
500

25.1

481.6

(%)

27.6

29.4

390.0

101.0

300

95.0

27.1

30

25.9

20
280

84.9

80

271.4

25.8

107.2

344.2
308.1

(%)

350

19.7

100

EPS

30

27.5

120
400

ROA

(Yen)

10

0

17.8

20.0

21.6

21.2
20.6

20

14.4
210

14.0

10

193.50 189.01

68.1

171.71

60
200

140

144.710

2005

2006 2007 2008
(Fiscal years ended March 31)

40

87.74
100

70
20

0

0

2004

2005

2006

2007

2008

0

2004

2005

2006

2007

2008

2004

Note: Operating performance figures for Pentax and its subsidiaries are included in the consolidated resultsfrom the second half of the fiscal year ended March 31, 2008 (October 1, 2007, to March 31, 2008).

HOYA ANNUAL REPORT 20083

A Message to Our Stakeholders

emphasis by panel manufacturers on mass production instead ofConcerning optical lenses, the digital camera market—which

new development softened orders for new masks from photomask

has grown for several years almost entirely without seasonal

producers including Hoya. Consequently, the photomask market

adjustments—was steady through the third quarter of the ﬁscal

contracted even as the panel market expanded. Although theyear. Although the Company’s performance was weakened in the

Company seems to have slightly augmented its market share, thefourth quarter by the inﬂuence of short-term production

shrinkage of the market as a whole made it diﬃcult to maintainadjustments carried out by digital camera manufacturers, results

sales levels. At the same time, we are achieving satisfactory results

for the full ﬁscal year remained ﬁrm. The digital camera market isfrom our eﬀorts in recent years to technologically diﬀerentiate our

expected to continue expanding, with the number of units shipped

products. Such eﬀorts are progressing steadily and have resulted

rising in line with growing demand from emerging markets. We

in higher ratings from customers.

expect unit prices to fall, however, causing the growth rate to taper

In glass disks for hard disk drives, the Company got an earlystart on technical development relating to the perpendicularoﬀ. Hoya will continue to pursue its policy of market growth throughspecialization in products that utilize its technical capabilities.

magnetic recording method, on which HDD producers
commenced full-scale commercialization from the end of the

Eye Carepreceding ﬁscal year. When we began manufacturing the new

In the Vision Care business, which produces eyeglass lenses, net

product, it unfortunately took longer than anticipated to develop

sales totaled ¥126.3 billion (up 5.5% compared with the preceding

technologies in line with the demands of our clients, leading toﬁscal year) and operating income reached ¥20.6 billion (downdisappointing results in the ﬁrst half of the ﬁscal year. However,

2.4% compared with the preceding ﬁscal year).

development gradually caught up and performance staged a

The ﬁscal year under review witnessed improved performance

healthy recovery in the third and fourth quarters. We are still notin the European market, owing to a successful expansion of sales

making the most of our potential, and we believe we must makechannels as a result of management resources dedicated to theswift changes to our operations to take full advantage of ourregion, in addition to currency transaction gains from the rising

capacity in technology and production.

euro. In the rapidly growing Asian markets as well, we achieved
growth in the double digits and above. However, demand was
sluggish in Japan and the United States, due to the impact ofsagging consumption. Particularly in Japan, falling prices per unit
product shrank the eyeglass market itself, which blunted thebusiness’s overall growth rate.
Concerning the Health Care business, net sales were ¥46.1
billion (up 13.0% compared with the preceding ﬁscal year) andoperating income reached ¥10.1 billion (up 10.3% compared withthe preceding ﬁscal year).
In intraocular lenses for implantation after cataract surgery,customers in Japan have recognized the advantages of our
products, and they are near our original goals for market share. We
expect new markets for such products once they obtain approval
from the U.S. Food and Drug Administration (FDA), which isscheduled to happen in the year ahead. Our Eye City chain ofcontact lens specialty stores in Japan slowed the pace of new

4New Structure of the Hoya Group
HOYA
Strategic
Business
Units

Blanks

Masks

MemoryDisks

PENTAX

OpticsVisionCare

HealthCareLife Care

Imaging
Systems

OpticalComponents

Global Headquarters

store openings, due to the inﬂuence of medical fee reforms.

Concerning the digital camera business, we are focusing on

However, the chain attracted more customers and realized higher

digital SLR cameras, targeting mainly high amateur users, and somerevenues at existing stores, as a result of further improvements inbusiness segments are already experiencing numerical performance

management eﬃciency and enhanced marketing activities. We

gains thanks to business narrowing and selection, strategic

see this as a year where we widened our lead over our

product mixes and the establishment of new sales channels.

competitors despite the inclement business climate.

Our initial goal is to boost the operating margin of the Pentax
businesses—primarily medical devices and digital cameras—

Pentax

non-inclusive of goodwill expenses, to 18% for the next three

Pentax Corporation—which became Hoya’s consolidated

years.

subsidiary in the second half of the ﬁscal year—posted net sales of¥89.0 billion and operating loss of ¥134 million. The EPK-i series

Outlook and Priority Measures for Fiscal 2009

endoscope system that went on sale in the United States in May

Hoya expects to see ongoing severe external conditions

2007 contributed to the sales increase. Also making a substantial

surrounding each of its businesses in the year ahead. In the global

contribution were sales of the digital SLR camera Pentax K10D,

economy as well, the U.S. subprime loan problem is spilling overwhich earned three major global camera awards, evincing its

into Europe and Asia. The Hoya Group does not consider itself

strong popularity in Japan and other countries.

immune to the inﬂuence of such externalities. However, far fromIn the half-year following consolidation, the Company

indicating any kind of loss of competitiveness, we believe thereaﬃrmed the promise and growth potential of medical

Company has the muscular ﬁnancial position and businessendoscopes as key devices essential to the medical ﬁeld. Going

structure to maintain a degree of strength even in somewhat

forward, we expect doctors’ needs to become more sophisticatedadverse circumstances.

and complex, encompassing the ability to not only view the

Each of the Company’s businesses are currently operating

inside of patients’ bodies, but to actually diagnose and treat thewell in comparison with one year ago, and these results areabnormalities discovered. We are proceeding with expansion in

manifesting in quantitative performance gains as well. In eachthe medical endoscope ﬁeld, including treatment tools for use

business, we have revised our operating structures to optimize

with endoscopes, and other peripheral equipment.

simplicity. These changes should enhance our ability to respond

HOYA ANNUAL REPORT 2008

5

A Message to Our Stakeholders

to market changes and allow us to sustain a measure of
proﬁtability through cost competitiveness even when productremoved from the portfolio once it has served its purpose.
My role as CEO is to continually tune the Group’s businessprices fall in the face of diﬃcult market conditions. Concerning

portfolio to the needs of the times. I consider it my highest

capital investments, from approximately one year prior we havemission to ensure the continued growth of the business entity

carefully considered which areas to be aggressive in and which tothat is the Hoya Group, through selection and winnowing of

narrow down, and have taken actions accordingly. We intend tobusinesses, appropriate allocation of resources and the

pursue the same policy in the year ahead and the years following,development of an optimal business portfolio.

channeling the minimum required level of ﬁnancial resources into
primarily frontline technology areas.

Based on this approach, in the ﬁscal year under review we
added the new portfolio elements of Pentax’s businesses to Hoya’s

It has been approximately eight years since I took up theexisting business portfolio. This was part of a two- to three-year

position of CEO. The scale of the Hoya Group businesses has

eﬀort to transform the Company, as well as one of the processesgrown substantially since then, but many improvements still needtoward paving a new path for Hoya’s growth over the next 10 years.

to be made in the operation and organizational structure of the

I see Hoya as an optics company. In that sense, I aim tobusinesses. With the addition of the Pentax business, I believe wedevelop the Company’s businesses by leveraging its opticalhave an excellent opportunity to review our operations from thetechnologies and maximizing opportunities for growth and proﬁts

ground up during the upcoming ﬁscal year. The Company has so

within those ﬁelds. Optics is one area that still has potential for

far ridden the wave of market growth to achieve solid performance

growth. I remain optimistic about the potential for new businessgains, a ride that has for too long lulled certain segments intodevelopment in this domain.

contentment with current levels of success. It is diﬃcult to change
vast expenditures of energy. However, we believe some areas

Striving for Sustained Growth into the Future
through Management Integration with Pentax

require reform from the standpoint of sharpening our competitive

I said before that Hoya is an optics company. In looking to theedge. Rather than fearing change, we intend to bring thenext phase of the Company’s growth utilizing its optical

Company back to its roots and commence with eﬀorts to bringtechnologies, one business we had longed to enter at some point

about such changes. I would like to start by changing the mentality

was endoscopes and other medical devices. We explored this ﬁeldof each Group employee to put such measures into practice.

early on, but starting a business from the ground up takes time.

what one has become accustomed to, and the change requires

Instead, we deemed outside resources a more eﬀective way ofBusiness Portfolio Management and a
Medium- to Long-Term Vision to Support
Sustained Growth

keeping pace with the times, and settled on the businessHoya’s concept of business portfolio management is a business

which Pentax possesses superb technologies and development

philosophy that entails retaining and subsuming several diﬀerent

capabilities. The medical endoscope business shows tremendous

businesses within the Group simultaneously and balancing thempotential. I would like to consciously cultivate this business into a

to sustain proﬁtability, stability and growth overall. This is Hoya’s

pillar to support the Hoya Group’s growth 10 to 20 years into thebasic attitude regarding management.

future. Although I simply say the “medical equipment ﬁeld,” thisAs with living things, every undertaking follows a life cycle of6

integration with Pentax as a viable option.
The medical endoscope business is very attractive, and one inmarket is expected to diversify. Limiting the domain to opticalbirth, growth, maturation and decline. In line with this process,technologies, which is an area of particular expertise for both

enduring expansion requires constant generation of new

corporations, we can demonstrate undisputed competitive

businesses, or else the drawing in of new businesses from theadvantages. To this end, we are aggressively investingoutside. As one business is being born, another business may be

management resources to cultivate and develop new markets.

Another anticipated beneﬁt of the business integration is the

A Final Word to Our Shareholders

contribution of Pentax’s optical design technologies to the

In the ﬁscal year under review, a diﬃcult external environment

enrichment of Hoya’s technology and expertise in optics. Pentax

and issues within the Company led to performance that fell short

has excellent technologies relating to the design of a wide variety

of expectations. I would like to once again apologize to ourof optical parts and the manipulation of light itself. Going forward,

shareholders for the signiﬁcant concerns this may have caused. In

we wish to share these technologies across the entire Group. By

the business integration with Pentax as well, we received a broad

fusing Hoya’s technical capabilities with Pentax’s opticalrange of opinions, admonitions and encouragement from ourtechnologies, we should see future possibilities not only forshareholders and a large number of our stakeholders, making thiscameras but also for totally new domains. To ensure favorable

watershed year one in which I felt a renewed sense of

results from consolidating the two companies, we ﬁrst intend toresponsibility as CEO. As Hoya responds ﬂexibly to changes in thetransform Pentax’s business structure to streamline management

times, we remain committed to creating the kind of value for theand bolster responsiveness to market needs.

general public and the advancement of society that only Hoya

This business integration represents a milestone, rather thanan endpoint, in the growth of the Hoya Group. Just looking at thecan oﬀer. I look forward to the understanding and support of ourshareholders in these endeavors for many years to come.

medical devices ﬁeld, we still see technologies and products thathave room for improvement. We maintain our policy of cultivating
and acquiring new technologies and new businesses to add value
to the Hoya Group.
Although Pentax Corporation has been dissolved by thismerger, we will continue to use the globally recognized Pentax
brand name.

Hiroshi Suzuki, President and CEO

HOYA ANNUAL REPORT 2008

7

In August 2007, looking to cultivate new business to accelerate growth into the next generation, the Hoya Group took on Pentax
Corporation as a consolidated subsidiary. We subsequently merged with the ﬁrm on March 31, 2008. We are pleased to introduce
Pentax as a perennial innovator in cameras and medical equipment, creating products born out of its unique technologies.

Cutting-edge R&D that looks to the future
Pentax researches and develops leading-edge technologies that look ﬁve or 10
years into the future, leveraging its optomechatronics technology. Under the
principal themes of optics, precision technology and medical technology, Pentax
adds to its internal resources by actively collaborating and engaging in joint
development with the research departments of outside ﬁrms, universities andother institutions to speed up R&D and strengthen development capacity. With
substantial growth anticipated for the medical ﬁeld, the corporation endeavors todevelop endoscope systems that utilize new technology, reﬁne the performance ofexisting products and channel resources into research in biotechnology,
nanotechnology and other future-oriented elemental technologies. The merger
with Hoya will accelerate Pentax’s research and development activities.

three core businesses fueled

Continual growth inby original technology and ideas

8

Lifecare Business

Imaging Systems Business

Since its release of the bronchoﬁberscope in 1977, Pentax has
developed and sold medical equipment that utilizes optics andprecision processing technology. In the ﬂexible endoscope ﬁeld
in particular, Pentax products designed for the respiratory
system; the digestive system; ear, nose and throat examination;and other areas have garnered extensive support from doctors
the world over for their superior performance, safety and easeof use. In the new ceramics ﬁeld, the ﬁrm also develops
biocompatible bone ﬁlling material and chromatography media
for puriﬁcation and separation of biopharmaceutical drugs.

In 1952, Pentax released the ﬁrst 35mm SLR camera made inJapan, going on to create original technologies and products as
a leader in the culture of images and photography. The PENTAX
K10D, a digital SLR camera with interchangeable lens released in
2006, has earned plaudits from users around the world anddominated three top global camera awards based on its excellent
performance, broad range of functions, superb usability andattractive pricing. The PENTAX K20D, released in March 2008, hasalso gotten oﬀ to a ﬁne start.

EuropePentax: A history ﬁlled with“ﬁrsts” inJapan and theworld
product

Asia
United StatesJapan

global networkA
providing the people of the world
with happiness and satisfaction
Beginning in 1962, Pentax has spent more than 40 years building anoverseas network and actively participating in the global market.
Pentax is appreciated as a worldwide brand.

Since its establishment in 1919, Pentax’s unique ideas andtechnical capabilities have generated an array of productsthat were the ﬁrst of their kind in Japan or in the world.
Pentax has continually innovated while remaining
committed to smaller, more compact, more user-friendly
cameras that retain high image quality. The corporation
has also broken new ground with products in the medical
equipment ﬁeld, which it entered in 1977, and the newceramics ﬁeld, which it entered in 1983.

1919
1938

Established Asahi Optical Joint Stock Co.

1952

Released the Asahiﬂex I, the ﬁrst 35mm SLR camera
made in Japan

1957

Released the Asahi PENTAX, an SLR camera featuring apentaprismFirst used “PENTAX” in product names

1977

Entered medical equipment ﬁeld and released FB-17A
bronchoﬁberscope

1981

Cumulative global production of SLR cameras topped
10 million
Released the PENTAX ME-F, the world’s ﬁrst TTL
auto-focus SLR camera

1983

Entered the new ceramics ﬁeld
Released APACERAM, an artiﬁcial tooth root usinghydroxyapatite

1985
1986

Released Japan’s ﬁrst apatite bone ﬁller

1987

Released the PENTAX SFX, the world’s ﬁrst TTL
auto-focus SLR camera with built-in ﬂash
Entered the electronic endoscope ﬁeld and released
the PENTAX videoendoscope with built-in CCD sensor

1997

Entered the digital camera ﬁeld and released the
PENTAX EI-C90 digital still camera
Released the PENTAX 645N, the world’s ﬁrst auto-focus,
medium-format SLR camera with interchangeable lens

2000

Developed and commercialized the world’s ﬁrst
DVD/CD-compatible hybrid diﬀraction lens

2002

Changed the company name from Asahi Optical Co.,
Ltd. to Pentax Corporation

2003

Released the PENTAX Optio S, a digital camera
equipped with a sliding lens system

2004

Acquired 100% share of Microline, Inc. to augment the
medical treatment equipment business, andestablished Microline Pentax, Inc.

Optical Components BusinessPentax’s top-class optical technology is used in lensmodules for compact digital cameras and pickup lenses
used to read from and write to CDs, DVDs and otheroptical disks. One such module is the sliding lens system,
an innovative lens structure brought to market in 2003,
which oﬀsets the lens groups and houses them on two
diﬀerent levels. The sliding lens system has contributed
signiﬁcantly to the development of thinner and lightercompact digital cameras.

Established Asahi Optical Co., Ltd. Began lens designand commenced production of camera lenses andbinoculars

Released the PENTAX Zoom 70, the world’s ﬁrst
compact zoom camera

HOYA ANNUAL REPORT 20089

Hoya at a Glance

We aim to continue growing our operations in the
Information Technology, Eye Care and now Pentax
businesses and divisions.

ElectroOptics
Division

Information
Technology
Photonics
Division

Net Sales Breakdown by Business Segment*(Year ended March 31, 2008)

Electro-Optics

43.6%

Vision Care

26.2%
Group Total

VisionCare
Division

Health Care

9.6%

Photonics

1.9%

Other

Pentax

0.2%

18.5%

Eye Care
HealthCare
Division

Pentax* Owing to the inclusion into Hoya’s scope of consolidation of Pentax

Corporation and its subsidiaries on August 14, 2007, consolidated operating
results for the ﬁscal year ended March 31, 2008, include the operating
results of Pentax Corporation and its subsidiaries for the second half of theﬁscal year (the six months from October 1, 2007, to March 31, 2008).

10

Other

At a Glance
Net Sales

Operating Margin(Billions of yen)

(%)

250

50

200

40

150

30

100

20

50

10
0

0

2005

2006

2007

15

12

12

9

9

6

6

3

3
0

0

2006

2007

25

120

20

90

15

60

10

30

5
0

0

2006

2007

2008

100

25

80

20

60

15

40

10

20

5
0

0

2005

2006

2007

2008

200

10

160

8

120

6

80

4

40

2
0

0

2005

2006

2007

Mask blanks for the productionof semiconductors
Photomasks for the productionof semiconductors
Photomasks for the productionof LCDs
Glass disks for HDDs
Optical lenses and materials

The Photonics Division applies optics technologies cultivated over many years toprovide light source devices and equipment that utilize lasers and UV. Many of theseproducts are used in manufacturing processes for semiconductors, LCD panels anddigital cameras, and Hoya anticipates that the division’s business will beneﬁt frompositive synergies with the Electro-Optics Division.

UV light sources and excimer
light sources
Industrial and medical laser
oscillators
Various types of electro-opticalglasses

The Vision Care Division is engaged in global markets with a focus on four regions:Japan, Europe, North America and Asia-Paciﬁc. Hoya develops its businesses in thisﬁeld in ways that best reﬂect the varying commercial practices, laws, government
regulations and consumer preferences in each region. The Company holds the top
market share in Japan, based on the high quality and unquestionable value of its
products. In Europe and the Asia-Paciﬁc region, demand is rising for high-value-added
products such as Hoya’s excellent progressive and high index lenses.

Eyeglass lenses

The Health Care Division is responsible for the development of the Eye City chain ofcontact lens specialty stores, and it also produces and sells intraocular lenses (IOLs)
used in the treatment of cataracts. Eye City is the largest chain in its market segment inJapan. The Eye City business continues to attract more customers, 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 fullrange of after-sales services. Hoya markets IOLs globally, with focus on its headquarters
in the United States.

Contact lenses
Intraocular lenses (IOLs)

2008

150

2005

As functions and performance standards rise for semiconductors, LCD televisions,personal computers and digital cameras, and as these products grow more compact,
Hoya maintains the technical skills, development capabilities and production systems
to respond accurately to such needs. Hoya thereby sustains a large share of each ofthese markets. The Electro-Optics Division has become a driver of growth and proﬁts
for the Hoya Group.

2008

15

2005

Core Products and Services

2008

Leveraging its optics and precision processing technologies developed over many
years, the Pentax business develops and sells a broad selection of products, including
medical devices, digital cameras, lens units for digital cameras, and microlenses.
Particularly in the medical devices market, Hoya is garnering strong support for its
development of ﬂexible endoscopes with unprecedented image clarity and device
operability. In cameras, the Company oﬀers products with superior image quality andperformance.

Medical endoscopes
Prosthetic bone ﬁller
Digital cameras
Lens units for digital cameras
Microlenses

Note: Included here for reference are 12-month net sales and operating margin ﬁgures for Pentax
Corporation and its consolidated subsidiaries, prior to inclusion in the Hoya Group.

The Crystal business provides top-grade crystal glass products created with masterful
technique from quality glass. The Service business is mainly engaged in the development
and operation of information systems for the companies in the Hoya Group.

Crystal glass
Development and operation of
information systems

HOYA ANNUAL REPORT 200811

Information Technology
Along with the digitization of telecommunications, broadcasting, home electronics, entertainment
and a host of other content comes the need to develop technologies to process increasing volumesof data at high speeds. Hoya provides the technology and products that enable the developmentof higher-capacity, faster information and telecommunications equipment that is more compact
and lightweight. In the process, we make a signiﬁcant contribution to the onward march oflarge-screen FPD televisions, digital cameras, notebook PCs and other digital products.

Electro-Optics Division

Mask Blanks and Photomasks
for Semiconductor Production
Hoya provides high-value-added products
and services that aid in semiconductor
miniaturization and process enhancement
As semiconductor miniaturization continues, lithographic
exposure—which transfers the circuit pattern onto the wafers—is
key to the production process. Hoya produces photomasks, which
are the master plates for the patterns used in lithographic
exposure, and the mask blanks that form the substrate for thephotomasks. A mask blank is a highly polished glass plate onto
which a homogeneous metallic ﬁlm and photosensitizing agent
have been applied; a photomask is a mask blank onto which apattern has been drawn with an electron beam or laser writing
device. Semiconductor manufacturers seek to continue
integrating more components with smaller circuits, as thisincreases device performance and saves on raw materials costs.
Hoya takes advantage of its technical capabilities cultivated over
the years to support semiconductor miniaturization by providing
high-precision mask blanks and photomasks that competitors
cannot match.

Signiﬁcant Actions Taken and Results Achieved in
the Fiscal Year under Review
High-precision products drove sales
Looking back on the semiconductor market in the ﬁscal year
under review, while the ﬁrst half saw hearty incentives for cuttingedge development, the second half witnessed manufacturers

12

From left: a glass substrate, a phase-shift half-tone mask blank, a homogenous metallic ﬁlm
coated layer, a completed blank with photoresist coating and a complete photomask withcircuitseeking to improve productivity while pursuing miniaturization
through more conservative means. At the same time, special
attention was placed on proﬁtability and eﬃciency as alarms weresounded over ever-inﬂating development investment costs.
In this environment, performance of Hoya’s mask blanks
stayed strong in the ﬁscal year under review, primarily supported
by high-precision products. Among these, phase-shift mask
blanks, which enable ﬁner lines to be drawn by changing thephase of the light used, sustained their growth trend from thepreceding year. The Company has nearly completed a techniquefor drawing circuit lines 45 nm* in width and has commenced
product shipments, as well as steadily progressing indevelopment of the upcoming 32 nm line width products.
In photomasks, rather than pursuing scale of business Hoya
concentrated on developing frontline applications andstrengthening cost competitiveness. As a result, we sustained thesame level of proﬁtability as during the preceding year. In thesemiconductor industry, chip manufacturers are regarding
manufacturing cost reduction as a key issue even as they
accelerate development in leading-edge applications, resulting in
more complex, high-level needs from photomask manufacturers
than ever before. In line with this shift, the Company maintains adevelopment system intimately coordinated with its customers, attimes even getting involved in customers’ circuit design andproduct development activities. Such coordination allows us tooﬀer not only cutting-edge technology development, but also
truly valuable solutions, such as products that increase yields oncustomers’ production lines.

leverage its technical capacity and product expertise backed by its
experience to provide mask blanks and photomasks that assist
customers in reﬁning their production processes. With
technological advancements in semiconductors happening on ashorter cycle especially in recent years, Hoya is committed toresponding swiftly to such market needs by further enhancing its
development capabilities and its ability to oﬀer customers
valuable solutions.

* One nanometer equals one billionth of a meter.

LCD Photomasks

Highlights

Hoya supports the expansion of the market
for LCD panels

EUV mask blanks, regarded as a candidate for the
next generation of lithography technology
The argon ﬂuoride excimer laser with a wavelength of 193 nm is
currently the predominant light source used for lithographic
exposure onto semiconductor wafers. The circuit patterns that the
ArF excimer laser can draw were considered to be limited to a line
width of 65 or 45 nm. However, as of 2008, advances in production
techniques have brought 22 nm pattern formation into view. On
the other hand, the strongest candidate for the next generation oflithography light source after ArF is extreme ultra violet (EUV),
which has a wavelength of 13 to 14 nm. Hoya has alreadycompleted its basic R&D for EUV mask blanks and is oﬀering test
mask blanks with a view to commencement of mass production.
We plan to continue enhancing EUV mask blanks toward practicalapplication in 2011 and beyond.

Policies and Forecasts for the Year Ahead

Liquid crystal displays (LCDs) permeate our lives on a broad scale,from ﬂat panel televisions and computer monitors to digital
cameras and mobile phones. LCD photomasks are the master
plates used in the manufacture of these LCD panels. Hoya is theworld’s leading producer of LCD photomasks, and it has strengths
in the production of large-scale LCD photomasks.
The LCD panel market continues to grow year by year, driven
by demand for large ﬂat-panel televisions and computers.
Particularly in ﬂat-panel televisions, which have enjoyed explosive
global popularity, the panel manufacturers that are the Company’s
customers are working to increase panel size and improve
productivity, in response to demand for larger displays and an
ongoing rapid slide in unit product prices. In line with such trends,
Hoya strives to provide large-scale photomasks for the eﬃcientmanufacture of larger panels and continues to supply newtechnologies that help improve its customers’ productivity.

Focusing on new product development and technicalsupport to improve semiconductor manufacturing
processes
Hoya will continue funneling resources into high-value-added
products and enhancing its development system in support of
32 nm. Moreover, the semiconductor industry is nearing full-scale
process development with 22 nm line widths. As a producer ofmask blanks, Hoya intends to actively participate in development
activities that look to the next generation, including joint
development projects with device and materials manufacturers.
In the semiconductor industry, to cut down on production
costs we anticipate even more industry activity that will change
the semiconductor manufacturing process itself. Hoya will

Large-scale photomasks for LCD production

HOYA ANNUAL REPORT 2008

13

Information Technology

Signiﬁcant Actions Taken and Results Achieved in
the Fiscal Year under Review
Oﬀering new value in harsh market conditions
In the ﬁscal year under review, panel manufacturers slowed thepace of investments in facilities, and the thriving panel market led
to a greater emphasis on mass production of existing models thanon new product development, which reduced the number of neworders for photomasks and softened overall demand in themarket. Coupled with plunging prices for certain products, theCompany faced a year fraught with adversity.
Under such circumstances, Hoya worked to further cut costs
and implemented new technologies to provide products that aid
customers in streamlining and reducing costs in their production
processes. For example, the Company is working to expand salesof its multi-tone mask, which can contribute to productivity
through a 15% to 20% physical reduction in the panel
manufacturing process. We have also applied high-leveltechniques used in photomasks for semiconductors, which wehave been involved in for many years, to commence technicalservices that simulate customers’ production processes with theaim of improving the process environment. As a result, ourcustomers have reevaluated our advanced technical abilities andservice quality, which we believe has succeeded in enhancing
customer trust in Hoya’s frontline technology capabilities.

Highlights
Pursuing excellence in quality, delivery times andcosts to nimbly respond to customer needs
From autumn 2006, Hoya commenced in-house production ofglass substrates (mask blanks) for LCD photomasks andreorganized its production system to incorporate all manufacturing
stages from substrate to photomask. These changes havebolstered cost competitiveness by raising photomask quality andensuring substrate supply. In addition, the tripolar production
system the Company has been promoting since 2005, with hubs
in Japan, Taiwan and South Korea, enables rapid response tocustomers in each region. There has been a growing tendency inrecent years for panel manufacturers to keep a cautious eye on
ﬁnal demand when placing orders for photomasks. Hoya andother photomask producers are therefore being asked to deliver
quality customized products in short time frames. In combination
with in-house production of mask blanks, this tripolar systemallows for agile response to such customer needs.

14

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

Policies and Forecasts for the Year Ahead
We are extending our market lead throughtechnological innovation and detailed accommodationof customer needs
As lower prices transform LCD televisions into consumer goods
readily purchasable by the general public in a process known as“commoditization,” the global market is projected to continue
expanding in the year ahead, boosted by the Olympic Games andthe spread of digital broadcasting networks. In the year ahead, we
expect panel manufacturers to ramp up capital investment andestablish new production lines in response to such demand, andthe supply and demand situation in the photomask market ispredicted to turn favorable.
Hoya will capitalize on these opportunities to elevate its
presence in the market by continuing its technological innovation
and responding carefully to the diverse needs of each customer.
In the brief space of 10 years, the LCD panel market has rushed
through a growth process that took the semiconductor market 30
years to complete, and there is still considered to be substantial
room for reﬁnement of production techniques. The Company
aims to oﬀer ground-breaking products to support the sustained
growth of LCD panels by applying the technical capabilities wehave accumulated in semiconductor photomasks to LCD
photomasks.

Glass Memory Disks for Hard
Disk Drives
We will further enhance our production anddevelopment structure to accommodate
continuing growth in the 2.5-inch HDD market
Hard disk drives (HDDs) are incorporated into personal computersand other digital devices as data storage units. Highly shockresistant glass disks are used in HDDs for notebook computers,
portable game consoles and other mobile devices to ensure thatdata is not damaged in transit due to vibration or impact.
Hoya produces and sells substrates (polished glass plates) andmedia (consisting of magnetic recording ﬁlms formed on thesurfaces of the substrates) for such glass disks. Nearly all the
Company’s sales of such products are for 2.5-inch disks, which areincorporated into HDDs and used in notebook computers, carnavigation systems and game consoles.

Signiﬁcant Actions Taken and Results Achieved in
the Fiscal Year under Review
Using adversity as a springboard for future growth
In the ﬁscal period under review, the 2.5-inch HDD market
expanded on a global scale amid growing worldwide demand for
notebook computers. Hoya's unit sales of substrates increased
from the preceding ﬁscal year, but unit sales of media fell as aresult of lagging development. Market prices also dropped, owing
to severe market competition. Also, for products denominated indollars, a rising yen eroded unit prices after conversion to theJapanese currency. As a result, sales declined overall.
Around the spring of 2007, HDD manufacturers fullytransitioned to a perpendicular magnetic recording method thatenables increased storage capacity through greater data
recording density. Although Hoya got a head start in developing
media compatible with the new method several years in advance,
delays in technical development at the ﬁnal phase ofcommercialization thrust the Company into an uphill battle with
its rivals in the ﬁrst quarter of the ﬁscal year under review.
However, we staged a gradual comeback from the second quarterand have now returned to a stable production system. As a resultof such technical issues, signiﬁcantly lower product prices despite
market expansion, and ongoing cost pressures due to rising raw
materials prices and the inﬂuence of exchange rates ﬂuctuations,proﬁtability in the ﬁscal year under review also declined comparedwith the previous ﬁscal year.

Policies and Forecasts for the Year Ahead
Expanding production systems in response to globally
increasing demand
Advancing rapid development through anorganizational structure responsive to the market

Glass memory disks used in notebook computer HDDs (illustration)

Demand for notebook computers is surging on a global scale,with notebook PCs forecast to overtake desktop models in 2009 asa percentage of all computers sold. This growing demand,
replacement demand for desktops in Western markets and new
demand for notebook PCs from emerging markets are expected
to propel continued robust growth in the 2.5-inch HDD market aswell. Moreover, although 3.5-inch HDDs have been standard for
desktops because of the lack of need for portability, recent
indications point toward the adoption of 2.5-inch units fordesktops as well, in the interests of energy and space eﬃciency.

HOYA ANNUAL REPORT 200815

Information Technology

In an advance response to such demand, Hoya is promoting aplan to augment manufacturing facilities at its Vietnam
plant—one of its main substrate production centers. We are also
working to reorganize our production system to achieve higher
quality, lower costs and more stable operations, in contrast to pasteﬀorts primarily focused on upping production volume. Our initial
goal is to consolidate marketing, development and production
functions to ensure ﬁrm support of customer needs throughspeedy development processes that enable swift response tomarket changes.

Optical Lenses
Advances in superior-performance opticalglass bring more sophisticated optical lenses
Hoya maintains a complete production system capable ofmanufacturing everything from optical glass to processed opticallenses, and develops and manufactures high-precision asphericalmolded lenses and polished lenses used in the photographic
optical units of digital cameras, video cameras, camera-equipped
mobile phones and other devices. In particular, aspherical molded
lenses—Hoya’s forte—have excellent aberration correction
properties, which enable wide-angle settings and require fewer
lenses, thereby contributing handsomely to more compact,
lightweight and functionally sophisticated cameras.

Signiﬁcant Actions Taken and Results Achieved in
the Fiscal Year under Review
Raising orders of lenses for compact digital cameras bycommercializing technically challenging concave
meniscus aspherical lenses

Glass memory disks for HDDs: transparent substrates and media

Highlights
Capitalizing on synergies with other divisions toenhance discrete track recording and othernext-generation technologies
To stay ahead in the fast-moving HDD technology race, theCompany is working to develop state-of-the-art technologies thatlook to the next generation and the generation after that. We are
currently focusing R&D resources on discrete track recording
media. By making grooves of non-magnetic material between
recording tracks, this technology reduces the incidence of noise
between neighboring tracks, thereby permitting an increase in data
recording density of 1.5 to 2.0 times compared with conventional
media. With the market anticipating commercialization of thetechnology in 2010, advances in media are leading to calls fortechnological innovation in substrates. Hoya is committed todeveloping and establishing production processes fornext-generation products, utilizing the expertise accumulated
throughout the Group at its R&D Center and other divisions.

16

In the ﬁscal year under review, demand for digital cameras swelledin Japan, Europe, North America and other developed countries,
as well as the BRICs markets of Brazil, Russia, India and China. The
market experienced a steady stream of high-performancecompact cameras, especially those having thin, lightweight
designs while sporting high megapixel counts over 10 million andhigh-powered built-in zoom functionality. The SLR camera market
is also growing steadily as resolutions improve, the number ofentry-level models increases, operability improves and the units
enjoy greater popularity with female shoppers ranging from pros
to amateurs.
In this environment, demand for Hoya’s aspherical molded
lenses and polished lenses grew in the ﬁrst half of the ﬁscal year
under review to signiﬁcantly exceed that of the previous year. In
contrast, orders for optical lenses fell in the fourth quarter, due to adownturn in demand for compact cameras that began in thesame quarter and the inﬂuence of inventory adjustments bycamera manufacturers. Amid such problematic circumstances,sales of concave meniscus aspherical lenses grew considerably to
become a core driver of net sales, as customers recognized thelenses’ superb functionality and quality. Furthermore, productionof SLR cameras has been increasing rapidly in the last several
years, while medium- and large-aperture lenses sustained healthy
sales momentum from the prior year.

Through to the preceding ﬁscal year, there was demand forboth 2- and 3-megapixel glass lenses for camera-equipped mobile
phones. However, a greater-than-expected switchover to plastic
lenses depressed overall units produced in the ﬁscal period underreview, despite the Company’s focus on deploying high-end 3- to
5-megapixel models, which are particularly well-suited to takeadvantage of the beneﬁts of molded glass lenses. Concerning
optical glass materials, we successfully commercialized ahigh-functionality material we had been developing and earned
resounding praise in bringing it to market. In terms of production,
we upgraded the capacity of our glass melting furnace and ouroverseas polishing and mold pressing plants in response tobooming demand. We also expanded our production lines forpolished lenses used in digital SLR cameras, for which demand is
expected to grow, and for aspherical lenses.

challenges by developing products ranging from advanced glassmaterials that have lower melting points while retaining excellent
optical properties, including high diﬀractive indices and low
dispersion rates to glass materials that present technicalchallenges in molding. Through this range, the Company ispromoting development of leading-edge high-performance glassmaterials that anticipate market needs through comprehensive
technical development all the way through to molding
techniques, thereby enabling mass production.

Highlights

Hoya is channeling resources into the development ofstate-of-the-art optical glass materials that oﬀer a high level of
performance. Unlike plastic, optical glass comes in a wide array of
diﬀractive indices and dispersion rates and has excellent stability
under changes in temperature, moisture and other environmental
factors, leading to its adoption in product areas requiring
especially high performance and reliability. Optical glass used inaspherical molded lenses has been diversifying to cover a broader
range of optical properties, in particular recently, and opticaldesigns will require even higher diﬀractive indices and lower
dispersion rates in the future. However, the extending coverage ofphysical properties is requiring ever more sophisticatedprocessing techniques for molded lenses, leading to technicalchallenges in glass molding. Hoya is responding to theseIn the Photonics Division, Hoya applies the optical technologies it
has cultivated over the years to manufacture and develop suchproducts as laser oscillators and UV light source devices. Principal
products include the defect correction equipment used in theﬂat-panel display (FPD) manufacturing process, laser oscillators for
precision processing that assists analysis aid processing during
semiconductor manufacturing, as well as UV light source devices
used in the UV resin bonding of such optical parts as optical
pickups and camera modules. We also provide color ﬁlters that areused in various optical equipment, as well as specialty glasses forindustrial and other applications.
During the ﬁscal year under review, in response to changes in
the marketplace we reviewed our product mix and stepped up
marketing activities. As a result, although sales remained on a parwith the preceding ﬁscal year, proﬁtability improved. In theupcoming ﬁscal year, we will concentrate on strengthening
relations with customers and developing products and enhancing
services to meet their needs. Through these eﬀorts, we will strive
to deliver truly valuable solutions to our customers.

Aspherical molded lenses

Color ﬁlters

Developing glass materials for high-performance
aspherical molded lenses with superior opticalproperties

Photonics Division

EXECURE 4000, a spot UV light source device

HOYA ANNUAL REPORT 200817

Eye CareEye care is growing in importance, particularly in developed countries with aging populations. Hoya meets
this demand around the world in a number of ways: with high-value-added eyeglass lenses; at its Eye City
chain of contact lens specialty stores that adopt a consulting-based sales approach; and through its
intraocular lenses (IOLs), which assist the simple and safe surgical treatment of cataracts. In short, we
provide a myriad of products and services to care for that most important sensory organ—the eye.

Vision Care Division

Eyeglass Lenses
Growing Steadily in a Diﬃcult Environment
by Providing High-Quality Eyeglass Lenses
on a Global Basis
The global market for eyeglass lenses is still expanding at several
percent per year. During the second half of ﬁscal 2008, however,the combination of weakening demand and an inﬂux of
low-priced lenses from Asia slowed the industry’s growth. Amid
this diﬃcult operating environment, Hoya’s Vision Care Business
implemented a number of management initiatives that succeeded
in boosted net sales 5.5%, compared with the preceding term.
Hoya excels by providing high-value-added lenses, produced
using the industry’s most advanced technologies. These include
high index materials; antireﬂective, scratch-resistant and a variety
of other coatings; and FreeForm design technology*1, which isused in such applications as double-surface progressive lenses.
The Company is optimizing its global supply chain, providing
custom lenses via its Thai mass-production facilities, processing
labs in countries throughout the world and its Super RX Labs inThailand, featuring newly expanded capacity. This system enables
Hoya to provide its customers with customized lenses swiftly andmore eﬃciently than ever before.
Hoya is also enhancing eyeglass sales to a much broader
customer base. For example, the Company helps retail stores oﬀer
higher-quality services by providing sales support software,
expanding the application of direct ordering systems and other IT
tools, as well as education and training.

18

Japan
Sales of Hoyalux FD Bifocal Eyeglass Lenses Increase
Throughout its long history of operations in Japan, Hoya has usedadvanced technologies to design high-value-added lenses thathave earned a solid reputation. In recent years, price competition
has intensiﬁed, owing to the proliferation of shops oﬀering
inexpensive eyeglasses. These shops, known as “one-price shops”
and “three-price shops,” are a relatively recent phenomenon.
One-price shops typically oﬀer generic-brand single-focus lenses
in a limited range of frames—all at a single low price. Three-priceshops are similar, but they oﬀer a broader range of options, andpricing is tiered accordingly. Until now, this price competition has
been limited mainly to single-focus lenses, but in the ﬁscal year
under review the eﬀects of this trend rippled outward. Prices fellon the high-end lenses that are Hoya’s mainstay, and shops
oﬀering lower-priced progressive lenses began to emerge,
pushing down prices marketwide.
Operating in this challenging business environment, Hoya has
focused on boosting sales of Hoyalux FD*2 bifocal lenses with adouble-surface progressive lens design. Despite the impact ofthese sales, however, revenues
were down slightly year on year asa result of the overall market
contraction.
Going forward, Hoya willcontinue to attract customers withproducts that incorporate superior
design and ophthalmic
technologies. We recognize thediversity of customers’ needs, andwe are implementing a multibrandstrategy targeting a broader rangeof customers.
Ad promoting REMARK, a new-concept lensEurope

Brazil, Russia, India and China

Hoya Market Share Rising Thanks to Growing Brand
Awareness

Our Keys to Growth

Until ﬁscal 2008, Hoya had enjoyed several years of sales growth inEurope, but consumer demand in this market slackened in ﬁscal
2008. To be speciﬁc, the market for eyeglasses decelerated sharply
in the third quarter. We addressed this situation by building the
Hoya brand through such eﬀorts as oﬀering IT tools, training
personnel at eyeglass retail stores and developing aggressive
marketing strategies. Through these eﬀorts, we increased sales of
Hoyalux iD Lifestyle*2 lenses, as well as lenses that incorporate
Hoya’s proprietary double-surface
progressive lens design.
To maintain this momentum, we
will strengthen our services for retailstores, thereby enhancing the Hoya
brand.

North America
Cultivating Sales Channels and Aggressively
Developing Our Brand Strategy
In ﬁscal 2008, this market endured issues related to the subprime
loan crisis and rising unemployment, which aﬀected all aspects ofconsumer spending. Although we have not placed a high priority
on the North American market until now, we have steadily
expanded these operations since our acquisition of local eyeglasslens processing and sales companies in ﬁscal 2001. Regulatory
requirements and stiﬀ competition are more challenging than inother markets, but we are steadily enhancing our market presenceby cultivating sales channels and building our brand.
In the United States, the baby
boom generation is nearing
retirement and increasingly needs
Hoya’s high-performance lenses.
We plan to introduce products totake advantage of this need, thus
boosting our North Americanbusiness onto a growth trajectory.

Hoya is developing businesses in Brazil, Russia, India and China(BRICs), which have growing populations and robust economies.
Russia and Eastern Europe are particularly noteworthy for therising number of people who can aﬀord quality eyewear. For
example, Hoya’s business in Russia doubled during the past year,
and demand for high-end eyeglass lenses is rocketing in Poland,
Hungary and Rumania.
China is also achieving rapid economic growth, but most of its
consumers remain unaware of the advantages of multifocal
lenses. In this market, only about 1% of the people who needmultifocal lenses wear them, but demand for high-value-added
eyeglasses is expected to grow in line with economic expansion
and as the value of these lenses are better understood. Hoya plansto secure a major share of this tremendous market.
India’s GDP has grown sharply over the past several years, andthe number of educated, middle-class people who can purchasequality eyewear has risen accordingly. In ﬁscal 2007, weestablished a local subsidiary in Mumbai, which is our base for
expansion.
Although Hoya’s eyeglass lens business has aggressively
expanded its global operations, its global market share lags its
business in Japan.
Our ﬁrst priority for the coming years is to bolster our global
presence by cultivating the BRIC markets. As part of this strategy,
we expect to take full advantage of opportunities to expand ourbusiness via local acquisitions. We believe the BRIC markets havegreat potential and expect to derive 80% of our growth fromthese emerging markets.
Hoya is also making plans for the future investment in SouthAmerica and other areas where we have no direct investments atpresent.
*1 FreeForm design technology: Created by using Hoya’s design and processing

technologies, these lenses feature aspheric surfaces customized to ensure optimal
performance tailored to each customer’s order.

*2 Hoyalux FD (in Japan)/ Hoyalux iD Lifestyle (in Europe): These reasonably priced

progressive lenses have the standardized design aspects of the superior Hoyalux iD
lenses (See *3) so that more customers can experience the beneﬁts of Hoyalux iD.

*3 Hoyalux iD: These double-surface progressive lenses are fully customized toprovide clear near and far vision.

HOYA ANNUAL REPORT 200819

Eye Care

We raised revenues and proﬁts by replacing andrebuilding stores and enhancing employee education

targeting unique regional features. Through eﬀorts such as these,
Eye City is working to respond swiftly to the major shifts thatcharacterize the operating conditions and competitive environment
in Japan’s contact lens market. By capitalizing on such changes,
we intend to take the lead over our competitors by reinforcing ourmanagement structure and improving our level of service.
Our second measure was to enrich employee education,
which is important as contact lenses are essentially highly
controlled medical devices. Based on suﬃcient knowledge of the
products we provide, the staﬀ of Eye City works to oﬀer higherquality service through consultation services wherein customers
are oﬀered the contact lenses that suit them best. In the ﬁscal
period under review, we stepped up training especially for store
managers and area managers to ensure that every store in our
extensive chain provides the same level of security and customer
satisfaction through quality consultation services.
Finally, we channeled resources into new productdevelopment and forays into new markets. We are leveraging
Hoya technologies to develop higher-value-added contact lenses,
which we will successively release into the market. In newmarkets, we opened three additional stores in Shanghai, China. As
a result of these measures, Eye City raised its competitive standing
and increased revenues and proﬁts compared with the previous
ﬁscal year.

Fiscal 2008 brought substantial changes in the businessenvironment, brought on by revised fee standards for medical
exams under the national healthcare system. In this environment,
Eye City implemented a number of management measures that
focused on creating stores that customers prefer.
First, to oﬀer more convenience to customers, we continued
the prior year’s eﬀorts to strategically replace underperforming
stores with new ones based on detailed trade area analysis. We
opened six new Eye City stores and closed nine others. Althoughthese moves reduced our total number of stores by three, better
locations and more eﬃcient management attracted newcustomers and encouraged more visits by existing customers, so
total customers served rose to more than 5.5 million. We alsoenhanced Eye City’s brand recognition through sales promotions

Eye City store in a shopping mall in Shanghai, China

Health Care Division

Eye City Chain of Contact Lens
Specialty Stores
While keeping pace with major changes in its
operating environment, Hoya strives to create
stores that customers prefer
Hoya’s Eye City chain of 150 contact lens specialty stores acrossJapan is the largest such enterprise in the country. Eye Cityemphasizes the eye health of each of its clients as it expands thescale of its business by providing quality products and services
that customers can feel secure in purchasing.

Signiﬁcant Actions Taken and Results Achieved in
the Fiscal Year under Review

20

Highlights
Moving into the Chinese Market, which Shows a
Growing Interest in Contact Lenses

Intraocular Lenses
Headquarters Relocating to the United Stateswith the Aim of Strengthening Global Business

Even though the Chinese population is 10 times larger thanJapan’s, only a small portion of this population wears contactlenses. Despite rapid economic growth coupled with increasing
interest in contact lenses—particularly among women in their
20s—market awareness of safety issues tends to be low, partly
because of regulatory issues. Amid such market conditions, we
opened the ﬁrst overseas Eye City store in Shanghai in December
2005. Expanding from this launch of China’s ﬁrst contact lens
specialty store, we have raised the number of Eye City stores inShanghai to six. To ensure that customers can feel secure in
wearing their contact lenses, staﬀ opticians use the latest eye
examination equipment to determine the best-suited lenses foreach customer. Such thorough after-sales service helps earn thetrust of our customers, demonstrating that we are their partner in
eye health.
We plan to continue opening stores in China in the future, as
we release new products and build up our presence in the
Shanghai market. Looking also at other major cities, we aim to rollout stores strategically based on the characteristics of each area,
thereby building an Eye City network in the Chinese market.

With advances in health care, the population of developed
countries is rapidly aging, leading to increasing prevalence of
age-related ailments, such as cataracts. With this condition, overtime the lens of the eye grows milky white and loses its
transparency. The resulting loss of sight can be rectiﬁed byreplacing the clouded natural lenswith a clear artiﬁcial lens, known as an
intraocular lens (IOL).
In addition to hard lenses, Hoya has
succeeded in creating a foldable softlens, which can be inserted into an
extremely small incision. Particularly inrecent years, demand has grown forsoft lenses, which reduce surgeryrelated stress to the patients. We
manufacture and sell an innovative
injector system using these foldable
lenses to simplify IOL surgery.
Foldable acrylic IOL

Policies and Forecasts for the Year Ahead

Signiﬁcant Actions Taken and Results Achieved in
the Fiscal Year under Review

Seeing change as opportunity, we will fortify our base ofoperations as we prepare to make our next leap forward
Further revisions in April 2008 to the fee standards for medical
examinations, including fees relating to contact lens examinations,is expected to mark the start of a new era in Japan’s contact lensmarket. To be sure, we expect industry conditions in theupcoming year to be challenging, leading to a slowdown in new
store construction and more stringent price competition. We willtake this period as an opportunity to fortify our operating base as
we prepare Eye City to make its next leap forward. During thisperiod, we will lay the foundations for a solid management basefrom which to aggressively expand our business, hinging on thedevelopment of each employee in their interactions withcustomers. Complementing these eﬀorts, we will oﬀer productlineups, services and prices that attract more customers and raisecustomer satisfaction even higher.

Stunning clarity from a leader in optics and vision
Hoya manufactures and sells foldable lenses that can be inserted
in extremely small incisions, as well as the lens injector systems
that make IOL surgery more convenient. Highly regarded byophthalmologists for the quality and performance of its products,
Hoya holds a high share of the domestic market in this area,
despite its late entry into the ﬁeld.
Since 2004, we have made steady inroads into the Europeanand Asian markets. Hoya recognizes, however, that it isunderrepresented globally and that it must reach out in particular
to the United States if it is to beneﬁt from the expected growth in
the world’s largest IOL market.
Hoya’s bold decision in ﬁscal 2008 to transfer the global
headquarters of its IOL business to Southern California, in the
United States, in ﬁscal 2009 gives it a visible presence in the world’s
largest market, as well as exposure to the industry’s most advanced
R&D and most renowned surgeons.

HOYA ANNUAL REPORT 200821

Eye Care

Highlights

Policies and Forecasts for the Year Ahead

Pursuing Product Development Based on Advanced
Technologies that Meet Ophthalmologists’ Needs

Accelerating global IOL market development throughfull-ﬂedged business expansion in the North American
marketDecades of research into optical designs and materials haveenabled us to develop a lens with a high refractive index, allowing
it to be thin and pliable enough to fold into an injector systemand deliver through a very small incision. In ophthalmic cataract
surgery, the smaller the incision size the less trauma there is to theeye and the faster healing occurs. Hoya concentrates its R&D
eﬀorts on developing quality products that are aligned withpatients’ needs. We diﬀerentiate ourselves by creating entirely new
and high-value-added products. For example, although IOLs canimprove eyesight that has diminished due to cataracts, they do
not necessarily free patients entirely from eyeglasses. Present-day
IOLs typically have a relatively long focus, making eyeglasses
necessary for close-up viewing. Hoya addressed this situation by
developing multifocal lenses, which feature several focal lengths.
These lenses are currently undergoing clinical testing. We are also
working on simpler methods of IOL insertion.
In addition to IOLs, we are pursuing developments in suchareas as cataract surgery to correct for astigmatism. We willcontinue our research in this vein, taking input from
ophthalmologists into account as we work to oﬀer total solutionsin the area of cataract surgery.

The iSert IOL injector system

22

In the upcoming ﬁscal year, Hoya expects to receive U.S. Food andDrug Administration (FDA) approval for iSert, its preloaded IOL
system. Accordingly, we are planning aggressive marketing eﬀorts
in North America. A system comprising an IOL injector with apreinserted lens, iSert is easier to use than previous products andallows the lens to be inserted through a small incision (2.65mm orless). For doctors, iSert simpliﬁes surgeries and reduces surgery
times. As the lens itself requires no handling, the iSert system
eradicates the risks of incorrect loading and minimizes the risk ofinfection, and the small incision size reduces the potential for
surgically induced astigmatism.
Some forecasts suggest that the value of the U.S. IOL market
will double that of Europe and Japan, combined, by around ﬁscal
2012. In line with the full-ﬂedged expansion of operations in the
U.S. market, we will conduct product design, engineering andprocess and development R&D at three global locations: North
America, Japan and Singapore. We also plan to reinforce our IOL
development.
At the same time, we will continue focusing on expanding ourexisting European business and aggressively cultivate emerging
markets, such as China and India.
Hoya continues to develop its business strategies with the aimof sustaining its double-digit growth. To achieve these targets,during the next three years we will optimize our supply chain,spanning product development, manufacturing, distribution andsales, enhancing quality and cost performance.

Pentax
Pentax’s unique concepts and advanced optical and precision processing technologies are employedin cameras, but they also ﬁnd their way into medical equipment, lens units for digital cameras,
ultra-small lenses and products in a broad range of other ﬁelds that require high-resolution images
and superior functionality and performance. In particular, demand is increasing for ﬂexible
endoscopes, in line with advances in medical treatment, doctors around the world praise Pentax
endoscopes for their ease of use and image clarity.

Lifecare Business
Employing endoscope systems and new
ceramics to provide high-quality products thatpush the envelope in medical care
Medical Devices“i” series megapixel-image-capable endoscope systemon sale in the United States and Europe
Pentax develops and sells ﬂexible endoscopes for medical use,
and medical accessories (surgical instruments for endoscopes).
Flexible endoscopes are minimally invasive medical devices
with beneﬁts for patients and doctors alike, as they enable early
detection and treatment of lesions in the body. These tools are
therefore being actively introduced in medical settings in Japan,
North America, Europe and all across the globe. Althoughconventionally used primarily to observe and diagnose
abnormalities, improvements in the functionality andperformance of endoscopes are allowing for immediate treatmentof observed areas and other advances in medical practice itself.
Recently, more and more countries are recommending colon
examinations to citizens who have reached a certain age, a trendthat promises signiﬁcant development and expansion of the roleof endoscopes in the medical profession.
In the ﬁscal period under review, Pentax released the new “i”
series endoscope system, which supports megapixel images. The
series has received a considerable response for image quality
surpassing that of existing products, as well as superior usability,
on the heels of product presentations at academic conferences in
the United States. Following full-scale releases in the Unites Statesin May 2007 and in Europe in December 2007, the system has
been selling steadily. To put this ﬁne product in the hands of more
doctors, we are marketing to medical institutions mainly inWestern countries and aim to reinforce our marketing structure in
the year ahead. We introduced the “i” series in Japan in May 2008,
which will be followed by launches in other Asian markets.

Highlights
Pentax endoscopes praised for their high image
quality and operability

Endoscope systems
These medical instruments enable internal observation and treatment of the digestive,
respiratory and other systems via a scope with an end-mounted image sensor, which isinserted into the mouth, nose, anus or other openings. Aﬀected areas and lesions can be
identiﬁed and treated without physical damage, placing less demand on the body andshortening hospital stays in comparison with open surgery. Flexible endoscopes are truly
human-friendly medical devices.

Pentax entered the medical devices ﬁeld with the 1977 release of
its ﬁrst bronchoﬁberscope. Since that time, we have leveraged our
optomechatronics technology cultivated through camera
development to create distinctive endoscopes with ourproprietary technical capabilities.
Flexible endoscopes must provide medical practitioners with
precise response to ﬁne manipulations down to the millimeter,
because the devices are inserted into narrow and convoluted
luminal spaces. Pentax endoscopes oﬀer superb operability thatreﬂects the doctor’s manipulations in an intuitive manner, moving
the end of the instrument subtly up, down, left and right, andresponding immediately when treatment tools are activated,
stopped or released. Seeking to improve on image quality andimage processing performance, the EPK-i series endoscope
system released in 2007 succeeded in displaying megapixel-level
image resolution. In addition, we are promoting R&D to solidify
our lineup of autoﬂuorescence endoscopes, ultrasound

HOYA ANNUAL REPORT 200823

Pentax

endoscopes that permit viewing of lesion depth, high-powered
endomicroscopes that can resolve even cellular nuclei, and otherproducts utilizing sophisticated viewing technologies, as well as
treatment tools for use with endoscopes.
Endoscopes are advancing from merely allowing examinationto actually letting doctors see the diseased areas. Medicine is also
evolving to a stage where abnormal parts can be diagnosed andtreated without open surgery, although this shift has only justbegun. Pentax remains committed to contributing to medical
progress by developing unique products through its proprietary
technology.

New Ceramics
Prosthetic ceramic ﬁllers highly regarded for use inorthopedics, brain surgery and dentistry
A number of new ceramic products are selling well, on ringing
praise from medical fronts in Japan. These include biocompatible
ceramic products APACERAM and BIOPEX-R, which are used as
prosthetic ﬁllers for defective parts of bones and following
operations in such ﬁelds as orthopedics and brain surgery, andBONETITE, which is used to ﬁll bone defects in tooth sockets andthose resulting from periodontal diseases. Used in biotech drug
puriﬁcation and isolation, the bulking agent CHT ceramichydroxyapatite (chromatography media) is employed in many
biopharmaceutical manufacturing processes around the world.
As the medical ﬁeld looks forward to sizable growth and adiversiﬁcation of needs, the Company strives to build up groups of
products truly sought after by customers and aggressively
promotes global operations, while reﬁning its unique technologies
to outshine its rivals.

Imaging Systems BusinessIn this environment,
the Company is funnelingresources into thedevelopment and designof digital SLR cameras andinterchangeable lenses,
for which demand is
expected to increase. In compact digital cameras, we are also
working to streamline our lineup of product models, enhance
regional sales strategies and reduce costs.
Product releases during the ﬁscal year included the March
2008 launch of the PENTAX K20D as the successor to the PENTAX
K10D (released in November 2006) that earned three major global
awards for digital SLR cameras. The K20D features a newly released
built-in CMOS sensor and high-deﬁnition images that stand out
from the crowd with an eﬀective resolution of 14.6 megapixels, aswell as shake reduction, a dust removal system and otherperformance reﬁnements on the K10D. As a product that fully
satisﬁes both high amateurs and professional photographers, theK20D has recorded solid sales since its launch. With its
high-deﬁnition expression and exhaustive attention to image
quality, the K20D is lauded as “a camera born to capture natureand scenery” by photography lovers and professionals alike.
We are working to enrich our lineup of interchangeable lenses
and accessories, including a production capacity increase at ourplant in Vietnam in the ﬁscal year under review. We continue toconcentrate on developing distinctive lenses that enable a
broader range of visual expression.
Furthermore, to enhance users’ enjoyment of the “image
culture” born out of using photographs as a form ofcommunication, the Company supports every aspect ofcustomers’ camera use by providing a variety of services, including
the Internet portal site Pentax+ [Plus] (helpful information on
cameras and photography, as well as online albums).
Pentax retains the creative spirit of manufacturing in its
ongoing eﬀorts to develop products and services customers seek.

Ramping up sales promotions targeting highamateurs, centering on digital SLR cameras
As the global market for digital cameras continues to expand,demand for digital SLR cameras is enjoying particularly rapid
growth, mainly among high amateur customers in developed
countries. At the same time, despite a greater number of units
shipped globally, diﬃculty in product diﬀerentiation and otherfactors have intensiﬁed price competition on compact digital
cameras.

24

Experience new-generation
digital photography!

Highlights

Lens Units for Digital Cameras

PENTAX K10D Wins Three Major Global CameraAwardsSliding Lens System Contributing to Thinner, More
High-Powered Cameras

Featuring an eﬀective resolution of 10.2 megapixels, internal shake
reduction and high-resolution images with superior color
reproduction, the PENTAX K10D (released in November 2006) won
three major global camera awards: TIPA Best D-SLR Expert inEurope 2007, EISA European Camera of the Year 2007–2008 andJapan Camera Grand Prix 2007.

In 2003, Pentax became the ﬁrst in the world to commercialize the
Sliding Lens System, a groundbreaking lens unit that oﬀers zoom
functions utilizing sophisticated optical design and mechanicaltechnology while enabling thinner camera construction.
The compact digital camera market continues to experience
intense product competition. In the 3–5x optical zoom market
during ﬁscal period under review, ultra-thin camera bodies
became an eﬀective element of product diﬀerentiation strategy. In
this background, thin and high-end lens units using the sliding
lens system and regular lens units boosted sales.
With optical zoom magnifying power expected to continue
increasing, the Company endeavors to meet market needs bycommercializing—product by product—the technical capabilities
it has cultivated over the years.

The new standard-setter for
digital SLR image quality

Optical Components Business
Delivering High-Value-Added Lens Modules
Based on Optical and Precision Processing
Technologies
Small-Size Lenses
Developing DVD/CD-Compatible Hybrid Lenses
Pentax’s DVD/CD-compatible hybrid lenses take full advantage of
the Company’s optical technology. Fine molding techniques
enable a single lens to read from and write to DVDs and CDs ateach of their respective wavelengths. This helps manufacturers
make smaller notebook PCs and achieves high-performance,high-eﬃciency playback and recording. Although the market
conditions in the ﬁscal year under review showed price decreases
due to competition, the Company worked to accommodate suchmarket needs by streamlining the production environment andraising yields in response.
We have already begun developing products employing
pickup lenses compatible
with Blu-ray and othernext-generation media, andwe intend to revamp ourbusiness structure in a timely
and speedy fashion to stay intune with market needs.

Sliding Lens System
With the sliding lens system, a central lens block slides into place when the lens is in storage
position, allowing for two-stage storage. This technology enables the creation of compact
cameras with a high-power optical zoom that ﬁts into a thin 2cm camera body.

HOYA ANNUAL REPORT 200825

R&D and Intellectual
Property Activities
Energy-eﬃcient materials
Developing 3C-SiC cubic monocrystal silicon carbide as aprospective energy-eﬃcient semiconductor

Research and Development
The Hoya Group pursues the twin objectives of achieving
sustainable growth and increasing corporate value. The Groupdevotes considerable eﬀort to strategic business planning andtechnology R&D that focus on the long term.
The saying, be “a big ﬁsh in a small pond,” is one straightforward way of expressing Hoya’s business strategy. The “big ﬁsh”
refers to Hoya’s top market share, and the “small pond” refers to
the niche markets in which Hoya is active. Those markets may not
be immense, but Hoya maintains its position as an industryleading company in every one of them. The idiom about being a
big ﬁsh in a small pond succinctly expresses Hoya’s businessstrategy for R&D, as well. Hoya strives to develop technologies andcultivate new businesses that will, in the future, make Hoya a big
ﬁsh in a small pond.
The Company’s business integration with Pentax in the ﬁscal year
under review should result in advances in the opto-electronics
technologies Pentax has cultivated in endoscopes, digital cameras
and other precision equipment, as well as deeper synergies with
Hoya in the ﬁeld of optics. The business integration with Pentax
should also result in advances in technological development in the
new growth ﬁeld of endoscopes and other medical devices. This ﬁeld
has grown in recent years, spurred by ongoing advances in medicalcare. As medical practices are expected to become more advanced
and needs to diversify, we will apply our technical superiority to thisﬁeld of business, exercising our potential as a big ﬁsh in a small pond.

R&D Structure
The Hoya Group delegates a lot of authority and responsibility toits business divisions. In research and development, each division
follows its own next-generation R&D as a natural extension of its
current activities. The R&D Center at Hoya’s Global Headquarters
operates with a longer-term viewpoint and is engaged in researchthat will lead to the development of the technologies that will
follow next-generation technologies, as well as research in new ﬁelds.

Major R&D Themes
Here, we look at Hoya’s principal research themes. We also
introduce new ﬁelds of development that have emerged throughthe integration with Pentax.

26

Preventing global warming is a worldwide concern, with energy
conservation measures being actively implemented in a broad
range of regions and industries. In view of this trend, Hoya is
promoting the development of 3C-SiC cubic monocrystal siliconcarbide semiconductor devices that are expected to oﬀer superiorenergy eﬃciency.
In comparison with ordinary silicon-based devices, 3C-SiC
devices are characterized by lower power loss and can operate athigh temperatures. When used in hybrid and fuel cell powered
vehicles, apart from the low energy consumption, they shouldhave lower production costs due totheir smaller size and the lower
weight of cooling systems. With thegoal of a practical application in
2010, Hoya is developing
technologies for the production oflarge-diameter 3C-SiC wafers.
3C-SiC

Nanoimprint technology
Fabricating nanoimprint molds, a technology regarded as agateway to the “terabyte*1 age”
The market continues to demand smaller and denser semiconductors to boost performance and reduce manufacturingcosts. However, the lithography processes used to transfer circuit
patterns onto semiconductors present substantial challenges incurtailing production equipment and component costs, which areballooning as semiconductors are miniaturized. Nanoimprint
technologies are being spotlighted as a possible solution.
Nanoimprint technology applies printing techniques to create
an ultra-ﬁne mold from which the circuit pattern is transferred bystamping—one of the cheapest means of producing large
numbers of ultra-ﬁne patterns.
Nanoimprint technology enables
the formation of patterns with line
widths of as small as a dozen
nanometers and is attracting
attention as an eﬀective
technology for discrete trackrecording media, which is regarded
as the next generation of recording
1 nanoimprint template (mold) for
32 nm node production
media for hard disk drives. Thistechnology would yield recording densities that allow for single
disks to store terabytes of data. Hoya got an early start inproducing nanoimprint molds and continues its research towardapplications for next-generation magnetic disks, optical parts andsemiconductors.
*1 One terabyte equals 1,000 gigabytes of data storage.

Nanoparticles
Developing new materials with revolutionary properties bycombining nanoparticle dispersion and surface
modiﬁcation technologies
Nanoparticles are ultra-microscopic with diameters of only a few
nanometers. The properties of metals, ceramics and othermaterials change at the nano-scale, yielding new functionality,
such as luminescence.
Hoya is researching the dispersion of a variety of nanoparticles
and changes in their surface characteristics, and is attempting todevelop compound materials with new physical properties.
During the current ﬁscal year, Hoya targets practical applications
in materials for high index optical parts and magnetic media
related ﬁelds.

Optical research
Developing design, software and measuring technologies
for the creation of precision optics products
The Company’s Optical Technology Center is developing design,
software and measuring technologies for all kinds of opticalsystems, including lenses for digital and security cameras,
binoculars and telescopes; pickup lenses for CDs, DVDs andBlu-ray Discs; as well as laser printers, projectors and medical
endoscopes.
By promoting in-house development of proprietary software
used in design, we can incorporate high-level functions not viablein commercial software, thereby enabling ghost analysis, imaging
characteristic evaluation and other simulation techniques
compatible with digitization, as well as improved accuracy for
MTF*2 evaluation.
In measuring technique development, we have createdunique measurement evaluation methods and completed a gauge
usable in mass production to assess birefringence (a phenomenon
that deteriorates the optical properties of resin lenses).
*2 MTF: Modulation Transfer Function, a benchmark for measuring lens imaging performance

Scanning ﬁber endoscope (SFE)
Pentax Develops SFE Imaging Device for Advanced
Endoscopes
Example of ﬂuorescence of nanocrystalline indium phosphide semiconductors

Connectors for optical communications
Promoting research on optical communication parts,
materials and special ﬁber optic cables in anticipation of
optical network expansion
In the midst of the swift rollout of broadband Internet
connections, Hoya is continuing to push ahead with R&D on
Fiber-to-the-Home (FTTH). One example is Hoya’s module
designed to convert optical signals to electrical ones at opticalcommunication access points. Such products are expected to
become key components for the extension of ﬁber optic
networks. In the ﬁscal year underreview, Hoya acquired a U.S.
company, Xponent Photonics, Inc.,
which owns technologies forhighly integrated optical modules,
and is preparing for a full-scale
Optical network component usedlaunch of these modules in Japan.
in supplying FTTH

SFEs are a new type of imaging device that was developed jointly
by the University of Washington and Pentax. Developed for inspection devices having an external diameter of 1.2 mm or less, SFEs
oﬀer high-deﬁnition images that are equal to or better than those
provided by charge-coupled devices used in current endoscopes,
while achieving a high frame rate*3. By combining various opticaltechnologies, SFEs are better able to distinguish between healthy
locations and tumor sites. Furthermore, SFEs can be combinedwith a host of peripheral accessories and procedural tools to create
medical equipment with a host of new functions. The new SFEs
allow for the creation of endoscopes that are smaller in diameterand oﬀer more advanced functions than in the past, featuring
diverse applications in endoscopic observation and medical
treatment. Hoya is moving ahead with product development.
*3 Frame rate is a standard measure of frequency per time unit that an image is refreshed.
Higher frame rates generate smoother images.

Distal end of prototype probe

Captured image with SFE probe
HOYA ANNUAL REPORT 200827

R&D and Intellectual
Property Activities

Biocompatible organic/inorganic
composite bone prostheses
Developing biocompatible bone prostheses to contributeto bone regeneration in medicine
Human bone consists of a nanostructure of collagen ﬁbers
deposited with arrays of apatite particles (a group of phosphateminerals). This structure is believed to form spontaneously
through the surface interactions of the two materials, aphenomenon known as self-organization.
Biocompatible organic/inorganic composite bone prostheses
are the result of artiﬁcially recreating an environment that imitates
bodily functions to catalyze the self-organization of apatite andcollagen. Within the body, the prostheses are absorbed throughthe same mechanism as normal bone metabolism to form newbone tissue because they have the same structure as natural
human bone. The prostheses demonstrate excellent functionality,
including sponge-like resilience in moist conditions.
These bone prostheses are garnering attention as a boneregeneration “scaﬀolding material” that is approaching practicalapplication in regenerative medicine because of their substantial
contribution to patients’ quality of life. The prostheses showpromise in applications that unite them with stem cells and bonemorphogenetic protein technologies.

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

Patent prosecution for obtaining patentrightsTo ensure the most eﬃcient possible patent prosecution for
obtaining patent rights, technical development managers andintellectual property managers work closely as a team. The
Company aims to secure all necessary intellectual property rightsfrom the initial stage of the development of leading-edge
technologies, with an eye toward peripheral, applied andalternative technologies.
In relation to those ﬁelds in which Hoya commands a leading
position, the Company focuses on accelerating the process of
securing patents in cutting-edge areas. At the same time, incompetitive markets, Hoya concentrates on promoting eﬃcientpatent prosecution while preventing infringement of the patents
held by other companies.
To achieve these ends, careful technical searches of patent
information at other ﬁrms are performed, and the Company
supports the patent prosecution that is most appropriate for eachﬁeld. Hoya is also devoting itself to the formation of global patent
networks that will be coordinated with the moves of its
production bases and trading partners into international markets.

Cross-licensing and out-licensing
The resilience of biocompatible organic/inorganic composite bone prostheses

Intellectual Property Activities
The Hoya Group’s intellectual property strategy protects its
proprietary technologies. Along with business strategies andtechnical development, intellectual property activities are a key
management strategy for supporting continued growth. The
successful business integration with Pentax in the ﬁscal year underreview augmented the Group’s intellectual property, and we
intend to meld the existing intellectual property of the two
corporations to create unprecedented value.

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

Prevention of imitation and infringement
Hoya maintains a constant watch on the market to ensure that its
technologies are not imitated by third parties. When its technologies

28are indeed being imitated, warnings are issued and, where
necessary, appropriate steps such as ﬁling for injunction are taken.
Hoya also respects patents held by others, aﬀording themappropriate value and avoiding infringement, as part of its eﬀorts
to streamline its patent management.

Utilization of third-party patents andtechnologies
Hoya does not rely excessively on its own proprietary
technologies and patents. If, after careful technical search andconsideration of the available technologies, the Company ﬁnds
that third parties have superior technologies, patents or otheradvantages, and if it decides that using them would be mosteﬃcient in commercializing a product, Hoya takes steps to seek
licenses to use third-party patents or introduce their technologies.

Systems Supporting Intellectual Property
Activities
The Hoya Group is organized according to business divisions andcompanies, with extensive delegation of authority, from strategic
business planning to decision-making. Each division has anintellectual property groups responsible for working in conformity
with the respective strategies of their divisions—for instance, by
ﬁling patent applications and other rights-related management
activities, taking actions in relation to patents held by others andlicensing out Hoya’s own patents.
Hoya’s global headquarters are under the management of thechief intellectual property oﬃcer and are responsible for working
to improve the intellectual property functions of the Group. This
includes such matters as establishing and promoting overall
intellectual property strategy, assisting business divisions in theestablishment of patent strategies, the training and skill
enhancement of employees, managing intellectual property
assets, and the development of patent management systems.
In particular, matters that necessitate decision-making for theGroup—for example those matters requiring coordination of
intellectual property issues that run across more than one
business division, or those involving the bringing of a case tocourt or reaching an amicable settlement—are deemed to require
the 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. At the same time,
to improve synergies between business divisions, the Company

periodically holds joint intellectual property meetings for theexchange and sharing of information on each division’s
intellectual property activities.

Status of Intellectual Property
Number of registered patents and allpatent applications lodged in countries
other than Japan
Hoya held 3,560 registered patents and utility models (2,492 ofwhich are through Pentax) in Japan as of March 31, 2008. The
Electro-Optics and Vision Care divisions accounted for 26% of thetotal, while Pentax accounted for 70%.
For Hoya, approximately 33% of all patent applications during
the ﬁscal year under review were lodged in countries outside Japan.

Global Applications (By year of application)
Applications filed by previous Hoya Corporation

Pentax applications filed

Percent of total(Applications)
900

(%)

44

46

930
32

33

600

300

260

335

280

45

330
33

300

30

15

600
0

0

2003

2004

2005

2007

2006

(Years ended March 31)

Percentage of patents granted
The percentage of patents granted groupwide in Japan in theﬁscal period ended March 31, 2007 (including those in the priorexamination and review stages) was approximately 60% (57% forprevious Hoya applications and 63% for Pentax applications).

Registered Patents and Utility Models (As of March 31, 2008)
New-Business Related

59Electro-Optics Division

583
Photonics Division

36
Pentax

2,492

Total

Vision Care Division

3,560

329
Health Care Division

60
Other

1
HOYA ANNUAL REPORT 200829

Environmental
Initiatives
Initiatives designed to reduce CO2
emissions and save energy

The expansion and sustainability of a company’s business must be
matched by the willingness to take on greater responsibility for
issues of social concern, such as environmental protection. Hoya
aims to grow in a manner that enables harmonious coexistencewith the earth’s environment. Hoya is engaged in a broad range ofenvironmental protection activities that aim to reduce theenvironmental impact of its operations.

Environmental Protection Support
Systems
In 1976, Hoya established pollution countermeasure committees
at each of its operating bases. In 1993, the Company set up anenvironmental protection organizational structure that addresses
environmental activities for each operating base companywide.
At the same time, based on the Corporate Mission and theManagement Principles for the Hoya Group, we drew up the Hoya
Group’s Environmental Philosophy and a set of Fundamental
Environmental Principles to serve as standards of behavior. Since
that time, we have persevered in our eﬀorts to reduce ourenvironmental impact.
In 1997, Hoya amended its Philosophy of Environment andFundamental Principles of Environment, based on which it has
been carrying out groupwide environmental protection activities
since then. At the same time, we have formulated Group
Environmental Management, System Regulations. The
Environmental Headquarters’ meetings directed by the CEO
establish and manage environmental protection systems andstructures as the most senior body responsible for theenvironment, and promote and oversee all of the Hoya Group’s
environmental protection activities.

Examples of Activities Aimed at
Reducing Environmental Impact
Based on its Philosophy of Environment and Fundamental
Principles of Environment, the Hoya Group has worked toeliminate the environmental impact of its activities. This section
looks at several ecological activities the Hoya Group carried out
during the ﬁscal year under review.

30

To cut CO2 emissions, we have converted operating locations
from heavy oil to liqueﬁed petroleum gas, and again to natural gas.
In line with these eﬀorts, Hoya took a number of initiatives tocurtail CO2 emissions from fuel use by cutting back on theamount of fuel used. These included implementing thermal
management systems in steam boiler facilities, monitoring fuelcombustion conditions, maintaining optimal air-fuel ratios andreducing the number of ignitions necessitated by equipment
starts and stops.
The Company also implemented ice thermal storage systems,
adopted high-eﬃciency electrical transformers and replaced
outdated equipment with the best new models to keep facilities
up to date. We also promoted greenery on rooftops at operational
facilities and on balconies, introduced policies permitting lighter
clothing in oﬃces year-round, adjusted room air temperatures tomore appropriate levels, managed lighting in smaller units ofspace by installing draw cord switches and maintained a policy ofturning oﬀ room lighting during break times.

Eﬀorts to reduce water consumption
At certain operating facilities, we have introduced ozone
treatment devices and extended the re-use of factory waste water.
In the past, applications for re-used waste water were limited towater for toilet ﬂushing and air-conditioning coolant water, due tothe eﬀect on water quality. However, the implementation ofozone treatment has allowed for a higher level of puriﬁcation. At
operating facilities, approximately 30% of waste water is used as
pure water for production.
Furthermore, we are re-using underground spring water as acoolant in cooling devices for molding machines. At certain
operating facilities overseas, we have also instituted water quality
monitoring to enable nearly 100% re-use of waste water used in
the ﬁnal rinse and cleaning phases.

Steps taken to reduce waste disposal volumes
Hoya reduced its volume of waste disposal through such eﬀorts asrecycling polishing sludge emitted by operating facilities as raw
material for concrete, decreasing sludge quantities by improving
waste water treatment processes, carrying out thermal recyclingof discarded plastics and their conversion to valuable, saleable
items, and collecting and recycling the cutting lubricant adhering
to cut scraps.
In addition, closing the gap between the total volume of glass
used and the volume of quality glass (the material loss volume)
helped further cut down on waste. To achieve this, we ﬁrst soughtmainly to ascertain the actual material loss in each process.
From the ﬁscal year under review, the Hoya Group succeededin converting some of its waste oil and waste plastic into valuable,saleable items, marking the commencement of enhanced eﬀorts
to reduce the volume of waste to be processed in the future.

Eﬀorts to reduce the volume of packaging
materials used
Hoya worked to reduce packaging materials through suchmeasures as re-using larger volumes of product packaging boxes
for a wider variety of purposes.

Steps taken to reduce chemical usage
We have implemented controls on the amount of substances usedor emitted in production processes, and introduced chemical
substitutions, in response to various laws and regulations. Targets
on chemical substances have been set through such guidelines as
the RoHS directive and REACH regulations. Each operating division
is preparing activities that respond to such overseas regulations,which grow stronger each year.

Steps to reduce the environmental impact
of products
We stopped distributing free software that is included withproducts via CDs and other physical media, switching instead todownload via the Internet and e-mail distribution.

Measures to reduce environmental risks
Steps to reduce leakage
Previously, the Company had transferred alkaline waste liquids
originating from certain processes to drum cans and thentransported them to the disposal site. However, as this procedure
was carried out on a daily basis, there existed a risk of leakage
from the drum cans toppling or otherwise being compromised.
Leakage from drum cans at the outside storage area was also a
concern, leading Hoya to help remedy the situation by
establishing a centralized alkaline waste liquid collection line. Theline stores the tanks indoors and enables rapid response in theevent of an incident by the placement of protective liquid barriers
and sensors around the tanks.
In addition, in response to increasing volumes of waste liquid
at certain operating facilities, we introduced new waste liquidtanks to supplement conventional tanks, thereby enhancing thereliability of waste liquid collection and helping to prevent leakage.
Measures for tanks and distribution lines
To prevent the risk of leakage from facilities that have become

outdated, the Group is taking necessary measures to reduce therisk of harmful substance leakage from aging pipes.
Also, at certain facilities we are taking such steps as removing
underground tanks and buried piping, introducing voluntary
reinforcement of inspections of tanks and buried drainage basins
and piping, and replacing or repairing tanks and pipes, as needed.
Speciﬁc examples of eﬀorts to cut the risk of leakage include
upgrades to piping for suspension waste water and duplication of
piping for chemicals, which have been completed. We will also
upgrade ﬁnal eﬄuent pipes releasing into rivers.
Renewal of aging facilities
To reduce risks associated with aging facilities, we are promoting
upgrades to extra-high-voltage transforming stations, drainage
facilities and other facilities required for plant operations.
Eﬀorts to improve and restore soil quality
With the closing certain facilities, we are conducting soil
remediation as stipulated by the Soil Contamination Policy Act
and other relevant legal statutes. Prior to commencing suchoperations, Hoya held an explanatory brieﬁng to communicate
with surrounding residents regarding the risks, taking appropriate
steps to ensure that they would not be inconvenienced.
Emergency response measures
Hoya strives to ensure that the environmental impact from its
operating facilities to the outside world is minimized in the eventof an accident, by compiling written procedures on emergency
response methods.

Measures to handle asbestos building
materials
One priority goal of the Group involves measures to handle
asbestos building materials. All sprayed asbestos had been either
removed or eﬀectively contained by March 2008.
Hoya is also promoting removal or other relevant measures forother construction materials when buildings are renovated or atother opportune times.

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 gainsuch certiﬁcation.
Since then, Hoya has proceeded with eﬀorts to gain
certiﬁcation for its operating facilities, including overseas
production bases, and a total of 42 Hoya group sites (13 in Japan,
29 abroad) have now acquired certiﬁcation.

HOYA ANNUAL REPORT 200831

Corporate
Governance

For Hoya, corporate governance is a matter of utmost importanceto management. Based on its fundamental philosophy that“companies are owned by their shareholders,” Hoya conducts its
corporate management with the goal of maximizing shareholder
value. To ensure it does not operate according only to internal
thinking on management, Hoya’s outside directors actively
represent shareholders in the capacity of auditors. The Company
has also separated the management and execution functions toaccelerate decision-making and increase management eﬃciencies.

Corporate Governance Systems
In June 2003, Hoya instituted a company-with-committees
management system, thereby establishing three committees—
the Nomination Committee, the Compensation Committee andthe Audit Committee—each distinct from the Board of Directors.
The Japanese Corporate Law stipulates that a majority of themembers of the three committees be outside directors, whereasat Hoya every one of the members are outside directors. Within
the company-with-committees framework, this system enablesdelegation of decision-making authority from the Board of
Directors to the executive oﬃcers so that they may focus on
speedy and eﬃcient management toward realizing improved
business performance. At the same time, the three committeescomposed of outside directors provide enhanced powers ofsupervision over the executive oﬃcers to ensure overallsoundness and transparency of management.

The Board of Directors and theThree Committees
To guard against the potential for stagnation in the Board of
Directors system, and to ensure lively debate, Hoya has since 1989
been gradually reducing the number of its directors. From a totalof 17 in 1989, the number had been halved to eight as of 1995.
Furthermore, to ensure that views can be freely expressed,
unconstrained by internal hierarchical structures or personal
relationships, the Company has invited outside directors toparticipate in its management, beginning in 1995. Increasing in
number each year, the outside directors currently comprise amajority in the Board of Directors, allowing for managerial
supervision and advice from a third-party perspective outside theCompany. Moreover, we welcomed one additional director, who is32

also an executive oﬃcer, from outside Hoya at the General
Shareholders’ Meeting held in June 2008, to further enhancebusiness execution to the accommodate the increasing scale ofoperations, including the business integration with Pentax.
Consequently, the Board of Directors now consists of ﬁve outside
directors and four internal directors, for a total of nine directors.
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. Internal directors serve concurrently as executive oﬃcers.
Authority has been further devolved from the executive oﬃcers to
the heads of each business division, who are responsible forday-to-day business operations in their respective areas of activity.
These division heads make detailed reports on each division’s
status to the executive oﬃcers at monthly business reporting
meetings, at which strategies for responding to each issue are
discussed. Important matters are all reported to meetings of theBoard of Directors.
The Nomination Committee, Compensation Committee andAudit Committee each have downstream operations that havepowers of appointment and dismissal and are independent of theexecutive oﬃcers. All the outside directors in each committee
have plenty of experience in management and possessinternational outlooks. Each of them can be expected to oﬀer
impartial and appropriate opinions. At all meetings of the Board of
Directors and the three committees, they oﬀer frank, straightforward views.
Nomination Committee
The Nomination Committee decides on the selection ofcandidates for appointment as directors and executive oﬃcers,
and submits them to the Board of Directors for its decision. The
committee also makes decisions on the referral to Shareholders’Meetings of proposals to relieve directors of their posts, and on
the referral to the Board of Directors of proposals to relieve
executive oﬃcers of their posts. The committee follows standards
for the selection of candidates for appointment as directors toensure that appointments are fair and appropriate.
Compensation Committee
The Compensation Committee prepares the remuneration systemthat boosts incentives for the directors and executive oﬃcers. It
was established with the objective of contributing to improved
ﬁnancial 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 andstock options. Each package is decided based on a considerationof such factors as prevailing business conditions, ﬁnancial results
and standards adopted by other companies.

Audit Committee
The Audit Committee, following the audit objectives and audit
plans decided upon by the same committee, veriﬁes the ﬁnancial
statements of the Company on the basis of reports received fromoutside auditors. In addition, it conducts hearings of the results ofoperational audits made by the Audit Department, verifying thesoundness, lawfulness and eﬃciency of the Company’s
operations. All items of signiﬁcant interest are reported to theBoard of Directors, and action is taken according to need.

Members of the Board of Directors
Internal Directors
Hiroshi Suzuki

Hiroshi Hamada

President and CEO

Director/Executive Oﬃcer,
Chief Operating Oﬃcer

Kenji Ema

Hiroaki Tanji

Director/Executive Oﬃcer,
Chief Financial Oﬃcer

Director/Executive Oﬃcer,
Chief Technology Oﬃcer

Outside Directors
Takeo Shiina

Yuzaburo Mogi

Outside Director,
Chairperson of theNomination Committee

Outside Director,
Chairperson of theCompensation Committee

Eiko Kono

Yukiharu Kodama

Outside Director

Yoshikazu Hanawa
Outside Director

Outside Director,
Chairperson of
the Audit Committee

Internal Control Systems
In addition to striving to further strengthen its corporate
governance, the Hoya Group also devotes resources to thedevelopment of sound internal control systems with the objectiveof ensuring ﬁtting and eﬃcient business management. These
internal control systems are included in the day-to-day
administrative processes of each business division, and the various
business divisions bear the primarily responsibility for theirimplementation, veriﬁcation and improvement. The head of eachbusiness division has the authority for managing that division andthe responsibility for improving business results. Each head is also
obligated to seek to further improve internal control systems, withthe objectives of maintaining compliance, the eﬀectiveness andeﬃciency of work practices, the reliability of ﬁnancial reporting
and the integrity of management assets. Each business is
responsible not only for increasing eﬃciency and eﬀectiveness toimprove business results, but also bears responsibility as acorporate citizen for the legality and propriety of its operations.
Concerning the development of control systems within eachbusiness division, the operating environment 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 theways control processes are audited and improved. For thesereasons, the control systems that operate within each businessdivision and each oﬃce are those that are deemed to be the mostappropriate and most eﬀective ones for each environment.
The Audit Department at Hoya Group Headquarters is
responsible for the regular auditing and veriﬁcation of

Corporate Governance Structure
General Meeting of Shareholders
Election

Executive Officers

Board of Directors
Internal directors: four (serving concurrently as executive officers)
Outside directors: fiveCompensation Committee
Secretariat

Compensation Committee: Five outside directors
Collaboration andmutual monitoring

Nomination Committee
Secretariat

Nomination Committee: Five outside directors
Collaboration andmutual monitoring

Audit Committee Secretariat

Audit Committee: Five outside directors

Election

Supervision
and advice

President
Executive Officers(Four internal directors)

Execution of
Operations

Divisions

HOYA ANNUAL REPORT 200833

Corporate
Governanceadministrative processes for each division and business oﬃce froman independent standpoint. It conducts operational audits, checks
that internal control systems are functioning as they should,
ensures that there is no dishonesty, and checks for possible areas
for improvement. Problem areas that come to light as a result ofaudit procedures become the subject of a recommendation forimprovement. Particularly important matters are reported to the
Audit Committee and the Board of Directors, as well as to the
executive oﬃcers. The executive oﬃcers decide upon and issue
directives for speedy, appropriate responses.
To achieve the best results from internal control systems, it isessential that all employees performing duties for an organization
work to foster greater awareness. The Hoya Group has establisheda set of Business Conduct Guidelines that clarify the guiding
principles under which each employee should perform his or her
duties, with resolute adherence to work ethics, and Hoya is
engaged in a wide range of employee education activities.
Another initiative, the Hoya Help Line (HHL), was establishedin 2003 as an internal reporting andconsultative system. If there is an act that
contravenes the law or the Hoya BusinessConduct Guidelines, the Hoya Help Line
ensures that the Company can discover
the contravention and that a report will quickly reach top
management, enabling timely and appropriate action to be takenon the issue. This structure helps to preserve the integrity of the
Hoya Group as a whole. The Hoya Help Line is a dedicated system
located within the Company’s headquarters for internal use, and it
can also be used as a point of contact with external lawyers who
are available to listen to employees. This separation preserves
anonymity and works to maintain the system’s functionaleﬀectiveness. As at the end of March 2008, the system had been
introduced at Group companies in Japan, North America (theUnited States and Canada), Thailand and Europe. The intention is
to continue to expand the number of countries covered, giving
the Hoya Help Line worldwide coverage.
Under the guidance of the Internal Controls Group, Hoya is
responding to Internal Control Reporting System requirements(Japan’s version of the Sarbanes-Oxley Act*) by building a
structure to elucidate the Hoya Group’s state of preparedness inrelation to its internal controls over ﬁnancial reporting, as well as
advancing development on operational and assessment systems
for internal controls. Starting in April 2008, the eﬀectiveness ofinternal control systems is being inspected and veriﬁed in stages,
and improvements are being instituted where necessary.
* Internal Control Reporting System requirements fall under Japan’s Financial Instruments andExchange Law, which was promulgated in June 2006 and came into eﬀect and applies to ﬁscal
periods beginning in or after April 2008. Covering publicly listed companies, it seeks to strengtheninternal controls through assessments of internal controls relating to ﬁnancial reporting bymanagement, and audits by certiﬁed public accountants. The law is designed to boost overall
reliability and trust in corporate disclosure.

34

Full Disclosure and Investor Relations
Activities
Hoya believes that fair and prompt disclosure of information andother investor relations activities are a fundamental duty ofmanagement. The Company respects the rights of each of its
shareholders concerning appropriate disclosure of information.
The Company also values communication with shareholders, andit continues to 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 sought
to shorten the period between the account settlement at the endof each quarter and the disclosure. The volume of information in
the quarterly reports is also the same as that contained in the
year-end ﬁnancial reports. The Company continues to strive toincrease the speed of disclosure and broaden the content.
Moreover, top management actively participates in investor
relations activities. For example, the CEO attends investor
meetings that are held each quarter to discuss quarterly ﬁnancial
reports, where he explains strategy and ﬁelds questions, and healso visits overseas institutional investors.
Furthermore, to enrich interaction with individual
shareholders and investors, Hoya has held seminars across Japanfor individual investors since 2006. The seminars were also
well-attended by shareholders and investors in the ﬁscal year
under review, oﬀering a chance for the attendees to learn more
about Hoya and also providing the Company with valuable
feedback. To meet the expectations of its shareholders, Hoya
strives to further improve its investor relations activities, aiming toachieve even higher levels of corporate transparency.

Number of Shareholders and Shareholding Ratio(As of March 31)
Number of shareholders

Foreign shareholding ratio

Individual shareholding ratio(People)(%)

80,00060

60,00045

40,00030

20,000

15

0

0

2002

2003

2004

2005

2006

2007

2008

Financial and Corporate Data
36 Ten-Year Summary
38 Management’s Discussion and Analysis
52 Consolidated Balance Sheets
54 Consolidated Statements of Income
55 Consolidated Statements of Changes in Net Assets
57 Consolidated Statements of Cash Flows
59 Notes to Consolidated Financial Statements
83 Independent Auditors’ Report
84 Corporate Data
85 Timeline
86 Hoya Group Global Network
88 Investor Information

HOYA ANNUAL REPORT 200835

Ten-Year Summary of Consolidated Financial Data
(Fiscal Years Ended March 31)

1999

2000

2001

2002

2003

H oya

201,290

201,110

236,802235,265

246,293

Pentax

128,080

113,554

103,526

105,165

108,189

H oya

31,726

34,68845,12843,89852,983

Pentax

9,897

736

(512)

1,481

3,970

H oya

33,61235,484

48,18445,77450,874

Pentax8,316(3,203)

(626)

682

3,639

H oya

17,837

20,716

21,86023,741

20,038

Pentax6,410(12,144)(1,241)(5,034)687

Return on assets (ROA) (%)

7.8

8.9

8.6

8.7

7.3

Return on owners’ equity (ROE) (%)

11.6

12.4

11.8

11.5

9.0

Owners’ equity ratio (%)

71.7

73.2

73.0

78.8

81.7

Inventory turnover (Months)

3.2

3.3

3.1

3.2

2.9

Capital expenditures (Millions of yen)

13,654

17,77039,673

19,585

15,948Depreciation, amortization and other (Millions of yen)

18,234

16,051

32,138

20,105

19,792

Research and development expenses (Billions of yen)

7.8

7.7

7.3

7.3

8.7

Net income

37.77

44.06

46.65

50.78

42.77

Cash dividends

7.50

8.75

12.50

12.50

12.50

Cash ﬂow

77.65

79.15

116.24

88.31

82.72

Net assets

340.56376.55420.11471.55486.29Price earnings ratio (PER) (Times)

44.5

55.0

43.7

44.5

41.8

Price cash ﬂow ratio (PCFR) (Times)

21.6

30.6

17.6

25.6

21.6

Price book value ratio (PBR) (Times)

4.9

6.4

4.9

4.8

3.7

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

1,680

2,425

2,040

2,260

1,787

Employees

9,414

10,651

12,966

13,311

14,023

Net sales (Millions of yen)

Operating income (Millions of yen)

Ordinary income (Millions of yen)

Net income (Millions of yen)

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

Notes: 1. Effective April 1, 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.” Thefigures 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. Owing to the inclusion in the scope of consolidation of Pentax Corporation and its subsidiaries on August 14, 2007, consolidated operating results for the fiscal year
ended March 31, 2008, include the operating results of Pentax Corporation and its subsidiaries for the second half of the fiscal year (from October 1, 2007, to March 31,2008). For reference, only the most important components of operating results during previous fiscal periods (through the first half of the fiscal year ended March 31,2008) are shown individually for Pentax Corporation and its subsidiaries. Pentax Corporation was merged by absorption into Hoya Corporation on March 31, 2008.

36

2004

2005

2006

2008

2007
First Half

Fiscal Year481,631

271,444

308,172

344,228

390,093

134,493

133,558

142,211

157,344

68,16784,920101,096

107,213

6,937

3,586

2,985

5,653

66,55489,525

103,638

102,909

5,375

3,396

3,260

5,067

39,54964,13575,62083,391

3,089

3,526

805

3,570

14.0

20.0

21.2

20.6

14.4

17.8

25.8

27.1

25.9

21.6

75.5

79.1

77.3

81.6

56.7

2.8

2.7

2.7

2.8

3.0

30,65940,17548,78654,432

39,46525,32822,52027,48536,42745,458

9.8

10.9

14.1

14.9

17.4

87.74

144.71

171.71

193.50189.01

25.00

37.50

60.00

65.00

65.00

174.91

171.65240.57229.23277.09491.90623.59648.87845.98903.49

28.9

20.4

27.7

20.2

12.4

14.5

17.2

19.7

17.1

8.4

5.2

4.7

7.3

4.6

2.6

2,537

2,950

4,750

3,910

2,340

18,092

21,23425,17628,45035,54585,689—95,074

3,337—
100,175

2,820—
81,725586—

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.
The figures presented for “net assets per share” for fiscal 2006 and earlier correspond to the figures previously presented as “shareholders’ equity per share.”

HOYA ANNUAL REPORT 200837

Management’s Discussion and Analysis

Hoya Group and Scope of Consolidation
The Hoya Group (the “Group”) consists of Hoya Corporation (the“Company”), 100 consolidated subsidiaries (seven in Japan and 93
overseas) and 11 aﬃliates (ﬁve in Japan and six overseas). Eightaﬃliates (two in Japan and six overseas) are accounted for by theequity method. Compared with the end of the previous ﬁscal year, ﬁve
consolidated subsidiaries were added through the establishment of
new companies and 36 by acquisitions. Five consolidated subsidiaries
were eliminated through mergers with other subsidiaries as well as one
through a merger with the parent and two through liquidations.
Each of the Group’s major business divisions and subsidiaries carryout their business strategies as formulated by the global headquartersat Hoya Corporation, yet with their own management responsibility.
Each region—Asia, North America and Europe—has its own
headquarters, which focuses on enhancing relations within its country
or region of operations, as well as supporting business promotion
activities. Hoya’s branch in the Netherlands is the ﬁnancial
headquarters for the Group.

Business Integration with Pentax
On December 21, 2006, Hoya concluded a preliminary agreement tomerge with Pentax Corporation as of October 1, 2007. The merger
would leverage the management resources of both companies to forge
a solid business foundation, create synergies and accelerate growth.
After signing the preliminary agreement, HOYA and Pentax held
several meetings aiming for signing a merger agreement in early April
2007, but for various reasons we deemed our initial plans for businessintegration by October 1, 2007, to be unworkable. However, the twocompanies continued to recognize that business integration would
contribute to the corporate value of both companies. Subsequent
negotiations and examinations prompted Hoya to make a tender oﬀer
for Pentax’s shares, and the two companies agreed on May 31, 2007, tocarry out the business integration by having Hoya take on Pentax as its
wholly owned subsidiary through stock swaps and other means.
Based on this agreement, Hoya’s tender oﬀer for Pentax’s sharesconducted from July 3 to August 6, 2007, resulted in Hoya holding
90.48% of Pentax’s total outstanding shares, thereby bringing Pentax
and 33 of its consolidated subsidiaries under Hoya’s scope of
consolidation as of August 14, 2007.
Strengthening Pentax’s core businesses will require ﬂexible
management. We realized that the merger that we initially planned
would be the ideal way to enable swift management decisions andbusiness operations at the Pentax divisions that rivaled the process at
Hoya’s other divisions, and would optimize the allocation ofmanagement resources across the Group instead of just within eachsubsidiary.

38

Consequently, the two companies concluded the merger
agreement at the Board of Directors’ meeting on October 29, 2007,
and Hoya merged with Pentax on March 31, 2008.
Even after the merger, the brand name “Pentax” will continue to be
used in light of its signiﬁcance and economic value.
The income statements of Pentax and its consolidated subsidiaries
have been consolidated into Hoya’s income statements from the third
quarter of the ﬁscal year under review (the three-month period from
October 1, 2007, to December 31, 2007). Accordingly, the Group’sbusiness results only reﬂect the addition of Pentax’s results after the
consolidation, which is the second half of the ﬁscal year under review(the six-month period from October 1, 2007, to March 31, 2008).

Net Sales
Consolidated net sales for the ﬁscal year ended March 31, 2008,
amounted to ¥481,631 million, rising 23.5% year on year and reaching ahistoric high. By principal business segment, net sales in theElectro-Optics Division of the Information Technology businessdeclined 4.3% year on year. Within the Eye Care business, net sales inthe Vision Care Division increased 5.5% year on year, and in the HealthCare Division net sales rose 13.0% year on year. The principal factor
behind these substantial increases in consolidated net sales during theyear was the addition of net sales for Pentax during the term. From
Pentax, only net sales of ¥89,032 million were added during the second
half of the ﬁscal year (the six-month period from October 1, 2007, to
March 31, 2008).
By customer region, net sales to customers in Japan increased
5.6%, to ¥188,520 million, and net sales to overseas customers surged
38.6%, to ¥293,111 million. As a result, the composition of net sales was
39.1% domestic and 60.9% overseas. Hoya continues to pursue global
business development, with its proportion of overseas net sales rising
accordingly.
Hoya calculates the eﬀect of exchange rates on operating results
during the ﬁscal year under review by comparing the foreign currency
denominated ﬁnancial statements of its overseas subsidiaries whenconverted into yen at the average exchange rate during the ﬁscal yearwith the same statements when converted into yen at the averageexchange rates prevailing during the previous year. In currency markets
during the ﬁscal year, the yen rose 2.7% against the U.S. dollar, to¥113.80, weakened 7.5% against the euro, to ¥162.26, and fell 12.7%
against the Thai baht, to ¥3.65. Because the yen fell against these twobase currencies, the operating results of Group companies in Europe
and Thailand rose compared with conversion at the rate during theprevious ﬁscal year. For the Group overall, the eﬀect of exchange rates
added ¥2,835 million to net sales and ¥4,391 million to net income.

Net Sales(Millions of yen)

400,000

300,000

200,000

100,000

0
Net sales (Millions of yen)

2004

2005

2006

2007

2008

271,444

308,172

344,228

390,093481,631

Sales by Business Segment(% of total)

100

75

49.8

43.6
53.8

55.4

56.2

1.5

3.5

2.9

2.3

25

36.2

30.8

30.4

30.7

0

10.4
2.1

10.2
1.7

10.3
1.0

10.5
0.3

1.9

50

26.2
9.6
18.5
0.2

2004

2005

2006

2007

2008

135,071

165,664

190,552

219,252

209,883

Photonics (Millions of yen)

4,116

10,74910,093

9,093

9,090

Vision Care (Millions of yen)

98,203

94,971

104,457

119,808

126,338

Health Care (Millions of yen)

28,381

31,40935,48440,85046,177————89,032

5,673

5,379

3,642

1,090

1,111

Electro-Optics (Millions of yen)

Pentax (Millions of yen)
Other Businesses (Millions of yen)

HOYA ANNUAL REPORT 200839

Management’s Discussion and Analysis

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

100

75
69.4

74.9

71.2

4.1
11.0
10.0

7.1
11.4
10.3

60.5

69.3

50

25

0

4.6
13.8

9.1

7.9

12.2

18.6

13.2

11.8

9.6

2004

2005

2006

2007

2008

Japan (Millions of yen)

188,441

230,946244,998

270,373291,566

Asia (Millions of yen)

12,404

12,64824,52730,92843,965

Europe (Millions of yen)

37,48633,80339,232

51,33689,420

North America (Millions of yen)

33,11330,77535,47137,456

56,680

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

100

75

39.1

45.8
54.6

54.0

50.4

16.5

20.1

25.2

29.0

14.8

11.8

12.0

13.7

50
29.5
25

0

14.1

14.1

12.3

11.5

2004

2005

2006

2007

2008

Japan (Millions of yen)

148,325

166,414173,506

178,547

188,520

Asia and Other Areas (Millions of yen)

44,66861,80886,848113,068

141,701

Europe (Millions of yen)

40,16836,43041,20153,524

92,116

North America (Millions of yen)

38,283

43,52042,673

44,95459,294Net Income
In line with the signiﬁcant increase in net sales, the cost of sales also
grew, rising 33.2%, to ¥262,944 million. Because cost of sales increased
at a rate greater than the 23.5% rise in net sales, the gross proﬁt margin
fell to 45.4%, down 4.0 percentage points from 49.4% in the previous
year. Selling, general and administrative expenses rose 44.6%, to¥123,613 million, with the ratio of SG&A expenses to net sales up 3.8
percentage points, from 21.9% to 25.7%. As a result, operating income
fell 11.3%, to ¥95,074 million, and the operating margin fell 7.8
percentage points, to 19.7%. Major factors included the inclusion into

40

12.4

19.1

the Group’s scope of consolidation from the second half of the ﬁscal
year of Pentax and its consolidated subsidiaries, as well as increased
production costs in pre-existing Hoya business segments and reduced
production yields for highly complex products. Also, the Group
continued its spending to ensure future growth, including capital
expenditures and marketing activities, as well as research anddevelopment, and personnel increases. By quarter, the operating
margin in the ﬁrst quarter was 23.2%, 26.6% in the second quarter,
18.7% in the third quarter and 13.3% in the fourth quarter.
Ordinary income during the year under review was ¥100,175
million, down 2.7% from the preceding ﬁscal year.

Other income and expenses included ¥5,926 million in equity inearnings of associated companies, a substantial improvement from the¥642 million recorded in the previous year, while gain on sales ofproperty, plant and equipment plunged from ¥9,629 million in thepreceding ﬁscal year to ¥520 million during the year under review.
Consequently, income before income taxes and minority interests
decreased ¥12,579 million, to ¥94,553 million.
The Group recorded ¥20,083 million in income tax–deferred and¥1,639 million in minority interests in net loss of consolidated
subsidiaries through the merger during the year under review. As aresult, net income was down 2.0% year on year, to ¥81,725 million.

Dividends
Hoya places top priority on capital investment, R&D investment andcorporate merger and acquisition in its quest for growth on the use ofinternal reserve funds. Once objectives in these areas have beenachieved, the Company’s basic policy is to actively return surplus funds
to shareholders. Dividends for the ﬁscal year under review 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. Taking into
account our performance in the ﬁscal year under review and ouroutlook, we decided to maintain dividends at the same level as for theprevious ﬁscal year.
On a consolidated basis, the dividend payment ratio was 34.4%, up
0.8 percentage point from 33.6% in the previous ﬁscal year.

Operating Income, Ordinary Income and Net Income(Millions of yen)

90,00060,00030,000

0
2004

2005

2006

2007

2008

Operating income (Millions of yen)

68,16784,920101,096

107,213

95,074

Ordinary income (Millions of yen)

66,55489,525

103,638

102,909

100,175

Net income (Millions of yen)

39,54964,13575,62083,391

81,725

Quarterly Profits(Millions of yen)

3Q

4Q

1Q

2Q

28,12527,216

24,631

22,64025,14025,70025,14826,921

21,50022,89919,96419,028

1Q

2Q

Operating income (Millions of yen)

27,241

Ordinary income (Millions of yen)
Net income (Millions of yen)

3Q

4Q

26,85027,52518,05923,97628,12028,171

19,90817,09721,021

22,60321,00430,00020,00010,000

0
2007

2008

HOYA ANNUAL REPORT 200841

Management’s Discussion and Analysis

Profit Ratios
(%)

40
30
20
10
0
2004

2005

2006

2007

2008

Operating margin (%)

25.1

27.6

29.4

27.5

19.7

Ordinary income ratio (%)

24.5

29.1

30.1

26.4

20.8

Return on sales (%)

14.6

20.8

22.0

21.4

17.0

Quarterly Profit Ratios
(%)

3Q

4Q

1Q

2Q

28.4

27.5

24.8

23.2

27.1

25.9

25.4

27.1

23.2

23.1

20.2

19.1

1Q

2Q

Operating margin (%)

29.4

Ordinary income ratio (%)
Return on sales (%)

3Q

4Q

26.6

18.7

13.3

24.5

27.8

19.2

14.7

17.5

20.8

15.4

15.5

40
30
20
10
0
2007

2008

Profitability
(%)

40
30
20
10
0
2004

2005

2006

2007

2008

Return on owners’ equity [ROE] (%)

17.8

25.8

27.1

25.9

21.6

Ordinary income/total assets (%)

23.6

27.9

29.1

25.4

17.6

Return on assets [ROA] (%)

14.0

20.0

21.2

20.6

14.4

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 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), 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.”42

Segment Information
For more detailed segment information, please refer to pages 12
through 25 of this report.

Information Technology (Electo-Optics Division)
Electro-Optics Division

impact on income. Other principal reasons for lower income included
an ongoing decline in product prices amid global economic
deceleration throughout the year, coupled with higher production
costs stemming from such factors as rising crude oil and raw materials
prices, as well as yen appreciation.
Capital expenditures in this division came to ¥24,431 million, down
38.8% from the preceding term. These expenditures went toward
up-front production-related investment involving next-generation
semiconductor-related projects, expansion of our HDD glass disk plantin Vietnam and upgrades to our plant in Thailand that makes polishedlenses for SLR digital cameras.

(Millions of yen)(%)

200,000

40

150,000

30

Information Technology (Photonics Division)

100,000

20

50,00010

The Photonics Division mainly produces industrial devices that employ
lasers and specialty light sources, which are used by manufacturers ofsemiconductors, LCD panels and optical devices. In a problematic
market environment during the year, Hoya promoted proﬁt-focusedbusiness strategies. Consequently, although divisional net sales
remained ﬂat, at ¥9,090 million, operating income surged 68.1%, to¥824 million.

0

0
2006

2007

2008

190,552

219,252

209,883

74,86280,08567,464

39.1

36.5

32.1

(Millions of yen)

204,192

258,746

210,007

Depreciation(Millions of yen)

18,71627,44927,653

Capital expenditures

37,24439,89924,431

Net sales(Millions of yen)

Operating income(Millions of yen)

Operatingmargin (%)
Assets(Millions of yen)

Note: The operating margin above is calculated using net sales plus intersegment sales. Pleaserefer to details on page 78, Segment Information.

In the Electo-Optics Division, net sales decreased 4.3% during the year,to ¥209,883 million. In mask blanks for semiconductor production,orders for phase-shift mask blanks and other high-precision productsrose in line with the ongoing miniaturization of semiconductors. In
photomasks for semiconductors, although orders for high-precisionand other products for the development of next-generation
semiconductors increased, Japan-centered demand for medium- andlower-end products was lackluster, resulting in a year-on-year decline
in sales. With regard to large-sized photomasks for LCD production,
panel manufacturers—Hoya’s customers—undertook concentrated
mass production during the year, but sluggish growth in demand fornew masks and falling market prices sapped sales. Sales of glass
memory disks for HDDs declined, aﬀected signiﬁcantly by delayedﬁrst-quarter introductions of new products that use the perpendicularmagnetic recording method. Sales of optical lenses increased, asworldwide growth in demand for digital cameras steadily pushed up
demand for aspherical molded lenses for compact digital cameras, aswell as for highly complex lenses.
Segment operating income fell 15.8%, to ¥67,464 million. A poorﬁrst-quarter performance in glass memory disks had a substantial

HOYA ANNUAL REPORT 200843

Management’s Discussion and Analysis

Eye Care (Vision Care Division)

Eye Care (Health Care Division)(Millions of yen)(%)

(Millions of yen)(%)

120,000

20

60,00020

90,00015

45,00015

60,00010

30,00010

30,0005

15,00050

00
Net sales(Millions of yen)

Operating income(Millions of yen)

Operatingmargin (%)
Assets(Millions of yen)

Depreciation(Millions of yen)

Capital expenditures(Millions of yen)

44

2007

2008

35,48440,85046,177(Millions of yen)

6,859

9,215

10,166

Operatingmargin (%)
Assets

19.3

22.6

22.0

19,927

24,41024,416

855

1,170

1,311

2,391

2,119

848

2007

2008

104,457

119,808

126,338

Net sales

20,37021,167

20,653Operating income

19.5

17.7

16.3

98,243

118,229

112,379

6,444

7,405

7,728

7,958

11,672

9,434

0
2006

2006

(Millions of yen)

(Millions of yen)

Depreciation(Millions of yen)

Capital expenditures(Millions of yen)

Note: The operating margin above is calculated using net sales plus intersegment sales. Pleaserefer to details on page 78, Segment Information.

Note: The operating margin above is calculated using net sales plus intersegment sales. Pleaserefer to details on page 78, Segment Information.

Net sales in the Vision Care Division rose 5.5%, to ¥126,338 million.
Sales in Japan were down 4.8%, as the market continued to contract.
Also, although sales of Hoya’s high-end eyeglass lenses rose, prices
were aﬀected by downward pressure resulting from stiﬀ competition
for low-end lenses. In Europe, the deceleration in consumer demand
grew more pronounced in the second half of the ﬁscal year, but by
focusing on high-value-added products throughout the ﬁscal year
Hoya succeeded in increasing sales in this market 10.0% year on year.

Net sales in the Health Care Division rose 13.0% from the previous year,to ¥46,177 million. Heightened eﬀorts to attract customers to our Eye
City chain of directly managed contact lens specialty stores throughconsulting-based sales and enhanced after-sales services succeeded inraising store sales even though the overall number of stores in the chain
decreased. Boosting sales in Japan and overseas were highly regarded
products such as soft yellow lenses—post-cataract-surgery IOLs.
The division’s operating income increased 10.3% during the year,

Asia-Paciﬁc sales in this division surged 20.0%, as the Company met
expanding regional demand for high-value-added products. North
American sales remained ﬂat, as the subprime loan issue prompted an
economic slowdown and aﬀected the propensity to consume.
Operating income in this division declined 2.4% during the year, to¥20,653 million, and the operating margin came to 16.3%. Thisdecrease in proﬁtability was attributable partly to our aggressive
marketing activities targeting eyeglass stores in Japan and overseas,
which we view as an investment in future growth, as well as toexpenditures on upgrades to maintain cutting-edge factories in Asia.
Capital expenditures in this division were down 19.2% from thepreceding term, to ¥9,434 million. This investment went toward IT
systems linking Hoya’s plants with customers’ eyeglass stores, as well as
eﬀorts to raise production system eﬃciency.

to ¥10,166 million, and its operating margin came to 22.0%. Although
the operating environment remained adverse, Hoya maintained
proﬁtability through aggressive investment in marketing to ensure
future growth on the one hand, while cutting operating costs on theother.

In the Lifecare business, sales of the new megapixel-image-capable“i” series of ﬂexible endoscopes for medical use enjoyed steady sales
growth in the North American and European markets. In the Imaging
Systems business, the PENTAX K10D, a digital SLR camera, has won
three top global camera awards. Following this model, we introduced
the PENTAX K100D standard model, and in the year under review welaunched the PENTAX K20D. In addition to contributing to robust
Imaging Systems business performance, the well-received PENTAX
K20D demonstrated our commitment to aggressive productdevelopment and rounding out our portfolio of products withinterchangeable lenses. However, as increasingly severe competition in
the compact digital camera market is depressing unit prices, sales inthis business were up only slightly during the year. Sales in the Optical
Components business increased as a result of higher unit sales ofhigh-end products using the Sliding Lens System and regular lens units.
Pentax operations incurred a ¥134 million operating loss during
the period. Contributing to this situation were the structural reforms
we implemented to lay the foundations for future growth, businessstrategy reviews and organizational revisions, asset revaluation losses,
and the amortization of goodwill that arose as the result of the merger.

Pentax(Millions of yen)(%)

200,000

15

150,000

10

100,000

5

50,0000-50Reference: Net sales for the
12-month period
Of which, net sales for six-month
period included in Hoya’s
consolidated statements ofincome (Millions of yen)
Operating income
Of which, operating income forsix-month period included in
Hoya’s consolidated statements
of income (Millions of yen)

2006

2007

2008

142,211

157,344

174,720
89,032

2,985

5,653

3,202
-134

2.1

Operating margin (%)

3.6

1.8

Other

-0.2

Reference: Pentax 12-Month Net Sales Figures

Our Crystal Glass business delivers top-end, hand-made crystal
glassware. This entirely new brand concept depends on the mastery of
Hoya’s craftsmen, who work tirelessly to augment their professional
skills. Hoya’s Service business involves the construction and operationof IT systems for companies throughout the Hoya Group.

Note: Net sales ﬁgures prior to consolidation are shown for Pentax Corporation and its
subsidiaries for reference in comparing against past performance. Net sales ﬁgures fromthe initial ﬁscal year are for 12-month periods. Net sales ﬁgures following consolidation
are shown for six-month periods.

Hoya’s Pentax operations in the second half of the ﬁscal year (fromOctober 1, 2007, to March 31, 2008), following the consolidation ofPentax and its subsidiaries, delivered net sales of ¥89,032 million.

Sales Growth Ratio (%)

Sales Growth and Proﬁtability of Main Business Segments Fiscal year ended March 31, 2008 (Compared with the previous ﬁscal year)* Size of circle shows the volume of operating income.

20

10

Health Care
PentaxElectro-Optics

0

Vision Care

-10

Consolidated Basis

0

5

10

15

20

25

30

35

40

Operating margin (%)
Note: Pentax operating performance ﬁgures for the ﬁscal year under review are the simple total of pre-consolidation and post-consolidation ﬁgures.

HOYA ANNUAL REPORT 200845

Management’s Discussion and Analysis

Sales Growth Ratio (%)

Sales Growth and Proﬁtability by Geographical Segment Fiscal year ended March 31, 2008 (Compared with the previous ﬁscal year)
90 * Size of circle shows the volume of operating income.
Europe70

Asia
North America

5030Consolidated Basis

Japan

10
Consolidated Basis
-10
0

5

10

15

20

25

30

35
Operating margin (%)

Group Employees by Region(% of total)

100
16.7

14.2

11.1

10.1

14.5

65.9

71.1

75.6

76.6

71.8

10.1
7.3

8.5
6.2

8.0
5.3

8.5
4.8

8.0
5.7

75
50
25
0

2004

2005

2006

2007

2008

18,092

21,23425,17628,45035,545

Japan (Persons)

3,023

3,007

2,800

2,861

5,158

Asia (Persons)

11,925

15,102

19,03021,78025,515

Europe (Persons)

1,821

1,809

2,009

2,429

2,862

North America (Persons)

1,323

1,316

1,337

1,380

2,010

Total

Capital Expenditures/Depreciation, Amortization and other(Millions of yen)

40,00020,000

0
2004

2005

2006

2007

2008

Capital expenditures (Millions of yen)

30,65940,17548,78654,432

39,465

Depreciation, amortization and other (Millions of yen)

25,32822,52027,48536,42745,458

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

46

Research and Development Expenses(Millions of yen)(%)

20,0004.0

15,0003.0

10,000

2.0

5,000

1.0

0

0
2004

2005

2006

2007

2008

R&D expenses (Millions of yen)

9,847

10,957

14,135

14,92017,413R&D expenses/net sales (%)

3.6

3.6

4.1

3.8

3.6

Financial Position

Shareholders’ Equity

Total assets as of March 31, 2008, stood at ¥689,444 million, a 54.0%
increase, compared with a year earlier. The primary factor in thissubstantial gain was the addition of the total assets of Pentax (¥204,853
million as of March 31, 2008), based on the merger of Hoya and Pentax.
Current assets grew 48.8% year on year, to ¥410,273 million. Major
contributing factors included a 50.4% increase in cash and cash
equivalents, to ¥181,467 million; a 27.8% rise in notes and accounts
receivable–trade, to ¥120,522 million; and a 66.6% increase ininventories, to ¥82,822 million.
Non-current assets increased ¥107,234 million to ¥279,171 million,
owing to a considerable increase in goodwill and deferred tax assets
based on the merger with Pentax.
Concerning liabilities, increases in notes and accounts

Retained earnings amounted to ¥373,888 million, partially based on¥28,089 million in dividends paid from ¥81,725 million in net income.
Treasury stock declined ¥4,768 million, to ¥7,984 million. As a result,
total shareholders’ equity came to ¥388,067 million, and net assets
grew ¥27,481 million, compared with the previous ﬁscal year, to¥394,626 million.
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 AccountingStandard for Presentation of Net Assets in the Balance Sheet”(Guidance No. 8 issued by the Accounting Standards Board of Japan on
December 9, 2005), the Shareholders’ equity section has been replaced

payable–trade and income taxes payable, as well as an issue of straightbonds to raise funds for the tender oﬀer on Pentax’s shares, brought
total liabilities to ¥294,818 million—a ¥214,319 increase.
Total interest-bearing debt—short-term loans, long-term debt withcurrent maturities, commercial paper, other long-term debt, andcorporate bonds—reached ¥136,192 million, resulting in a 19.8% rateof leverage.

by a net assets section, to which accumulated gains (losses) fromrevaluation and translation adjustments, stock subscription rights andminority interests have been added to shareholders’ equity. As areplacement for the former 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 theﬁscal year under review was 56.7%, a total of 24.9 percentage points
lower than the 81.6% in the previous ﬁscal year.

HOYA ANNUAL REPORT 2008

47

Management’s Discussion and Analysis

Total Assets, Owners’ Equity and Owners’ Equity Ratio(%)(Millions of yen)75

600,000

50

400,000

25

200,000

0

0
2004

2005

2006

2007

2008

Total assets (Millions of yen)

289,887

351,482

361,538

447,644689,444

Owners’ equity (Millions of yen)

218,979

277,889

279,481365,102391,084

75.5

79.1

77.3

81.6

56.7

Owners’ equity ratio (%)

Interest-Bearing Debt(%)

(Millions of yen)20

120,000

10

80,000040,000

0
2004

2005

2006

2007

2008

Short-term loans (Millions of yen)

486

194

—

—

6,465

Long-term debt with current maturities (Millions of yen)

—

—

—

—

8,749

Commercial paper (Millions of yen)

—

—

—

—

6,192

Long-term debt (Millions of yen)

—

—

—

—

13,268

Corporate bonds (Millions of yen)

—

—

—

—

99,967

Subtotal

486

194

—

—

134,641

Discounted promissory notes (Millions of yen)

—

—

—

—

1,551

Total

486

194

—

—

136,192

Leverage ratio (%)

0.2

0.1

—

—

19.8

Note: Corporate bonds were issued to fund a public tender oﬀer to acquire Pentax Corporation, as follows:
Five-year bonds: ¥39,982 million
Seven-year bonds: ¥24,991 million
Ten-year bonds: ¥34,994 million

48expenditures of ¥72,463 million (up ¥71,555 million) for the purchase ofshares of subsidiaries, stemming from the acquisition of Pentax’s sharesand other changes in the scope of consolidation, and expenditures of¥38,889 million (down ¥13,490 million) for purchases of property, plantand equipment, especially investments to support forthcoming
products in the Electro-Optics Division.
Net cash provided by ﬁnancing activities amounted to ¥68,253
million, an increase of ¥92,144 million. Although dividends paid totaled¥28,076 million (up ¥2,266 million), this was oﬀset by proceeds of¥99,804 million from long-term loans and corporate bonds issued forthe tender oﬀer on Pentax’s shares.
As a result of the above, the balance of cash and cash equivalents
as of March 31, 2008, was ¥181,336 million—an increase of ¥60,714
million.

Cash FlowsNet cash provided by operating activities amounted to ¥119,809
million, an increase of ¥21,016 million from the previous ﬁscal year. The
main positive factors were income before income taxes and minority
interests of ¥94,553 million (down ¥12,579 million year on year),depreciation and amortization of ¥44,876 million (up ¥8,537 million)
and a decrease in notes and accounts receivable of ¥6,254 million (up¥20,055 million). The main negative factors were an increase ininventories of ¥7,163 million (up ¥2,364 million), equity in earnings ofassociated companies of ¥5,926 million (up ¥5,284 million) and income
taxes paid of ¥24,960 million (up ¥1,598 million).
Net cash used in investing activities amounted to ¥113,037
million—a ¥66,385 million increase. This was primarily attributable to

Net Cash Provided by Operating Activities(Millions of yen)

100,000

75,00050,00025,000

0
2004

2005

2006

2007

2008

Net income (Millions of yen)

39,54964,13575,62083,391

81,725

Net cash provided by operating activities (Millions of yen)

78,74476,000105,855

98,793

119,809

Quarterly Net Cash Provided by Operating Activities(Millions of yen)

3Q

4Q

1Q

2Q

22,89919,96419,02817,09735,017

19,95029,76021,815

1Q

2Q

Net income (Millions of yen)

21,500Net cash provided by operating activities (Millions of yen)

14,066

3Q

4Q

21,02022,60321,00430,45032,59534,94830,00020,00010,000

0
2007

2008

HOYA ANNUAL REPORT 200849

Management’s Discussion and Analysis

Stock Price Data
(Times)

(Yen)

40

4,000

30

3,000

20

2,000

10

1,000

0

0
2004

2005

2006

2007

2008

Price earnings ratio (Times)

28.9

20.4

27.7

20.2

12.4

Price cash ﬂow ratio (Times)

14.5

17.2

19.7

17.1

8.4

Price book value ratio (Times)
Stock price at fiscal year-end (Yen)

5.2

4.7

7.3

4.6

2.6

2,537

2,950

4,750

3,910

2,340

(after adjustment for stock split)

Stock Price and Trading Volume
Stock price (Yen)

Trading volume (Thousands of shares)

4,000

80,0003,000

60,0002,000

40,0001,000

20,000

0

0
2007
4

5

6

7

8

9

10 11 12

2008
1

2

4

3

5

6

7

8

9

10 11 121

2

3 (Month)

Dividend Per Share
(Yen)

60

40

20

0
2004

2005

2006

2007

2008

Period-end dividend (Yen)

12.50

22.50

30.00

35.00

35.00

Interim dividend (Yen)

12.50

15.00

30.00

30.00

30.00

Total dividend (Yen)

25.00

37.50

60.00

65.00

65.00

Note: 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.

50

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
As the Hoya Group develops its business on a global scale, if the currenciesof 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 thosecountries in which the Hoya Group has major sales operations depreciate, itwould bring about a decrease in sales.
Inﬂuence of International Situations
In the event that the future movement of people, goods or money were to
be extraordinarily restrained in certain regions, or if certain unexpected
events took place in those countries in which the Hoya Group has business
operations—including changes in the political, economic or legal
environments, labor shortages, strikes, accidents or natural calamities,
etc.—certain problems may arise in the execution of business operations.
Our Business as in Production Goods
Every part of the Electro-Optics product range, which constitutes a major
portion of Hoya Group revenue, involves intermediate production goods,
components or materials. Therefore, growth of the business thereof isaﬀected substantially by the market conditions of such end-consumer
products such as personal computers and digital home appliances that are
manufactured utilizing the resultant products.
Emergence of Discounters and Lowering of Prices in the Consumer
Goods Sector
In recent years, discount shops of an unprecedented type have emerged andbrought about a lowering 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 businessresults and ﬁnancial condition of the Hoya Group might be adversely aﬀected.
Competence for Developing New Products
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, thebusiness results and ﬁnancial condition of Hoya Group might be adversely aﬀected.
Competition
The Hoya Group, which has the top market share for its many products intheir respective sectors, is constantly exposed to relentless competition.
There is no guarantee that the Hoya Group can maintain its overwhelming
market share and compete eﬃciently in future. If customers shift allegiancedue to cost pressures or ineﬃciency of Hoya’s competitiveness, the businessresults and ﬁnancial condition of Hoya Group might be adversely aﬀected.
Production Capacity
At present, the Hoya Group reinforces its production capacity so as to meetorders 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 andsales plans of its customers, which might bring about increased market
share for its competitors, etc., and adversely aﬀect the business results andﬁnancial condition of the Hoya Group.

New BusinessNew business is important for future growth. In the event that no promising
new business is developed, the growth of the Hoya Group might not be achieved
as planned. Besides, the Hoya Group may carry out mergers and acquisitions
as a part of its business strategy. If unexpected obstacles emerge after suchacquisition and unscheduled time and costs are required, the businessresults and ﬁnancial condition of the Hoya Group might be adversely aﬀected.
Risk of Information Leaks
In the course of its operations, the Hoya Group retains a substantial amountof personal and conﬁdential information, and the Group has numerous
measures in place to manage this information. Nevertheless, in the unlikely
event that an outﬂow of information were to occur, the Hoya Group could
experience a loss of trust from society and face signiﬁcant liability for damages.
Intellectual Property Risk
In its new product development and manufacturing, as well as its sales
activities, the Hoya Group conducts thorough advance research to avoid
infringing upon other companies’ intellectual property rights. Nevertheless,these eﬀorts cannot eliminate the risk of a third party asserting
infringement of their intellectual property rights. In such an event, in
addition to legal costs and depending on the outcome of litigation, the
Hoya Group might be unable to take advantage of said technology andcould become liable for substantial damage compensation payments.
Product Quality Risk
The Hoya Group manufactures a wide variety of products according tostringent quality standards. However, if a quality issue were to arise,necessitating a recall or resulting in product liability, in addition to the costof collecting such products the Group could incur signiﬁcant damage to its
reputation with customers. Also, depending on the product the Group
could be liable for substantial damage compensation payments.
Risk Related to Human Resource Retention and Training
The ongoing growth of the Hoya Group is largely dependent on its ability toretain and train superior personnel in a wide range of ﬁelds. However, the
Hoya Group’s growth and operating performance could be negatively
aﬀected if the swiftly diversifying employment environment resulted in asituation that halted the ﬂow of capable human resources or impeded therecruiting and training of new personnel.
Risk in Procuring Raw Materials and Other Items
Some of the raw materials and parts the Hoya Group uses in its
manufacturing activities are of a specialty nature, such that suppliers arelimited, so the selection of alternative suppliers would be problematic.
Therefore, a natural calamity or accident on the part of a supplier could
result in a sudden rise in purchase costs or the inability to secure a stablesupply of parts from suppliers. This situation could cause the Hoya Group to
delay product shipments or result in lost opportunities, thereby having anegative eﬀect on the Group’s operating performance and ﬁnancial position.
Risk of Loss in Corporate Value from Hostile Takeover
The Hoya Group believes that management’s responsibility is not to create
measures defending it against corporate acquirers. However, as the people
entrusted by shareholders management believes that it is important toachieve future corporate growth, enhancing corporate value by raising theGroup’s operating performance and ﬁnancial soundness. If a hostile
takeover were to occur nevertheless, the Hoya Group’s operating
performance and ﬁnancial condition could be negatively aﬀected.

Disclaimer
This report is provided by the Hoya Group solely for the purpose of reference to those investors making their own evaluation of the Company attheir own risk. We accept no liability whatsoever for any direct or consequential loss arising from any use of this report.

HOYA ANNUAL REPORT 200851

Consolidated Balance Sheets
Hoya Corporation and Subsidiaries
March 31, 2008 and 2007

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

ASSETS

2008

2007

2008

¥181,467¥120,622$1,811,229

120,522

94,2971,202,934

CURRENT ASSETS
Cash and cash equivalents
Notes and accounts receivable
Trade
Other

2,399

2,142

23,945

Allowance for doubtful receivables(2,388)(1,312)(23,835)

Inventories (Note 4)

82,822

49,722826,649

Deferred income taxes (Note 9)

10,868

7,068

108,474

Other current assets

14,583

3,168

145,553

410,273

275,707

4,094,949

16,888

9,154

168,560

Total current assets

PROPERTY, PLANT AND EQUIPMENT (Note 5)Land
Buildings and structures

77,59870,040774,508

Machinery and vehicles

250,705

245,2112,502,296

Furniture and equipment

35,302

29,991

352,351

Construction in progress
Total
Less—accumulated depreciation
Net property, plant and equipment

10,212

11,918

101,926

390,705

366,3143,899,641(238,502)(223,096)(2,380,497)

152,203143,218

1,519,144

INVESTMENTS AND OTHER ASSETS
Investment Securities (Note 3)

4,924

2,898

49,147

Investments in non-consolidated subsidiaries and aﬃliated companies

17,27911,678172,462

Goodwill

32,6802,243

326,180

Software

4,960

2,431

49,506

Lease deposits

3,718

3,435

37,110

Deferred income taxes (Note 9)41,1592,724

410,809

Other assets

22,573

3,632

225,302

Allowance for doubtful receivables
Total investments and other assets
TOTAL ASSETS
See notes to consolidated ﬁnancial statements.

52

(325)

(322)

(3,244)

126,968

28,7191,267,272¥689,444¥447,644$6,881,365

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

LIABILITIES AND NET ASSETSCURRENT LIABILITIES
Notes and accounts payable
Trade
Construction and other
Short-term loans payable and long-term debt with current maturities (Note 8)
Income taxes payable (Note 9)
Accured bonuses to employees
Accured expenses
Other current liabilities
Total current liabilities
LONG-TERM LIABILITIESBonds (Note 8)Long-term debt (Note 8)
Employees’ pension and retirement beneﬁts (Note 6)
Allowance for periodic repairs
Other long-term liabilities
Total long-term liabilities
TOTAL LIABILITIES

2008

2007

2008

¥ 55,539
24,334
21,40630,793
7,453
22,515
6,816
168,856¥ 27,733
11,857—
12,821
4,328
13,695
7,747
78,181$ 554,337
242,878
213,654
307,346
74,389224,723
68,031
1,685,358

99,967
13,268
10,2101,017
1,500
125,962
294,818

—
—
—
890
1,428
2,318
80,499997,774
132,428
101,906
10,151
14,972
1,257,231
2,942,589

6,264
15,899373,888

6,264
15,899322,51362,521
158,6883,731,790(7,984)
388,067(12,752)
331,924(79,689)
3,873,310

(835)
3,852

(86)
33,264(8,334)38,447

3,017

33,17830,113

633

167

6,318

2,909
394,626¥689,444

1,876
367,145¥447,644

29,035
3,938,776$6,881,365

CONTINGENT LIABILITIES (Notes 12 and 13)
NET ASSETS (Notes 2.q and 7)
SHAREHOLDERS’ EQUITY (Notes 16 and 19)
Common stock—authorized, 1,250,519,400 sharesissued, 435,017,020 shares
Capital surplus
Retained earnings
Treasury stock, at cost— 2,158,291 shares in 2008
and 3,447,681 shares in 2007
Total shareholders’ equity
ACCUMULATED GAINS (LOSSES) FROM REVALUATION AND
TRANSLATION ADJUSTMENTS
Net unrealized loss on available-for-sale securities, net of tax
Foreign currency translation adjustments
Total accumulated gains from revaluation andtranslation adjustments
STOCK SUBSCRIPTION RIGHTS (Note 17)
MINORITY INTERESTSTOTAL NET ASSETSTOTAL LIABILITIES AND NET ASSETSHOYA ANNUAL REPORT 200853

Consolidated Statements of Income
Hoya Corporation and Subsidiaries
Years Ended March 31, 2008, 2007 and 2006

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

2008

2007

2006

2008

NET SALES¥481,631¥390,093¥344,228$4,807,176

COST OF SALES (Notes 10 and 12)

262,944

197,410172,034

2,624,453

218,687

192,683

172,194

2,182,723

Gross proﬁt

123,61385,47071,0981,233,786

95,074

107,213101,096

948,937

Interest and dividend income

4,596

2,922

1,795

45,873

Interest expense(1,451)

(87)

(142)

(14,482)

Foreign exchange gains (losses)—net(5,447)(6,711)

243(54,367)

Equity in earnigs of associated companies

5,926

642

1,285

59,148Loss on clariﬁcation of soil pollution and others(1,612)(767)(3,726)(16,089)

—

—

(523)

—

Loss on disposal of property, plant and equipment(1,125)(3,327)(625)(11,229)

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

(581)

(88)

(1,233)(5,799)SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Notes 10 and 12)
Operating income
OTHER INCOME (EXPENSES):

Loss on closure of plant(1,921)(1,055)(1,689)(19,174)

Gain on sales of property, plant and equipment

520

9,629

109

5,190

Gain on transfer of business

—

—

1,656

—

Loss on write-down of investment securities

(909)

—

—

(9,073)

Other income (expense)—net

1,483(1,239)(879)

14,802Other expenses—net

(521)

(81)

(3,729)(5,200)94,553

107,132

97,367

943,737

Current(34,550)

23,492

22,250(344,845)

Deferred

20,08371(512)

200,449

14,46723,563

21,738144,396

1,639

(178)

(9)

16,359¥ 81,725¥ 83,391¥ 75,620$ 815,700

2008

2007

2006

Basic net income¥189.01¥193.50¥171.71$1.89

Diluted net income

188.78

192.78171.08

1.88

Cash dividends applicable to the year

65.00

65.00

150.000.65

Additional retirement beneﬁts paid to employees (Note 6)

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTSINCOME TAXES (Note 9)

Total income taxes
MIINORITY INTERESTS IN NET INCOME OFCONSOLIDATED SUBSIDIARIESNET INCOME

Yen

U.S. Dollars

2008

PER SHARE OF COMMON STOCK (Notes 2.p and 15)

See notes to consolidated ﬁnancial statements.

54

Consolidated Statements of Changes in Net Assets
Hoya Corporation and Subsidiaries
Years Ended March 31, 2008, 2007 and 2006

Millions of Yen

Outstanding
Number of
Shares ofCommonStock

BALANCE, MARCH 31, 2005
Net income
Appropriations
Cash dividends, ¥210.00 per share
Bonuses to directors
Stock split
Repurchase of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Net increase in unrealized gain on
available-for-sale securities
Net increase in foreign currencytranslation adjustments
Net increase in minority interests
Other decreases
BALANCE, MARCH 31, 2006
Net income
Appropriations
Cash dividends, ¥60 per share
Bonuses to directors
Repurchase of treasury stock
Disposal of treasury stock
Changes attributed to accounting changes
in overseas consolidated subsidiaries
Net increase in unrealized gain on
available-for-sale securities
Net increase in foreign currencytranslation adjustments
Net increase in subscription rights
Net increase in minority interests
Other increase
BALANCE, MARCH 31, 2007
Net income
Appropriations
Cash dividends, ¥65 per share
Repurchase of treasury stock
Disposal of treasury stock
Net increase in unrealized gain on
available-for-sale securities
Net increase in foreign currencytranslation adjustments
Net increase in subscription rights
Net increase in minority interests
BALANCE, MARCH 31, 2008

111,381,243

CommonStockCapitalSurplusRetained
Earnings¥6,264¥15,899¥268,255
75,620Treasury
Stock,
at Cost¥ (7,879)

Net Unrealized
Foreign
Gain (Loss)
Stock
Currency
on Available
Subscription
Translationfor Sale
RightsAdjustments
Securities,
Net of Tax¥ 38¥(4,688)¥ —Minority
Interests¥ 831(23,398)(65)
334,143,729(15,695,711)
786,152(871)(53,181)(64,032)
2,450
53,18172
11,83089

430,615,413

6,264

15,899(14)
266,346
83,391(16,280)

110

7,142

—

920

(25,843)(64)(2,861)
956,787(1,607)

(13)
3,539

290
(196)
26,122
167
956
431,569,339

6,264

15,899322,51381,725

2(12,752)(86)

33,264167

1,876(28,089)(3,407)
1,292,797(2,261)

(13)
4,781
(749)
(29,412)466

432,858,729¥6,264¥15,899¥373,888¥ (7,984)¥(835)¥ 3,852

¥633

1,033
¥2,909See notes to consolidated ﬁnancial statements.

HOYA ANNUAL REPORT 200855

Consolidated Statements of Changes in Net Assets
Hoya Corporation and Subsidiaries
Years Ended March 31, 2008, 2007 and 2006

Millions of U.S. Dollars (Note 1)

BALANCE, MARCH 31, 2007
Net income
Appropriations
Cash dividends, $0.65 per share
Repurchase of treasury stock
Disposal of treasury stock
Net increase in unrealized gain on
available-for-sale securities
Net increase in foreign currencytranslation adjustments
Net increase in subscription rights
Net increase in minority interests
BALANCE, MARCH 31, 2008
See notes to consolidated ﬁnancial statements.

56

Retained
Earnings

Treasury
Stock,
at CostCommonStockCapitalSurplus$62,521$158,688 $3,219,016 $(127,292)
815,700

Net Unrealized
Foreign
Gain (Loss)
Stock
Currency
on Available
Subscription
Translationfor Sale
RightsAdjustments
Securities,
Net of Tax$ (856)$ 332,005$1,669Minority
Interests$18,725(280,359)(22,567)(130)
47,733(7,478)(293,558)
4,649$62,521$158,688 $3,731,790$ (79,689)$(8,334)$ 38,447$6,318

10,310$29,035

Consolidated Statements of Cash Flows
Hoya Corporation and Subsidiaries
Years Ended March 31, 2008, 2007 and 2006

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

2008

2007

2006

2008

¥94,553¥107,132¥97,367$943,737

44,87636,33926,252447,909

557

(243)

235

5,559

1,132

155

278

11,299OPERATING ACTIVITIESIncome before income taxes and minority interests
Adjustment for
Depreciation and amortization
Provision for (reversal of) allowance for doubtful receivables
Provision for accrued bonuses to employees
Provision for reserve for periodic repairs

126

268

76

1,258

Gain on sales of property, plant and equipment(519)(9,629)(109)(5,180)Loss on disposal of property, plant and equipment

1,125

3,327

625

11,229Loss on impairment of long-lived assets

582

88

1,233

5,809

Loss on write-down of investment securities

872

—

—

8,703

(2,121)

4,783

(599)

(21,170)

Foreign exchange loss (gain)
Bonuses to directors
Equity in earnings of associated companies
Gain on transfer business
Other

—

(65)

(65)

—

(5,926)(642)(1,285)(59,148)——(1,656)—

11,757(700)

77

117,347

Changes in assets and liabilities
Decrease (increase) in notes and accounts receivable

6,254(13,801)(4,042)62,421

Increase in inventories(7,163)(4,799)(2,547)(71,494)

Decrease in other current assets

1,039

2,250

2,097

10,370

Increase (decrease) in notes and accounts payable(3,170)(1,208)

3,644(31,640)

917

(781)

2,420

9,153

Interest and dividend income(4,595)(2,922)(1,795)(45,863)Interest expense

1,451

87

142

14,483

Increase (decrease) in other current liabilities

Interest and dividends—received

4,419

2,557

1,866

44,106

Interest—paid(1,397)

(41)

(112)

(13,943)

Income taxes—paid(24,960)(23,362)(18,247)(249,127)

Total adjustments

25,256(8,339)8,488

252,081

Net cash provided by operating activities

119,809

98,793

105,855

1,195,818

27

30

—

269

—

(408)

(2,070)—(72,463)

(908)

(337)

(723,256)

INVESTING ACTIVITIES
Proceeds from sales of investment securities
Payments for investment securities
Payment for acquisition of investments in newly consolidated subsidiaries
Proceeds from sales of property, plant and equipment
Payments for property, plant and equipment

1,216

10,218267

12,137(38,889)(52,379)(47,742)(388,152)

Proceeds from transfer of business

—

—

2,230

—

Proceeds from other assets

479

654

271

4,781

Payments for purchases of other assets
Net cash used in investing activities(3,407)(3,859)(4,632)(34,005)(113,037)(46,652)(52,013)(1,128,226)

HOYA ANNUAL REPORT 200857

Consolidated Statements of Cash Flows
Hoya Corporation and Subsidiaries
Years Ended March 31, 2008, 2007 and 2006

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

2008

2007

2008

2006

FINANCING ACTIVITIES¥ (3,882)(208)$ (38,746)

Proceeds from long-term bank loans and issuance of corporate bonds

99,804——

996,147

Repayments of long-term debt

(1,866)——(18,625)

Net decrease in short-term loans

¥

—

¥

(30)

(13)

(64,032)

(299)

2,518

1,934

1,855

25,132(28,076)(25,810)(23,403)(280,227)

(215)

(2)

0

(2,146)

Net cash provided (used in) by ﬁnancing activities

68,253(23,891)(85,788)681,236NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS

60,71437,048(29,301)

605,988

Payments for purchases of treasury stock
Proceeds from sales of treasury stock
Dividends paid
Other

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQIVALENTS(14,311)

8,798

2,645

(142,840)

CASH AND CASH EQIVALENTS, BEGINNING OF YEAR

120,62283,574

112,875

1,203,933

CASH AND CASH EQIVALENTS, END OF YEAR

¥181,336¥120,622¥ 83,574$1,809,921

See notes to consolidated ﬁnancial statements.

58

Notes to Consolidated Financial Statements
Hoya Corporation and Subsidiaries

No. 1 BASIS OF PRESENTING CONSOLIDATEDFINANCIAL STATEMENTS
The accompanying consolidated ﬁnancial statements have been
prepared in accordance with the provisions set forth in the Japanese
Financial Instruments and Exchange Act and its related accounting
regulations, and in conformity with accounting principles generally
accepted in Japan, “Japanese GAAP”, which are diﬀerent in certain
respects as to application and disclosure requirements of International
Financial Reporting Standards.
The accounts of overseas subsidiaries are based on theiraccounting records maintained in conformity with generally accepted
accounting principles prevailing in the respective countries of domicile.
The accompanying consolidated ﬁnancial statements have been
restructured and translated into English (with some expanded
descriptions and the inclusion of consolidated statements of changes
in net assets for 2006) from the consolidated ﬁnancial statements of
Hoya Corporation (the “Company”) prepared in accordance withJapanese GAAP and ﬁled with the appropriate Local Finance Bureau of
the Ministry of Finance as required by the Japanese Financial
Instruments and Exchange Act. Some supplementary information
included in the statutory Japanese language consolidated ﬁnancial
statements, but not required for fair presentation, is not presented in
the accompanying consolidated ﬁnancial statements.
The translations of the Japanese yen amounts into U.S. dollars areincluded solely for the convenience of readers outside Japan, using theprevailing exchange rate at March 31, 2008, which was ¥100.19 to U.S.
$1. The convenience translations should not be construed as
representations that the Japanese yen amounts have been, could havebeen, or could in the future be, converted into U.S. dollars at this or any
other rate of exchange.

No. 2 SUMMARY OF SIGNIFICANT ACCOUNTING
AND REPORTING POLICIESa. Principles of Consolidation—The consolidated ﬁnancial statements
as of March 31, 2008 include the accounts of the Company and its 100(67 in 2007 and 62 in 2006) subsidiaries (together, the “Group”). Under
the control or inﬂuence concept, those companies in which theCompany, directly or indirectly, is able to exercise control over
operations are fully consolidated, and those companies over which theGroup has the ability to exercise signiﬁcant inﬂuence are accounted forby the equity method.
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 have been
eliminated in consolidation. All material unrealized proﬁts included in
assets resulting from transactions within the Group are eliminated.

b. Cash Equivalents—Cash equivalents are short-term investmentsthat are readily convertible into cash, and are exposed to insigniﬁcantrisk of changes in value. Cash equivalents mature or become due
within three months of the date of acquisition.
c. Inventories—Inventories are stated principally at cost using the
average method.
d. Investment Securities—All investment securities are classiﬁed asavailable-for-sale securities. Marketable available-for-sale securities arereported at fair value, with unrealized gains and losses, net of
applicable taxes, reported in a separate component of net assets. The
cost of securities sold is determined based on the moving-averagemethod.
Non-marketable available-for-sale securities are stated at cost
determined by the moving-average method. For other than temporary
declines in fair value, investment securities are reduced to net
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 equipment of
the Company and its domestic subsidiaries is computed substantiallyby the declining-balance method at rates based on the estimateduseful lives of the assets, while the straight-line method is applied tobuildings acquired on or after April 1, 1998 by the Company and its
domestic subsidiaries, and to almost all property, plant and equipmentof consolidated foreign subsidiaries. The ranges of useful lives are from10 to 50 years for buildings and structures and from 3 to 12 years formachinery and vehicles.
In accordance with the revision of the Corporation Tax Law,
starting in the consolidated ﬁscal year under review, a depreciation
method based on the revised Corporation Tax Law is used for tangible
ﬁxed assets acquired on or after April 1, 2007. The change caused
operating income and income before taxes and other items to decrease¥426 million ($4,252 thousand). The eﬀect of this change on businessand geographical segments was insigniﬁcant.
This revision of the Corporation Tax Law also aﬀects the treatmentof assets acquired on and prior to March 31, 2007. The residual
amounts of these assets shall be depreciated to the memorandum
values (¥1) in a straight line over ﬁve years, commencing with thefollowing ﬁscal year in which each asset's depreciation reaches to 5% of
the acquisition cost by the declining method deﬁned in the old
Corporation Tax Law is terminated. The eﬀects of this change on
income before taxes and minority interests were insigniﬁcant.
f. Impairment of Long-Lived Assets—The Group reviews its
long-lived assets for impairment whenever events or changes incircumstance indicate the carrying amount of an asset or asset group
may not be recoverable. An impairment loss would be recognized if thecarrying amount of an asset or asset group exceeds the sum of the

HOYA ANNUAL REPORT 200859

Notes to Consolidated Financial Statements
Hoya Corporation and Subsidiaries

undiscounted future cash ﬂows expected to result from the continued
use and eventual disposition of the asset or asset group. The
impairment loss would be measured as the amount by which thecarrying amount of the asset exceeds its recoverable amount, which is
the higher of the discounted cash ﬂows from the continued use andeventual 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.
Amortization of patent is calculated over 8 years. Goodwill is amortizedon a straight-line basis over its estimated useful life determined foreach 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 thehistorical 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 areprovided based on the estimated amount to be paid.
iii) Employees’ pension and retirement beneﬁts: To prepare forretirement beneﬁts payment to employees, an amount deemed tohave accrued at the end of the consolidated ﬁscal year under review
is provided as an allowance in certain divisions and overseas
subsidiaries, based on estimated amounts of retirement beneﬁt
obligations and pension assets at the end of the year. Past service
costs are amortized on a straight-line basis over 10 years, which isless than the expected average remaining working lives of theemployees. Actuarial gains and losses are also amortized on astraight-line basis over 10 years, which is less than the expected
average remaining working lives of the employees, commencing
with the following ﬁscal year.
iv) Reserve for periodic repairs: Reserve for periodic repairs is provided
at amount estimated based on the expenses of the latest extensive
repairs for continuous melting furnaces.
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. Under
Japanese accounting standards for leases, ﬁnance leases that deem totransfer ownership of the leased property to the lessee are to becapitalized, while other ﬁnance leases are permitted to be accounted
for as operating lease transactions if certain “as if capitalized”
information is disclosed in the notes to the lessee’s consolidated
ﬁnancial statements.

60

k. Income Taxes—The provision for income taxes is computed basedon the pretax income included in the consolidated statements ofincome. The asset and liability approach is used to recognize deferred
tax assets and liabilities for the expected future tax consequences of
temporary diﬀerences between the carrying amounts and the tax basesof assets and liabilities. Deferred taxes are measured by applying
currently enacted tax laws to the temporary diﬀerences.
l. Appropriations of Retained Earnings—Appropriations of 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 the balance
sheet date. The foreign exchange gains and losses from translation arerecognized in the statements of income to the extent that they are nothedged by forward exchange contracts.
n. Foreign Currency Financial Statements—The balance sheet
accounts of the consolidated overseas subsidiaries and associatedcompanies 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. Other than the portion
charged to the minority interests, diﬀerences arising from suchtranslation are shown as “Foreign currency translation adjustments” ina separate component of net assets. Revenue and expense accounts ofthe consolidated overseas subsidiaries are translated into Japanese yenat the monthly average exchange rates.
o. Derivatives and Hedging Activities—The Group uses derivative
ﬁnancial instruments to manage its exposures to ﬂuctuations in 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.
Derivative ﬁnancial instruments and foreign currency transactions
are classiﬁed and accounted for as follows: (a) all derivatives arerecognized as either assets or liabilities and measured at fair value, andgains or losses on derivative transactions are recognized in thestatements of income and (b) for derivatives used for hedging
purposes, if derivatives qualify for hedge accounting because of highcorrelation and eﬀectiveness between the hedging instruments andthe hedged items, gains or losses on derivatives are deferred until
maturity of the hedged transactions.
Hedging instruments and hedged items as of March 31, 2008 wereas follows:
Hedging instruments: Forward exchange contracts
Hedged items: Loans payable denominated in foreign currency

p. Per Share Information—Basic net income per share is computed by
dividing net income available to common shareholders by theweighted-average number of common shares outstanding for theperiod, retroactively adjusted for stock splits. Diluted net income pershare 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). Cashdividends per share presented in the accompanying consolidated
statements of income are dividends applicable to the respective 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, theCompany 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 AccountingStandards Board of Japan on December 9, 2005), and theimplementation 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 Accounting Standards”).
Under the New Accounting Standards, the balance sheet
comprises three sections, which are the assets, liabilities and net assets
sections. Previously, the balance sheet comprised the assets, liabilities,
minority interests, as applicable, and the shareholders’ equity sections.
The consolidated balance sheet as of March 31, 2006 has been
restated to conform to the 2007 presentation. There were no eﬀects on
total assets or total liabilities from applying the New AccountingStandards 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.
r. Accounting Standard for Statement of Changes in Net Assets—
Eﬀective from the year ended March 31, 2007, the Company and its
consolidated subsidiaries adopted the new accounting standard,“Accounting Standard for Statement of Changes in Net Assets”(Statement No. 6 issued by the Accounting Standards Board of Japanon December 27, 2005), and the implementation guidance, “Guidanceon Accounting 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 AccountingStandards”). Accordingly, the Company prepared the statements ofchanges in net assets for the year ended March 31, 2007 in accordancewith the Additional New Accounting Standards. Also, the Company
voluntarily prepared the consolidated statement of changes in net
assets for 2006 in accordance with the Additional New AccountingStandards. Previously, consolidated statements of shareholders’ equity
were prepared for the purpose of inclusion in the consolidated ﬁnancial
statements although such statements were not required underJapanese GAAP.
s. Accounting Standards for Business Combinations, Etc.— Eﬀective
April 1, 2006, the Company and its consolidated subsidiaries adopted
the new accounting standards, “Accounting Standard for Business
Combinations” (Business Accounting Council Statement of Opinion,
October 31, 2003) and “Accounting Standard for Business Divestitures”(Statement No. 7 issued by the Accounting Standards Board of Japanon December 27, 2005), and the implementation guidance, “Guidanceon 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 the year
ended March 31, 2007.
t. Accounting Standard for Directors’ Bonus—Eﬀective April 1, 2006,
the Company and its consolidated subsidiaries adopted the new
accounting standard, “Accounting Standard for Directors’ Bonus”(Statement No. 4 issued by the Accounting Standards Board of Japanon November 29, 2005). As a result, operating income and income
before income taxes and minority interests for the year ended March
31, 2007 decreased by ¥68 million, respectively. Adoption of thisstandard has little impact on segment information.
u. Stock Option—Eﬀective April 1, 2006, the Company and its
consolidated subsidiaries adopted the new accounting standard,“Accounting Standard for Share-based Payment” (Statement No. 8
issued by the Accounting Standards Board of Japan on December 27,2005) and the implementation guidance, “Guidance on AccountingStandard for Share-based Payment” (Guidance No. 11 issued by the
Accounting Standards Board of Japan on December 27, 2005).
As a result, operating income and income before income taxes andminority interests for the year ended March 31, 2007 decreased ¥167
million, respectively.
v. Reclassiﬁcation and Restatement—Certain prior year amounts
have been reclassiﬁed to conform to the current year presentation.
Also, as described in Notes 2.q and 2.r, the consolidated balance
sheet for 2006 has been adapted to conform to new presentation rulesof 2007. Also, in lieu of the consolidated statement of shareholders’equity for the year ended March 31, 2006, which was prepared on a
voluntary basis for inclusion in the 2006 consolidated ﬁnancial
statements, the Company prepared the consolidated statement ofchanges in net assets for 2006 as well as for 2007. These
reclassiﬁcations had no impact on previously reported results ofoperations or retained earnings.

HOYA ANNUAL REPORT 200861

Notes to Consolidated Financial Statements
Hoya Corporation and Subsidiaries

No. 3 INVESTMENT SECURITIESInvestment securities as of March 31, 2008 and 2007 consisted of the following:
Millions of Yen

Marketable equity securities
Non-marketable equity securities
Total

Thousands of U.S. Dollars

2008

2007

2008

¥3,616
1,308¥4,924¥1,542
1,356¥2,898$36,091
13,056$49,147

The carrying amounts and aggregate fair values of marketable equity securities at March 31, 2008 and 2007 were as follows:
Millions of Yen
Cost

Unrealized Gains

Unrealized
LossesFair Value

March 31, 2008
Available-for-sale—Equity securities¥4,677¥—¥1,061¥3,616

March 31, 2007
Available-for-sale—Equity securities¥1,693¥—¥ 151¥1,542Thousands of U.S. Dollars

March 31, 2008
Available-for-sale—Equity securities

Cost

Unrealized Gains

Unrealized
LossesFair Value$46,681$—$10,590$36,091

Available-for-sale securities whose fair value was not readily determinable as of March 31, 2008 and 2007 were as follows:
Carrying AmountMillions of Yen

Equity securities
Investment to limited partnership and others
Investment in unconsolidated subsidiaries and aﬃliated companies
Total

Thousands of U.S. Dollars

2008

2007

2008

¥1,060248
17,279¥18,587¥1,100256
11,678¥13,034$10,580
2,476
172,462$185,518

These were no sales of available-for-sale securities for the years ended March 31, 2008 and 2007.

No. 4 INVENTORIESInventories as of March 31, 2008 and 2007 consisted of the following:
Millions of Yen

Finished products and merchandise
Semi-ﬁnished products and work in process
Raw materials
Supplies
Total

62

Thousands of U.S. Dollars

2008

2007

2008

¥32,290
23,36010,987
16,185¥82,822¥17,453
10,0699,498
12,702¥49,722$322,287
233,157
109,662
161,543$826,649

No. 5 IMPAIRMENT OF LONG-LIVED ASSETSThe Group reviewed its long-lived assets for impairment for the years
ended March 31, 2008, 2007 and 2006. As a result, the Group
recognized impairment losses of ¥129 million ($1,288 thousand), ¥88
million and ¥864 million for the years ended March 31, 2008, 2007 and2006, respectively, as other expense for a decline in value, mainly fromproperty of certain plants including the Tokyo Studio (in Akishima
Plant) of the Crystal division, due to a continuous operating loss of that
unit. The carrying amount of the relevant machinery was written down
to the recoverable amount, which was measured at its value in use. The
discount rate used for computation of the present value of future cash
ﬂows was 5%.
The Group reviewed its intangible ﬁxed assets for impairment for
the year ended March 31, 2008, and as a result recognized an
impairment loss of ¥212 million ($2,116 thousand) as other expense fora decline in value of the intangible ﬁxed assets since there was a
possibility for the non-competition provision. The carrying amount of
the relevant intangible assets were written down to the recoverable
amount, which was measured at its value in use. The discount rate used
for computation of the present value of future cash ﬂows was 5%.

The Group reviewed its long-lived assets for impairment for theyears ended March 31, 2008. As a result, the Group recognizedimpairment losses of ¥149 million ($1,487 thousand), as other expense
for a decline in value, mainly from buildings and structures due to acontinuous operating loss of that unit. The carrying amount of relevantbuildings and structures was written down to the recoverable amount,which was measured at its value in use. The discount rate used forcomputation of the present value of future cash ﬂows was 5%.
The Group reviewed its long-lived assets for impairment for theyears ended March 31, 2008. As a result, the Group recognizedimpairment losses of ¥91 million ($908 thousand), as other expense,
mainly from buildings and structures in Mulleheimm, Germany, andmachineries in Itabashi-ku, Tokyo, since these were currently idle. The
book value of idle assets was reduced to their recoverable amount,which was measured on the basis of their net sale price.
The Group reviewed its long-lived assets for impairment for theyear ended March 31, 2006, and as a result recognized an impairment
loss of ¥369 million as other expense for a decline in value of the leased
land in Machida-City, due to a fall of market land prices. The carrying
amount of the relevant land was written down to the recoverable
amount, which was measured at its declared value.

No. 6 EMPLOYEES’ SEVERANCE AND RETIREMENT BENEFITSThe Company and certain of domestic subsidiaries provide contribution beneﬁt plan. And Pentax divisions provide deﬁned beneﬁt plans.
Employees’ severance and retirement beneﬁts included in the liability section of the consolidated balances sheets as of March 31, 2008, 2007.
Millions of Yen

Projected beneﬁt obligation
Less fair value of pension assets
Unrecognized actuarial diﬀerences
Prepaid pension cost
Employees’ serverance and retirement beneﬁts

Thousands of U.S. Dollars

2008

2007

2008

¥20,899(8,848)(1,865)24¥10,210

¥—
—
—
—
¥—

$208,594(88,312)(18,615)
239$101,906

Included in the consolidated statements of income for the years ended March 31, 2008, 2007 and 2006 are severance and retirement beneﬁt expenses
comprised of the following:
Millions of Yen

Service costs-beneﬁts earned during the year
Interest cost on projected beneﬁt obligation
Expected return on plan assets
OthersServerance and retirement beneﬁt expenses

Thousands of U.S. Dollars

2008

2007

2006

2008

¥1,007
192
(182)
3,726
¥4,743

¥—
—
—
—
¥—

¥—
—
—
—
¥—

$10,051
1,916(1,816)37,189$47,340HOYA ANNUAL REPORT 200863

Notes to Consolidated Financial Statements
Hoya Corporation and Subsidiaries

Assumptions used for the years ended March 31, 2008 and 2007 are set forth as follows:
2008
Discount rate
Expected rate of return on plan assets
Amortization of unrecognized prior service cost
(Straight-line method)
Recognition of unrecognized acturial gain
(Straight-line method from the following ﬁscal year of recognition)

2007

Mainly 2.0%
Mainly 3.5%——

Mainly 10 years—

Mainly 10 years—

The estimated amount of all retirement beneﬁts to be paid at the future retirement date is allocated equally to each service year using the estimatednumber of total service years.

No. 7 NET ASSETS“Net assets” comprises four subsections, which are shareholders’equity, accumulated gains (losses) from revaluation and translation
adjustments, stock subscription rights and minority interests.
The Japanese Corporate Law (“the Law”) became eﬀective on
May 1, 2006, replacing the Japanese Commercial Code (“the Code”).
Under Japanese laws and regulations, the entire amount paid for
new shares is required to be designated as common stock. However, acompany may, by a resolution of the Board of Directors, designate an
amount not exceeding one-half of the price of the new shares asadditional paid-in capital, which is included in capital surplus.
Under the Law, in cases where a dividend distribution of surplus ismade, the smaller of an amount equal to 10% of the dividend or theexcess, if any, of 25% of common stock over the total of additional
paid-in capital and legal earnings reserve must be set aside asadditional paid-in capital or legal earnings reserve. Legal earnings
reserve is included in retained earnings in the accompanying
consolidated balance sheets.
Under the Code, companies were required to set aside an amountequal to at least 10% of the aggregate amount of cash dividends andother cash appropriations as legal earnings reserve until the total of
legal earnings reserve and additional paid-in capital equaled 25% ofcommon stock.
Under the Code, legal earnings reserve and additional paid-in
capital could be used to eliminate or reduce a deﬁcit by a resolution of
the shareholders’ meeting or could be capitalized by a resolution of the64

Board of Directors. Under the Law, both of these appropriations
generally require a resolution of the shareholders’ meeting.
Additional paid-in capital and legal earnings reserve may not be
distributed as dividends. Under the Code, however, on condition thatthe total amount of legal earnings reserve and additional paid in capitalremained equal to or exceeded 25% of common stock, they wereavailable for distribution by resolution of the shareholders’ meeting.
Under the Law, all additional paid-in capital and all legal earnings
reserve may be transferred to other capital surplus and retained
earnings, respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as
dividends is calculated based on the non-consolidated ﬁnancial
statements of the Company in accordance with Japanese laws andregulations.
Since the Company introduced the committees system in 2003,
dividends may be paid upon resolution of the Board of Directors,
subject to certain limitations imposed by the Law. Interim dividends
may also be paid upon resolution of the Board of Directors, subject tocertain limitations imposed by the Law.
On May 22, 2008, the Board of Directors resolved cash dividends
amounting to ¥15,150 million ($151,213 thousand). Suchappropriations have not been accrued in the consolidated ﬁnancial
statements as of March 31, 2008. Such appropriations are recognizedwhen the Board of Directors resolves them.

No. 8 SHORT-TERM DEBT AND LONG-TERM DEBT
Short-term debt at March 31, 2008 and 2007 consisted of the following:
Millions of Yen

Thousands of U.S. Dollars

2008

2007

2008

Short-term loans and overdrafts, principally from banks, with interest rates ranging
0.00% to 5.23% (2008)¥ 6,465¥—$ 64,527

Commercial Paper
Total

6,192
¥12,657—¥—

61,803$126,330

Long-term debt at March 31, 2008 and 2007 consisted of the following:
Millions of Yen

Bonds
1.42%, unsecured straight bonds, payable in yen, due September 2012
1.62%, unsecured straight bonds, payable in yen, due September 2014
1.93%, unsecured straight bonds, payable in yen, due September 2017Loans
Long-term loans and overdrafts, principally from banks, with interest rates ranging
0.00% to 5.23% (2008)

Total
Less current portion included in current liabilities

Thousands of U.S. Dollars

2008

2007

2008

¥ 39,982
24,991
34,994
99,967¥———$ 399,062
249,436
349,276
997,774

22,01722,017——219,752
219,752

121,984(8,749)¥113,235——¥—

1,217,526(87,324)$1,130,202

Annual maturities of long-term debt as of March 31, 2008 were as follows:
Millions of Yen

Year Ending March 31
2009
2010
2011
2012
2013
Thereafter
Total

Thousands of U.S. Dollars

2008

2007

¥ 8,749
4,607
4,038
44,128
6
60,456¥121,984

¥—
—
—
—
—
—
¥—

2008
$

87,32445,98340,303
440,44360
603,413$1,217,526

HOYA ANNUAL REPORT 200865

Notes to Consolidated Financial Statements
Hoya Corporation and Subsidiaries

No. 9 INCOME TAXESThe company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in a normal
eﬀective statutory tax rate of approximately 40.4% for the years ended March 31, 2008, 2007 and 2006.
Signiﬁcant components of deferred tax assets and liabilities as of March 31, 2008 and 2007 were as follows:
Millions of Yen

Current:
Deferred tax assets:
Inventories—intercompany unrealized proﬁts
Accrued bonuses to employees
Accrued loss on clariﬁcation of soil pollution and others
Accrued enterprise taxes
Inventories—loss on write-down
OtherLess valuation allowance
Total
Deferred tax liabilities:
Undistributed earnings of associated companies
Other
Total
Net deferred tax assets
Non-Current:
Deferred tax assets:
Asset adjuetment accountNet operating loss carried forward
Amortization of goodwill and property, plant and equipment
Loss on impairment of long-lived assets
Allowance for doubtful receivables
Loss on devaluation of investment securities
Other
Less valuation allowance
Total
Deferred tax liabilities:
Reserves for special depreciation and other
Depreciation expense
Reserves for deferred gains on ﬁxed assets
Other
Total
Net deferred tax assets

66

Thousands of U.S. Dollars

2008

2007

2008

¥ 2,002
2,835
601
1,592
5,120
4,553
(1,590)15,113¥2,647
1,656
—
923
78
1,764
—
7,068

$ 19,982
28,296
5,999
15,89051,10345,444(15,870)
150,844(2,600)(1,749)(4,349)¥10,764——
7,068¥7,068(25,951)(17,457)(43,408)$107,436¥20,012
20,161
1,017
531
131
2,569
2,302
(4,804)
41,919

¥

—
—
1,577
622
111
—
1,119
—
3,429

$199,740
201,228
10,1515,300
1,308
25,641
22,976(47,949)
418,395

(289)
(292)
(198)
(166)
(945)
¥40,974

(540)
—
—
(165)
(705)
¥2,724(2,885)(2,914)(1,976)(1,657)(9,432)$408,963

A reconcilation between the normal eﬀective statutory tax rates and actual eﬀective tax rates reﬂected in the accompanying consolidated
statements of income for the years ended March 31, 2008, 2007 and 2006 was as follows:
Normal eﬀective statutory tax rate
Lower or exemption income tax rates applicable to income in certain foreign countries
Expenses not permanently deductible for income tax purposes
Per capita portion
Non-taxable dividend income
Intercompany cash dividend and transactions
Equity in earnings of associated companies and retained earnings
Change in valuation allowance
Tax credit on reserch and development expenses
Foreign tax credit
Amortization of goodwill
The amount inﬂuence of merging
Consolidated adjustment on unrealized gain in inventories
Other—net
Accutual eﬀective tax rate

2008

2007

2006

40.4%
(20.1)
0.6
0.1
(1.6)
2.9
0.2
0.6
(0.8)
(1.4)
1.2
(9.0)
1.2
1.0
15.3

40.4%
(17.1)
0.4
0.1
(1.5)
1.5
(0.2)
—
(0.7)
—
—
—
—
(0.9)
22.0

40.4%
(18.2)
0.4
0.1
(1.8)
1.8
(0.5)
—
(0.5)
—
—
—
—
0.6
22.3

No. 10 RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses charged to income for the years ended March 31, 2008, 2007 and 2006 were ¥17,413 million ($173,795
thousand), ¥14,920 million, ¥14,135 million, respectively.

No. 11 SUPPLEMENTARY CASH FLOW INFORMATION
1. Reconciliation of cash and cash equivalents
A reconciliation of cash and cash equivalents between the consolidated balance sheets and the conslodated statement of cash ﬂows at
March 31, 2008 and 2007 is as follows:
Millions of Yen

Thousands of U.S. Dollars

2008

2007

2008

Cash, time deposits and other cash equivalents¥181,467¥120,622$1,811,229

Time deposits with deposit terms of more than three months
Cash and cash equivalents at end of the year

(131)
¥181,336(—)¥120,622(1,308)$1,809,921

2. Purchases of newly consolidated subsidiaries
The Company started to consolidate Pentax and its subsidiaries at September 30, 2007. The following shows the reconciliation from the payment forpurchasing Pentax shares, which equals to the total of the assets and liabilities of the Pentax and its subsidiaries, to the payment for acquisition ofsubsidiaries' shares which eﬀects the scope of consolidation.
Millions of Yen

AssetsGoodwill
Liabilities
Minority interests
Cash paid for the capital
Cash and cash equivalents of consolidated subsidiaries
Cash paid in conjunction with the purchases of consolidated subsidiaries

Thousands of U.S. Dollars

2008

2008

¥174,189
27,226(98,198)(8,438)
94,77922,648¥ 72,131$1,738,587
271,744(980,118)(84,220)
945,993
226,051$ 719,942

HOYA ANNUAL REPORT 200867

Notes to Consolidated Financial Statements
Hoya Corporation and Subsidiaries

No. 12 LEASESThe Group leases certain machinery, computer equipment, oﬃce space and other assets. Total rental expenses including lease payments for the years
ended March 31, 2008, 2007 and 2006 were ¥7,482 milion ($74,678 thousand), ¥3,909 milion and ¥5,602 milion, respectively.
Pro forma information of leased property such as acuisition cost, accumulated depreciation, accumulated impairment loss, obligation underﬁnance lease, depreciation expense of ﬁnance lease that do not transfer ownership of the leased property to the lessee on an “as if capitalized” basis
for the years ended March 31, 2008 and 2007 was as follows:
Millions of Yen

2008
MachineryandVehiclesFurnitureand Equipment¥5,282
3,156
3¥2,123¥5,6374,048
25¥1,564

Aquisiton cost
Accumulated depreciation
Accumulated impairment loss
Net leased property

Thousands of U.S. Dollars

2008

2007
Total

MachineryandVehiclesFurnitureand Equipment¥10,9197,204
28¥3,687¥1,745658
3¥1,084¥2,6301,307
25¥1,298Total

MachineryandVehiclesFurnitureand Equipment

Total¥4,3751,965
28¥2,382$52,720
31,50030$21,190$56,263
40,403250$15,610$108,983
71,903280$ 36,800

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

Due within one year
Due after one year
Total

Thousands of U.S. Dollars

2008

2007

2008

¥2,0391,662¥3,701¥ 704
1,698¥2,402$20,351
16,589$36,940

Allowance for impairment loss on leased property of ¥7 million ($70 thousand) and ¥9 million as of March 31, 2008 and 2007 are not included in
obligations under ﬁnance leases.
Depreciation expense and other information under ﬁnance leases:
Millions of Yen

Thousands of U.S. Dollars

2008

2007

2006

2008

Due within one year

¥2,347¥718¥726$23,425

Lease payments
Reversal of allowance for impairment loss on leased property
Impairment loss

2,355
8
4

727
9
6

896
170
—

23,50580
40

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

Due within one year
Due after one year
Total

68

Thousands of U.S. Dollars

2008

2007

2008

¥ 85
84
¥169

¥184
400
¥584

$ 848
839
$1,687

No. 13 CONTINGENT LIABILITIESAt March 31, 2008, 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

Thousands of U.S. Dollars

2008

2007

2008

¥2,0702¥2,072¥2,772
3¥2,775$20,661
20$20,681No. 14 DERIVATIVES AND HEDGING ACTIVITIES
Derivatives and hedging activities as of March 31, 2008 and 2007 consisted of the following:
1. Conditions of transactions
The Group enters into derivative contracts, including foreign exchange forward contracts, currency option contracts, and interest rate swap contracts
to hedge foreign exchange risk and interest rate exposures. The Group does not enter into derivatives for trade or speculative purposes.
(1) Hedge accounting methods
Deferral hedging is applied. Appropriation is adopted for hedging exchange risks when the criteria for appropriation are met.
(2) Hedging methods and hedged items
Exchange risks are hedged based mainly on the Company’s ‘Internal Management Regulations’, and the Company adopted a policy of notconducting any speculative derivative trading.
Hedging mehod: Forward exchange contracts
Item hedged: Foreign currency denominated debt
2. Fair value of transactions
No derivative transaction subject to hedge accounting was carried out for the year ended March 31, 2007. Therefore, the validity of hedging is notevaluated.
Fair value of transations as of March 31, 2008 was as follows:
Currency-related transactions

Unrealized gain
(loss)

Millions of Yen
Items

Forward foreign exchange contracts
Sell—USDEURO
Buy—USDEURO
OptionBuy-Call—USD

Contract value

Contract over
one yearMarket value¥ 7,626
10,140
100
1,777

¥—
—
—
—

¥587
111
5
104

¥

¥—

¥ 15

321

¥587
111
5
104
¥ 15

Notes: 1. Market value:(1) Forward foreign exchange contract : Translated by forwward exchange rates(2) Currency option contract : Calculation of market is based on the prices provided by the ﬁnancial institutions the Company has business connection with.
2. Transactions which are translated at the contracted forward rates are excluded.

HOYA ANNUAL REPORT 200869

Notes to Consolidated Financial Statements
Hoya Corporation and Subsidiaries

Interest rate swap
Millions of Yen
Items

Interest rate swap
Receive ﬂoating pay ﬁxed

Contract value

Contract over
one yearMarket value

Unrealized gain
(loss)¥11,011¥8,711

¥(82)

¥(22)

Notes: 1. The principal amount regarding the interest rate swap is notional. The ﬁgures do not indicate market risks relating to the derivative transactions
2. Calculation of market value is based on the prices provided by the ﬁnancial institutions the Company entered into the interest rate swap contracts with.

Currency-related transactions
Thousands of U.S. Dollars
Items

Forward foreign exchange contracts
Sell—USDEURO
Buy—USDEURO
OptionBuy-Call—USD

Contract value

Contract over
one yearMarket value

Unrealized gain
(loss)$ 76,115
101,208
1,000
17,736$————$5,859
1,108
50
1,038

$5,859
1,108
50
1,038

$

$—

$ 150

$ 150

3,204

Interest rate swap
Thousands of U.S. Dollars
Items

Interest rate swap
Receive ﬂoating pay ﬁxed

Contract value

Contract over
one yearMarket value

Unrealized gain
(loss)$109,901$86,945$(818)$(220)

No. 15 NET INCOME PER SHARE
Reconciliation of the diﬀerences between basic and diluted net income per share (EPS) for the years ended March 31, 2008, 2007 and 2006 was follows:

For the year ended March 31, 2008
Basic EPS—Net income available to common shareholders
Eﬀect of dilutive securities—Stock options
Diluted EPS—Net income for computation
For the year ended March 31, 2007
Basic EPS—Net income available to common shareholders
Eﬀect of dilutive securities—Stock options
Diluted EPS—Net income for computation
For the year ended March 31, 2006
Basic EPS—Net income available to common shareholders
Eﬀect of dilutive securities—Stock options
Diluted EPS—Net income for computation

70

Millions of Yen

Thousands ofSharesYen

U.S. Dollars

Net Income

Weighted-Average
SharesEPS

EPS¥81,725—¥81,725

432,383522
432,905¥189.01$1.89¥188.78$1.88¥83,391—¥83,391

430,968
1,615
432,583¥193.50¥75,555—¥75,555

440,008
1,625
441,633¥171.71¥192.78¥171.08

No. 16 SHAREHOLDERS’ EQUITY(For the year ended March 31,2008)
Type and Number of Shares Issued, and Type and Number of Treasury Stock
Number of
Shares Issued
As of March 31,2007

Shares issued
Common stock
Total
Treasury stock
Common stock*Total

435,017,020
435,017,020
3,447,681
3,447,681

Increases in
Number of
Shares Issued
for the year Ended
March 31, 2008

Decreases in
Number of
Shares Issued
for the year Ended
March 31, 2008

—
—

—
—

3,407
3,407

1,292,797
1,292,797

Number of
Shares Issued
As of March 31, 2008

435,017,020
435,017,020
2,158,291
2,158,291

Notes: *Details of increases and decreases are as follows:
Increase of 3,407 shares attributed to the repurchase of odd lot shares
Decrease of 397 shares attributed to the request for additional purchase of odd lot shares by shareholders
Decrease of 1,292,400 shares attributed to the exercise of stock options

HOYA ANNUAL REPORT 200871

Notes to Consolidated Financial Statements
Hoya Corporation and Subsidiaries

No. 17 STOCK OPTION PLANS
1. Description of Stock Option(1) Description of Stock Option Plans
1st stocksubscription rights

Type and number ofrecipients (Note 1)

2nd stocksubscription rights

Directors of the Company
6
Directors of subsidiaries
43
Employees of the Company 121
Employees of subsidiaries
58

Number of stock options
by type of stock to be
Common stock
3,747,600
issuedNobember 1, 2002
Grant date
Remain employed from the grant
date (November 1, 2002) to the
Vesting requirements
end of the vesting period.
From the grant date to the end
Service periodof the vesting period.
From October 1, 2003 to
Exercise period (Note 2)
September 30, 2007

5th stocksubscription rights

Type and number ofrecipients (Note 1)

Directors of the Company
Directors of subsidiaries
Employees of the Company
Employees of subsidiaries

8
13
85
77

3rd stocksubscription rights

Directors of the Company
Directors of subsidiaries
1 Employees of the Company
1 Employees of subsidiaries

Employees of the Company
Employees of subsidiaries
Common stock

32,000 Common stock

4th stocksubscription rights

8
14
60
35

700,000

June 9, 2003
Remain employed from the grant
date (June 9, 2003) to theend of the vesting period.
From the grant date to the endof the vesting period.
From October 1, 2003 to
September 30, 2007

December 12, 2003
Remain employed from the grant
date (December 12, 2003) to theend of the vesting period.
From the grant date to the endof the vesting period.
From October 1, 2004 to
September 30, 2008

6th stocksubscription rights

7th stocksubscription rights

Directors of the Company
Directors of subsidiaries
Employees of the Company
Employees of subsidiaries

8 Directors of the Company
73
12
88

Directors of the Company
Directors of subsidiaries
Employees of the Company
Employees of subsidiaries
Common stock

8
5
54
43

635,600

December 13, 2004
Remain employed from the grant
date (December 13, 2004) to theend of the vesting period.
From the grant date to the endof the vesting period.
From October 1, 2005 to
September 30, 20098

Number of stock options
by type of stock to be
Common stock
890,000 Common stock
780,800 Common stock
77,600issuedGrant date
January 1, 2006
November 7, 2006
December 14, 2007
Remain employed from the grant Remain employed from the grant Remain employed from the grantVesting requirements

Service period
Exercise period (Note 2)

date (January 1, 2006) to theend of the vesting period.
From the grant date to the endof the vesting period.
From October 1, 2006 to
September 30, 2015

date (November 7, 2006) to theend of the vesting period.
From the grant date to the endof the vesting period.
From October 1, 2007 to
September 30, 2016

date (December 14, 2007) to theend of the vesting period.
From the grant date to the endof the vesting period.
From October 1, 2008 to
September 30, 2017

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 account a four-for-one stock split forcommon 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.

72

(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, 2008. Number of stock options is expressed in number of shares to beissued upon exercise.
a. Number of stock options (Note)
1st stocksubscription
rightsUnvested
As of March 31, 2007
GrantedForfeited
VestedUnvested
As of March 31, 2008
VestedAs of March 31, 2007
VestedExercised
Forfeited
VestedAs of March 31, 2008

2nd stocksubscription
rights

3rd stocksubscription
rights

4th stocksubscription
rights

5th stocksubscription
rights

6th stocksubscription
rights

7th stocksubscription
rights

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

780,800——
780,800—
77,600
—
—

—

—

—

—

—

—

77,6001,497,200—
1,205,200
292,000

16,000—16,000—512,000—
44,400—530,400—
26,800—889,200————
780,800————

467,600

503,600

889,200

780,800

—
—
—
—
—
—

6th stocksubscription
rights

7th stocksubscription
rightsNote: Number of shares in the above table is adjusted taking into account a four-for one stock split for common stock as of Novemner 15, 2005

b. Per unit information

Exercise price (yen) (Note1)
Average stock price on
exercise (yen) (Note1)
Fair value per unit
(as of grant date)(yen) (Note2)

1st stocksubscription
rights

2nd stocksubscription
rights

3rd stocksubscription
rights

4th stocksubscription
rights

5th stocksubscription
rights

1,918

1,673

2,438

2,713

4,150

4,750

4,230

3,896

3,950

3,852

3,843

—

—

—

—

—

—

—

—

(a)
(b)
(c)
(d)

1,113
1,224
1,289
1,448

(a)
(b)
(c)
(d)

745
786
880
946

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.

HOYA ANNUAL REPORT 200873

Notes to Consolidated Financial Statements
Hoya Corporation and Subsidiaries

2. Valuation Method for Fair Value of Stock Options
The 7th stock subscription rights granted for the year ended March 31, 2008 are valued as follows:
Fair value of stock subscription rights is valued for each of the following exercise periods.
(a) From October 1, 2008 to September 30, 2009(b) From October 1, 2008 to September 30, 2010(c) From October 1, 2008 to September 30, 2011(d) From October 1, 2008 to September 30, 2017a. Option-pricing model used: Black-Scholes modelb. Major assumptions used:

Stock price to volatility (Note 1)
Estimated time to exercise (Note 2)
Estimated dividends (Note 3)
Risk free rate (Note 4)

(a)

(b)

(c)

(d)

29.37%
5.38 years
¥65
1.07%

29.54%
5.88 years
¥65
1.11%

31.35%
6.38 years
¥65
1.15%

32.36%
6.88
¥65
1.20%

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, 2007.
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 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, 2008 as follows:
Cost of sales
Selling, general and administrative expenses¥ 105 million¥ 311 million

No. 18 BUSINESS COMBINATIONS AND BUSINESS DIVESTITURES
Business combination — the purchase method
1. Name of the acquired company, description of its businesses,
major reasons for business combination, business combination
date, legal form for business combination, name of the concerned
company after business combination and ratio of acquired voting
rights(1) Name of the acquired company and description of its businesses
Acquired company: Pentax Corporation
Business description: Manufacture, sale, etc. of life care products,
imaging systems and optical components(2) Reasons for business combination
The Company and Pentax Corporation aim to establish strong
operating foundations by using management resources they
respectively own in a manner supplementary to each other. The
two companies also seek to create corporate value by developing
attractive products with optical and precision processing
technologies at which they excel and oﬀering the products to abroader range of customers.
Following the management integration, the Company andPentax Corporation are working to optimize their businessportfolios, and aim at further bolstering their competitiveness.

74(3) Business combination dateAugust 14, 2007
(4) Legal form for business combination
Share acquisition(5) Name of the concerned company after business combination
Pentax Corporation(6) Ratio of acquired voting rights
90.58% (Note: The Company and Pentax Corporation merged in
March 2008. Details of their merger are stated in “businesscombination—under common control.”)
2. Period of the acquired company’s results included in consolidated
ﬁnancial statements for the consolidated ﬁscal year under review
The acquired company’s results during the period from October 1,
2007 to March 31, 2008 are consolidated.
3. Cost of acquiring the company and its breakdown
Share acquisition expenses¥ 94,482 million
Direct expenditure on share acquisition
296 million
Acquisition cost
¥ 94,778 million

4. Amount of goodwill, reason for its recognition, amortization
method and period(1) Amount of goodwill¥ 27,225 million(2) Reason for recognition
The market value of net assets at the time of business combination
fell short of the acquisition cost. For this reason, the diﬀerence isrecognized as goodwill.
(3) Amortization method and amortization period
Straight-line amortization in 10 years
5. Assets received and liabilities succeeded on the businesscombination date, and their major constituents
Current assets¥ 100,132 million
Fixed assets
74,056 million
Total assets¥ 174,188 million
Current liabilities
Long-term liabilities
Total liabilities¥ 67,822 million
30,375 million¥ 98,197 million

6. Estimated eﬀects on consolidated statements of income for the
consolidated ﬁscal year under review in case businesscombination is presumed to have been completed on the ﬁrst dayof the ﬁscal year
Net sales¥ 85,689 million
Operating income
956 million
Ordinary income-169 million
Income before income taxes and other items-1,725 million
Net income-1,195 million
Net income per share-2.76(Method for calculating estimated amounts and important premises)
Estimated amounts were calculated retroactive to the ﬁrst day of theconsolidated ﬁscal year under review, based on ﬁgures presented instatements of income for the period from April 1, 2007 to September
30, 2007. Estimated net sales and losses stated above were calculated byassuming that the business combination had been completed on the ﬁrst
day of the consolidated ﬁscal year, and that the acquired company’s
voting rights had been owned at the rate of 100% from the ﬁrst day.
The amounts stated above include adjustments for goodwill
amortization and interest cost, etc. These amounts have not been
veriﬁed through audit.
Business combination — under common control(Summary of transaction)
The Company merged its ﬁve consolidated subsidiaries, namely Pentax
Optotech Co., Ltd., Pentax Tohoku Co., Ltd., Pentax Fukushima Co., Ltd.,

Pentax Service Co., Ltd. and Pentax Incubation Co., Ltd., into Pentax
Corporation eﬀective March 30, 2008. The Company merged Pentax
Corporation by absorption on March 31, 2008.
(Major reason for business combination)
The Company and Pentax Corporation reached an agreement for
integrating their management for the purposes of establishing strong
operating foundations by using management resources in theirpossession in a manner supplementary to each other, generatingsynergies, and accelerating new growth for the future. Based on thisagreement, the Company made a tender oﬀer to Pentax Corporation
and, as a result of the oﬀer, made Pentax Corporation a consolidated
subsidiary.
The Company reached the conclusion that management mobility
and ﬂexibility were essential for strengthening Pentax Corporation’s
core businesses and that integration in the form of a merger, as it hadoriginally planned, was the best way that allows Pentax Corporation
divisions to make business judgments and take business actions as
speedily as the Company’s divisions, and optimizes the distribution ofmanagement resources in the integral framework of the Hoya Group,
instead of small subsidiary frameworks. The Company ﬁrmly believes
that the merger and integration of Pentax Corporation divisions into
itself make the Group organization ﬂatter, compared with the maintenanceof Pentax Corporation as its subsidiary, and permit the Hoya Group to
make business judgments ﬂexibly and speedily, and to achieve further
growth in new ﬁelds with appropriate resource distribution.
1. Merger involving six consolidated subsidiaries, namely, Pentax
Corporation, Pentax Optotech Co., Ltd., Pentax Tohoku Co., Ltd.,
Pentax Fukushima Co., Ltd., Pentax Service Co., Ltd., and Pentax
Incubation Co., Ltd.
(1) Names of companies involved in business combination,
description of their businesses, business combination date, legal
form for business combination, and name of the company formed
through business combination
Names of companies involved in business combination anddescription of their businesses
Combining company: Pentax Corporation
Business description: Manufacture and sale, etc. of life careproducts, imaging systems and optical components
Combined company: Pentax Optotech Co., Ltd.
Business description: Manufacture and sale of opticalcomponents, precision components, machinery and tools
Combined company: Pentax Tohoku Co., Ltd.
Business description: Manufacture of medical equipment
Combined company: Pentax Fukushima Co., Ltd.

HOYA ANNUAL REPORT 200875

Notes to Consolidated Financial Statements
Hoya Corporation and Subsidiaries

Business description: Manufacture of optical components
Combined company: Pentax Service Co., Ltd.
Business description: Repair of optical components
Combined company: Pentax Incubation Co., Ltd.
Business description: Research and development of medical
equipment
Business combination date
March 30, 2008
Legal form for business combination and name of the company
formed through business combination
The legal form for this business combination is merger by
absorption with Pentax Corporation as the surviving company.
The name of the company formed through businesscombination is Pentax Corporation. No share issuance or capitalincrease resulted from the merger.
(2) Summary of accounting procedures
The merger stated above is eliminated in its entirety as an internaltransaction, as it corresponds to a transaction, etc. under common
control. Therefore, this merger has no impact on the consolidated
ﬁnancial statements.
2. Merger of the Company and Pentax Corporation(1) Names of companies involved in business combination,
description of their businesses, business combination date, legal
form for business combination, and name of the company formed
through business combination
Names of companies involved in business combination anddescription of their businesses
Combining company: Hoya Corporation (the Company)
Business description: Manufacture and sale, etc. ofelectro-optics, vision care and healthcare products
Combined company: Pentax Corporation
Business description: Manufacture and sale, etc. of life careproducts, imaging systems and optical components
Business combination date
March 31, 2008
Legal form for business combination and name of the company
formed through business combination
The legal form for this business combination is merger by
absorption with the Company as the surviving company andPentax Corporation as the company ceasing to exist. The nameof the company formed through business combination is Hoya
Corporation. No share issue or capital increase resulted fromthe merger.

76(2) Summary of accounting procedures
The merger stated above was treated in accordance with the
Accounting Standard for Business Combinations (issued by theBusiness Accounting Council on October 31, 2003) and the
Implementation Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures(issued by the Accounting Standards Board of Japan on December
27, 2005). The assets and liabilities which the Company took overfrom the ceased company were based on their book values
recorded on the day before the merger date. Their book values
were adjusted only when the Company adjusted the ceasing
company's book values in its consolidated ﬁnancial statements.
(3) Items relating to cash payment on merger to minority shareholders
Acquisition cost and its breakdown
Share acquisition expenses¥ 9,757 million
Direct expenditure on share acquisition— million
Acquisition cost
¥ 9,757 million
Money paid for acquisition and its calculation method(A) Consideration for acquired shares¥ 770 was paid for each share acquired(B) Method for calculating per-share payment
The amount of per-share payment was calculatedcomprehensively in view of amounts calculated bythird-party organizations.
(C) Number of acquired shares and their valuation
Common stock
12,671,186 shares
Valuation¥ 9,757 million
Amount of goodwill, reason for its recognition, amortization
method and period(A) Amount of goodwill¥ 4,507 million(B) Reason for recognition
The goodwill resulted as the acquisition value ofadditionally obtained Pentax shares exceeded the value ofnet assets received for the additionally interest acquisition.
(C) Amortization method and amortization period
Straight-line amortization in 10 years

No. 19 SUBSEQUENT EVENTSAppropriations of Retained Earnings
The following appropriations of retained earnings for the year ended March 31, 2008 were resolved by the Company’s Board of Directors on May 22,
2008:
Year-end cash dividends, ¥35.00 ($0.35) per share

Millions of Yen

Thousands of U.S. Dollars¥15,150$151,213

In addition to the cash dividends described above, the Company paid interim cash dividends of ¥12,984 million ($129,594 thousand, ¥30 ($0.30) per
share) on November 26, 2007, based on a resolution of the Board of Directors.

Partial sale of shares in NH TECHNO GLASSThe Company sold 21.5% of its 50% shareholding in NH TECHNO GLASS CORPORATION (“NH TECHNO GLASS”), applied an equity method, to the
Carlyle Group (“Carlyle”) on June 6, 2008 based on the share transfer agreement on May 9, 2008.
1. Reasons for share disposal
The Company agreed to accept Carlyle as its investment partner in NH
TECHNO GLASS, following the decision to sell the entire shareholding(50%) in NH TECHNO GLASS made by joint investment partner Nippon
Sheet Glass Co., Ltd. In a parallel development, the Company decided
to transfer 21.5% of its shareholding in NH TECHNO GLASS, in which it
held a 50% stake, to Carlyle. Nonetheless, the Company will ultimately
own 47.4% of NH TECHNO GLASS shares, following changes to its
capital structure and organizational restructuring. As a major
shareholder in NH TECHNO GLASS, the Company will continue to workin concert with Carlyle.
Taking advantage of the share transfer agreement, NH TECHNOGLASS will develop its businesses more aggressively under President
Makino’s leadership. Speciﬁcally, NH TECHNO GLASS will engage inaggressive capital investment focusing on its production facilities
overseas, to respond to the requests for increases in LCD glass
substrate output being made by customers. Moreover, the Company
will strengthen the business infrastructure of NH TECHNO GLASS
further in concert with Carlyle, with a view to enhancing its corporate
value and listing its shares on a stock exchange in the future.
2. Proﬁle of the acquiring party(1) Business nameCarlyle Group(2) Representative
Louis Gerstner (co-representatives for Japan: Tamotsu Adachi and
Masao Hirano)(3) Head oﬃce address
Washington, D.C., the United States (1001 Pennsylvania Ave., N.W.
Suite 220 South, Washington, D. C.)(4) Description of major businesses
Investment operations (private equity fund)(5) Relationship with the Company
None

3. Date of share disposal
June 6, 2008
4. Name of the aﬃliate, description of its businesses, and details of
its transactions with the Company(1) Business name
NH TECHNO GLASS CORPORATION(2) Representative
Jun Makino, president(3) Address
Yokohama City, Kanagawa Prefecture(4) Date of establishment
May 21, 1991
(5) Business description
Manufacture and sale of TFT LCD glass substrates(6) Fiscal year-end
End of March(7) Number of employees
1,147 persons on a consolidated basis, including 184 persons
in Japan(8) Major oﬃces
Yokohama, Yokkaichi and overseas subsidiaries (in Taiwan,
Singapore and South Korea)(9) Capital sum¥ 3,000 million(10) Aggregate number of outstanding shares
60,000 shares(11) Shareholders
The Company (shareholding ratio at 50%) and Nippon Sheet
Glass Co., Ltd. (shareholding ratio at 50%)(12) Contents of transactions with the Company
Purchase and receipt of royalties

HOYA ANNUAL REPORT 200877

Notes to Consolidated Financial Statements
Hoya Corporation and Subsidiaries

5. Number of shares to be sold, sale value, gain or loss on sale, andequity ratio after disposal(1) Number of owned shares before transfer
30,000 shares (ownership ratio: 50%) (number of voting rights:
30,000 rights)(2) Number of shares to be transferred
12,921 shares (sale value: 17,400 million yen)(3) Gain on sale
10.4 billion yen will be recorded as other income.
(4) Number of owned shares after transfer
17,079 shares (ownership ratio: 28.5%) (number of voting rights:
17,079 rights)

No. 20 SEGMENT INFORMATION
Information about industry segments, geographical segments and sales to foreign customers of the Company and subsidiaries for the years ended
March 31, 2008, 2007 and 2006 was as follows:(1) Industry Segments
a. Sales and Operating Income
Millions of Yen

2008
Information
Technology

Sales to customers
Intersegment sales
Total sales
Operating expenses
Operating income (loss)

Eye CarePentaxElectro-Optics

Photonics

Vision Care

Health Care

¥209,883
383
210,266
142,802¥ 67,464¥9,090
246
9,336
8,512
¥ 824

¥126,338(2)
126,336
105,683¥ 20,653¥46,177—
46,17736,011¥10,166¥89,0322
89,034
89,168¥ (134)

Other
Businesses

Total

Eliminations
andCorporate

Consolidated¥1,111
2,761
3,872
4,227
¥ (355)¥481,631
3,390
485,021386,403¥ 98,618¥—(3,390)(3,390)154¥(3,544)¥481,631—
481,631386,557¥ 95,074

Other
Businesses

Total

Eliminations
andCorporate

Consolidated¥2,81847129
146¥562,510
44,733581
39,455¥126,934143—
10¥689,444
44,876581
39,465

Eliminations
andCorporate

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

2008
Information
Technology

AssetsDepreciation
Impairment loss
Capital expenditures

Eye CarePentaxElectro-Optics

Photonics

Vision Care

Health Care

¥210,007
27,653—24,431¥8,037138—
141¥112,379
7,728
61
9,434

¥24,416
1,311
212
848

¥204,853
7,856
179
4,455

a. Sales and Operating Income
Thousands of U.S. Dollars

2008
Information
Technology

Sales to customers
Intersegment sales
Total sales
Operating expenses
Operating income (loss)

78

Eye Care

Electro-Optics

Photonics

Vision Care

$2,094,843
3,822
2,098,665
1,425,312$ 673,353$90,728
2,454
93,182
84,959$ 8,223$1,260,986 $460,898(20)—
1,260,966
460,898
1,054,826
359,427$ 206,140 $101,471

PentaxOther
Businesses

Total$11,092
27,561
38,65342,190$ (3,537)$4,807,176
33,837
4,841,013
3,856,702$ 984,311

Health Care

$888,629
20
888,649
889,988$ (1,339)$— $4,807,176(33,837)—(33,837) 4,807,176
1,537
3,858,239$(35,374) $ 948,937

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

2008
Information
Technology

AssetsDepreciation
Impairment loss
Capital expenditures

Eye Care

Electro-Optics

Photonics

Vision Care

$2,096,087
276,007—$ 243,843$80,217
1,376—$ 1,413$1,121,659
77,129611$ 94,165

Other
Businesses

Pentax

Total

Health Care

$243,697 $2,044,645
13,08578,4092,116
1,790$ 8,463 $ 44,463$28,127471
1,288$ 1,455

Eliminations
andCorporate

Consolidated$5,614,432 $1,266,933 $6,881,365
446,477
1,432
447,909
5,805
—
5,805
$ 393,802 $103 $ 393,905

a. Sales and Operating Income
Millions of Yen

2007
Information
Technology

Sales to customers
Intersegment sales
Total sales
Operating expenses
Operating income (loss)

Eye Care

Electro-Optics

Photonics

Vision Care

Health Care

¥219,252
414
219,666
139,581¥ 80,085¥9,093
248
9,341
8,851
¥ 490

¥119,8080119,808
98,641¥ 21,167¥40,850040,85031,635¥ 9,215

Other
Businesses

Total

Eliminations
andCorporate

Consolidated¥1,090
2,766
3,856
4,206
¥ (350)¥390,093
3,428
393,521282,914¥110,607¥—(3,428)(3,428)(34)¥(3,394)¥390,093—
390,093282,880¥107,213

Other
Businesses

Total

Eliminations
andCorporate

Consolidated¥2,518458890¥411,664
36,19488
53,935¥35,980145—
497¥447,644
36,33988
54,432b. Assets, Depreciation, Loss on Impairment of Long-Lived Assets and Capital Expenditures
Millions of Yen

2007
Information
Technology

AssetsDepreciation
Impairment loss
Capital expenditures

Eye Care

Electro-Optics

Photonics

Vision Care

Health Care

¥258,746
27,449—39,899¥7,761125—
155¥118,229
7,405—
11,672¥24,410
1,170
—
2,119

a. Sales and Operating Income
Millions of Yen

2006
Information
Technology

Sales to customers
Intersegment sales
Total sales
Operating expenses
Operating income (loss)

Eye CareLifestyleRefinement

Electro-Optics

Photonics

Vision Care

Health Care

CrystalService¥190,552
744
191,296
116,434¥ 74,862¥10,093
246
10,3399,405¥ 934¥104,4571
104,458
84,088¥ 20,370¥35,484
035,484
28,625¥6,859¥1,864
33
1,897
2,052
¥ (155)¥1,778
4,333
6,111
5,464
¥647

Total

Eliminations
andCorporate

Consolidated¥344,228
5,357
349,585
246,068¥103,517¥ —(5,357)(5,357)(2,936)¥(2,421)¥344,228—
344,228
243,132¥101,096

HOYA ANNUAL REPORT 200879

Notes to Consolidated Financial Statements
Hoya Corporation and Subsidiaries

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

2006
Information
Technology

AssetsDepreciation
Impairment Loss
Capital expenditures

LifestyleRefinement

Eye Care

Electro-Optics

Photonics

Vision Care

Health Care

¥204,192
18,716—37,244¥7,606109—
208¥98,243
6,444
—
7,958

¥19,927
855
—
2,391

CrystalTotal

Eliminations
andCorporate

Consolidated¥334,792
26,177864
48,723¥26,74675
369
63¥361,538
26,252
1,233
48,786

Service

¥840
—
864
762

¥3,98453—
160

Notes: 1. The Company and subsidiaries primarily engage in the manufacture and sale of products in six major segments grouped on the basis of similarities in the types, nature and market of the
products. The six segments, namely, Electro-Optics, Photonics, Vision Care, Health Care, Pentax, and Other Businesses, consist primarily of the following products:
Electro-Optics: Photomasks and mask blanks for semiconductors, masks for liquid-crystal display (LCD), parts for glass panels of LCDs, glass disks for hard disk 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.
Pentax:(Lifecare) Endoscopes, Medical Accessories, APACERAM bone prosthesis, CHT Ceramic Hydroxapatite, etc.
(Imaging System) Digital cameras, Interchangeable lenses, Accessories for cameras, etc.
(Optical Components) Digital camera modules, Micro lenses, CCTV 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 theimportance of separate presentation, and from the ﬁscal year ended March 31, 2007, these businesses are presented together as “Other Businesses.”
3. Since Pentax and its subsidiaries were consolidated to Hoya Corporation during the period under review, the segmentation of business category, products and services are reclassiﬁed as per
above. Proﬁt and loss of Pentax and its subsidiaries are combined into the Consolidated Statements of Income from October 1, 2007 and the statements of income include Pentax and its
subsidiaries’ proﬁt and loss only for six months ended March 31, 2008.
4. Corporate operating expenses consist primarily of the administration expenses of the Company and foreign holding companies, which are not allocated to industry segments. Corporate
operating expenses for the years ended March 31, 2008, 2007 and 2006 were ¥6,289 million ($62,771 thousand), ¥3,370 million and ¥2,630 million, respectively.
5. 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, 2008, 2007 and 2006 were ¥153,256 million ($1,529,654 thousand), ¥61,381 million and ¥35,135 million, respectively.
6. 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, 2008, 2007 and 2006 are summarized as follows:
Millions of Yen

2008

Sales to customers
Interarea transfers
Total sales
Operating expenses
Operating income (loss)
Assets

Japan

North
America

Europe

Asia

Total

Eliminations
and Corporate

Consolidated¥291,566
54,012345,578
315,42130,157¥333,040¥56,680374
57,05451,788
5,266¥37,722¥89,420757
90,177
83,3596,818¥66,642¥43,965
157,230
201,195
157,360
43,835¥228,174¥481,631
212,373694,004
607,928
86,076¥665,578¥—(212,373)(212,373)(221,371)
8,998¥23,866¥481,631—
481,631386,557
95,074¥689,444

Thousands of U.S. Dollars

2008

Sales to customers
Interarea transfers
Total sales
Operating expenses
Operating income (loss)
Assets

80

Japan

North
America

Europe

Asia

Total

Eliminations
and Corporate

Consolidated$2,910,128
539,0993,449,227
3,148,226
301,001$3,324,080$565,729
3,730
569,459
516,901
52,558$376,505$892,501
7,552
900,053
832,01368,040$665,161$ 438,818
1,569,318
2,008,136
1,570,614
437,522$2,277,417$4,807,176
2,119,699
6,926,875
6,067,754
859,121$6,643,163$—(2,119,699)(2,119,699)(2,209,515)
89,816$ 238,202$4,807,176—
4,807,176
3,858,239
948,937$6,881,365

Millions of Yen

2007

Sales to customers
Interarea transfers
Total sales
Operating expenses
Operating income (loss)
Assets

Japan

North
America

Europe

Asia

Total

Eliminations
and Corporate

Consolidated¥270,373
26,847297,220
257,021¥ 40,199¥193,390¥37,456
305
37,761
36,916¥ 845¥13,507¥ 51,336
813
52,14944,663¥ 7,486¥107,564¥ 30,928
159,124
190,052
135,227¥ 54,825¥207,158¥390,093
187,089
577,182
473,827¥103,355¥521,619¥—(187,089)(187,089)(190,947)¥ 3,858¥ (73,975)¥390,093—
390,093282,880¥107,213¥447,644

Millions of Yen

2006

Sales to customers
Interarea transfers
Total sales
Operating expenses
Operating income (loss)
Assets

Japan

North
America

Europe

Asia

Total

Eliminations
and Corporate

Consolidated¥244,998
23,901
268,899
230,414¥ 38,485¥163,840¥35,471
222
35,69334,606¥ 1,087¥22,377¥39,232683
39,91533,367¥ 6,548¥63,346¥ 24,527
120,813145,340
97,226¥ 48,114¥149,299¥344,228
145,619489,847
395,613¥ 94,234¥398,862¥—(145,619)(145,619)(152,481)¥ 6,862¥ (37,324)¥344,228—
344,228
243,132¥101,096¥361,538

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 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, 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 forthe years ended March 31, 2008, 2007 and 2006 were ¥4,142 million ($41,341 thousand), ¥2,993 million and ¥2317 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, 2008, 2007 and 2006 were¥115,499 million ($1,152,800 thousand), ¥59,047 million and ¥33,959 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, 2008, 2007 and 2006 are summarized as follows:
Millions of Yen

2008
Overseas sales (A)North America

Europe

Asia

Other

Total

¥59,294¥92,116¥140,433¥1,268¥293,111

12.3%

19.1%

29.2%

0.3%

481,631

Consolidated sales (B)(A)/(B)

60.9%

Thousands of U.S. Dollars

2008
Overseas sales (A)North America

Europe

Asia

Other

Total

$591,815$919,413$1,401,667$12,656$2,925,551
4,807,176

Consolidated sales (B)(A)/(B)

12.3%

19.1%

29.2%

0.3%

60.9%

HOYA ANNUAL REPORT 200881

Notes to Consolidated Financial Statements
Hoya Corporation and Subsidiaries

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%

390,093

Consolidated sales (B)(A)/(B)

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%

344,228

Consolidated sales (B)(A)/(B)

49.6%

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.

82

HOYA ANNUAL REPORT 200883

Corporate Data
(As of March 31, 2008)

Established
November 1, 1941

Directors and Executive Oﬃcers (As of June 18, 2008)

Paid-in Capital¥6,264,201,967

Takeo Shiina (Advisor of IBM Japan, Ltd.)

Directors
Yuzaburo Mogi

Employees
Hoya Corporation
5,205 (up 2,156 from March 31, 2007)
Average age: 42.5
Average years of service: 16.5

(Representative Director, Chairman & CEO of Kikkoman Corporation)

Yoshikazu Hanawa (Honorary Chairman of Nissan Motor Co., Ltd.)
Eiko Kono (Special Advisor of Recruit Co., Ltd.)
Yukiharu Kodama(President of The Mechanical Social Systems Foundation)

Hoya Group
35,545 (up 7,095 from March 31, 2007)

Hiroshi Suzuki

Fiscal Year
From April 1 to March 31 of the following year

Hiroshi Hamada

Ordinary General Meeting of Shareholders
June

Hiroaki Tanji

Record Dates
For the Ordinary General Meeting of Shareholders: March 31
For dividends from surplus: March 31, September 30

Executive OﬃcersKenji Ema

Hiroshi Suzuki (President & CEO)
Hiroshi Hamada (Chief Operating Oﬃcer)
Kenji Ema (Chief Financial Oﬃcer)
Hiroaki Tanji (Chief Technology Oﬃcer)

Hoya Group Business Matrix by Business Segment and Area
Global Headquarters(Formulates Group strategies)

Eye CarePentax

Other

Japan

Legal and Financial Support

Information
Technology

Asia(Regional headquarters)

United States(Regional headquarters)

EU/FHQ(Regional headquarters andGroup ﬁnancial headquarters)

Global Business Expansion

84

Timeline(As of March 31, 2008)

1941

November

1996

An optical glass production plant was established in the city of
Hoya, in metropolitan Tokyo, and production of optical glass was
initiated.

August

The plant was incorporated with capital of ¥1.2 million.

1997

November

1944

August

April

1945

October

Crystal products were introduced.

1947

AugustCompany name changed to Hoya Crystal Glass ManufacturingCo., Ltd.

1952

February

The manufacture of optical glass BK7 resumed.

1960

November

1961

October

Hoya was listed on the Second Section of the Tokyo Stock
Exchange.

1962
May

October

The manufacture of eyeglass lenses commenced.
Hoya was listed on the Second Section of the Nagoya Stock
Exchange.

1963
May

May

The Optics Division’s Showa Plant (currently Akishima Plant) wascompleted in Tokyo. The Company merged with three aﬃliates.
December

April

February

The Crystal Division’s Musashi Plant was completed.

September

The Vision Care Division launched sales of progressive multifocal
lenses.

2000
April

Sales of soft contact lenses began.

1973

February

July

The Company’s listings were advanced to the First Section of theTokyo and Nagoya Stock Exchanges.

1974

January

1982

October

Hoya Electronics Co., Ltd., merged with the parent company.

1983

January

The construction of the Hachioji Plant in the Electronics Division
was completed, and the production of IC photomasks
commenced.

1984

AugustOctober

The current Head Oﬃce was completed.
Hoya Lens Corporation and Hoya Crystal Corporation mergedwith the parent company.

1985
April

OctoberNovember
April

AugustJanuary
March
June
July

The production of intraocular lenses (IOLs) commenced.
The production of aspherical molded-glass lenses commenced.

October

Hoya Europe B.V. of the Netherlands (currently Hoya Holdings
N.V.) and Hoya Corporation USA were established.

2006

Glass disks for HDDs were launched.

October

Hoya Group’s Environmental Philosophy was established.

2007

February

1994
April

The Hoya Group was reorganized with the establishment of theElectro-Optics Division, the Vision Care Division and the Crystal
Division.

Hoya began manufacture and sale of 3C-SiC, a new substratematerial for semiconductors.
Technical alliance formed with Dai Nippon Printing Co., Ltd. tojointly 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.
merged with Hoya Corporation.
Hoya established a company-with-committees system.
Global ﬁnancial management operations were transferred to aregional 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.

2005

November
March

1993

October

Hoya began marketing HOYALUX Summit Pro and NuLux lenses
that use EYRY, a high-index, plastic lens material.
Hoya began manufacturing soft intraocular lenses.

2003

March

1991

March

May

The R&D Center was completed in the city of Akishima.

1989

Hoya acquired Optical Resources Group, Inc. (ORI), a processor
and marketer of eyeglasses in the United States (integrated into
Hoya Corporation in March 2001).
Hoya acquired the semiconductor photomask production divisionof Oki Electric Industry Co., Ltd.

2002

2004

1987
June

October

The Kodama Plant was completed for medical-related
production and research.

1986

All major domestic plants received ISO 14001 certiﬁcation.
Hoya acquired Belgian eyeglass manufacturer Buchmann OpticalIndustries N.V.

2001
May

The Electronics Division’s Nagasaka Plant was completed, andthe production of IC substrates began. Hoya’s on-line network tohandle eyeglass lens orders was introduced in the Vision Care
Division.

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.

1999

1972

December

Hoya introduced its “internal company system,” reorganizing
Group operations centered on two internal companies(Electro-Optics and Vision Care) and three subsidiaries (Hoya
Photonics, Inc., Hoya Healthcare Corporation, and Hoya Crystal
Corporation).
Hoya implemented ERP R/3, an enterprise resource planningsystem developed 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
to receive ISO 14001 certiﬁcation.

1998

1967
April

Hoya formed an alliance with IBM to develop a next-generation
glass disk for HDDs.
Kumamoto Plant commenced operations as a photomask
manufacturing plant.

AugustA four-for-one split of common shares was implemented.
Subsidiary Hoya Advanced Semiconductor Technologies Co., Ltd.
was merged with Hoya Corporation.
Contact lens production sector transferred to a subsidiary, Hoya
Healthcare Corporation.
Pentax Corporation converted to consolidated subsidiary throughacquisition of shares via takeover bid.

2008

March

Pentax Corporation absorbed via merger.

1995
June

Hoya introduced an outside director system.

HOYA ANNUAL REPORT 200885

Hoya Group Global Network(As of March 31, 2008)

EuropeRegional Headquarters

Regional Headquarters

HOYA HOLDINGS N.V.

HOYA HOLDINGS ASIA PACIFIC PTE LTD.

Amsterdamseweg 29, 1422 AC Uithoorn, The Netherlands

138 Cecil Street, #08-03 Cecil Court, Singapore 069538

TEL +31-297-514-356

TEL +65-6323-1151

Information Technology

Information Technology

HOYA CONBIO FRANCE EURLHOYA ELECTRONICS MALAYSIA SDN. BHD.
HOYA MICROELECTRONICS (SUZHOU) LTD.
HOYA MICROELECTRONICS TAIWAN CO., LTD.
HOYA ELECTRONICS KOREA CO., LTD.
HOYA MAGNETICS SINGAPORE PTE LTD.
HOYA GLASS DISK (THAILAND) LTD.
HOYA GLASS DISK PHILIPPINES, INC.
HOYA GLASS DISK VIETNAM LTD.
HOYA OPTO-ELECTRONICS QINGDAO LTD.
HOEV CO., LTD.
HOYA OPTICS (THAILAND) LTD.
HOYA OPTICAL TECHNOLOGY (SUZHOU) LTD.
HOYA OPTICAL (ASIA) CO., LTD.
TAIWAN NH TECHNO GLASS CORPORATIONNH TECHNO GLASS SINGAPORE PTE LTD.
NH TECHNO GLASS KOREA CORPORATION

Eye Care
HOYA LENS DEUTSCHLAND GMBH
HOYA LENS DANMARK A/SHOYA LENS U.K. LIMITED.
HOYA LENS NEDERLAND B.V.
HOYA LENS FINLAND OYHOYA LENS ITALIA S.P.A.
HOYA LENS IBERIA S.A.
HOYA LENS SWEDEN AB
HOYA LENS FRANCE S.A.S.
HOYA LENS POLAND SP. Z O.O.
HOYA LENS BELGIUM N.V.
HOYA LENS HUNGARY RT.
HOYA LENS MANUFACTURING HUNGARY PRIVATE CO.
HOYA HILL OPTICS SOUTH AFRICA (PTY) LTD.
HOYA LENS NORWAY AS
HOYA MEDICAL EUROPE GMBH
PentaxPENTAX EUROPE N.V.
PENTAX EUROPE GMBH
SISTEMAS INTEGRALES DE MEDICINA, S.A.
PENTAX NEDERLAND B.V.
PENTAX ITALIA S.R.L
PENTAX U.K. LTD.
PENTAX FRANCE S.A.S.
PENTAX SCHWEIZ AG

Equity-method affiliate

86

Asia and Oceania

North America
Regional Headquarters
HOYA HOLDINGS, INC.
101 Metro Drive, Suite 500, San Jose, CA 95110, U.S.A.
TEL +1-408-441-0400

Eye CareInformation Technology

HOYA LENS THAILAND LTD.
HOYA LENS AUSTRALIA PTY. LTD.
HOYA LENS TAIWAN LTD.
HOYA LENS (S) PTE. LTD.
HOYA LENS HONG KONG LTD.
HOYA LENS KOREA CO., LTD.
HOYA LENS GUANGZHOU LTD.
HOYA LENS PHILIPPINES, INC.
MALAYSIAN HOYA LENS SDN. BHD.
THAI HOYA LENS LTD.
THAI HOYA HOLDINGS LTD.
HOYA MEDICAL SINGAPORE PTE.LTD.
HOYA LENS SHANGHAI LTD.
HOYA LENS MANUFACTURING MALAYSIA SDN. BHD.
HOYA HEALTHCARE (SHANGHAI) CO., LTD.
HOYA LENS INDIA PRIVATE LTD.
HOYA LENS VIETNAM LTD.
FOCUS PREFERENCE SDN. BHD.

HOYA CORPORATION USA
HOYA PHOTONICS, INC.
RADIANT IMAGES, INC.
QSTREAMS NETWORKS, INC.
Eye Care
HOYA LENS CANADA, INC.
HOYA LENS OF AMERICA, INC.
EAGLE OPTICS, INC.
HOYA LENS OF CHICAGO, INC.
HOYA LENS OF NEW ORLEANS, INC.
MORGAN OPTICAL, INC.
VISION MEMBRANE TECHNOLOGIES, INC.
HOYA SURGICAL OPTICS, INC.
PentaxPENTAX OF AMERICA, INC.
PENTAX CANADA INC.
MICROLINE PENTAX INC.

PentaxPENTAX CEBU PHILIPPINES CORPORATIONPENTAX HONG KONG LTD.
PENTAX VN CO., LTD.
PENTAX (SHANGHAI) CORPORATIONPENTAX SINTAI HOLDING CO., LTD.
PENTAX SINTAI OPTICAL INSTRUMENT (SHENZHEN) CO., LTD.
PENTAX VQ CO., LTD
PENTAX BASO (GUANGZHOU) OPTOMECHATRONICS CO., LTD.
PENTAX VOICEWARE CO., LTD.
PENTAX OPTICAL COMPONENT HONG KONG LTD.
PENTAX TRADING (SHANGHAI) CO., LTD.
PENTAX MEDICAL SINGAPORE PTE LTD.
TI PENTAX HOLDING CO., LTD.

HOYA ANNUAL REPORT 2008

87

Investor Information(As of March 31, 2008)

Listing of the Company’s SharesFirst Section of the Tokyo Stock Exchange
Shares of Common Stock
Authorized: 1,250,519,400
Issued:435,017,020

Share Ownership
Ownership
Individuals,
others
18.6%

Financial
institutions
0.3%

Financial
institutions
27.7%

Trading Unit
100 shares
Shareholders
82,383

Shareholders

Foreign investors
51.9%

Principal Shareholders

Other
corporate
investors
1.8%

Individuals,
others98.2%

Number of Shares(Hundreds of shares)
283,363

Voting Rights (%)
6.55

1

Shareholder
JPMorgan Chase Bank 380055

2

Japan Trustee Services Bank, Ltd. (Trust Account)

255,679

5.91

3

The Master Trust Bank of Japan, Ltd. (Trust Account)

201,351

4.65

4State Street Bank and Trust Company

145,279

3.36

5

The Dai-ichi Mutual Life Insurance Company

115,306

2.66

6State Street Bank and Trust Company 505103

112,313

2.60

7

Deutsche Bank Trust Company Americas

106,418

2.46

8

Mamoru Yamanaka

90,1972.08

9

Nippon Life Insurance Company

74,426

1.72

10

The Chase Manhattan Bank N.A. London SL Omnibus Account73,9291.71

1,458,263

33.70

2007

2008

Total

Issuance of Stock Acquisition Rights

Share Price

Stock acquisition rights are issued as stock
options, based on Board of Directors resolutions.
Seventh Issue (Resolved by the Board of
Directors on October 29, 2007)
1. Stock acquisition rights granted: 194
2. Class and number of shares to be issued upon
exercise of stock acquisition rights: 77,600
shares of common stock
3. Paid-in amount for stock acquisition rights:
Gratis
4. Exercise value per share at exercise of stockacquisition rights: ¥4,230
5. Exercise period of stock acquisition rights:
From October 1, 2008, to September 30, 2017.
However, limits on exercise volume per period
are determined separately.

88

Other corporate investors
0.7%
Foreigninvestors
0.8%

High

Low

High

Low

January–March¥4,750¥3,810¥3,460¥2,200April–June¥4,210¥3,660July–September¥4,340¥3,640

October–December¥4,320¥3,440Transfer Agent
Mitsubishi UFJ Trust and Banking Corporation
Corporate Agency Department
7-10-11 Higashisuna, Koto-ku
Tokyo 137-8081, Japan
Tel: +81-3-5683-5111

Global Headquarters

HOYA CORPORATION
2-7-5 Naka-Ochiai, Shinjuku-ku,
Tokyo 161-8525, Japan
TEL +81-3-3952-1151

R&D Center
3-3-1 Musashino, Akishima-shi,
Tokyo 196-8510, Japan
TEL +81- 42-546-2755

Financial Headquarters

Netherlands Branch
Amsterdamseweg 29,
1422 AC Uithoorn, The Netherlands
TEL +31-297-514-356<Blanks Division>

Europe Branch
Bilton House, 54/58 Uxbridge Road,
Ealing, London, W5 2ST, U.K.
TEL +44-20-8579-6939<Vision Care Company>

Global Headquarters
Amsterdamseweg 29,
1422 AC Uithoorn, The Netherlands
TEL +31- 297-514-350

North America Headquarters
651E, Corporate Drive,
Lewisville, TX 75057, U.S.A.
TEL +1-972-221-4141

Asia Headquarters
315 Outram Road, #05-10
Tan Boon Liat Building,Singapore 169074
TEL +65-6224-2933

For additional information about this publication, contact:

Corporate Communications
2-7-5 Naka-Ochiai, Shinjuku-ku,
Tokyo 161-8525, Japan
TEL +81-3-3952-1160 FAX +81-3-3952-0726
URL http://www.hoya.co.jp/

HOYA ANNUAL REPORT 200889