Briefing Summary of the Analyst / Investor Meeting for the Consolidated Financial
Results for the 2nd Quarter : Three Months ended September 30, 2009
Tokyo, October 30, 2009
Note: This memo is posted for reference purposes for the convenience of those who
were unable to attend the meeting and is not a verbatim record of all statements madeat the meeting. Please be aware that it has been compiled in a concise form at the
judgment of the Company’s Corporate Communications Group. Please also refer tothe cautionary notes on the final page.
Quarterly Financial Highlights by Mr. Ema, CFO<Consolidated financial results for the second quarter (July to September)>•

The interim dividend was 30 yen per share, the same amount as the interim period of theprevious year. The payout ratio was 91.4%. The regional holding company in the Netherlands
paid dividends of 124.0 billion yen to the HOYA Corporation in Japan at the end of June. As aresult, HOYA has ample funds for dividends. Almost all profits for the interim period will be
returned to shareholders.

•

In the notes shown on page 6 of the Quarterly Report, the amount of the effect of foreignexchange translation of overseas consolidated subsidiaries and the rate of increase or decreasein foreign exchange rates are indicated in terms of the US dollar, Euro and Thai baht. In thesecond quarter under review, the yen appreciated 13.3% against the US dollar, 16.6% against
the euro, and 13.0% against the Thai baht on a year-on-year basis. With the appreciation of theyen, net sales fell by 8.3 billion yen from a year earlier, operating income declined by 2.0
billion yen, ordinary income dropped by 2.0 billion yen, and quarterly net income decreased by
1.7 billion yen.

•

Net sales were significantly adversely affected by the euro. Income declined due to the effect of
the Thai baht. Production capacity is concentrated with manufacturing subsidiaries in Asia. The
income of the manufacturing subsidiaries was significant and had an impact.

•

On a consolidated basis, net sales declined 16.8%, of which 6.5% or 8,295 million yen was
attributable to the effect of foreign exchange rates. Excluding the effect of foreign exchange
rates, net sales fell 10.3% on an actual business activity basis. Net sales dropped 8.4% in theElectro-Optics (EO) division and 0.3% in the Vision Care (VC) division, rose 0.7% in the
Health Care (HC) division, and declined 1.7% in the Pentax division. The EO divisionaccounted for most of the decline in net sales. Digital-related businesses were adversely
affected after the Lehman shock.

•

On a consolidated basis, operating income declined 9.2% from a year earlier. Operating income
decreased 9.8% or 2.0 billion yen due to the effect of foreign exchange rates, but rose 0.5% or
0.1 billion yen on an actual business activity basis. Operating income fell 24.3% or 5.0 billion
yen in the EO division, but rose 3.2% or 0.6 billion yen in the VC division, 2.7% or 550 million
1yen in the HC division and 18.8% or 3.8 billion yen in the Pentax division. The Pentax showeda significant improvement from the operating loss it posted a year earlier.
•

Please look at the segment information on page 8. In the past, the EO division showed thehighest profit ratio. Given the impact of the slump in digital-related businesses, however, theprofit ratio of the Eye Care was higher than that of the EO. The Pentax moved into the black. In
the Pentax division, an asset impairment loss of 28.0 billion yen was recognized at the end of
March this year. As a result, without the cost of 1.1 billion yen that should originally have beenrecorded for the quarter under review, the overall cost was lower. The Pentax showed a profit ofaround 70 million yen, however, even with the above cost of 1.1 billion yen, and returned to theblack, albeit only just.

•With respect to the growth rate by product (page 13), almost all businesses showed a decline.
The year-on-year growth rate posted a double-digit drop because it is compared to the actual
results before the Lehman shock.

•

Conversely, compared to the immediately preceding quarter, a bottom was reached in theJanuary to March period. The first quarter showed double-digit improvement from the January
to March period, and the second quarter under review also indicated double-digit recovery fromthe first quarter. However, mask blanks and LCD photomasks remained at the same level as thefirst quarter, or showed a slight decline. MD (Memory Disk) indicated a recovery of about 70%
from the previous fourth quarter in the first quarter, and an approximately 60% recovery fromthe first quarter in the second quarter. MD is currently in full production. The volume of MD
increased, but its unit prices dropped. MD recovered to only about 70% of net sales at its peak,
due to a fall in selling prices and the effect of the appreciation of the yen.

Segment Overview by Mr. Suzuki, CEO<Mask Blanks/ Photomasks for Use in Semiconductors>•

In the semiconductor industry, consumables seem to be making a fairly good recovery but theequipment-related business still has some way to go with HOYA falling somewhere in the
middle. Even if there is a recovery of volume, the mask industry will not improve unless the
new designs and nodes start moving. For the time being, the market for masks is difficult.
HOYA has an 80% share of the market in mask blanks, but with the market shrinking, there isan overall drop on sales of 20% with one third due to the exchange rates, one third due to thedecline in unit prices and one third due to the aggravation of product mix. This situation willprobably continue for the time being. It is difficult to imagine any major expansion of the mask
market in the future. Since it is thought that the number of designs will decrease due toconsolidation among manufacturers, there is no sense of an increase for masks. There is finallysome startup in mass production of 45 nm but the hurdles are still high for the 32 nm. No matter
which manufacturer, there are no so many installments of high NA liquid immersion steppers
and without double exposure, it is not possible to make holes on chip. I believe that without
capital investment, the ever-shrinking chip will come out using double exposure, before going2

to 32 nm. I also believe that there is a connection with the demand for masks but unless moving
to the new node, there will be no uplift in mask prices and things will be tough.
<Photomasks used for LCD>•

As for LCDs, I believe that the situation is favorable to China. Since every manufacturer seems
to be going to China, the actual work of manufacturing the panels will probably also be moving
to China. As far as panel production goes, we are seeing trends that are different from those of
the past.

<Glass Memory Disks (MD) for HDD>•

Since about the last week of August, production has been running at full. Since September, alack of capacity has caused some inconvenience to customers.

•

The brakes were suddenly applied after the Lehman shock, but the subsequent acceleration was
also sudden. Viewed from the perspective of the whole year, I am not sure that results will
exceed those of last year due to the big fall in production in the first half-term. The Company istrying to retrieve in the second half-term what was lost in the first half of the year. At the
moment, both substrates and media are operating at full capacity.

•

Since it seems that we will fall short in terms of quantities in the second half of next year, there
is a plan to build another factory.

•

Unit prices are falling, in particular, for media. Since there has been a decline of 35-40% on
unit price alone, I believe it will take time before a return to the previous state in terms of sales
and earnings.

•

There is a lack of production capacity in media. Since there does not seem to be much
elbowroom in the overall market and there will soon be a shortage of substrates and media, I
believe that prices will stabilize somewhat. For 2.5 inch disks, when memory capacity shifts to
320GB and I believe there will be a recovery in unit prices so the future is somewhat bright.

<Eyeglass Lenses>•

From a macro perspective, the situation is not all that bad but in Japan it is not good. As ever,
the market in Japan is shrinking. The unit price factor was big in the past but now it seems that
there is also contraction on a volume basis. The market is contracting by about 8%.

•

For various reasons, business performance in the United States was not good in the 2nd quarterbut on a local currency basis, there has been growth in the overseas markets including Europe
and Southeast Asia.

•

Considering the stated intention to sacrifice profitability for growth, the profit ratio is climbing
even as sales are sluggish, and the upshot is a situation where VC profit ratio is overtaking EO.
Nevertheless, there is a sense that the profit ratio for this term improved by about one point for
inventory-related reasons. Again, I would like to adopt a strategy of reinforcing growth.

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Segment Overview by Mr. Hamada, COO<Digital Cameras and Optical Lenses etc.>•

Since the crash last year, inventory adjustment has been ongoing with all manufacturers curbing
production. Stores have only recovered to about 80% in a year-on-year comparison but orders
have been coming in since the summer and it seems that market conditions are recovering.

•Compact cameras will probably finish at 95-96% compared to the previous year and SLR at
99%, close to 100% in a year-on-year comparison in terms of volume. Volume seems to be
recovering but the unit price is falling. This also has an impact on raw materials. HOYA opticalmaterials and optical lenses have also recovered to the levels of the preceding year in terms ofvolume but since unit prices have fallen by 20-30%, sales have decreased by 20-30% comparedto the previous financial year.

•

From now on, it depends on how much is sold at Christmas season. Many of our customers in
optical lenses said they are not sure about the outlook and there is a sense of caution aboutplacing orders. The peak for optical lenses is from October to December with the start of the
New Year being quiet. Now is the time to proceed with care.

•

How much is sold in the stores is the key. There is a small recovery in North America while
Japan is so-so, and Europe seems to be a little weak. According to the chain stores, customers
are down by 20%.

•

We manufacture the plastic lenses used in Blu-ray. In the spring of this year orders were
flooding in but since the products for Christmas have already been manufactured and shipped,
things are a little calmer now.

•

In camera business, there is less of a burden on several fronts thanks to last year’s restructuring
and as a result of narrowing the focus to channels, regions and countries where we are strong,
there has been considerable improvement but we still do not have our heads above water in the
2nd quarter. We are working hard to get to the surface and take in some air (turn to black) in the
3rd quarter.

•

Volumes for the PENTAX K-7 midrange camera that was released in July are according to plan.
Since the product is priced at ¥110,000-¥130,000, the results will not go beyond expectations.

•

Orders for the K-x, a camera that is available in a choice of 100 colors, have been extremely
high. Since it has not been on the market long, we have yet to receive the numerical results.

<Contact Lenses>•

In monetary terms, the market seems to have dropped by about 5%. There have been cases ofcustomers switching one-day disposable contact lenses for lenses that can be used for two
weeks or a month. At HOYA positive growth continues and we would like to see double-digit
annual growth. There is also steady growth in the market share.

<Intraocular Lenses (IOL)>•

Growth in the market has been flat or little declined. A year-on-year comparison shows positive4

growth for HOYA.
•

Since entering the US market six months ago, we have received high marks from
ophthalmologists, and the sense of expectation is high with respect to HOYA as an optics
manufacturer and further evolution of optical technology through the merger with Pentax.

•

We have moved the headquarters for the business to the United States and we have picked an
American as a head of the division. It seems that this is something that ophthalmologists inNorth America appreciate. We are aiming for double-digit growth in the future.

<Medical Endoscopes>•

Overseas accounts for 95% of sales. Europe and North America are about fifty-fifty so theexchange rate has a great impact on the business.

•

On a local currency basis, a year-on-year comparison shows positive growth for the units andthe scopes for gastrointestinal (stomach and colon) endoscopes in both Europe and North
America. The growth rate is higher in Europe.

•

The United States is in the middle of revamping its healthcare system and the impact is some
psychological restraint on buying. Large hospitals that depend on the budget system have afreeze on buying. Outpatient centers for colon examination established by groups of medicalcolleagues are operated privately and as such they are sensitive to business trends. There is a
wait-and-see attitude of making decisions after seeing how the Obama reforms and theeconomy develop. Nevertheless, consumption of scopes is favorable since these are tools ineveryday use.

Questions and answers
Q： Actual operating income is 4.0 billion yen higher than the 14.7 billion yen that was expected at
the time of the financial results announcement for the first quarter. Tell us which products havecontributed to this result.
A：(Ema, CFO)The MD substrate has contributed significantly to this result.
Q：Can you give us an outlook for the third quarter?
A：(Ema, CFO) Not yet, because the financial results for the second half will depend on what sales
are like during the Christmas selling season.
(Suzuki, CEO)During the second quarter, sales were not as brisk in July, and began to rise fromthe latter part of August. Given this, sales are not expected to increase sharply in the third
quarter, but are expected to rise from the second quarter. I think the problem will be the fourth
quarter, but I do not expect that sales will decline sharply in the fourth quarter.
Q： I am a little shocked because the forecast of sales of mask blanks is pessimistic. It appears that
exposure equipment makers have received numerous orders. I asked a mask inspection
equipment maker, who told me that the sales volume of advanced masks had increased5considerably. As a result, I expected good news from HOYA. I am a little concerned about thefact that I consider that your competitors have increased their share. What is your reaction to
this?
A：(Suzuki, CEO) In terms of advanced products, awareness increased, but there was no boom in theactual business. As of now, in advanced product development, 32nm and 3Xnm are in sights.
These in a red zone (there is no solution to produce) in the past in terms of technology changed
to yellow. It means it has reached the stage where they may be produced, but they are not at thestage of commercialization yet. We compete with other makers in the 32nm and 22nm nodes, andthere are therefore no effects on profitable business. Both the 32nm and the 22nm will take moretime. It will take one to two years to determine the next standards for blanks. I think that some of
the blanks of the maker you mentioned will be used for 32nm. But I think that most of blanks to
be used for 32nm will be the blanks of HOYA. It will take more time for the blanks to have asignificant effect on business.
Q：Can you give us a forecast of capital investment and depreciation expenses for the fiscal year
under review? If they increase, what will be the contributing factors? What are the projected
capital investment and depreciation expenses for the next year?
A：(Ema, CFO)I previously advised that capital investment would amount to 25.0 billion yen, but I
now expect that capital investment will increase by approximately 3.0 billion yen to around 28.0
billion yen. An increase of 3.0 billion yen is attributable to eyeglass lens manufacturing facilities
and investment in new business with an allied party. Depreciation expenses stand at around 35.0
billion yen, which has not changed from last time. As to figures for the coming term, I have nodata I can provide because the annual plan is yet to be developed.
Q：Will capital investment for MD be made in the next term?
A：(Suzuki, CEO) Capital investment for MD will be made next year on an inspection basis. It will
therefore be reflected in next year’s figures.
Q：With regard to photomasks used for semiconductors, I see that no new facilities or equipment
have been purchased recently. What is your schedule for the future?
A：(Suzuki, CEO) Facilities and equipment for 32nm and 22nm were purchased last year and are
currently in the start-up process. Consequently, I believe that we are included in the advanced
group for semiconductor masks.
Q：Are HOYA’s LCD photomasks benefiting from the boom in liquid crystal capital investment in
China?
A：(Suzuki, CEO) We may be receiving certain benefits, however I believe that the facilities andequipment will become those for mass production. As a result, the market for masks will not be
as large. I rather think that if production increases in China, the market capacity will certainly
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be exceeded. I am concerned about this. A rise in capital investment in China may be favorable
for HOYA, however if it causes a problem to industries, the mask industry will be also affected.
Q：I understand that HOYA took various measures to win back market share for LCD photomasks.
What were the effects?
A：(Suzuki, CEO) I think that the measures we took have had an impact. With the start of G10, theentire market has expanded. Our competitor has only enjoyed the expanded portion. As to theremaining portion, I believe that our share has increased. The share of HOYA in the entire market
has declined, but I think that our non-commitment to G10 was a good decision.
Q：For how long did the price of MD decline? Is my recollection that the price hit the bottom in thesecond quarter correct? If the plants are added, will depreciation expenses become a factor tosqueeze profits?
A：(Suzuki, CEO)The price declined from the end of last year to the beginning of this year, and has
continued to hit the bottom since then. Now that the price has fallen, it will not rise unlesstechnologies are improved. As a result, the price is continuing to crawl the bottom. I believethat the shift to the next technologies will take place in the latter part of December, and I
therefore expect that the price will recover in the fourth quarter. I believe that capital investment
will amount to more than 10.0 billion yen, but it will not cause a heavy burden on a net basis
because the other depreciation expenses have decreased.
Q：Will another plant be constructed for both substrate and media? When will the production
capacity be increased next year?
A：(Suzuki, CEO)Another plant will be constructed for substrate only. The peak of the production
capacity will be around this time next year. Even if a plan for new plant begins to be developed
now, the plant will not be ready by this time next year. We will therefore use the vacant space ofthe existing plants next year, and make do. The new plant will operate normally the year after
next.
Q：Do you mean that there is room to increase the volume by using the vacant space of the existing
plants?
A：(Suzuki, CEO) I believe that the space can accommodate next year’s portion, since I expect thatthe demand volume will increase by less than 18% to 20%. Given partial replacement of the 3.5inch with the 2.5 inch and an increase in the 2.5 inch for laptop PC, 18% is assumed.
Q：Did sales of endoscopes on a local currency basis increase from a year earlier?
A：(Hamada, COO)Sales of endoscopes rose in Europe, and remained roughly flat or dropped
slightly in North America.

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Q：Has the effect of the healthcare system reform in the U.S. been felt yet? If there is progress in thereform, will capital investment be reduced? Or will demand for endoscopes rise due to anincrease in demand for examinations?
A：(Hamada, COO) The effect began to be felt from around this January onward. It appears thatpeople are psychologically unwilling to buy.
(Suzuki, CEO) I think the healthcare system reform is favorable for endoscopes. If the existing
policy is carried out, a budget will be prepared for what is preventive and for early discovery.
As a result, it appears that the healthcare system reform is considered favorable for endoscopes
in general.
Q：I would like to confirm your approach to M&A. I heard that, in the past, Mr. Suzuki said that
expenditure would be a maximum of around 500 billion yen, given a good deal, and Mr. Hamada
recently mentioned a figure of around 100 billion yen. I think it will depend on whether or not thedeal is good. If it is a good deal, will you conduct M&A by increasing borrowings? Or will you
conduct M&A within the limit of the available cash?
A：(Suzuki, CEO) Even if the Company merged or acquired a good company at a cost of 500 billion
yen, the Company would not collapse. In this sense, I think I said that we could do it at a cost ofaround 500 billion yen. I do not know what finance will be provided at the time, and whether itwill be an acquisition or a merger. I was speaking hypothetically.
(Hamada, COO) I was asked whether there could be a deal as large as the Pentax deal. I repliedthat such a deal may exist. It appears that the amount of that deal was therefore reported in anarticle.
(Suzuki, CEO) I don’t think that a company engaging in the eyeglass lens business would be as
high as 100 billion yen. However, a medical company worth several tens of billions of yen would
easily be priced at 100 billion yen on the present market. If that amount of money is not on hand,nothing meaningful can be done if there is a desire to do something in the medical area. I think
this is a recent approach to valuation in the market.
Q：Can you give me the current operating income ratio for endoscopes?
A：(Suzuki, CEO)I cannot provide a specific figure. Basically, endoscopes are selling well, and they
are better than before in terms of earnings and structure. However, endoscopes are very
susceptible to foreign exchange rates. The overall cost of endoscopes is determined in yen, butalmost all the sales are derived from overseas. As a result, sales of endoscopes on a US dollar or
euro basis are affected by foreign exchange rates. Nonetheless, some profits have been earned
from endoscopes, so please take into account the fact that endoscopes have improved in terms ofstructure. I think that the creation of a structure that is not vulnerable to foreign exchange rates
will be a task in the future.
Q：You said that the mask blanks business is still experiencing difficulties. However, I believe there is8

a possibility that sales of mask blanks will show a double-digit increase in the first half of next
year. Orders received for devices and equipment are currently increasing. I therefore believe thatthe plant will begin to operate about a half year later, reflecting the orders. Are actual sales ofmask blanks recorded earlier or later than when sales of manufacturing equipment arerecorded?
A：(Suzuki, CEO) In general, sales of mask blanks are recorded earlier. Photomasks are required forequipment makers to conduct inspections. Sales of equipment are recorded when the inspectionof the equipment is completed. On the other hand, photomasks are sold and their sales arerecorded between the process of manufacturing the equipment and conducting inspections. As aresult, I believe that the recording of sales of photomasks is earlier in general, by around threemonths.
Q：How do you see the stock price and valuation? How are they viewed internally?
A：(Suzuki, CEO) The current stock price is lower than the price quoted last year when the
Company’s results were poor, so it does not appear entirely linked to the Company’s results.
Regardless of whether the current market is good or bad, I believe that the current market
capitalization of the Company is low, at around 750 billion yen. I think that the EVITDA ratioof 9 is somewhat low. Unless these figures become a little higher, I will personally not besatisfied.
Certain statements contained in this report constitute forward-looking statements
regarding the company’s future performance and environment of the industry inwhich the company is involved. Forward-looking statements are based on the
judgment of the company and corporate group obtained based on information
obtainable at the time the statements are made and they also contain risks anduncertainties. The company does not guarantee the completeness or accuracy of thecontent. Consequently, you are advised to refrain from making investment judgments
relying entirely on these forecasts. Actual performance and the industry environment
may differ materially from those expressed by the forward-looking statements for anumber of reasons. You are requested to make final decisions regarding investment,
etc., on your own. Please be aware that we cannot take responsibility for the outcomeof investments.

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