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

Review of Fiscal 2010
At the start of fiscal 2010, Hoya faced an extremely harsh business climate. There was no sign of a letup in the economic slump, and we approached the new fiscal period with a real sense of crisis. Market demand – particularly for digital products such as semiconductors, PCs, LCD panels and the like – plunged to extremely low levels at the end of fiscal 2009, and the industry as a whole was forced to conduct extensive inventory adjustments. Hoya had little choice but to respond to this slump with aggressive measures to slim down operations. We temporarily suspended production in several business segments, and made exhaustive efforts to reduce fixed costs to a level that matched the low sales levels. By summer, the strict production cuts and inventory adjustments began to take effect, and demand began to recover rapidly. However, this rebound was more sudden than expected, and it took some time to adjust to the improved demand conditions. Thus, even though volume rebounded in the latter part of the year, unit prices remained weak, and have yet to regain the levels they held before the economic crisis. Consequently, even in the second half, we continued to face a rather difficult earnings structure.

In the Eye Care and Medical businesses, demand remained fairly solid even in the immediate wake of the "Lehman Shock". Earnings contributions from these segments remained relatively firm. Although we have been trying to accelerate business expansion by investing in growth segments, during fiscal 2010 it was necessary to place the emphasis on balanced earnings, and Hoya had to cut back investments in future growth businesses. Consequently, Hoya will need to review the roadmap for future growth, and address the associated issues during fiscal 2011.

Due to the business conditions described above, consolidated net sales for the period declined 9.0% year on year, to ¥413,524 million. Operating income rose 8.9%, to ¥64,327 million, ordinary income was down 18.7% year on year, to ¥57,805 million, but net income increased by 50.8%, to ¥37,875 million.

Although the adverse business climate caused sales to drop off, year on year, the efforts we made to improve Hoya´s cost structure have turned the Company into a leaner, more muscular organization. As a result, operating income registered year-on-year growth. Furthermore, the asset impairment losses and write-offs that Hoya booked in fiscal 2009, on the Pentax business, among others, amounted to ¥30.4 billion. Since these items disappeared from the accounts in fiscal 2010, net income grew more than 50% year on year.

Portfolio Management Aimed at Perpetuating Growth
Since Hoya was founded in 1941, as Japan´s first specialized manufacturer of optical glass products, the Company has focused its efforts on developing businesses in its area of core competence – optical technology. The Company has expanded steadily, and now operates businesses in a variety of related fields, including electronics, photonics, eye care and health care.

However, the Company´s growth has not been simply a haphazard diversification. Hoya´s management philosophy is based on careful business portfolio management. Each of the business units overseen by the Hoya Group has a specific role to play in contributing to the group´s overall growth and earnings performance. Though the characteristics of each individual business may differ, we strive to maintain an effective balance among the parts, adjusting the portfolio carefully to address changes in market needs and the conditions of the business environment. By managing its business portfolio effectively, Hoya aims to achieve sustainable growth over the long term.

About ten years ago, Hoya´s portfolio of businesses could be divided into two roughly equal halves – the information technology business and the eye care business. However, as the global market for digital electronics products expanded, the information technology business steadily increased its contributions to overall sales and profits, and it has now become the main engine of growth for the Hoya Group. Favorable market trends have supported the Company´s growth, but we have steadily enhanced our competitive edge by developing optical technology to a level that few competitors can match. This technology forms the basis for Hoya´s success in generating high profitability.

The unprecedented financial crisis which struck in fiscal 2008 triggered structural changes in many industries and consumer markets, and accelerated other global changes such as the growing importance of emerging industrialized countries. It also had major implications for the economic growth that has been driven by the global shift to digital technology.

To address these changes, Hoya is reappraising its business portfolio. In the Information Technology business, we intend to continue focusing on the optical technology that has always been Hoya´s greatest strength, seeking to maintain a competitive edge in existing businesses and thus generating a steady flow of earnings. However, we also plan to expand our focus over the next decade and seek to accelerate growth in the Company´s other business segments – eye care, health care and medical equipment. Hoya already has a long history of success in these businesses. We will seek to generate growth in industrialized countries, where the average age of the population is rising, by providing higher value-added products. At the same time, we will work to expand into markets in emerging economies.

Hoya will continue adjusting its business portfolio on the basis of long-term strategies that aim to perpetuate company growth.

Outlook for the Future
The specific direction of Hoya´s business portfolio management will be based on the trends we anticipate in our major markets. Although in the Electro-Optics field, many manufactures might appear to have suspended technological developments during fiscal 2010, there has been a great deal of technological advancement behind the scene. Hoya is also preparing to implement its advances, timing the launch of new technologies to match market needs. Meanwhile, emerging economies are taking a more prominent role in the electronics industry in every respect, from production to the final consumer markets for the products. By cooperating closely with manufacturers in these countries, Hoya intends to establish an even stronger global presence. From a long-term perspective, the expanding volume of information that is generated and demanded by today´s information technology products will make our optical technologies increasingly vital to the processing, storage and transmission of information. This trend could open up entirely new fields of business for Hoya.

In the Vision Care business, the market is steadily polarizing into two major formats – independent store channels and major eyeglass chains. We intend to refine our business model and pursue a two-channel strategy, in an effort to satisfy both of these retail customers.

The Eye City business, which operates a chain of contact lens specialty stores, is expanding steadily in Japan with the opening of new stores. However, in order to derive the maximum benefits from this chain store strategy, Hoya intends to accelerate the pace of new store openings and thereby increase market share. Our intraocular lens business, which provides artificial lenses for cataract surgery, received a boost in August 2009 when the FDA approved these lenses for sale in the US. This will allow us to move forward with a global expansion strategy. We are now on the same footing as business rivals, and we will strive to establish a competitive edge by providing distinctive products through a unique sales channel strategy.

In the two years since Hoya acquired Pentax, the business has been reorganized to achieve a better fit with Hoya´s management strategy, with Pentax operations restructured into three segments – medical endoscopes, digital cameras and other products. We expect the merits of this business integration to become steadily more apparent in the future.

The economic dislocation and confusion which followed the collapse of Lehman Brothers is gradually fading, and the global economy moving back towards normalcy. Still, major global changes are very likely to continue, and as a corporate manager, I consider it crucial to repay the trust and confidence invested in Hoya by its shareholders by anticipating and responding to the changing environment with decisive yet carefully considered actions. I believe that business conditions in fiscal 2011 will be considerably better than last year, and the challenges that each of our businesses face will become clearer. On behalf of the entire Hoya management team, I want to assure stakeholders that we will carefully consider all the risks, and try to chart a course for even greater success in the future.

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

I want to thank Hoya´s customers and shareholders for their understanding, and welcome their continuing support as we move towards a brighter future.

Hiroshi Suzuki, President & CEO
July 2010