HOYA : CorporateGovernance_EN_20181203_rev

Corporate Governance Report

[TRANSLATION]

This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. The Company assumes no responsibility for this translation or for direct, indirect or any other forms of damages arising from the translation.

Last Update: December 3, 2018

HOYA CORPORATION

Hiroshi Suzuki, President & CEO

Contact: 03-6911-4820

Securities Code: 7741http://www.hoya.co.jp/english/index.html

The corporate governance of HOYA CORPORATION is described below.

I.

Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information

1. Basic Views

HOYA promotes management with the aim of maximizing its corporate value based on the recognition that corporate governance is a matter of utmost importance for management.

As the basis of taking a fair approach to stakeholders, we have adopted a "company with Nomination Committees, etc." structure simultaneously with the revision of the Companies Act, which enables us to better distinguish the execution and supervision of management to prevent management from being conducted based solely on in-house logic. We have also set forth in the Articles of Incorporation that the majority of Directors consist of Outside Directors, who actively supervise management by Executive Officers and provide advice in order to improve corporate value from an objective and broad perspective.

HOYA also gives Executive Officers the authority and responsibility for the execution of operations, in order to accelerate decision making and improve management efficiency.

HOYA has established HOYA Corporate Governance Guidelines at the meeting of the Board of Directors, and intends to enhance corporate governance structure and to introduce better governance systems by revising the guidelines.

The HOYA Corporate Governance Guidelines is attached at the end of this report.

[Reasons for Non-compliance with the Principles of the Corporate Governance Code]

The Company complies with all principles of the Corporate Governance Code.

[Disclosure Based on the Principles of the Corporate Governance Code]

【Principle 1-4 Cross-Shareholdings】

It is HOYA's policy not to cross-hold shares of other listed companies which is aimed for securing pro-management shareholders and this policy is stated in "HOYA Corporate Governance Guidelines". According to the policy, we do not have such shares. We dispose shares of listed or non-listed companies if meaning of holding those shares become diluted. When exercising the voting rights on shares, we will vote against to proposals which will adversely affect rational for holding the shares and/or to proposal which will adversely affect corporate value.

(HOYA Corporate Governance Guidelines, III-3)http://www.hoya.co.jp/english/csr/pdf/Governance_Guideline_E.pdf

Once a year, the board of directors review each listed share and those non-listed shares with book value of more than 25 mil. yen. The board assess rational and benefit of having these shares compared to disposing those shares. As a result of 2018 assessment, it was decided to dispose 1 out of 4 listed companies' shares and to keep 2 non-listed companies' shares which were subject to the assessment.

【Principle 1-7

Related Party Transactions】

The Regulations of the Board of Directors stipulate that the Board of Directors should discuss transactions between the company and executives, directors, and major shareholdershttp://www.hoya.co.jp/english/csr/pdf/BOD_rule_E.pdf

【Principle 2-6 Roles of Corporate Pension Funds as Asset Owners】

Hoya Group adopts defined-contribution plans for the employees respecting their autonomous decision-making in asset building. Hoya corporation provide e-learning and other education opportunities to these employees.

【Principle 3-1 Full Disclosure】

HOYA considers it important to disclose information that seems to be beneficial to stakeholders, and the company discloses such information actively. Annual activities are described in Annual Report on the web site.

http://www.hoya.co.jp/english/ar2018/index.html

(i) Management Mission and Principleshttp://www.hoya.co.jp/english/csr/philosophy.html

(ii) HOYA Corporate Governance Guidelineshttp://www.hoya.co.jp/english/csr/pdf/Governance_Guideline_E.pdf

(iii) The Compensation Committee, which consists only of Outside Directors, decides on a remuneration package for each Director or Executive Officer.

http://www.hoya.co.jp/english/csr/governance.html

(iv) The Nomination Committee, which consists only of Outside Directors, selects candidates for Directors and Executive Officers.

http://www.hoya.co.jp/english/csr/governance.html

(v) The reasons for the Nomination Committee's selection of candidates for Directors and candidates for Executive Officers serving also as Directors are explained in reference documents for the notice of a general meeting of shareholders.

http://www.hoya.co.jp/english/investor/meeting.html

【Supplementary Principle 4-1-1 Scope of delegation to management】

The Regulations of the Board of Directors stipulate that many responsibilities regarding the execution of business operations are transferred to Executive Officers. The Board of Directors discusses and makes decisions on important matters related to the direction of business management, the setting of goals and strategic direction and the rights of shareholders.

http://www.hoya.co.jp/english/csr/pdf/BOD_rule_E.pdf

【Principle 4-8 Effective Use of Independent Directors】

The Articles of Incorporate state that Outside Directors should account for equal to or more than 50% of the Board of Directors. (After the general meeting of shareholders held in June 2018, there are six Outside Directors and one internal Director (83.3% of the Board of Directors are outside Directors).http://www.hoya.co.jp/english/csr/pdf/AOI_E.pdfa

(HOYA Corporate Governance Guidelines II-2 V-1)

【Principle 4-9 Independence Standards and Qualification for Independent Directors】

HOYA has established independence standards for the Nomination Committee's selection of Independent Directors.

http://www.hoya.co.jp/english/csr/governance.html(HOYA Corporate Governance Guidelines II-3 VII-3)

【Supplementary Principle 4-11-1 Composition of Board】

The Criteria for the Selection of Directors, which are set by HOYA's Nomination Committee, stipulate that as for the overall framework of the Board of Directors, the appropriate balance among knowledge, experience, and skills, all of which are necessary to fulfill the role of the Board of Directors, and the concept of diversity are all taken into consideration. There are currently six Outside Directors, and five out of six people have experiences as corporate managers in different industries. One of them is a female director. Also, the other director is an expert on accounting and finance.

【Supplementary Principle 4-11-2 Concurrent holdings of positions by directors】

The Criteria for the Selection of Directors do not limit the number of positions that can be served concurrently by a Director. But a precondition for selection or reappointment is that the percentage of attendance in meetings of the Board of Directors should be at least 75%. As for positions served concurrently by a Director, please refer to reference documents for the notice of a general meeting of shareholders and "Matters Related to Independent Directors" in this report.

http://www.hoya.co.jp/english/csr/governance.html

【Supplementary Principle 4-11-3

Board Evaluation】

As for the operation of the Board of Directors, a questionnaire survey is conducted once a year (in March),

and the Board makes necessary improvements based on analysis and self-evaluation survey results.

(HOYA Corporate Governance Guidelines V-3)

Outline of the results of evaluation for fiscal 2017:

- Board of Directors meetings actively exchanged opinions, and indicated no issues in the effectiveness of its supervisory functions, which was confirmed by, for example, questions and opinions expressed from various angles about executive officers' proposals as well as the objective evaluation of each executive officer made by the nomination and compensation committees. During the fiscal year ended March 2018, a series of discussions regarding the composition of the Board of Directors in terms of ensuring diversity was held and a decision was made to propose a new candidate with different skill sets. Also, implementation of advancement of a structure that strengthens internal functions have been discussed. Future issues to be addressed have been confirmed as considering more specific measures in relation to succession planning, holding deeper deliberations on medium- to long-term portfolio strategy, and deepening deliberations on policy related to society and the environment.

【Supplementary Principle 4-14-2 Training Policy】

New Outside Directors receive explanations regarding the company's business and structure before taking office and subsequently continue to receive explanations of the company's business at the Board of Directors meetings, facilities tours, briefings, etc.

When there is a law revision, etc., lectures by lawyers, etc. are arranged during the Board of Directors meeting and we strive to assist them to acquire knowledge required of Directors also through provision of publications and materials regarding governance and notifications of external workshops.

(HOYA Corporate Governance Guidelines V-7)

【Principle 5-1 Policy for Constructive Dialogue with Shareholders】

HOYA shall promote various opportunities for holding dialogues with shareholders in order to comprehend the shareholders' mindset amid an ever-changing management environment.

(HOYA Corporate Governance Guidelines IV)

Regarding the dialogue with shareholders, the company's CEO, CFO and other Executive Officers also engage in direct dialogue with shareholders. (HOYA Corporate Governance Guidelines IV-1)

Regarding investor relations, the company's CEO, CFO and Executive Officer in charge of the head office are involved in the decision-making of the system and policy. IR staff belong to the same division as corporate planning, general affairs and legal affairs to strengthen cooperation. They cooperate with the financial division regarding account closing and have formed an organic collaboration.

(HOYA Corporate Governance Guidelines IV-2)

The company's CEO, CFO and COO attend quarterly financial result briefings and explain the results. In addition, the company holds business briefing sessions and facility tours as a means to enhance shareholders' understanding of the company. IR staff reports the opinions of shareholders they obtain from meetings, publications, etc. to the Executive Officers as appropriate and to the Board of Directors on a regular basis. (HOYA Corporate Governance Guidelines IV-3)

The company requires those who directly engage in dialogue with shareholders to concentrate on acquiring knowledge of insider trading restrictions.

The company carries out surveys regarding practical shareholders on a regular basis and utilizes the result for confirming the shareholder ownership structure and examining the relationship with shareholders.

2. Capital Structure

Percentage of Foreign Shareholders

Equal to or More than 30%

[Status of Major Shareholders]

Name / Company Name	Number of Shares Owned	Percentage (%)
Japan Trustee Services Bank, Ltd. (Trust Account)	20,947,988	5.49
The Master Trust Bank of Japan, Ltd. (Trust Account)	17,826,400	4.67
JP Morgan Chase Bank 380055	17,429,621	4.57
JP Morgan Chase Bank 380072	13,163,190	3.45
State Street Bank and Trust Company 505001	10,084,165	2.64
State Street Bank and Trust Company	9,310,660	2.44
Mamoru Yamanaka	9,020,424	2.36
Japan Trustee Services Bank, Ltd. (Trust Account 5)	7,739,600	2.03
State Street Bank West Client-505234	7,341,289	1.92
JP Morgan Chase Bank 385632	6,829,401	1.79

Controlling Shareholder (except for Parent Company)	―
Parent Company	Nil

Supplementary Explanation

―

3. Corporate Attributes

Listed Stock Market and Market Section	Tokyo Stock Exchange First Section
Fiscal Year-End	March
Type of Business	Precision Instruments
Number of Employees (consolidated) as of the End of the Previous Fiscal Year	Equal to or More than 1000
Sales (consolidated) as of the End of the Previous Fiscal Year	From ¥100 billion to less than ¥1 trillion
Number of Consolidated Subsidiaries as of the End of the Previous Fiscal Year	From 100 to less than 300

• 4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder ―

• 5. Other Special Circumstances which may have Material Impact on Corporate Governance ―

II.

Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management

1. Organizational Composition and Operation

Organization Form

Company with Nomination Committees, etc.

[Directors]

Maximum Number of Directors Stipulated in Articles of Incorporation	10
Term of Office Stipulated in Articles of Incorporation	1 year
Chairperson of the Board	President
Number of Directors	7

[Outside Directors]

Number of Outside Directors	6
Number of Independent Directors	6

Outside Directors' Relationship with the Company (1)

Name

Attribute

Relationship with the Company*