About Konica Minolta

Giving Shape to Ideas

January 1, 2006

2006 New Year Message from the President, Fumio Iwai
In Pursuit of Continual Innovation

Happy New Year!

Last year, the US economy was on the upswing, and the Asian economy, spearheaded by China, was showing a high rate of growth: in Europe, however, economic stagnation was evident, mainly due to weak internal demand. It had been feared that Japan's domestic economy would be adversely affected by the steep rise in the price of crude oil and other commodities, but, thanks to an increase in corporate revenues and a mild resurgence in consumer spending, the economy showed an upward trend. Despite predictions that the global economy will show steady growth this year, the situation by no means warrants optimism.

The Konica Minolta Group was formed in 2003, and will celebrate its third anniversary this year. Until fiscal 2004, we directed our energies towards establishing our IT and human resources systems and other aspects of our business infrastructure: on the whole, things went according to plan. Since fiscal 2005, we have focused on strengthening our corporate group force and have pursued selection and concentration, fostering new businesses, and expanding our business through alliances, mergers and acquisitions.

On the other hand, the business environment surrounding our Group is undergoing radical changes. Price competition has become even more savage, especially in photo imaging industry such as cameras and color film, while the color film market itself has been shrinking much faster than anticipated. Foreseeing that this trend is likely to speed up, we have dramatically accelerated the structural reforms we had initially planned, and decided to work towards an extensive scaling-down of our photo-imaging operation, reducing its relative size within the Group as a whole. We have also decided to accelerate the shifting of our business resources towards growth areas.

Due to the foreseeable expenses involved in the above structural reforms, our net profit for fiscal 2005 is, unfortunately, likely to show a negative figure. However, unifying the whole Konica Minolta Group force, we are confident of achieving a dramatic recovery in our revenues in fiscal 2006.

The market surrounding us is changing dramatically, driven by changes in technology, and in the priorities and lifestyles of people. In this upheaval, it is vital that we, as a company, should avoid complacency to keep our eyes on the future, and pursue continual innovation through planning and fostering of the new businesses and essential technologies.

Our Group has its own track-and-field team, which has already won several times in the All-Japan Inter-Business Organization Ekiden relay race (known as the New Year Ekiden). I believe that this success owes to the high targets our team has set itself, and the positive way it has taken on the challenge of self-transformation, both as a team and as individual players. As a business, we shall draw inspiration from the way our track-and-field team has fought so hard against stiff competition. To increase our prowess as a business group, we must forge ahead proactively with our reforms, undaunted by the speed at which the market is changing.

We will, from now on, be concentrating our business resources on industry-oriented sectors, such as the core business technologies field, the strategic optical device field, and the growth expected medical imaging field. In other words, the Konica Minolta Group will restructure its businesses, aiming for growth, greater stability, and increased corporate value. Your continued support and encouragement are appreciated more than ever.

In closing, I would like to offer my sincere wishes for your continued health and prosperity in 2006.

Fumio Iwai, President and CEO
Konica Minolta Holdings, Inc.

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