Governance Structure and Operations

Operation

In principle, the Board of Directors meets once a month. Prior to the meeting, the Chairperson of the Board and the President confirm the key discussion points for upcoming Board meetings and align their understanding of the agenda for the next three months to optimize the cycle for the exercise of supervisory functions.
In addition to the advance distribution of materials, Outside Directors are provided with prior briefings on important agenda items individually by the secretariat or the responsible Executive Officers and Corporate Vice Presidents. Through receiving questions and opinions in advance, efforts are made to ensure that discussions at Board meetings are focused on key issues and are of high quality.
Furthermore, information exchange and the sharing of perspectives in executive sessions contribute to enhancing the effectiveness of the Board of Directors. In addition, Informal gatherings of Directors, where participants can engage in open and candid dialogue, facilitate frank two-way discussions between execution and supervision.

Attendance

The meeting results and attendance rates for the Board of Directors and the three committees at the end of fiscal 2025 are shown in the table below.
In fiscal 2025, the attendance rate at meetings of the Board of Directors and the three committees for the five outside directors (Soichiro Sakuma, Masumi Minegishi, Takuko Sawada, Saeko Arai and Yoshihiko Kawamura) was 100%.

Note:All members of the Board of Directors are required to attend more than 80% of the meetings. To achieve this attendance rate, the number of companies they can serve as directors (officers under Japan’s Companies Act) is restricted to no more than three listed companies, in principle.

Activities of the Board of Directors and the Three Committees in Fiscal 2025

1. Board of Directors
   Fiscal 2025, the final year of the Medium-term Business Plan, was positioned as a year to solidify the foundation for sustainable growth from fiscal 2026 onward under the initiative “Turn Around 2025.” With a strong focus on improving shareholder value, the Board of Directors provided supervision and advice from a medium- to long-term perspective, incorporating an investor-oriented viewpoint. Discussions focused on strengthening business portfolio management based on ROIC and enhancing the Company’s value creation story.
   The formulation of the new Medium-term Business Plan was a central agenda item. The Board engaged in intensive discussions on financial targets, capital structure, core technologies, and the execution capability and feasibility of initiatives linked to improving gross profit margins, cost efficiency, and capital efficiency.
   Prior to formal Board meetings, directors’ roundtable meetings are held to identify key focus areas at an early stage of executive consideration. This ensures that Board discussions are concentrated on material issues. In conjunction with this, in setting the Board's agenda, efforts were made for efficient operation, such as implementing written resolutions and reports in a timely manner, and for agenda items aimed at information sharing, materials were distributed in advance so that only questions and answers were conducted on the day of the Board meeting.
2. Nominating Committee
   In fiscal 2025, based on a review of the composition and selection criteria of the Board of Directors and the three committees, the Nominating Committee formulated proposals for director appointments.
   (1) The Nominating Committee’s views in the review and the results thereof are as follows.
   <Review Approach>
   • The Board of Directors shall have an appropriate number and composition to achieve sustainable growth and increase corporate value, taking into account the Company’s medium- and long-term business issues and strategies.
   <Review Results>
   • The total number of directors shall be nine, consisting of five independent outside directors and four internal directors.
   • The selection of outside director candidates will proceed after clarifying the desired qualifications and their priorities.
   • The Chairperson of the Board shall be selected from among the independent outside directors.
   • One of the internal directors shall be a director who does not concurrently serve as an executive officer and shall be a full-time audit committee member.
   • Internal directors who concurrently serve as executive officers shall be selected taking into account the roles to be played on the Board of Directors based on management strategies and other factors.
   (2) Based on the above, the Nominating Committee discussed and confirmed the following:
   <Independent Outside Directors>
   • All five current independent outside directors will continue to be nominated as candidates for director. While maintaining the balance and diversity of knowledge, experience, and capabilities as before, the Company aims to enhance corporate value sustainably through supervision and advice from a medium- to long-term perspective.
   <Chairperson of the Board>
   • The current Chairperson continues as a candidate, as the individual fully meets the required qualifications and is expected to lead Board operations effectively toward achieving the goals of the new Medium-term Business Plan starting in fiscal 2026.
   <Directors who do not concurrently serve as Executive Officers>
   • A new candidate is selected as the current Inside Director who does not concurrently serve as an Executive Officer will retire based on the tenure criteria stipulated in the Nominating Committee regulations. The candidate is expected to contribute, by leveraging experience in leading the growth of the Company’s technologies as the executive in charge of technology, to providing specialized and effective supervision of future growth strategies and to enhancing the effectiveness of the Audit Committee as a full-time member.
   <Internal Directors who concurrently serve as Executive Officers>
   • Current Directors who concurrently serve as Executive Officers shall continue to be candidates. In addition to the President, the committee will include the Executive Officer in charge of accounting and finance and the Executive Officer in charge of the Industry Business to ensure accountability in important management decisions and contribute to effective discussions.
   
   Note that when appointing Executive Officers, the Nominating Committee received reports on the selection process and reasons for selection, and reviewed them prior to the Board of Directors’ resolution. Since the change of President in April 2022, we have consistently worked on the succession plan for the next President. We will continue to receive regular reports from the President on the Progress of the succession plan and provide supervision and advice.
3. Audit Committee
   The Audit Committee audited the legality and propriety of management decision made by directors, executive officers and corporate vice presidents confirmed the facts of improper conduct as well as violations of the law or articles of incorporation, and monitored and verified the internal control system that has been established and put into operation. It also rigorously reviewed whether an independent position was maintained in the external accounting auditor’s audit and whether a proper audit was conducted and determined selections or dismissals of Accounting Auditors.
4. Compensation Committee
   To further strengthen incentives for achieving the targets of the Medium-term Business Plan and annual budgets, the Compensation Committee has continuously conducted examinations and deliberations on the review of the executive compensation system.
   Based on these discussions, the Committee resolved to revise the executive compensation system and apply it from fiscal 2026 at its meeting held on March 26, 2026.
   In addition, in the course of the above examinations and deliberations, the treatment of TSR-linked stock bonus, which had been resolved at the Compensation Committee meeting held on April 28, 2025, was further specified, and was resolved at the Compensation Committee meeting held on March 26, 2026.
   In order to appropriately evaluate, as an incentive, the achievement status of strategic priority measures in the individual evaluation of “annual performance-linked cash bonus,” at the beginning of the fiscal year (May 15, 2025) and at the interim (November 27 of the same year), the Compensation Committee received explanations from the President & CEO regarding important issues and progress status of the strategic priority measures of each Executive Officer, and provided supervision and advice.
   After the end of the fiscal year, at the Compensation Committee meeting held on May 14, 2026, the Committee received from the President & CEO a proposal regarding the status of achievement of strategic priority initiatives for each Executive Officer and the related evaluation (with 100% as the standard, ranging from 0% to 200%).
   Following deliberation, the Committee determined the amount of annual performance-linked cash bonus for each Executive Officer, together with the “performance level portion” and the “performance target achievement portion.”

Provision of Information and Support System for Outside Directors

1. Provision of Information to Outside Directors
   The actions described in Training of Directors below are taken.
   Also, each outside director is provided with information including the market trend, IR, and crisis management.
2. Supporting System for Outside Directors
   The Audit Committee Office serves as the secretariat for the Audit Committee, while the Board of Directors Office serves as the secretariat for the Board of Directors, the Nominating Committee, and the Compensation Committee, and by having their respective staff support Outside Directors, the Company has established a system to ensure that the Board of Directors and each committee function appropriately.
   The secretariat distributes materials to outside directors in advance and provides a briefing on the agenda up to three months ahead of meetings. Additionally, the secretariat, along with the executive officers or corporate vice presidents responsible for the agenda, explains key agenda items in advance. This setup creates an environment where the Board of Directors can focus on critical issues and operate efficiently and seamlessly. The secretariat also plans, proposes, and accompanies Board members on visits to worksites as part of its information-provision duties.

Training of Directors

In accordance with the director election standards, the Nominating Committee selects candidates who possess the qualities needed to be a director. The Company assesses whether new directors require training based on their individual’s knowledge, experience, and other characteristics. If training is deemed necessary, the Company provides suitable opportunities for it.

1. For outside directors, the Company provides information about the group’s structure, business activities, finances, the medium-term business plan, its progress, and other relevant subjects. Additionally, the Company offers basic information about its businesses and corporate-level functions, as well as analyst reactions to financial results briefings.
2. For outside directors, the Company arranges visits to the development, manufacturing, sales, service, and other operations of each business unit. Executive officers, corporate vice presidents, and frontline employees provide the latest information about each business during these visits.
   
   Activities in fiscal 2025 are listed below:
   
   • Three outside directors participated in person at an internal technology presentation (Value Creation Forum) jointly held by the four business domains, received direct explanations from employees at each booth, and engaged in Q&A and opinion exchanges.
   • Three outside directors visited the Customer Engagement Center at the Tokyo site Hachioji of Konica Minolta, Inc.
   • One outside director visited Konica Minolta Business Solutions France S.A.S.
3. Inside directors are provided opportunities to attend governance training held by external institutions, and information about various seminars is given to inside and outside directors as opportunities to participate when appropriate.

Evaluation of Board of Directors Effectiveness

In 2003, the Company transitioned to a company with committees (now a company with three committees). To assess whether the corporate governance system is functioning as intended, the Company began performing self-assessments of the Board of Directors’ effectiveness in 2004. These self-assessments have been conducted annually since then to facilitate ongoing improvements.
Each year, past activities are reviewed, and self-assessments of the Board of Directors’ and the statutory three committees are carried out to ensure that the corporate governance system contributes to sustainable growth and improvements in medium- and long-term corporate value. Based on these assessments, issues that the Board of Directors needs to address in the upcoming fiscal year are identified, and measures to enhance effectiveness are planned.
After conducting an evaluation by an external organization in fiscal 2022, which was a year in which there were major turning points in the Company’s corporate governance, such as the appointment of an Independent Outside Director as Chairperson of the Board, the Board of Directors Office has taken the lead in conducting the evaluation of the effectiveness of the Board of Directors. In fiscal 2025, while confirming the status of responses to and improvements in issues identified from the previous evaluation results, issues to be addressed in fiscal 2026 were identified, and together with the direction of responses, were reported to the Board of Directors in May 2026. The evaluation results are reflected in the policy for Board of Directors operations for fiscal 2026 by the Chairperson of the Board and in the agenda items of each committee, and are used to lead to improvement actions.

For details on the effectiveness assessment of the Board of Directors, see pages 16 through 19 of the Corporate Governance Report.

• Corporate Governance Report (972KB)

Policy and Procedures for Appointing Director Candidates

Based on reviews concerning the composition, standards for selection, etc. of the Board of Directors and the three committees, the Nominating Committee raises its policy to upgrade its selections of Director candidates by performing yearly examinations from the standpoints of balance of knowledge, experience and capabilities, and diversity, and uses the following process to make selections.

<Board of Directors>
1) Confirmation of Directors who will resign due to standards for the number of years as a Director or age and expected number of new Outside Director and new Inside Director candidates.

<Outside Director Candidates>
2) To select Outside Director candidates, after the Nominating Committee confirms the selection process, the members of this committee determine the knowledge, experience and capabilities that will be required of new Outside Directors in order to enable them to be a good match with Outside Directors to be reelected.
3) The Chairperson of the Nominating Committee requests the Nominating Committee members, other Outside Directors, and the President & CEO to recommend a wide range of candidates based on their respective information. In addition, as reference information, a candidate database prepared by the secretariat, including information such as independence and concurrent positions, centered on candidates with experience in the management of global companies, is distributed to the Nominating Committee members and others.
4) The Nominating Committee takes into consideration the items listed below in order to narrow down the number of candidates, from the recommended individuals obtained through the preceding process in order to determine an order of priority.
• Selection standards for Directors
• Standard for independence of Outside Directors
• Balance of knowledge, experience and capabilities required for Outside Directors and diversity (skill matrix)
5) The Chairperson of the Nominating Committee and, if necessary, a member appointed by the Chairperson, will interview the candidates in order of candidacy, and approach them about assuming the position of Outside Director.

<Inside Director Candidates>
6) Candidates for “Internal Directors” shall be discussed between the President and the Internal Nominating Committee on the basis of the following points; proposed candidates for Directors who shall not concurrently serve as Executive Officers, and proposed candidates for Directors who shall concurrently serve as Executive Officers, once the President has shared with the Internal Nominating Committee his/her concept for the executive structure for the next fiscal year.
• Selection standards for Directors
• Roles of Directors who do and do not concurrently serve as Executive Officers
• Required skills, experience and other characteristics of Directors who do and do not concurrently serve as Executive Officers (skill matrix)
7) The Nominating Committee uses the draft proposals to examine the candidates.

The Applicable Approaches and Standards for Appointing Director Candidates

Description in the Reference Materials for the General Meeting of Shareholders (The 122th Ordinary General Meeting of Shareholders)

1. Expertise and experience expected of candidates for Directors (skills matrix)

Director Skills Matrix
In order to obtain useful advice on the Company’s management issues at the Board of Directors, the backgrounds of industry, principal management experience, and areas of expertise are organized as a skill matrix, and diversity in knowledge, experience, and abilities is taken into consideration.
With respect to sustainability skills (Note), as with risk management, these are positioned as a higher-level concept for which those responsible for management should bear responsibility, and are expected of all Directors.

(Note) Experience in management strategies that balance the sustainability of business with the fulfillment of corporate social responsibility

* “Global executive management experience” includes both actual experience at a global business and experience relating to overseas business operation.

Executive System

1. Under a mandate from the Board of Directors, executive officers make decisions about operations and then execute them. Business execution is overseen by the Board of Directors and reviewed by the Audit Committee to ensure the efficiency, adequacy, legality, and soundness of management.
2. Executive officers are appointed by the Board of Directors, which selects the President and senior executive officers from among the executive officers, and establishes a division of duties among them. The executive officers, including the President, make decisions concerning the execution of duties delegated by the Board of Directors, and execute their duties.

Selection or Dismissals of Executive Officers

1. The Board of Directors uses a fair, timely, and appropriate method to select people who have the capabilities to serve as executive officers. These individuals must be able to create new value for the Group and earn the support of internal and external stakeholders. Standards for making these judgments about capabilities are defined in “Standards for the Selection of Executive Officers.”
   Individuals must have the ability and experience for the internal and external management of the Group's business operations. Qualification standards also take into consideration knowledge about specialized fields and technologies, an individual's age when the time for renewing the appointment comes, and other items. In addition, the Board of Directors selects individuals with a strong commitment to ethics, the ability to put customers first, the ability to drive innovation, strong motivation to achieve goals, and other such characteristics.
2. To select new executive officers, candidates who have completed senior executive candidate training must pass through the first stage of the selection process, which involves submitting documents and completing an interview. Next, an assessment is performed in order to reach a highly objective and appropriate decision. This process includes input from both an external perspective and from the perspective of people at the Group who frequently interact with these candidates as part of their jobs. An evaluation conference, which consists of the President and the executive officer responsible for personnel, is held to examine the results of this process. This results in the selection of candidates to become executive officers.
3. To determine the new team of executive officers, the President selects from the list of executive officer candidates the individuals believed to be well suited to serve as executive officers. Next, a proposal for the selection of executive officers for the new fiscal year is prepared and submitted to the Board of Directors, with a list of the duties for each executive officer.
4. Prior to the submission of this proposal to the Board of Directors, the Nominating Committee performs oversight of the entire process, including a confirmation that a suitable process was used. Oversight includes receiving the proposal for the new executive officer team (including the proposed new executive officer selections from the President) and a report about the proposed duties of each executive officer.
5. The Nominating Committee considers observing the character of executive officer candidates to be an important matter and utilizes opportunities such as attending meetings of the Board of Directors and reporting to informal gatherings of directors. After receiving the proposal for the selection of executive officers mentioned above from the President, the Nominating Committee discusses the content of the proposal, creates a summary of its conclusions regarding matters such as the appropriateness of candidates and training issues, and provides these as feedback to the President.
6. The Board of Directors takes the “Standards for the Selection of Executive Officers” into full consideration when deciding whether or not to dismiss an executive officer.

Compensation Policy (Fiscal 2026)

1. Compensation system (see diagram below)

   1) For Directors (non-executive Inside Directors), in light of their role to supervise management, the portion reflecting short-term performance shall be eliminated, and their compensation shall consist of “fixed bonus” as base compensation and “stock bonus.” “Stock bonus” shall be “non-performance-linked stock bonus.” Outside Directors shall receive only “fixed bonus,” which includes compensation commensurate with their roles.

   2) Compensation for Executive Officers shall consist of “fixed bonus,” “performance-linked cash bonus for each fiscal year”, and “stock bonus.” “Stock bonus” shall consist of “performance-linked stock bonus” and “TSR-linked stock bonus.”

2. Total compensation and “fixed bonus” shall be set separately at appropriate levels by position and job value, while utilizing objective external data and evaluation data on a regular basis.
3. “Performance-linked cash bonus for each fiscal year” shall be determined based on the degree of achievement of performance targets for the relevant fiscal year and the degree of achievement of each Executive Officer’s key initiatives. The portion linked to the achievement of fiscal year performance targets shall be determined within a range of 0% to 200% of the standard amount. The targets shall be key consolidated management indicators related to performance (profit attributable to owners of the Company).

4. Stock bonus shall be as follows.

   1) “Non-performance-linked stock bonus” for Directors shall be granted in the form of the Company’s shares at the end of each fiscal year, with the aim of continuously enhancing motivation to contribute to the improvement of shareholder value and promoting the holding of the Company’s shares.

   2) “Performance-linked stock bonus” for Executive Officers shall be granted in the form of the Company’s shares within a range of 0% to 200% based on the degree of achievement of targets after the completion of the Medium-term Business Plan, with the aim of enhancing incentives for achieving the targets of the Medium-term Business Plan and promoting the holding of the Company’s shares. The medium-term performance targets shall be key consolidated financial indicators (ROE), taking into account the medium-term management policy.

   3) “TSR-linked stock bonus” for Executive Officers shall be granted in the form of the Company’s shares within a range of 0% to 200% based on the Company’s TSR relative to the growth rate of comparative indicators, with the aim of encouraging motivation to enhance shareholder value and thereby contribute to the long-term enhancement of corporate value, as well as promoting the holding of the Company’s shares. The standard number of shares for “stock bonus” is set by position in the first year of the Medium-term Business Plan.

   4) Certain portions of shares are distributed in cash on the assumption that they are exchanged for cash.

   5) Shares of the Company obtained as stock bonus shall be held in principle for one (1) year after the date of retirement from the post of each director or executive officer.

5. The ratio of “fixed bonus,” “performance-linked cash bonus for each fiscal year,” and “stock bonus” for Executive Officers shall be set at approximately 40:30:30 for the President and CEO, who is the Representative Executive Officer, and for other Executive Officers the ratio of fixed bonus shall be set higher than that for the President and CEO.
   In addition, within “stock bonus” for Executive Officers, the ratio of “performance-linked stock bonus” to “TSR-linked stock bonus” shall be set at approximately 60:40.
6. Compensation for non-residents of Japan may be handled in different ways from the above-mentioned treatment above due to legal and other circumstances.
7. If the Board of Directors must resolve a correction to financial statements after they are announced due to a material accounting error or fraud, the Compensation Committee shall consider corrections to performance-linked bonuses and limit payment or request return of the bonuses when necessary (so-called “claw back clause”).
8. The Company reviews levels, composition, and other elements of compensation in a timely and proper manner in accordance with changes in the management environment.

(Note 1)Compensation levels
The compensation levels for Directors and Executive Officers are set with the objective of securing and retaining capable personnel who will drive the Company’s growth. Appropriate levels are determined by taking into account position and job value, while utilizing objective external data and evaluation data on a regular basis.

(Note 2)Components of compensation and composition ratios

Indicators for Performance-linked Bonuses, Reasons for the Selection of These Indicators, and Method for Determining the Amount of Performance-linked Bonuses

1. Annual performance-linked cash bonus

(1) Overview (Items and Indicators)

Item	Portion according to performance level	Portion according to personal appraisal
Weight within item	70%	30%
Evaluation indicator	Net Profit	Achievement rate against target of key strategic measures
Evaluation basis	Degree of achievement of Group-wide performance targets	Evaluated by the President within a range of 0% to 200%, with 100% as the standard

Note:1. Component ratios are theoretical values based on design.
2. The President and CEO is subject only to the application of the performance-linked portion.

(2) Indicators and the reasons for the selection of these Indicators

1) The indicator for the “performance-linked portion” is the amount of profit attributable to owners of the Company (consolidated).
This indicator has been selected on the basis that it is one of the most important indicators in the Medium-term Business Plan that commenced in FY2026, that it enables the clarification of management accountability for improving profitability and capital efficiency, that it clarifies the establishment of profitability and accountability for profits in the current situation, and that it is considered to be the most straightforward indicator for presenting management results to shareholders in an easily understandable manner.

2) The “individual evaluation component” uses as indicators the degree of achievement, level of difficulty, and the degree of involvement of the President with respect to each Executive Officer’s key issues and individual targets. Accordingly, this component is evaluated from perspectives and items that differ from those of the “performance-linked component.
In particular, it is noted that measures which do not appear in financial indicators, or measures that are accompanied by a temporary deterioration in financial indicators, shall be executed in a timely and appropriate manner if they are strategically necessary for the enhancement of the Company’s medium- to long-term corporate value.

(3) Method for deternining compensation amount

1) For the performance-linked portion, the payout rate is calculated based on the Group annual budget achievement rate for the relevant indicator, and the payout amount is determined by multiplying this payout rate by the standard amount for each position.

2) For the individual evaluation portion, the payout amount is determined by multiplying the standard amount for each position by the evaluation of the degree of achievement of the important issues for each Executive Officer, as proposed by the President and CEO, within a range of 0% to 200%, with 100% as the standard.
In order to ensure objectivity and fairness in this evaluation, at the beginning of the fiscal year, the Remuneration Committee receives explanations from the President and CEO regarding the important issues and target levels for each Executive Officer, and confirms their consistency with the annual management plan outline and the Medium-term Business Plan as determined by the Board of Directors.

3) The payout amounts are deliberated and resolved by the Compensation Committee.

(Note)The relationship between the Group annual budget achievement rate and the payout rate for the performance-linked portion is as follows:

Achievement rate	Payout rate
Minimum achievement rate (*) ÷ less than 2	0%
Minimum achievement rate ÷ 2 and less than the minimum achievement rate	Minimum achievement rate − (minimum achievement rate − achievement rate) × 2
Minimum achievement rate to less than 100%	Same as the achievement rate
100% to less than 150%	100% + (achievement rate − 100%) × 2
150% or more	200%

(Note)Minimum achievement rate (*): Achievement rate at the time of public announcement (Publicly disclosed figure divided by the Group annual budget figure ÷ Group-wide annual budget)

2. Stock Bonus (Performance-linked)

(1) Overview (Items and Indicators)

Item	Performance-linked stock bonus	TSR-linked stock bonus
Weight	60%	40%
Evaluation indicator	ROE	Relative TSR
Evaluation basis	Degree of achievement against the target value for the final fiscal year of the Medium-term Business Plan	Relative TSR

(Note 1)The ratios of each component represent theoretical values in the design.

(Note 2)The calculation formulas and definitions of relative TSR, etc., are as follows:

• Relative TSR:
  The Company’s TSR during the evaluation period divided by the growth rate of TOPIX (including dividends) during the same period
• The Company’s TSR:
  (Average of the closing share price of the Company during the last three months of the final fiscal year of the evaluation period + total dividends paid during the evaluation period)
  divided by average of the closing share price of the Company during the last three months of the fiscal year preceding the start of the evaluation period
• Growth rate of TOPIX (including dividends):
  Average of TOPIX (including dividends) during the last three months of the final fiscal year of the evaluation period divided by average of TOPIX (including dividends) during the last three months of the fiscal year preceding the start of the evaluation period
• TSR Evaluation period:
  Latest three fiscal years (latest two fiscal years for the inaugural delivery only)

(2) Indicators and the reasons for the selection of these indicators

1) The indicator for the performance-linked stock bonus is ROE (Group consolidated), and the evaluation is conducted based on the degree of achievement against the target set for the final fiscal year of the Medium-term Business Plan.
ROE was selected as one of the most important indicators in the Medium-term Business Plan starting from FY2026, as it clearly demonstrates management’s responsibility for improving profitability and capital efficiency.
In addition, ROE integrally reflects multiple management factors, including profitability (profit margins), efficiency (asset turnover), and capital structure, and is therefore regarded as a metric that enables a comprehensive evaluation of the results of the Medium-term Business Plan using a single figure.

2) The indicator for the TSR-linked stock bonus is TSR, and the evaluation is conducted using relative TSR. This is because initiatives aimed at enhancing shareholder value are considered to provide executives with incentives to increase long-term corporate value.

(3) Methods for determining the amount of compensation

1) For the performance-linked stock bonus, the payout rate is calculated based on the degree of achievement of the target for the final fiscal year of the Medium-term Business Plan period. The number of shares to be delivered is determined by multiplying this payout rate by the cumulative standard points for each position over the same period, with one point equivalent to one share.

2) For the TSR-linked stock bonus, the payout rate is calculated based on relative TSR for each fiscal year. The number of shares to be delivered is determined by multiplying this payout rate by the cumulative standard points for each position for the relevant fiscal year, with one point equivalent to one share.

3) The payout rate varies within a range of 0% to 200%, depending on the degree of target achievement or relative TSR.

4) The standard points for each position are calculated by dividing the amount allocated to each position by the reference share price.

5) The reference share price is defined as the average share price during the first three months of the Medium-term Business Plan period.

6) The number of shares to be delivered as described above is deliberated and resolved by the Remuneration Committee.

(Note 1)The relationship between the degree of achievement of the target for the final fiscal year of the Medium-term Business Plan period and the payout rate under the performance-linked stock bonus is as follows:

Achievement Rate	Payout Rate
Less than 50%	0%
50% to less than 100%	100% − (100% − Achievement Rate) × 2
100% to less than 150%	100% + (Achievement Rate − 100%) × 2
150% or more	200%

(Note 2)The relationship between relative TSR and the payout rate under the TSR-linked stock bonus is as follows:

Relative TSR	Payout Rate
Less than 50%	0%
50% to less than 200%	Same as Relative TSR
200% or more	200%

(Reference)Evaluation period and timing of share delivery for share-based compensation

(Note)As a transitional measure, only for the initial introduction, the evaluation period shall be two fiscal years.

Audit Committee System and Roles

The Audit Committee is comprised of four directors (who do not hold positions as executive officers), three of whom are outside directors. The Chairperson of the Audit Committee is selected from among the outside directors. To ensure effective operation of the committee, it has established its own office (Audit Committee Office) with staff members who are independent of any sections committed to actual business operations. The Audit Committee members evaluate the legality and validity of the management decisions made by directors, executive officers and, monitor and validate internal control systems, assess the adequacy of the accounting auditors, and determine the agenda of the general meeting of shareholders regarding the appointment and dismissal of accounting auditors. In principle, a committee meeting is held before the meeting of the Board of Directors, so that the committee members can present their opinions to the meeting of the Board of Directors, if deemed appropriate.

Corporate Audit Office Systems and Role

The Company has set up the Corporate Audit Office to be responsible for the internal audit of the entire group and to perform internal audits of the Company and its subsidiaries as an organization under the direct control of the President. The Corporate Audit Office has established a dual reporting line and reports to the President and the Audit Committee, and the Chairperson of the Audit Committee reports the contents of the Audit Committee report to the Board of Directors accordingly. Using the risk assessment approach, the division evaluates these companies in terms of the reliability of their financial statements, the efficiency and effectiveness of their business operations, their legal compliance, and the protection of assets. It also conducts follow-up audits to verify what improvements have been made in response to audit findings. Additionally, major subsidiaries have their own internal audit divisions that work closely with the Corporate Audit Division of Konica Minolta Inc. to enhance the internal audit function of the entire Group.