Management

• Print

July 28, 2017

Company Name: Konica Minolta, Inc.
Representative: Shoei Yamana, President and CEO
Stock Exchange Listing: Tokyo (First Section)
Local Securities Code Number: 4902
Contact: Mami Iwamoto, General Manager, Corporate Branding Division
Tel: (81) 3-6250-2100

Konica Minolta, Inc. (hereinafter referred to as "the Company”) passed a resolution at the meeting of its Compensation Committee held on May 11, 2017, to introduce a medium-term performance-linked stock compensation system that utilizes a trust (hereinafter referred to as "System") as an incentive plan for its executive officers and directors excluding outside directors (hereinafter referred to as "Management Members"). The Company decided (*1), based on the resolution at the meeting of its Compensation Committee held today and the decision by the President and Representative Executive Officer, the details relevant to the System which covers Management Members, Group Executives and Technology Fellows (hereinafter referred to as "Executive Officers, etc."), including the total amount of shares to be acquired and the timing at which the trust concerning the System will be created, and will notify you as follows.

1. Introduction of the System

(1) The Company has formulated "SHINKA 2019", Medium Term Business Plan for the three-year period from FY2017 to FY2019. In order to fulfill this Medium Term Business Plan , the Company will introduce the System for the purpose of linking the performance targets set forth in the plan with the compensation of Executive Officers, etc.*2. The System will involve highly transparent and objective performance-linked stock compensation in that the compensation of Executive Officers, etc. will be determined according to the extent to which performance targets are fulfilled, among other factors. It is intended to help boost their motivation to improve the Company's business performance on an ongoing basis and in the medium/long run, and increase Konica Minolta Group's corporate value more than ever before.

(2) Upon introducing the System, the Company will adopt a structure called a Board Incentive Plan trust (hereinafter referred to as "BIP Trust"). Through the BIP Trust, the Company will execute the granting or payment (hereinafter referred to as "Granting, etc.") of Company shares and cash in the amount equivalent to the conversion value of Company shares (hereinafter referred to as "Company shares, etc.") to Executive Officers, etc. depending on such factors as their respective job positions and the extent to which performance targets of the medium-term business plan have been fulfilled.

(3) Compensation based on the System will consist of: "medium-term performance-linked stock compensation", which involves the Granting, etc. of Company shares, etc. to Executive Officers, etc. according to their respective job positions and the extent to which performance targets of the Medium Term Business Plan have been fulfilled; and "medium-term stock compensation”, which involves the Granting, etc. of Company shares, etc. to directors according to their respective roles and terms of office.

*1 The resolution on the introduction of the System was passed today at the meeting of the Compensation Committee, in which outside directors constitute the majority of members and an outside director serves as chairperson. Of note, the Compensation Committee conducts a fair evaluation of the appropriateness of the performance targets, the target fulfillment status, etc. and ensures transparency and objectivity in the decision-making process and outcome with respect to the executive compensation system.

*2 In conjunction with the introduction of the System, the existing stock compensation-type stock options system will be abolished, and new subscription rights to shares will no longer be granted. Compensation of the Company's directors will thus consist of basic compensation in the form of "base salary" and "medium-term stock compensation". Executive Officers, etc.'s compensation will consist of "base salary", "annual performance-linked cash compensation" and "medium-term performance-linked stock compensation". Outside directors' compensation will consist exclusively of "base salary".

2. Structure of BIP Trust

(i) The Company will have a resolution at the meeting of its Compensation Committee and a decision made by the President and Representative Executive Officer on the compensation of Executive Officers, etc., in relation to the introduction of the System.

(ii) The Company will establish stock-granting rules concerning the System at the meeting of the Compensation Committee.

(iii) The Company will contribute cash to the Trustee to the extent approved based on a resolution at the meeting of the Compensation Committee and a decision by the President and Representative Executive Officer in (i), and create a BIP Trust in which beneficiaries are Executive Officers, etc., who meet the beneficiary requirements (hereinafter referred to as "Trust").

(iv) The Trust will acquire Company shares from the stock market by using the cash contributed in (iii) as the source of financing, in accordance with the Trust administrator's instructions.

(v) Dividends of Company shares in the Trust will be paid in the same manner as other Company shares.

(vi) Voting rights for Company shares in the Trust shall not be exercised throughout the Trust period.

(vii) During the Trust period, points will be awarded to Executive Officers, etc. in accordance with the stock-granting rules depending on such factors as their respective job positions and the extent to which performance targets set forth in the Medium Term Business Plan have been fulfilled. If Executive Officers, etc. have met the beneficiary requirements, the Trust will execute the Granting, etc. of Company shares, etc. proportionate to the number of such points.

(viii) In cases where any residual shares have arisen upon the expiry of the Trust period due to the failure to fulfill the performance targets during the Trust period or for other such reasons, the Company plans to either: continue to use the Trust in the form of the System or the same type of incentive plan as the System by amending the Trust agreement and making additional contributions to the Trust; or not continue the use of the Trust, in which case such residual shares will be transferred from the Trust to the Company without charge and the Company will retire such shares by resolution of the Board of Directors.

(ix) Property remaining at the time of the termination of the Trust is slated to be vested in the Company up to the amount of the Trust money after deducting the amount of stock acquisition funds.

(Note) The Trustor may entrust additional cash to the Trust as funds for acquiring Company shares up to the amount of funds for acquiring Company shares approved based on a resolution at the meeting of its Compensation Committee and a decision by the President and Representative Executive Officer.

3. Details of the System

(1) Overview of the System

This System is a stock-based compensation system covering the three fiscal years from the fiscal year ending March 31, 2018, to the fiscal year ending March 31, 2020, corresponding to the period of the Company's Medium-Term Business Plan (hereinafter referred to as "Covered Period”), by which Company shares, etc., are granted according to the position of the Executive Officers, etc., and the extent to which performance targets, set forth in the Medium-Term Business Plan, are fulfilled. In the event that the Trust is continued as provided for in (3) b., below, respective fiscal years corresponding to the subsequent Medium-Term Business Plan will be set as the Covered Period.

(2) Eligibility for the Trust (beneficiary requirements)

Executive Officers, etc., will be granted Company shares, etc., by the Trust in the number corresponding to their points (as stated in (4) below), provided that they meet the beneficiary requirements as follows:
(i) The beneficiary assumes the position of an Executive Officer, etc., during the Covered Period.
(ii) The beneficiary has not resigned for personal reasons, been dismissed, etc. or engaged in certain wrongdoing conduct while in office.
(iii) The beneficiary meets any other requirements deemed necessary to fulfill the purpose of the System as a stock-based compensation system.

(3) Trust period

a. Initial trust period

The trust period of the Trust established based on this System shall be approximately three years from August 7, 2017 to August 31, 2020 (planned).

b. Continuation of the Trust

The Company may continue the Trust, upon the expiry of the trust period, as the same type of stock-based compensation plan as this System by amending the trust agreement and making additional contributions to the Trust; provided, however, that, upon such continuation of the Trust, the details of such stock-based compensation plan will be deliberated and decided again, with the management policies and the Medium-Term Business Plan at that point in time taken into consideration, at the meeting of its Compensation Committee.

(4) Company shares, etc., subject to Granting, etc., to Executive Officers, etc.

Company shares, etc., subject to Granting, etc., to Executive Officers, etc., shall be determined as one share of the Company per point according to the number of points calculated pursuant to the following point calculation formula. If, however, the number of Company shares held under the Trust increases or decreases due to a stock split, allotment of shares without contribution or reverse stock split, etc., the Company will adjust the number of Company shares subject to Granting, etc., per point according to the percentage of such increase or decrease of Company shares.

(Point calculation formula)

(i) Medium-term performance-linked stock compensation

The performance-linked points, that are calculated as the value where the points calculated by dividing the funds for compensation determined in advance per position by the stock price at the time the Trust acquires Company shares (hereinafter referred to as "Standard Points per Position”) is multiplied by the performance-linked coefficient (*3) according to the cumulative performance for each fiscal year during the period of Medium-Term Business Plan, shall be granted to Executive Officers, etc., who hold office on the date of the Ordinary General Meeting of Shareholders held following the end of each fiscal period during the Covered Period (*4).
With respect to Group Executives and Technology Fellows, the performance-linked points will be granted to those who hold office as of the end of each fiscal year during the Covered Period (*5).

(ii) Medium-term stock compensation

The Standard Points per Position shall be granted to directors who hold office as of the date of the Ordinary General Meeting of Shareholders held following the end of each fiscal period during the Covered Period (*4).

*3 The performance-linked coefficient shall be evaluated based on 50% of consolidated operating profit (cumulative amount) and ROE (averaged number), respectively, and the compensation according to the performance achievement ratio shall vary within the range of 0% to 150%.

*4 If an Executive Officer, etc., retires before, or takes office after, the date of the Ordinary General Meeting of Shareholders during the period of the Medium-Term Business Plan, necessary adjustment shall be made according to his/her term of office.

*5 If a Group Executive or Technology Fellow retires before, or takes office after, the end of fiscal year during the period of the Medium-Term Business Plan, necessary adjustment shall be made according to his/her term of office.

(5) Method and timing of Granting, etc., of Company shares, etc., to Executive Officers, etc.

Executive Officers, etc., who meet the beneficiary requirements shall receive the Granting, etc., of Company shares, etc., after the expiry of the Covered Period in principle based on the cumulative number of points calculated according to the item (4) above (hereinafter referred to as “Cumulative Points”). In this case, such Executive Officers, etc., shall receive the Granting, etc., of Company shares, etc., corresponding to 50% of the Cumulative Points (shares less than share unit to be rounded off) and the money equivalent to the disposal value of Company shares corresponding to the remaining Cumulative Points that are converted into cash under the Trust. Such Executive Officers, etc., who receive Company shares shall continue to hold those shares at least one year after their retirement.
If an Executive Officer, etc., passes away before the expiry of the Covered Period, a legal heir of such Executive Officer, etc., shall receive the money equivalent to the disposal value of Company shares corresponding to the Cumulative Points at that point in time after such shares are converted into cash under the Trust.
Furthermore, if an Executive Officer, etc., does not have a securities brokerage account that handles Japanese shares, such Executive Officer, etc., shall receive the money equivalent to the disposal value of Company shares corresponding to the Cumulative Points at that point in time after such shares are converted into cash under the Trust.

(6) Trust money to be contributed to the Trust and maximum number of Company shares subject to the Granting, etc., from the Trust

The trust money to be contributed to the Trust during the trust period shall be as follows :
Amount of trust money to be contributed to the Trust during the initial trust period: 1,164,537,500 yen (*6)
Furthermore, the maximum number of Company shares, etc., subject to the Granting, etc., to Executive Officers, etc., under the System during the trust period shall be the number calculated by dividing the amount of stock acquisition funds by the stock price at the time the Trust acquires Company shares (any fraction to be rounded down).

*6 Total of stock acquisition funds for the Trust during the trust period, trust fees and trust expenses

(7) Method for the Trust to acquire Company shares

The Trust shall acquire Company shares from the stock market to the extent of the amount of stock acquisition funds.

(8) Exercise of voting rights related to Company shares held under the Trust

To ensure the neutrality of the Company’s management, the voting rights of Company shares held under the Trust shall not be exercised during the trust period.

(9) Treatment of dividends related to Company shares held under the Trust

The dividends of Company shares held under the Trust will be received by the Trust and applied to trust fees and trust expenses. If residual money remains upon the closing of the Trust after dividends are applied to trust fees and expenses, such money will be donated to organizations which have no conflict of interest with the Company. If the Company continuously uses the Trust, such residual money will be used as the stock acquisition funds.

(10) Treatment of residual shares at the expiry of the trust period

If residual shares remain in the Trust at the expiry of the trust period due to underachievement of performance targets or other factors, the Trust may be continued as the same type of stock-based compensation plan as the System by amending the trust agreement and making additional contributions to the Trust. In the event the Trust is terminated at the expiry of the trust period, the Trust will transfer such residual shares to the Company without compensation, which the Company will retire by a resolution of the Board of Directors.

(For reference)

[Details of trust agreement]

(i) Trust type	Money held in trust other than individually-managed money in trust (third party benefit trust)
(ii) Purpose of trust	Giving incentives to Executive Officers, etc.
(iii) Trustor	Company
(iv) Trustee	Mitsubishi UFJ Trust and Banking Corporation (Co-trustee: The Master Trust Bank of Japan, Ltd.)
(v) Beneficiaries	Executive Officers, etc., who meet the beneficiary requirements
(vi) Trust administrator	A third party who has no conflict of interest with the Company (certified public accountant)
(vii) Date of trust agreement	August 7, 2017
(viii) Trust period	August 7, 2017 to August 31, 2020 (planned)
(ix) Commencement date of the System	August 7, 2017
(x) Exercise of voting rights	No voting rights to be exercised
(xi) Type of stocks to be acquired	Common stock of the Company
(xii) Amount of trust money	1,164,537,500 yen (including trust fees and trust expenses)
(xiii) Time period for acquiring shares	August 8, 2017 (planned) to August 31, 2017 (planned)
(xiv) Method of stock acquisition	To be acquired from stock market
(xv) Rights holder	Company
(xvi) Residual property	The residual property the Company may receive as the rights holder shall be limited to the extent of the reserve for trust expenses, etc., which is calculated by deducting stock acquisition funds from trust money.

(Note) The aforementioned planned date may be changed to another appropriate date in accordance with applicable laws and regulations, etc.

[Details of trust and stock-related administration]

(i) Trust-related administration	Mitsubishi UFJ Trust and Banking Corporation and The Master Trust Bank of Japan, Ltd. will serve as the trustees of the Trust and perform trust-related administration.
(ii) Share-related administration	Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. will perform administration related to the granting of Company shares to the beneficiaries based on the administrative service agreement.