its human resources and compensa- tion schemes, and the separation of research, human resources and gener- al affairs, accounting, and the infor- mation systems division into separate companies. External assessment of the Company has also improved, as illus- trated by the inclusion of the rise in its aggregate market value and other news about Daikin in various news- papers, magazines, and other media.  At the general shareholders’ meet- ing held on June 28, 2001, the Board of Directors resolved to pay cash dividends applicable to the year of ¥12.00 per share. In air conditioning operations, sales volumes grew substantially, both domestically and overseas, which helped compensate for the otherwise negative effects of the yen’s apprecia- tion—particularly against the euro— on segment sales, which increased 17% compared with the previous term, to ¥401.2 billion. Operating income surged 81%, to ¥24.5 billion. Daikin succeeded in substantially increasing sales in its domestic air conditioning operations through such efforts as the ongoing development of such unrivaled products as the commercial-use SUPER INVERTER 70 and the residential-use URURU & SARARA. Sales promotion campaigns focused on the demand for air condi- tioner replacement and increased sales to home appliance mass mer- chandisers. In commercial-use air conditioners, we rapidly boosted our market share to approximately 40%, the greatest share ever achieved in our history. We also increased our share of the residential-use air conditioning market to approximately 12%, thus ranking among the top three in the industry and closing the gap with our major competitors.  Daikin is also leading other Japa- nese manufacturers in aggressively developing its global framework by acquiring sales agents in the growing markets of Europe and Asia, including China, as well as such emerging mar- kets as India, Central America, and South America. The Company’s 1999 global tie-up agreement with Matsushita Electric Industrial Co., Ltd. (Matsushita Electric), in the air condi- tioning business will steadily solidify over the next few years. As the first step in these operations, we will begin supplying Matsushita Electric with commercial-use air conditioners in China and, in return, Matsushita Electric will supply us with residential- use air conditioners, also for the Chinese market. Through this partner- ship, we will maximize the strengths of both companies and expand sales in the increasingly competitive market of China. In chemicals, in addition to increased demand for fluoroplastics from Japan’s semiconductor market, business re- bounded in the United States in FEP for LAN cable insulation. As a result, seg- ment sales increased 17% compared with the previous term, to ¥96.2 billion, and operating income increased 33%, to ¥16.0 billion, both of which repre- sent substantial improvements in earn- ings and profit. The share of the global market held by Daikin’s chemicals busi- ness has been steadily expanding every year, and in fiscal 2001 it reached 20%, making the Company the number two player in the global industry. As other manufacturers withdraw from the market and restructure their operations, we now have a chance to compete head to head with the industry leader. Seizing this chance, we will strive to capture the number one position in the global industry by fiscal 2006 by achieving gradual growth through the accelerated development of new prod- ucts, applications, and markets and by seeking high returns through strategic investments. One of our most important projects is the construction of a manu- facturing plant in China, approval for which has been granted, and we estab- lished a new subsidiary for the plant in April 2001. In the months and years ahead, we will concentrate our managerial resources on our core businesses of air conditioning and fluorochemicals and expand them into the number one and number two businesses on the global market, respectively. FINANCIAL HIGHLIGHTS MANAGEMENT PERSPECTIVE TOPICS REVIEW OF OPERATIONS FINANCIAL SECTION CORPORATE DATA 3 ’01 ’00 ’99 ’98 ’97 ’96 ’95 59 76 95 115 143 141 170 325 349 357 347 321 323 362 Overseas Business Ratio (Consolidated basis) Overseas sales (¥ billion) Domestic sales (¥ billion) Overseas business ratio (%) 15.4 17.9 21.1 25.0 30.8 30.3 32.0 Free Cash Flow (FCF)  (¥ billion) FCF = Income before income taxes +  Depreciation and amortization –  Investments + Net working capital Consolidated basis Non-consolidated basis ’01 ’00 ’99 ’98 ’97 ’96 ’95 15 –2 –16 –2 13 15 18 20 9 –8 –5 14 17 6 An Overview of  Fiscal 2001 Operations