FINANCIAL HIGHLIGHTS MANAGEMENT PERSPECTIVE TOPICS REVIEW OF OPERATIONS FINANCIAL SECTION CORPORATE DATA We will strive to raise the ratio to net sales of the products we have developed over the past five years from the current 31%, to 35% by fiscal 2006. We recognize that alliances are an indispensable tool for swiftly expanding our business and enhancing our competi- tiveness in response to the rapidly changing times. We will strive to establish competitive business operations by con- sidering alliances in such areas as new business develop- ment, technology platform enhancement, applications development, and raw materials procurement. To respond to sales expansion, our growth strategy calls for an increase in supply capacity over the next five years to 1.5 times the current level by augmenting the production capacity of existing facilities and establishing new manufac- turing plants. To help achieve this objective, in fiscal 2002 we will commence the supply of semiconductor etching agents from Formosa Daikin Advanced Chemicals Co., Ltd., a joint venture with Formosa Plastics Corporation of Taiwan, the IT equipment production nexus of the world.  To strengthen fluoroelas- tomer operations in Europe, we plan to commence fluo- roelastomer production in France in fiscal 2003 to fol- low up on Daikin Chemical Netherlands B.V.’s com- mencement of precom- pounding.  In China, we have bro- ken ground on the con- struction of a new plant at Daikin Fluorochemicals (China) Co., Ltd., which we estab- lished in Changshu, Jiangsu, in April 2001, and plan to com- mence the supply of fluoroplastics and fluorochemical products in fiscal 2003. The Jiangsu plant will supply highly cost-competitive products—made possible through the application of cutting edge production technologies—to the high growth potential markets of China and other countries in Asia. The environment surrounding the oil hydraulics business for the term under review was generally favorable as capital investment recovered, particularly in IT-related sectors, and exports to Asia increased. Overall demand for oil hydraulics equipment increased 7.2%, to ¥232.7 billion. Against this backdrop, Daikin strove to increase sales of its unique lineup of energy-conserving products, which includes inverter coil cooling units and the ECORICH series of inverter oil hydraulic systems, as well as develop new customers. As a result, we succeeded in increasing division sales and market share for the second consecutive year. 15 Overview Sales (% of net sales, ¥ billion) In fiscal 2001, sales for the Oil Hydraulics Division rose 13.6%, to ¥19.7 billion. This amount accounted for 3.7% of consolidated net sales. high-quality, reliable products to the entire world. By maintaining profitability and proactively allocating managerial resources to our fluorochemicals business, we will augment our capabilities and create new markets, and strive to achieve the number two position in the world with a 25% global market share. Oil Hydraulics By constantly devel- oping and implement- ing new technologies, Daikin will continue to conduct safe and envi- ronmentally sound operations and supply 20.3 22.3 17.0 17.4 19.7 ’97 ’98 ’99 ’00 ’01 3.7%