(Presentation by Masanori Togawa, President & CEO)

I would like to thank you for taking time out of your busy schedule

to attend this briefing on the strategic management plan

FUSION20.

I would now like to speak about the management policy for the

latter half of three years and the main points of our management

plan.

1

First, allow me to explain the points once again concerning

FUSION.

Daikin aims for sustainable development with management that is

unique from other companies such as the balancing of short-term

profitability and long-term growth.

In FUSION, we express our goals five years in the future as the

direction for development of the Group, establish Group strategies

and execution themes for achieving them, and strive toward them

by clearly stating quantitative targets three years in the future.

Moreover, once two years have passed, we once again clarify the

Group strategies, execution themes, and quantitative targets for

the final fiscal year.

2

Daikin introduced “FUSION” in 1996, and, excluding the time of the

Lehman Shock, we have attained our established targets,

increased financial results, and linked these efforts to improving

corporate worth. Through this, I believe that we have met many of

the expectations from stakeholders and earned their trust.

3

Next I would like to discuss the basic strategy of FUSION20 once again.

For this plan, we began fiscal year 2016 by setting our goals for fiscal

year 2020 at net sales of 3 trillion yen and operating income margin of

12% along with quantitative targets for fiscal year 2018, which is the mid-

term year, at net sales of 2 trillion 500 billion yen and operating income of

270 billion yen.

As a basic strategy, we have worked toward further growth and

development by the dual aspects of thoroughly strengthening existing

domains in the main businesses of Air Conditioning, Chemicals, and

Filter while expanding into new domains by challenging new fields.

4

In evaluating this past two-year period, we performed as needed to

assuredly achieve our goals for FUSION20.

In our main businesses, we further raised competitiveness by

enhancing our sales and service capabilities, expanding sales of

high value-added products, and promoting total cost reductions.

Moreover, despite a demanding business environment, which

included a sharp rise in prices for raw materials, we achieved

record highs for the fifth consecutive term.

We also implemented active investments for future growth. Various

measures were taken as needed in a timely fashion ahead of other

companies. These include increasing production capacity and

introducing the latest in production engineering, mainly in North

America and Asia, aggressively executing M&A in important

strategic businesses such as Applied and Filter, and significantly

improving technological and product capabilities with the

Technology and Innovation Center as the core.

5

The special feature of FUSION is the ability to thoroughly execute

according to the planned strategy with an unwavering focus on

achieving quantitative targets while at the same time promoting a

flexible structure in management that anticipates changes in the

management environment and market trends as they occur and

reviews key strategies in a timely manner.

In this formulation of measures for the latter-half three years plan this

time, I believe there is no need to make significant changes

concerning our basic policy raised at the beginning of “expanding

business by the dual aspects of strengthening our main businesses

while expanding business domains and converting the business

structure.” Together with making active investments necessary for

future growth and development, we will continue to implement our

Group strategies.

However, the business environment surrounding the Daikin Group is

changing at a faster rate than expected, and I would like to take

these changes as opportunities and incorporate them into the plan

for the latter half of three years.

6

With the changing times, new technologies such as IoT/AI are

rapidly evolving, practical applications are advancing, and

business development is accelerating and expanding.

Additionally, with the Paris Agreement coming into effect and the

revision of the Montreal Protocol (Kigali Amendment),

environmental regulations, such as for reduction of greenhouse

gas emissions and gradual reduction of HFC production and

consumption, are also being further strengthened.

Also the development of the “Fourth Industrial Revolution” that has

been brought about by IoT/AI is significantly impacting economic

activities including manufacturing, sales, and consumption as well

as people’s lifestyles. Market and customer needs are shifting

“from providing goods to providing experiences” and “from

ownership to use” and the creation of significant added value has

changed from products in of themselves to the various services

produced from data.

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Against this backdrop, the latter-half three years plan this time firmly adheres

to the basic policy of expanding business by the dual aspects of strengthening

main businesses while expanding business domains and converting the

business structure. At the same time, we intend to lead the industry by

focusing especially on the following two points.

The first point is that we will significantly convert the revenue structure in the

air conditioning business to an configuration that not only performs units sales

of energy-saving equipment but also earns revenue throughout the entire

value chain. The advance of IoT/AI technologies has enabled the low-cost

development of infrastructure that analyses accumulated data. Leveraging

these technologies, we will promote air conditioning systematization and

networking and provide a variety of services that include energy-saving

proposals for the entire building, design and engineering, and a wide range of

services extending from servicing and maintenance to failure prediction. In

this way, we create new customer value.

The second point is for us to strengthen our environment-leading initiatives by

utilizing our position as the only manufacturer providing both air conditioning

equipment and refrigerant to promote conversion to R32 and development of

new refrigerants and equipment for even lower GWP. By further refining our

expertise in energy-saving technologies and contributing to the realization of a

low-carbon society, we aim to solve social issues and expand business.

8

In a three-year period from now, we will conduct growth

investments amounting to 600 billion yen for capital investments

and research and development (investment plan: 360 billion yen;

R&D: 220 billion yen). Investments for M&A will continue to be

aggressively implemented as part of our business strategy but

because this area is currently under review it has been excluded

from the investment plan at this time.

In addition to increasing production capacity, strengthening product

development, and enhancing the sales and after sales service

systems, we will work to strengthen business competitiveness by

such activities as accelerating the AC solutions business that

utilize IoT/AI, building a digital factory, strengthening and improving

environmental technologies to comply with tighter environmental

regulations, acquiring advanced technologies through open

innovation, and hiring and developing IT-related personnel.

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Based on these factors, we established quantitative targets for fiscal

year 2020 of 2 trillion 900 billion yen in net sales, 348 billion yen in

operating income, and 12% in operating income margin.

However, we have not abandoned our goal for net sales of 3 trillion

yen which I mentioned at the beginning of formulation of FUSION20.

In addition to our focus on execution and achievement of Group

strategy themes, I would like us to challenge the goal of 3 trillion yen

in net sales by further developing business expansion themes.

For operating income margin, we will continue by achieving 12%

operating income margin while executing growth investments and

striving in the future with an eye on the appropriate level as a truly

global and excellent company.

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