Corporate Ethics

Daikin Industries has three corporate policies: absolute credibility, enterprising management, and harmonious personal relations. In August 2002, we established Our Group Philosophy to realize these corporate philosophies through activities in every corner of the Group.

To make corporate ethics an integral part of Daikin, we have built a system that allows us to continuously monitor changes inside and outside the company, and discover and solve issues that are crucial to the entire Group. (See the section on Corporate Ethics)

At the same time, we are particularly concerned about improving systems that allow us to achieve thorough legal compliance-the foundation of corporate ethics. The entire Group is dedicated to constantly improving systems and mechanisms that allow us to keep up on all laws and regulations; ensure compliance is built into all of our regular work processes; and prevent incidences of non-compliance. (See the section on Legal Compliance)

Sound Corporate Activities Live Up to Society's Expectations

The Daikin Group's definition of corporate ethics is to ensure company-wide compliance with all that is required to contribute to sound corporate activities that meet society's expectations in a changing social environment.

In FY2003, we set up a structure for promoting corporate ethics throughout the entire Group: We established the Corporate Ethics Committee, headed by the President & COO. This committee includes an Officer in Charge of Corporate Ethics and this officer's staff, the Corporate Ethics Department. The committee is constantly monitoring the situation of both the company and society and coming up with ways that the Group can improve.

In the Corporate Ethics Department, there is a Help-line for Corporate Ethics, where employees can give opinions or receive consultation on all matters of corporate ethics. The Corporate Ethics Department has the capability to promptly deal with the situation: it takes the report or information and studies it, then discusses the matter with the relevant division to ensure that the same problem does not happen again.

In FY2006, the Daikin Group began establishment of Group-wide risk management.

Ensuring Legal Compliance As a Prerequisite for Corporate Ethics

In FY2003, we set up a system for promoting legal compliance, which includes the appointment of compliance leaders in all divisions and main group companies and the holding of regular meetings for compliance leaders. Our Handbook for Corporate Ethics contains guidelines for legal compliance. To ensure employees stick to these guidelines, divisions and group companies in Japan carry out daily triple checks and self-assessment. We also practice legal compliance audits and internal audits.

In FY2006, we put part of the sources of legal information gathered in the various divisions on the Daikin intranet, thus sharing this important information across the entire company.

As for overseas group companies, eight main group companies^* are working with us to raise corporate ethics and legal compliance by sharing information with the Corporate Ethics Department and the Legal Affairs and Intellectual Property Department of Daikin Industries. We plan to get other overseas companies, including O.Y.L. Industries BHD, which Daikin acquired in FY2006, involved in the near future and have these companies at the same level of corporate ethics and legal compliance as the eight main group companies.

*Eight main overseas group companies: Daikin Europe N.V., Daikin America, Inc., Daikin Air-Conditioning (Singapore) Pte Ltd., Daikin Industries (Thailand) Ltd., Daikin Australia Pty. Co., Ltd., Daikin Air-Conditioning (Shanghai ) Co., Ltd., Daikin (China) Investment Co., Ltd., Daikin Fluorochemicals (China) Co., Ltd.

Compliance Promotion System

Checking Systems for Legal Compliance

Education and Awareness for Officers and Employees

In FY2006, we educated employees on the Whistleblower Protection Act and issues like information security. As well, we held training for officers. We will continue to hold regular education and awareness sessions.

Main Compliance Education Conducted in Graded Training Sessions