The Next Generation of Trane Controls

1. The Next GenerationofTrane Controls Paul Ehrlich, Trane GCC John Conover, VP Sales Americas

2. TNG Vision “Start with a clean slate and develop a scalable automation architecture that will work with our customers selected technologies”

3. Agenda • Look at customer needs, competition, and technology • Look toward the future • What your office needs to do today!

4. What We Have Learned About... • Our industry • Customers • Competition • Trane • Technology • Directions for the future

5. Industry Robustness Summary • Controls market holds opportunity • no clear leader today • growing at 7.0% compound annual growth rate • Trane has opportunity to: • grow share by offering more services • grow share globally

6. Building Floor Space 25.0% 20.0% 15.0% 10.0% Trane BAS Today 5.0% 2.7% with BAS 11.4% with BAS 44.0% with BAS 0.0% 10k - 20k 1k - 5k 5k - 10k 25k -50k 50k - 100k 100k - 200k 200k - 500k Over 500k We have a very large controls market opportunity TODAY! Building Square Footage Source: Pacific Northwest National Lab/DOE

7. Today’s Market • A variety of niche and broad spectrum players meet most needs • Small buildings are an under-addressed opportunity • Customers want a single seat of operation • Vertical markets require customized solutions • Extreme simplicity is an opportunity

8. Future Market NeedsMajor Trends/Issues • Fewer on-site facilities staff due to more outsourcing • Shortage of qualified labor • Disposable economy • Homeland security • Convergence of BAS and IT systems • Expectation of interoperability/integration • Buildings with more unitary equipment

9. Value Added Services ICS Provider Trane Unit Controls + Trane System Controls Unit Controls on Trane Equipment Controls Company Maintain Strength Grow ICS Penetration Initiate Presence Tomorrow’s Opportunity

10. Major Technology Trends • Movement toward Internet standards • communications using networks • Web browser interface • internet communications (XML) • Wireless communications • Large scale component integration

11. Zone Sensor Zone Sensor Proposed Wireless Architecture PC Workstation or PDA Building Control Unit Wireless Ethernet Mesh Networking Technology Control Valve UCM UCM

12. Trane Today • Many products • Strong focus on ICS and new construction • Moderately successful in controls • Products are not highly scalable • Internet support available - But...

13. Existing Control Platforms Controller Sales (2001) - Area Shows Revenue per Platform VAV/VariTrac ZN010/510/511 ZN520/521/524 ZN517 MP501 BCU TUC TCM Voyager UCM Reliatel Relative cost / complexity Intellipak UCM AH540/541/MP580/581 MP503 TCM PCM UPCM UCP1 VAV UCP2 CH530 RTAA Tracker CCP 1 10 100 1,000 10,000 100,000 1,000,000 Loop Controller BCU Units shipped Communications Bridge Web Server

14. Where Do We Need To Go? • Develop a new Internet enabled, highly scalable architecture - TNG - “the next generation” • Increased controls focus in field offices • become even more successful in ICS • focus on existing building and services • be the Systems Integration company

15. New Product Architecture • Designed to be highly scalable • Based on a few hardware platforms • Utilize Internet communications • Wireless communications • Communicating I/O and zone sensors • Simple installation and operation

16. Rooftop Rooftop Zone Sensor Proposed Architecture Comm Link

17. AHU VAV Controller VAV Controller VAV Controller Local Display Proposed Architecture Ethernet (wired or wireless) TCP/IP XML PC or PDA Web Browser Comm Link

18. Model for the Future Controls Pro-Forma TNG Relative cost/complexity Platform 1 Platform 2 1 10 100 1,000 10,000 100,000 1,000,000 Units per year (based on 2001)

19. Future of Controls Business “People using knowledge to turn building systems into business advantages, together” Vision Current Future One organization responsible for delivering consistent products and focus to our customers Scattered development efforts and focus People Products that are difficult to sell, install, and operate Fewer products with more consistent design and operation Knowledge Windows based technologies Web based, XML technology Deliver information to customers in any manner they want to receive it

20. Future of Controls Business Vision Current Future Building Systems Success in new construction, existing building, & vertical markets when integrating to all brands of HVAC and non-HVAC equipment Success in new construction when integrating to our HVAC equipment Limited integration capability outside of our systems Integrate to systems that our customers want us to Business Advantages Product complexity drives limited use by customers Consistent products that are easy to operate Building management limited to HVAC Development and installation efficiencies Expensive to develop and install Enable comprehensive building management Together Owner direct channel Indirect sales channel No long-term customer tether Creating customers for life Price driven sales process Value driven sales process

21. Controls Business Sales Growth Opportunity 1,100 1,000 900 800 700 $ Million TNG with Distribution Changes 600 Distribution Changes Only 500 TNG Only No Product or Distribution Changes 400 300 200 2007 2002 2003 2004 2005 2006 Year

22. Value to Trane • Growth - leverage controls sales from $350 million to $ 1.0 billion in 2007 • increased sales of ICS systems • entry into small building market • entry into the existing building market • Systems integration • knowledge based services • leverage unit controls on Trane equipment • Increase our field productivity • Leverage development resources

23. View of Tomorrow Controls Product/Service Offering Marketing Sales/Fulfillment ICS Nothing Full Potential Delivered ICS “Controls Company” Current Technology Limit Building System Integration Front End Service Open Systems TNG Technology Limit Start positioning today - move to new technology soon!

24. But….. • While development of the next generation has already started -products are “a ways out” • Focus for today needs to be on how your office will get ready for these new solutions

25. Let’s Look at What’s Needed to Get Ready • GCC field advisory panel has encouraged the need for a retooling of our organization • You need to help lead this effort • Exercise to set action items for change - what needs to happen this year and next

26. Group Exercise

27. Retooling ICS • ICS will remain a core strength and a will differentiate Trane • But we need to do better!

28. Retooling Small Buildings • Buildings below 25,000 square feet are a challenge today • Why do we want to be in these buildings? • How can we be more successful in this area? • existing building focus (start small) • Global National Accounts

29. Retooling Existing Building • We need to focus on existing buildings • Incredible opportunity • Requires a different focus then new construction

30. Retooling System Integration • Need to become the system integration company • Investment in both your office and in St. Paul • New products and services coming

31. Retooling Knowledge Based Systems • Knowledge based systems are the future • Be ready to sell knowledge - not just equipment • Examples: • ICS service contracts • Tracer Summit Users Network • new programs from Global After Market

32. Retooling Trane Unit Controls • Need to work with our NES group to position Trane controls as an advantage - even when we don’t have the building • Advantage us over Carrier, York, McQuay

33. Retooling Sales • Build a focus on vertical markets - start with V-files • Learn how to call on IS managers • Develop contractors as delivered ICS partners

34. Retooling Operations • Become competent in systems integration • Be able to accurately cost out jobs • Be operationally efficient - in both new construction and existing building • Be willing to support contractors for delivered solutions