Kansai Financial Report 2011

2011
Corporate Report
Year Ended March 31, 2011
Profile
Established in 1918, Kansai Paint Co., Ltd. has grown into Japans largest paint manufacturer as well as one of the countrys most progressive businesses. Today, the company enjoys a well-established position as one of the worlds leading paint manufacturers. The various products provided by the Kansai Paint and its Group companies are highly valued around the world, by customers not only in Japan, but in Europe, the United States, and Asian countries such as China, and India, playing important roles in the protection and beautification of all types of products and merchandise. Some of our paints and coatings even instill the products they coat with special functionality. Our products are receiving high praise and earning a reputation for exceptional reliability in a wide range of fields. The fact that we hold a large share of the automotive coating market and that our products are used by many automobile manufacturers contributes to the good reputation we enjoy. We also continue to put unwavering effort into products for all types of items requiring painting or coating, including industrial products, residential housing, office buildings, and steel structures such as ships, bridges and plants. Kansai Paint is much more than a paint manufacturer that simply sells its products through its joint ventures and affiliated companies. Throughout the world, Kansai Paint utilizes the achievements and knowledge earned through research and development efforts, and transforms these into technical services that the company is able to provide its customers together with the companys outstanding products and services.
Five-Year Summary of Selected Financial Data

Years ended March 31, 2011, 2010, 2009, 2008 and 2007
Consolidated Basis
Millions of yen Thousands of U.S. dollars (Note 1)
2011 For the year: Net sales Operating income Income before income taxes Net income At year-end: Total assets Owners equity Per share amounts (in yen and U.S. dollars): Net income 236,985 21,102 23,375 12,675
2010 222,401 20,505 22,401 11,831
2009 229,989 13,424 16,602 10,786
2008 256,586 23,756 26,397 13,755
2007 231,214 22,090 24,287 13,267
2011 $ 2,850,090 253,782 281,118 152,435
271,244 167,195
270,373 161,230
240,666 145,730
282,884 156,832
299,299 164,131
$ 3,262,105 2,010,764
47.73
44.56
40.61
51.53
48.98
$ 0.57
For convenience only, U.S. dollar amounts in this report have been translated from Japanese yen at the rate of 83.15 to U.S.$1.00, the exchange rate at March 31, 2011. Owners equity comprises total shareholders equity and total accumulated other comprehensive income. Net income per share is computed based on the weighted average number of shares outstanding.
Net sales
(Millions of yen)
Operating income
(Millions of yen)
Income before income taxes

(Millions of yen)
256,586
250,000
26,397 22,401 23,375
Contents
200,000
231,214
229,989
236,985 222,401
25,000
23,756 22,090 20,505 21,102
25,000
24,287
20,000
20,000
Five-Year Summary of Selected Financial Data ............................................. 1 A Message from the President .................................................................... 2 Management Philosophy and Vision ........................................................... 4 Board of Directors ..................................................................................... 6 Business Review ALESCO at a Glance .................................................................. 8 Business Overview by Segment ................................................. 10 Research and Development Operations .................................... 12 New Products .......................................................................... 14 Environmental Activities Policies on Environmental Conservation ................................... 16 Environmental Management .................................................... 17 ALES ECO PLAN 2010 .............................................................. 18 ALES ECO PLAN 2012 Settlement ............................................. 20 Management of Chemical Substances ..................................... 21 Environmental Conservation Activities ...................................... 22 Development of Environmental Technologies and Products / Green Procurement ............................................................... 24 Social Activities Treatment of Employees .......................................................... 26 Occupational Safety and Health ............................................... 28 Consumer Protection ............................................................... 29 Social Action Programs ............................................................ 30 Financial Section ...................................................................................... 32 Directory ................................................................................................. 55
16,602
150,000 15,000
13,424
15,000
100,000
10,000
10,000
50,000
5,000
5,000
2007
2008
2009
2010
2011
2007
2008
2009
2010
2011
2007
2008
2009
2010
2011
Net income
(Millions of yen) 14,000 12,000 10,000 8,000
Total assets
(Millions of yen)
Owners equity
(Millions of yen)
13,267
13,755 12,675 11,831 10,786
300,000 250,000 200,000 150,000
299,299 282,884 270,373 271,244 240,666
200,000
164,131
150,000
156,832
161,230 167,195 145,730
100,000
6,000 4,000 2,000 100,000 50,000 50,000
2007
2008
2009
2010
2011
2007
2008
2009
2010
2011
2007
2008
2009
2010
2011
Kansai Paint Co., Ltd.
Corporate Report 2011
A Message from the President
have increased, but in the latter half of the term the price hike in raw materials combined with the continuing strong value of the yen has impacted our results, as has the Great East Japan Earthquake. Despite these impacts, we were able to post gains in both net sales and profit on a consolidated basis.
our management foundation to meet the needs of globalization, we are planning to improve management efficiency by increasing collaboration between our overseas and domestic businesses. 2. Strengthen Profitability in Domestic Business By acting based upon what the market is indicating and developing products that offer a high degree of added value, we are looking to expand our market share. Through optimizing our business organization we will become more cost competitive and this in turn will lead to stronger profit performance.
Outlook for the Fiscal Year Ending March 2012

Looking to the future and an economic forecast, growth in developing nations, especially those in Asia, is expected to continue, but there are concerns that issues such as the rising cost of raw materials and exchange rate fluctuations, etc. may impact our profitability. Moreover, the Great East Japan Earthquake has delivered a huge impact on the domestic and overseas economy over a considerable area and we believe that the long-term, serious effects of this disaster will be felt through difficult economic times ahead. Under these circumstances, we will develop our business activities in line with the management strategies of the Group as stated below, but for the time being, our first priority is to contribute to the recovery effort following the Great East Japan Earthquake. As for the outlook for this term (fiscal year 2011), we have set targets as follows: net sales of 270,000 million (approx. US$3,247 million), operating income of 20,000 million (approx. US$241 million) and a net income of 14,000 million (approx. US$168 million) on a consolidated basis.
In Closing
Kansai Paint and its Group companies, working in the spirit of profit and fairness, are entering a new stage in global business activities. To that end, we will build our global manufacturing and sales system and develop our business to meet the needs of customers in every region. By increasing the level of collaboration and working towards improving our business performance, we will continue on the road to company growth. We sincerely hope this corporate report has provided useful information pertaining to the activities of Kansai Paint and its Group companies.
To all of our shareholders, here at Kansai Paint and its Group companies, we take the concept of contributing to society by providing products and services that satisfy our customers as our fundamental business philosophy. The coating business, the core business of the Kansai Paint Group, is supported by our customers in a wide range of fields, including various industrial products centering on automobiles, buildings, structures, ships and others. The very foundation of the existence of the Kansai Paint Group is the concept of continuously working to improve our level of customer satisfaction, and through these efforts, we are working to increase the value of our stock, strengthen our operational foundations and contribute widely to society.
Overview of the Fiscal Year Ended March 2011

Detailed figures for the consolidated fiscal year (fiscal year 2010 ended on March 31, 2011) are included in the latter half of this corporate report. To summarize, we achieved consolidated net sales of 236,985 million (approx. US$2,850 million, a year-over-year increase of approx. 6.6%), consoli-
dated operating income of 21,102 million (approx. US$254 million, a year-over-year increase of approx. 2.9%), and consolidated net income of 12,675 million (approx. US$152 million, a year-over-year increase of approx. 7.1%). Furthermore, for the term under review, annual dividends were 10 per share. Looking at the global economy for the term in review, a gradual recovery is continuing as the economic-stimulus packages implemented by each country reap results. In the Asian region, domestic demand, particularly in India and China continues to grow. In Europe and North America, there are high levels of unemployment and unease about the financial system, but a gradual recovery is also taking hold in these regions. On the other hand, political unrest in the Middle East and North Africa has triggered a steep rise in the price of crude oil and so inflation concerns have come to the fore. The domestic Japanese economy continues its gradual recovery following the results of a broad range of government policies but at the end of the term, the impact of the Great East Japan Earthquake posed enormous challenges for economic activities. Amidst these economic conditions, with regard to the consolidated business results of the Kansai Paint Group, sales in India and the Asian region
Management Strategies
Our current three-year mid-term business plan was launched in fiscal year 2010 and the points below indicate important policy areas as we continue to develop our business activities. 1. Promotion of Globalization Our overseas businesses continue to grow apace and to take our business results to another level, with special focus on Asia and developing nations, where the prospects for growth are most positive. As we plan to reinforce the way our business is structured, we continue to advance in developing businesses in new territories and fields, areas that can make a significant contribution to our business performance. Furthermore, as we strive to reinforce
Yuzo Kawamori President, Representative Director
Management Philosophy and Vision

1. To further build company credibility with the public and to contribute to society by providing products and services that achieve customer satisfaction. 2. To build on our knowledge and strive for technological innovations in order to improve the companys performance. 3. To harness the collective efforts of all individuals in order to maximize company returns.
The Kansai Paint concept of corporate social responsibility

Building on a foundation of sustained growth through sound business activities, we are working to realize our corporate social responsibilities with a strong sense of awareness of compliance and risk management, and through product creation and activities that emphasize environmental preservation.
Corporate Mission
(Established January 1967)
Kansai Paint Stakeholders
Global Environment
Employees Customers
Management philosophy
Our corporate mission is to contribute to society by providing eco-friendly and value-added coating materials and services that satisfy our customers. To realize new innovations in coating materials, we have defined our philosophy so that our employees are eager to undertake new challenges, and so that we can combine our wisdom and knowledge to create future products. We aim to use our products and services to make continuous contributions to society.
Vision
Synchronizing business and environmental conservation, the company promotes its worldwide activities by developing high quality, high performance, and low-cost coating products with new functionality, and aims to be the leading, most trusted company in the world. Kansai Paint Co., Ltd. and its Group companies have defined basic activity guidelines based on our corporate mission.
Internal Controls Risk Management Disclosure of Information
Industrial Associations
Business Connections
Sound Business Activities
Contributions to Society
Shareholders and Investors
Kansai Paint Group
Environmental Preservation
Local Societies
Compliance
Basic activity guidelines (Established January 2001)

1. We shall conduct all phases of our business operations while adhering to high ethical standards, will comply with laws and social norms, and will engage in fair and transparent business activities to win the trust of societies throughout the world. 2. We shall respect the cultures of each country and region, observe local customs for better coexistence with such societies, and will use our business operations to contribute to the development of these societies. 3. We shall actively and voluntarily get involved in environmental conservation while we manufacture and provide eco-friendly products. 4. We shall develop and provide products and services based on the principle of customer first, with the goal of satisfying our customers. 5. We shall respect each employees individuality and create a workplace environment that nurtures the spirits of challenge and teamwork. 6. We shall respond to the expectations of our customers, employees, and shareholders by sustaining the continuous growth of our global business operations.
Compliance promotion
Kansai Paint strives to comply with laws and regulations, and to fulfill the companys social responsibilities. To that end, the company has set forth guidelines by defining a Code of Ethics, a Code of Conduct, and a Code of Behavior so that it can carry out appropriate business operations based on the corporate spirit of Profit and Fairness. We have also installed a Corporate Governance Committee, which is headed by the President of Kansai Paint, in order to make all employees of Kansai Paint and our Group companies fully aware of our ethical standards. We offer a wide variety of compliance activities, including educational training for all levels of employees, from new hires through to company directors, installing hotlines, and disseminating information through company bulletins. In the event that an issue of non-compliance occurs, this issue will immediately be brought to the attention of the relevant departments through notification and discussion. Accurate information shall be disclosed and corrective measures applied. During fiscal 2010, one of our affiliated companies had a compliance issue with regard to the labeling displayed on a product and they responded by implementing rapid corrective measures as well as conducting a review of their internal corporate rules, in order to ensure that the issue could not reoccur in perpetuity.
Compliance Promotion, Management Systems
Auditors President
Corporate Governance Committee Management Headquarters Legal Department Review Office
Compliance Promotion Committee Risk Management Investigation Committee Internal Control Promotion Committee Information Management Committee
Corporate governance organization (As of June 2011)

This internal control organization assures healthy business administration and audits.
Appointments/ Dismissals
Corporate Governance Organization

General Shareholders Meeting
Appointments/Dismissals
Board of Directors
Audits Appointments/Audits
Risk management
Management Committee
External Auditor Board of Auditors

Coordination
President
Internal Audits
Auditor
Financial Audits
Review Office
Executive Officers Company Departments and Affiliate Companies
Corporate Governance Committee*
* Corporate Governance Committee: The President serves as chairman, and the committee members are directors from each company division. The committee oversees matters such as internal control functions, compliance, risk management, and information management.
The Corporate Governance Committee led by the President was established with the purpose of proactively taking measures against critical risks that may affect company operations. Furthermore, the Risk Management Guidelines and the Risk Management Manual were put together in order to describe actions to be taken against risks that could be foreseen. Additionally, the Action Manual was prepared to counteract risks closely related to our operations and regardless of whether said risk is located in Japan or overseas, the company needs a system to facilitate rapid access to information related to every type of risk and to implement appropriate countermeasures based
on an accurate grasp of the situation. The company ensures that the operations of the risk management organization are well controlled and maintained. In fiscal 2010, as with previous years, we have remained aware of the effect of natural disasters such as earthquakes, etc. both in Japan and overseas, as well as maintaining a grasp of political unrest overseas, thanks to our internal corporate communication network. We will also consider the preparation of a business continuity plan (BCP) in order to quickly respond to risks, so that we can minimize the risks to our customers.
5
Board of Directors
Business Review ew w
President
Yuzo Kawamori
Executive Vice President

Koichi Imada
08
ALESCO at a Glance
Directors
Mitsuhiro Fukuda Hiroshi Ishino Shigeru Nakamura Masanobu Ota Hiroshi Sakamoto Koichi Imada
Executive Vice President
10
Business Overview by Segment
12
Research an
Yuzo Kawamori
President
Corporate Auditors
Saburo Takizawa Hiroshi Suwa Mineo Imamura Yoko Miyazaki
(as of June 30, 2011) 6

Kansai Paint Co., Ltd. Corporate Report 2011 Kansai Paint Co., Ltd. Corporate Report 2011
Business Review
ALESCO at a Glance
Automotive Coatings
Industrial Coatings
Decorative Coatings
Marine and Protective Coatings
42%
Product Sales Ratio Product Sales Ratio
29%
Product Sales Ratio
20%
Product Sales Ratio
9%
Main Products and Services

Automotive coatings are classified as coatings for new cars used by automobile manufacturers and as automotive refinish paints used in auto body shops. Automotive coatings for new cars are paints applied by automobile manufacturers and paints applied at auto parts factories, using automatic application lines with high temperature curable paints. Automotive refinish paints are intended for use in body shops for vehicles damaged in accidents, etc.

Industrial coatings are used with a wide range of industrial products, including construction vehicles, industrial machines, agricultural equipment, home electronics, beverage cans, pre-coated metals and various types of building materials. For this area, different types of coating performance, coating methods and application conditions are required for various types of industrial products. In order to meet these needs, we are providing an exceptionally wide and diverse range of paints, coatings and services.

Decorative coatings include coatings to protect structures such as residential houses and buildings from deterioration and coatings used to enhance the beauty of structures. These coatings are classified as exterior coatings or interior coatings, depending on where they are used, and are also classified according to the type of application coatings for new structures and coatings for repairs. These coatings are used in close proximity to the human living environment, so recently there has been a growing demand for eco-friendly products in this area.

This area encompasses marine coatings used with marine structures in order to provide long-term protection from corrosion for steel structures and protective coatings for structures on land. Marine structures include ships, offshore structures and marine containers, while structures on land include bridges, tanks, and plants. Coatings are available for new structures and for maintenance applications.
Business Review
Business Overview by Segment
Japan
In the area of automotive OEM coatings, we have been putting our efforts into developing new technologies such as the Waterborne 3-Wet Coating System, which gives a high-quality external appearance and actively works to reduce emissions of CO2, as well as our clear top coat with improved scratch resistance. We are striving to open up new markets through these new technologies. In the second half of the term under review, the subsidy system for buyers who purchase an eco car came to an end and this impacted the number of vehicles being manufactured but despite this we still managed to record an increase in sales. In the auto refinishing paint field, we have bolstered our range of environmentally friendly coatings as well as reinforcing our color-matching online system and striving to expand our sales and as a result we managed to increase our sales for the term under review. In the field of industrial coatings, as demand recovers supported by strong exports for construction machinery, our coatings for beverage cans were in demand due to the intensely hot summer and as a result we recorded an increase in sales. In the area of decorative coatings, the slump in new housing constructions and capital investment in the private sector continues, so as a consequence we have been actively developing orders centered on repainting and recoating existing structures and as a result we were able to record an increase in sales.
In the area of marine and protective coatings, we have striven to expand sales in ship repair, namely anti-fouling paint for the vessels hull and functional coatings for repairs, but due to the slump in the new ship construction market, our sales for the term under review decreased. In the field of protective coatings, in order to receive orders for bridge repairs we have worked on promoting our high value-added products but both public and private investment in these structures continues to fall, so as a consequence we registered a decrease in sales for the term under review. As a result, our sales in Japan totaled 146,808 million, an increase of 2.3% on the previous term.
Asia
In the automotive coatings field, rising demand from China coupled with a large-scale increase in the number of automobiles manufactured in Thailand and Indonesia, etc. has led to a growth in sales. In the industrial coatings field, we have been able to increase sales, centered on construction machinery, in China and Thailand. As a result, our sales in Asia totaled 40,169 million, an increase of 18.1% on the previous term.
Europe
Customer manufacturing in the area of industrial coatings continues its steady progress and consequently our sales in Turkey have shown some growth. As a result, our sales in Europe totaled 9,100 million, an increase of 6.2% on the previous term.
Other Business
Sales for other business totaled 496 million, a decrease of 10.8% from the previous term.
India
In the field of automotive coatings, new manufacturing plants owned by domestic automakers as well as Japanese manufacturers have moved into full production and due to this expansion in production, our sales have risen accordingly. Furthermore, with the expansion of the Indian economy centered on internal demand, we have been positive in developing sales and consequently we have seen an increase in our sales in the field of decorative coatings. As a result, our sales in India totaled 40,409 million, an increase of 12.8% on the previous term.
10 Kansai Paint Co., Ltd. Corporate Report 2011
11
Business Review
Research and Development Operations
With 5 research institutes and 1 research center, the Kansai Paint Group, through coordination with the technological departments of the Group companies, is aiming for effective, broad-based research activities that will enable the Company to respond to what the market needs in a more timely fashion. Through our focus on global development and by strengthening coordination between all companies in the Kansai Paint Group, we are also working to promote technological development in order to meet the needs and standards of countries around the world, as well as fostering human resources capable of working on a global scale. During the consolidated term under review, the total R&D expenditure of the Kansai Paint Group amounted to 5,582 million, and a total of 561 people have been involved in R&D activities in the Kansai Paint Group as a whole. The following is an overview of the companys R&D activities by business segment. In our basic research, we strive to accumulate fundamental technologies that are useful for coatings and the development of new business potential. Our fundamental technologies focus on polymer synthesis, new cross-linking reactions, pigment dispersion, surface and interface control, rheology control, and biotechnologies able to contribute to the improvement of the environment, etc. Thus we are aiming for the creation of a new foundation for coating technology that can act as a springboard towards the next stage of technology. In the area of fundamental analysis and evaluation, we are working to establish new analytical technologies to contribute to the development of products based on more precise technological foundations, regarding the phenomena observed in the film formation stage and the performance of films, an area where establishing evaluative technologies is very difficult. Furthermore, through these technologies, our shared plan for each of the companies in the Group is to
place particular focus on our services such as analysis and consulting related to quality, safety and the effect on environment of our products for our customers both at home and overseas, and we are promoting the establishment of reliable, global operation systems. In the area of color design, in the automotive coatings field, we have developed and proposed advanced color groups for Japanese automobile manufacturers through research and analysis of the latest color trends. Looking overseas, we undertook a survey of automotive color trends at motor shows as well as researching automobile color trends in Asian countries. In regard to decorative and industrial coatings, we undertook a survey and analysis of design style trends for detached houses and this information was utilized to create new color proposals for construction materials and design proposals for building materials. In the field of color application technology, we moved forward with our technological development into the color formation and color stability of water-based coatings. Moreover, in the field of color science, we continued our research into the feasibility of a custom color matching process for trucks using a computer color matching system for metallic coatings and we plan to improve the efficiency of our color matching processes not only for exterior colors, but also for components. In regard to coatings and coating system development, we are developing eco-friendly technologies in order to contribute to a sustainable society on a global scale, with particular effort being put into research and development to create paints and coatings that are sensitive to the global environment, specifically products that reduce the amount of greenhouse gases and volatile organic compounds. Moreover, we are working in the research and development of eco-friendly technologies that encompass the entire
lifecycle of paint and coating products, from raw materials, manufacturing of the coatings, application, drying and disposal. In the area of automotive coatings, in addition to continuing our development of high value added coatings that offer high quality, durable, scratch resistant finishes, etc., we have also been working to expand and diversify the use of our highly-evaluated Waterborne 3-Wet Coating System, manufactured using eco-friendly technologies that are both process- and energy-efficient. In the area of industrial coatings, decorative coatings, and protective coatings, we are promoting the conversion to water-based coatings in these fields as well as striving to research and develop an environmentally-appropriate coating system that is capable of reducing the number of coats required as well as replacing traditional soluble coatings with advanced high solid coatings. On the other hand, we are also working to research and commercialize coating products with high functions, such as heat shielding, anti-bacterial functions as well as multiple colors and patterns. In addition, we are working to develop the evaluation technologies and evaluation equipment required
for the development of these coatings, which will facilitate efficient product development as well as increasing the perfection rate for finished products. We have been promoting the development of new technologies and new products in the fields of electronics and communications, the environment and biotechnology. In the field of electronics and communications, we have been working on the development of photo-resist materials that will reduce the burden on the environment through fewer processes and reduced waste, etc. and we plan to expand the uses of our laser direct imaging photo-resist and screen printing resist materials, etc. In the environmental and biotechnological fields, we are also promoting the development of a wastewater processing system for waterborne coatings and the development and improvement of supporting carriers for a more efficient sewage processing system. Furthermore, during the term under review, expenditure on research and development by segment amounted to 5,181 million for Japan, 217 million for India and 183 million for Europe.
13
Business Review
New Products
Automotive Coatings: Promoting Environmental Sensitivity -Measures to Reduce Volatile Organic Compounds (VOC) from Bumper Coatings
Our activities to reduce the amount of VOC and CO2 in the automobile body, through our use of water-based coatings as well as our developments with the waterborne 3-Wet Coating System, are growing favorably (according to our own business performance data). Furthermore, it is expected to reduce the amount of VOC in bumpers, a large-sized resin exterior component affixed to the automobile. With regard to our current approach to reducing the amount of VOC contained in the coating for automobile bumpers (made from polypropylene material), we are developing a high solidification approach to the process of applying the primer, base and clear coats (by reducing the amount of solvent contained in solvent-based coatings) which gives superior workability as well as moving forward with our water-based coatings which are advantageous with regard to VOC, as shown on Fig. 1. Fig. 2 illustrates film composition on resin materials and the functions that are required of these films. Looking ahead, in order to improve the fuel efficiency of automobiles there is a need to reduce the weight of these vehicles and it is thought that resin materials are a suitable way to move forward with this. Also from the perspective of reducing VOC, we believe it will become increasingly important to develop water-based coatings for use with resin materials.
Composition and Current Status of Anti-VOC Coatings (Fig.1)
800 Estimated amount of VOC (g/L)
Solvent-based
Solvent-based
Solvent-based 600 High-solid type High-solid type 400 High-solid type
Formerly Combination of solvent-based
Currently Combination of high-solid types
200 Water-based
Water-based
Under development Combination of water-based
Primer
Base Coat
Clear Coat
Film composition on resin materials and their required functions (Fig.2) Composition of Coating Film Required Functions Weather resistance Physical properties External appearance Design characteristics Physical properties Adhesiveness Concealment Lightweight Strength, etc.
Clear Coat Base Coat Primer Materials
Environmental Activities
16
Policies on Environmental Conservation
ALES COOL: High-Performance Solar Radiation-Reflective Coating

We have recently developed ALES COOL, a highperformance solar radiation-reflective coating that can reduce the heat energy that is generated on a sun-exposed roof. ALES COOL forms a coating film that can efficiently reflect sunbeams containing solar (infrared) rays. In terms of its heat performance, ALES COOL benefits from a raw material that is effective at reflecting infrared rays which is contained in both the topcoat and the undercoat and this creates a double-blocking effect that delivers spectacular improvements in heat performance. By applying a coating of ALES COOL on the roof, the rooftop temperature during the hottest part of the summer can results in temperatures cooler by some 10 to 20 degrees centigrade. This can lead to reductions of up to 40% in terms of the cost of electricity consumption in order to keep indoor temperatures at a comfortable level, and energy conservation simulations* have shown that this reduction in electricity consumption also translates into a reduction of as much as 40% in CO2 emissions. Furthermore, ALES COOL has also been certified in the Environmental Technology Verification project 2010 (ETV) as a technical measure to counteract heat island phenomenon. (Verification No. 051-1048~1053)
*Simulation using SMASH software developed by the Institute for Building Environment and Energy Conservation
Spectral Reflectivity Graph (Measurements taken using Coffee Brown color paint)
100 90
17 20
Environmental Management
Regular Roof Paint
Degree of Reflection (%)
80 70 60 50 40 30 20 10 0 300
Visible Rays
Infrared Range
18 21
ALES ECO PLAN 2010
ALES ECO PLAN 2012 Settlement Management of Chemical Substances
500
700
900
1100
1300
1500
1700
1900
2100
2300 2500
Wavelength (nm)
22 24
Environmental Conservation Activities
Double-blocking effect of two layers of coating film on sunlight (infrared rays)
Sunlight (infrared rays)
Development of Environmental Technologies and Products / Green Procurement
Topcoat
Undercoat
Roof
15
Policies on Environmental Conservation

Corporate Policies on Environmental Conservation
1. To supply products after full consideration of their potential impacts on people and the environment. 2. To undertake proactive countermeasures to cope with the potential effects of products on people and the environment. 3. To cooperate with internal and external organizations to raise awareness concerning the environment, safety, and health. 4. To disclose and provide information related to the environment, safety, and health.
Environmental Management
Audit by Top Management, RC Committee

All committees report the status of their activities, and their results once a year individually to top management including the President in his capacity as the Chairman of the RC Committee. These committees then ask senior management for their confirmation of these reports and for instructions regarding further activities to assure the efficiency and effectiveness of overall operations throughout the company, taking the production, technical and sales divisions as one body. During a top-level diagnosis of fiscal 2010, the RC Committee, now chaired by President Kawamori, reported on the activities of each committee in the first year of our 13th mid-term business plan as well as the current status of our overseas quality assurance and chemical substance control programs. Discussions were also held in regard to the ALES ECO PLAN 2012, the next stage of our RC activity plan, with the following points identified.
Environmental & Product Safety Committee

We have been able to achieve almost all of the goals set out in the ALES ECO PLAN 2010. The goal of reducing the amount of hazardous substances in our finished products has been carried over to the ALES ECO PLAN 2012. Moreover, we will contribute to the preservation of the global environment through moving forward with developing our products and technologies to reduce the burden they place on the environment, which accurately meet the needs of our customers, as well as conforming with legal regulations both overseas and in Japan.
Basic Policies
1. To develop new technologies and products with a focus on the maintenance and promotion of environmental friendliness, and the protection of natural resources. 2. To communicate fully with customers, and promote the wider use of eco-friendly products. 3. To proactively prevent the occurrence of environmental, safety, and health issues related to customer use of our products. 4. To promote green procurement and the purchase of green products. 5. To disclose environmental, safety, and health information regarding our products.
6. To ensure a sound environment, safety and health, and reduced solvent emissions in our business operations. 7. To reduce waste and effluent, and promote recycling and resource recovery. 8. To reduce energy use and carbon dioxide emissions. 9. To educate our employees and affiliated companies regarding environmental, safety, and health issues, as well as to promote communication with our stakeholders. 10. To issue environmental and social reports.
User- and Customer-Related Environmental Safety Committee

The User- and Customer-Related Environmental Safety Committee promotes companywide activities to formulate and establish internal company systems and rules that will allow us to respond appropriately to the enforcement and revisions of various environment-related laws and regulations in Japan and abroad so that we may properly and accurately provide products to the market which meet customer needs.
Action Policies
Operational Policy
In order to achieve our goals concerning the protection of the global environment, our company and all of its employees cooperatively promote Responsible Care based on the Action Policies.
Environmental Safety & Health Committee

Our aim as a coating manufacturer is to Always have Safety as our Utmost Priority and Constantly Aim for Zero Accidents in the Workplace. In concrete terms, this means our Committee activities are divided amongst our five teams: 1. The Central Environment, Safety, and Health Diagnosis Team; 2. The Health and Sanitation Sub-Committee; 3. The Company-Wide Safety & Environment Promotion Team; 4. The Central Energy Conservation and Environmental Measures Team; 5. The Safety & Environment Promotion Teams for Overseas and Affiliated Companies. These teams simultaneously conduct safety checks for all group companies, and the Central Safety and Environment Manager, the Central Hygiene Manager and specialized team also carry out a central diagnosis on the environment, safety, and hygiene. Efforts to ensure compliance with laws and KYT activities (hazard prediction training), education and training (through classes where participants experience hazardous situations, etc.) are ongoing throughout the year. In this way, we are proactively preventing workplace accidents.
Responsible Care
It is recognized that regulations alone can not completely ensure eco-friendliness, human safety, and health. In response to current demands, the worlds chemical industries have begun working on self-imposed controls to protect the environment, safety, and health at all stages of chemical processing, from development right through to disposal. This activity is called Responsible Care (RC).
Environmental Conservation (Responsible Care) Organization Chart

ALES ECO PLAN RC Committee
Committee Chairman:President
2010 Instructions by Top Management

1. With the diversification of the overseas market, we need to create a more robust management system to meet customer needs and deal with compliance. 2. Work to improve product quality, the environment, safety and hygiene at our overseas business sites through closer coordination with local companies. 3. Work towards achieving the goals as set out in the ALES ECO PLAN 2012
RC Top Management Review

President, Senior Managing Director in Charge, Auditor
Secretariat
QA & Environment Division
Environmental & Product Safety Committee Activities Reduce toxic substances in products Development of Eco-Products
User- and Customer-Related Environmental Safety Committee Activities Fulfillment of a system for dealing with environmental laws and regulations Dealing with PL (Product Liability)
Environmental Safety & Health Committee Activities Reduce the burden on the environment during production operations Securing of Safety and Health Environmental conservation
RC Committee for Company-wide Promotion of Quality Control and Environmental Protection
Reflection in Company-wide PDCA activities ISO14001 Activities

Site Environmental Policies
Objectives, Targets, Plans Management Review
Implementation and Operation Internal Audits, Monitoring, Measurement, etc.
17
ALES ECO PLAN 2010

(Evaluation of FY2010 results and targets) Activities Items Targeted 1. Lead compounds in products sold Reduction of Environmental Hazardous Substances & Product in Products Safety 2. Hexavalent chrome compounds in products sold 3. Volume of T, X, EB*1 in finished products sold*2 4. VOC rate in coating products sold*3 Promotion of Products with Reduced Environmental Burden FY2010 Targets Reduce fiscal 2003 figures by 50%: 471 tons 236 tons Reduce fiscal 2003 figures by 50%: 333 tons 167 tons Reduce fiscal 2003 figures by 15%: 37,200 tons 31,620 tons Reduce fiscal 2003 figures by 10% Increase ratio of eco-products to at least 65% FY2010 Achievements 193 tons/annual shipments (59% reduction compared with fiscal 2003) 138 tons/annual shipments (59% reduction compared with fiscal 2003) 29,800 tons/annual shipments (20% reduction compared with fiscal 2003) 22.8% (7% reduction compared with fiscal 2003) Eco-product ratio: 63% Target value not achieved (Due to the effects of a sluggish market, it is proving slow to switch to products that have a reduced environmental impact) Target value not achieved (Due to a decrease in production volume, the unit production volume target was not achieved but there was a decrease in the overall amount of energy) Target value achieved Target value not achieved (Due to a decrease in production volume, the unit production volume target was not achieved but there was a decrease in the overall amount of waste and the zero emission target was achieved) Target value achieved Evaluation
1. Energy consumption (per unit of production) Reduction of Environmental Burden in Operations 2. CO2 emissions (total) 3. Waste emissions (per unit of production) 4. Waste recycling ratio Assurance of Environmental Environmental Safety during Safety and Transportation Health Securing Safety and Health 1. Total energy during shipping (basic unit) Fiscal 2006: 9.27 L/t (converted to crude oil) 2. Assurance of transportation safety 1. Number of accidents (lost-work injuries) 2. Organic solvent handling operations in Class-II Class-III workplaces 1. ISO 14001 activities Environmental Conservation Activities 2. Preparation for environmental accounting 3. Prevention of environmental pollution
Reduce fiscal 2007 figures by 1.5%
17% increase compared with fiscal 2007
Reduce amount for fiscal 1990 by 10% Reduce fiscal 2007 figures by 3.0% Maintain a level of 99% or higher 4.0% reduction from fiscal 2006 results Establishment of labor-saving operations 0 cases 0 cases Ongoing implementation Ongoing publication 0 cases
11% decrease compared with results for fiscal 1990 37% increase compared with fiscal 2007 Annual average: 99.5% 11% reduction compared with the results for FY2006
Target value achieved Labelling 100% maintained 0 cases 5 cases of Class II workplaces 1 case of a Class III workplace Ongoing implementation Ongoing publication Within standard values: 0 cases Response to and implementation of the revisions to the Chemical Substances Management Promotion Law Response to and implementation of the revisions to the Law Concerning the Examination and Regulation of Manufacture, etc. of Chemical Substances Response to and implementation of the revisions to the administrative code for poisonous and deleterious substances Accepted and applied corrective measures to the issues indicated regarding non-compliant labeling of hazardous substances Implementation of revisions to related systems with regard to the revisions to the MSDS, etc. laws Response to and implementation of the revisions to the labor safety law master Maintenance of the system to provide online security when an order is received for products that contain poisonous and deleterious substances 0 claims for Kansai Paint, Kansai Paint Sales, NKM, Hapio Environment and Social Report 2010 (Japanese) published in June Information was released as planned Publication of the English edition of the Corporate Report 2010 (September) Target value achieved Target value achieved Target value not achieved (The local exhaust ventilation and air blowers, etc. have undergone improvements)
1. Compliance with domestic and overseas environmental laws User- and CustomerRelated Environmental Safety User- and Customer-Related Environmental Safety Activities 2. Enhanced environment management system
Creation of and adherence to a system that strictly obeys all rules and regulations related to the environment Revision of our label designs in order that they should be appropriate in terms of legal regulations
Implementation of each item was continued
Maintenance of a system to deal with MSDS and PRTR issues Color label KK-VAN and revisions to the labor safety law master Revision of the system for receiving and placing orders for poisonous and deleterious substances Determine candidates for PL and achieve 0 claims Ongoing publication Ongoing publication
*3 Coating products excluding thinners sold
3. Prevention of product liability claims 1. Publishing of environmental report Disclosure of Environmental Information 2. Publishing of annual report
*2 Finished products: including thinners sold
*1 T, X, and EB indicates toluene, xylene, and ethylbenzene
19
ALES ECO PLAN 2012 Settlement

Items Targeted 1. The amount of lead in products sold*1 Reduction of Hazardous Environmental Substances in Products & Product Safety 2. The amount of hexavalent chrome in products sold*2 3. The amount of T, X, EB*3 in coating products sold*4 (T: Toluene, X: Xylene, EB: Ethyl benzene) 4. VOC rate contained in coating products sold*5 Spread of environmentally friendly coatings Management of REACH-regulated as a restricted substance SVHC*6 Targets for Final Fiscal Year (FY2012) 70% reduction from fiscal 2003 results 65% reduction from fiscal 2003 results 27% reduction from fiscal 2003 results 12% reduction from fiscal 2003 results Ratio of environmentally friendly coatings sold: 98% or higher 100% 2.0% reduction from fiscal 2010 results 12% reduction from fiscal 1990 results 2.0% reduction from fiscal 2010 results Maintenance of 99% or higher 2.0% reduction from fiscal 2009 results Establishment of operation 0 cases FY2011 Targets 63% reduction from fiscal 2003 results 60% reduction from fiscal 2003 results 23% reduction from fiscal 2003 results 10% reduction from fiscal 2003 results Ratio of environmentally friendly coatings sold: 97% or higher 100% 1.0% reduction from fiscal 2010 results 11% reduction from fiscal 1990 results 1.0% reduction from fiscal 2010 results Maintenance of 99% or higher 1.0% reduction from fiscal 2009 results Establishment of operation 0 cases
Management of Chemical Substances

Corporate Rules Regarding the Selection of Raw Materials at the Product Design Stage
We have prepared a system to evaluate the chemical substances contained in raw materials to be used beforehand and as such pre-evaluations are carried out voluntarily, we endeavor to secure the environment, safety, and health for our business sites and neighboring residents as well as for the use and final disposal of our products.
Lead Compounds Contained per 100 Tons of Products Sold
(t)
Hazardous Material Reduction Results

1) Lead compounds contained in products sold
We are continuing our efforts to reduce the use of lead compounds and compared with FY2003, the amount of lead compounds in products sold was 41% (193 tons) in FY2010. The percentage of lead compounds per 100 tons of coating product showed a decrease compared with the previous fiscal year due to our further transition from rustproof coatings containing lead to rustproof coatings that are both chromium- and lead-free. Looking forward, we are promoting the switch to rust-proof coatings free of lead- and chromium-based agents.
0.25 0.20 0.15 0.10 0.05 0.19 0.14 0.10 0.08
0.13
0.13
1. Energy consumption (per unit of production) Reduction of Environmental Burden in Operations 2. CO2 emissions (total) 3. Waste generated unit production volume 4. Waste recycling ratio Assurance of Environmental Safety during Environmental Transportation Safety and Health Securing Safety and Health 1. Total energy during shipping (basic unit) 2. Assurance of transportation safety 1. Number of accidents (Lost-work injuries) 2. Organic solvent and specially controlled substance handling operations in Class-II Class-III workplaces 3. Safety assurance at affiliated companies overseas 1. ISO 14001 activities Environmental Conservation Activities 2. Preparation for environmental accounting 3. Prevention of environmental pollution
2003
2005
2007
2008
2009
2010 (FY)
2) Hexavalent chromium compounds contained in products sold

We are continuing our efforts to reduce the use of hexavalent chromium compounds, and compared with FY2003, the amount of these compounds in products sold was 41% (138 tons) in FY2010. The results for the percentage of hexavalent chromium compounds per 100 tons of coating product was about the same as the previous fiscal year. Factors hampering the reduction of products including hexavalent chromium compounds include the required verification of long-term performance aspects, such as weather resistance and durability, and the high cost of material substitution. However, we are continuing with our efforts to develop and expand replacement products, thereby reducing these compounds.
Hexavalent Chromium Compounds Contained per 100 Tons of Products Sold

(t)
0.20 0.15 0.10 0.05
0.13 0.10 0.08 0.07 0.07 0.06
0 cases Implement a safety diagnosis program at affiliated companies overseas Ongoing implementation Ongoing publication Within standard values 0 cases Adherence to a system to comply with all Japanese environmental regulations Consideration and construction of a system to comply with the environmental regulations in each of our overseas locations in accordance with market developments Construction of the required system Determine candidates for PL and achieve 0 claims Ongoing publication Ongoing publication
0 cases Implement a safety diagnosis program at affiliated companies overseas Ongoing implementation Ongoing publication Within standard values 0 cases Adherence to a system to comply with all Japanese environmental regulations Consideration and construction of a system to comply with the environmental regulations in each of our overseas locations in accordance with market developments Construction of the required system Determine candidates for PL and achieve 0 claims Ongoing publication Ongoing publication
2003
2005
2007
2008
2009
2010 (FY)
3) Toluene, xylene, and ethyl benzene contained in products sold

We are continuing our efforts to reduce the use of toluene, xylene, and ethyl benzene (hereafter, T, X, and EB). We have transitioned from solvent-based coatings to water-based coatings and due to our progress in developing a market for coatings that do not contain PRTR substances, in FY2010 there was a decrease of 20% in the use of these materials compared with the figure for FY2003, representing a large reduction to 29,800 tons. Our target reduction was 15% so we were able to attain our goal. Unfortunately, due to a sluggish market, the amount of T, X and EB per 100 tons of coating and thinner sold actually increased. In the future, we will continue to develop products to replace those containing T, X, and EB, and further promote the reduction in the use of these substances.
Toluene, Xylene, and Ethyl benzene Contained per 100 Tons of Products Sold
(t) 15
12.7 10
12.0
11.1
11.0
10.2
10.8
2003
2005
2007
2008
2009
2010 (FY)
User- and CustomerRelated Environmental Safety
User- and CustomerRelated Environmental Safety Activities
1. Compliance with domestic and overseas environmental laws
2. Enhanced environment management system 3. Prevention of product liability claims
4) VOC percentage contained in products sold

In FY2010, with regard to the percentage of VOC contained in coating products sold, it became slow to switch to products with a reduced environmental burden due to a sluggish market. Compared with FY2003, the percentage of VOC contained in coating products sold was reduced by 7% but we were not able to attain our stated goal of a 10% reduction compared to the figures for FY2003. Looking forward, we will continue to work towards expanding the market for low-VOC products such as water-based and high solid coating products.
VOC percentage Contained in Products Sold

(%) 30 24.4 20 23.7 23.5 22.6 22.5 22.8
Disclosure of Environmental Information
1. Publishing of environmental report 2. Publishing of Corporate Report
10
*1) Amount of lead (Pb): amount of elemental lead content *2) Amount of hexavalent chromium (Cr VI): amount of elemental hexavalent chromium content *3) T, X, and EB indicates toluene, xylene, and ethylbenzene
*4) Finished product: including thinners sold *5) Coating products excluding thinners sold *6) SVHC: Substance of Very High Concern
2003
2005
2007
2008
2009
2010 (FY)
21
Environmental Conservation Activities

Reduction of CO2 emissions
We understand that the reduction of energy consumption and CO2 emissions in our production process is an important part of our business activities, and thus we are promoting the installation of energy-saving equipment when upgrades are conducted.
CO2 Emissions in Production Plants Including incinerators*
Water Conservation Efforts at Production Plants

The carbon dioxide emission volume for the production division in FY2010 was 33,500 tons. The production volume decreased by 2.8% compared with FY2009, and the basic unit for CO2 emissions was 140kg-CO2/ton, about the same as our performance for FY2009.
CO2 Emissions in R&D Divisions
(t-CO2) 14,000 13,000 Total CO2 emissions CO2 emissions per production unit 12,000 11,000 11,800 600 400 200 213 Total CO2 emissions 2006 129 2007 300
In FY2010, the amount of water used in the manufacturing stage was about the same as FY2009. Kansai Paint shall
continue to make effective use of cooling water and boiler steam water.
Amount of Water Used

(103m3)
Amount of Water Used per Production Unit

(L/kg) 5
1,000 800 Total 795 760 292 715 287 721 307 703 295
Tap water
4 3 2 1 2.57 2.45 2.71 2.93 2.94
(t-CO2) 40,000 35,100 32,500 25,000 114 17,500
(kg-CO2/t) 36,900 34,200 400 34,500 33,500 300 200 100
12,400 11,900 11,600
12,400
282
339
316 112 2008
322 92 2009
321 87 2010 (FY)
119
130
140
140
Groundwater Industrial water
2006
2007
2008
2009
2010 (FY)
2006
2007
2008
2009
2010 (FY)
2006
2007
2008
2009
2010 (FY)
Promotion of energy-saving activities

The amount of energy used by the production division in FY2010 decreased by 1.5% compared with FY2009, but the decrease in production volume meant that energy used per basic unit increased by 1.4% compared with FY2009. The basic unit for CO2 emissions stayed the same but the basic
Transitions in Energy Consumption in Production Plants
(106MJ) 800 704 700 600 500 2,290 2,400 (kJ/kg) 4,000 676 2,560 677 2,750 670 2,800 2,000 1,000 3,000 255 Total energy consumption Energy consumption per production unit 2006 2007 2008 2009 2010 (FY) 250
Water pollution prevention at production plants The amount of COD discharge, an indicator of the emission volume of water pollutants, has almost remained unchanged since FY2007 when the water processing facilities at our Nagoya plant were upgraded. unit for energy consumption increased due to an increase in the proportion of low-CO2 emission electricity used by the production division. We are going to continue our energy-saving activities in order to suppress the amount of energy used.
Transitions in Amounts of Energy Used by Technology and R&D Divisions
(106MJ) 300 268 259 251 269
Transitions in COD Emissions

(t) 5 4 3 2 1 1.75 1.23 1.26 1.24 1.26
2006
2007
2008
2009
2010 (FY)
COD (Chemical Oxygen Demand) COD is an index of water pollution resulting from organic matter, and expresses the amount of oxygen consumed during the oxidation decomposition of the organic matter.
743
Waste Reduction
Total energy consumption
2006
2007
2008
2009
2010 (FY)
Air Pollution Controls (at Production Plants)

SOx Emissions Quantities, NOx Emissions Quantities, Dust Emissions Quantities
(t) 20 15 10 5 0.7 2006 0.1 0.5 0.1 2007 0.7 0.1 2008 0.5 0.05 2009 0.4 0.07 2010 (FY) 9.3 10.4 9.5 10.3 10.2 SOx NOx Dust
Kansai Paint started a company-wide waste reduction system in 1999 to promote the 3Rs of industrial waste required by a resource cycling society A reduction in the generation of industrial wastes (Reduce), recycling of waste that is generated (Recycle), and the reutilization of materials (Reuse). We have set our sights on the achievement of zero emissions for industrial waste generated through our manufacturing activities. As a result, we were able to achieve
zero emission by our production plants in fiscal 2005 and have been able to maintain zero emissions since that time. As for Recycle and Reuse, as shown in the graphs below, our production plants achieved a very high standard for the ratio of recycling, 99.5%, in fiscal 2010.
SOx (sulfur oxide) SOx comprises sulfur dioxide and a small amount of sulfur trioxide, and is discharged when fuels including crude oil, heavy oil, and coal, as well as wastes containing sulfur, are burned. NOx (nitrogen oxide) NOx, comprises nitrogen monoxide, nitrogen dioxide, etc., and is contained in exhaust gases from thermal power stations, boilers, incinerators, and trucks. Dust Dusts are particulate matters comprising soot and cinders, and are defined by the Air Pollution Control Law as particles discharged when fuels and other materials are burned or used as thermal sources. Note Data from the five production sites (including the Technology Department) were totaled up.
Amount of Industrial Waste Generated (Production Plants)
Recycling Ratios, and External Intermediate Treatment Amounts, Including Final Landfill Amounts (Production Plants)
(t) 32,000 30,770 30,000 28,000 26,000 24,370 2006 2007 2008 2009 24,460 2010 (FY) 30,850
(t) 200 99.7 99.7 99.6 99.6 99.5
(%) 100
27,070
100 Amount of generated industrial waste
110
113 102 99 99
Amount of 95 external intermediate treatment including final landfill Recycling ratios
2006
2007
2008
2009
2010 (FY)
23
Development of Environmental Technologies and Products/Green Procurement

Kansai Paints Basic Technologies Look to the Future
Kansai Paints core technologies are represented by coating material, coating processes and coloring technologies. Furthermore, these technologies are supported by fundamental technologies that include polymer synthesis, molecular cross-linking, photochemistry and material coloring. These core technologies are used in a wide range of applications to improve surfacing results and increase product value. In order to assure the original mission of paint and coating, the protection of a product, ensure a beautiful appearance and reduce the burden on the environment throughout the lifecycle of the product, we are concentrating on research and development that will ensure a low-environment burden, high performance and highly functional products.
Technologies to modify surfaces and to extremely increase the value of products
Polymer synthesis Light energy Coloring materials
Biotechnology
Application
Coatings
Analysis Rheological control
Color and Design

Computer simulation Polymer cross-linking Engineering Surface control
Pursue the ultimate in possibilities for coating materials
Develop new technologies and new fields based on coating technology
Develop environmentfriendly products
Life Cycle Assessment (LCA) Initiatives

The protection function of a coating for a material comes into play when a coating film is formed, suppressing the deterioration of the coated material, increasing its durability and contributing to environmental conservation. The primary burdens placed on the environment up to the time of the formation of the coating film are generated from the raw materials used in the coating and in the film formation process of coating application, so Kansai Paint is designing products with reduced environmental burden throughout the lifecycle of the coating material and coating film. For example, products with thinner coating film thicknesses, increased coating film durability and simpler drying processes. LCA is a useful tool for quantitatively ascertaining the environmental burden of the product. Based on this LCA method, we have studied evaluation methods that can be suitably applied to coatings and these methods have served useful in the evaluation of environmental burden at the time of product design.
Social Activities
26
Treatment of Employees
Kansai Paint Procurement Policies

Kansai Paint promises to conduct fair and impartial business transactions following a legal mindset. Kansai Paint shall work to open doors widely for business transactions, both in Japan and abroad. In the spirit of green procurement, Kansai Paint shall give preference to business partners that have established environmental management systems. Kansai Paint shall create a fair relationship of cooperation within which the company is on equal footing with business partners as we continue to work to enhance our partnerships.
Classifications of Materials Used

In regard to the materials used by Kansai Paint, we shall clearly classify materials, make specific details available to our business partners, etc., using such documents as the Kansai Paint Environmental Management Substances List and shall work to obtain materials that minimize the burden on the environment.
28 30
Occupational Safety and Health
29
Consumer Protection
Social Action Programs
25
Social Activities
Treatment of Employees
Human Resource Development and Training

Our human resource development plan has been designed to motivate our employees, as we consider that motivation is one of the most important factors in human development.
Equal Employment Opportunities

We respect the Equal Employment Opportunity Law for Men and Women. We implement many measures to protect both womens rights and their persons. We provide equal pay and benefits to both genders without discriminating against female employees.
Health Care
The Health and Sanitation Sub-Committee has been installed under the Environmental Safety & Health Committee, which is dedicated to ensuring the good health of all employees in Kansai Paint Group companies. In FY2010, the committee continued to promote its antismoking campaign while continuing its activities to support people suffering from mental health issues and lifestyle-related illnesses.
Lifestyle-related disease measures

We have endeavored to engage in enlightenment activities such as the implementation of training seminars held in each region as well as circulating health news, etc.
Human resource development system

Five themes have been defined for human resource development training: a self-development program, a long-term training plan, expansion of job capabilities, a revolution in corporate culture and a training structure.
Prevention of Sexual Harassment

Our company rulebook specifically prohibits sexual harassment and provides a system for all employees to receive consultation by phone and e-mail. Furthermore, this subject is included in the training program and seminars for managers and new hires.
Mental health care support

During a training course for new employees, participants were given instructions on general health management and stress measures by our industrial physicians on the theme of Health Management for Adults, as a part of the process of transition from being a student to becoming a full-fledged member of society.This increased awareness of health management for mind and body concept as well as raising self-awareness of the importance of self-care. Aiming for the creation of a workplace that promotes health and an easy-to-work-in environment, we provided instructions on the basics of line care for newly appointed administrators, based on the theme of Mental Health in the Workplace, and we are also promoting safety-awareness activities. Moreover, we hold regular training seminars in each region.
Systematically established training system

Our training system has been systemized as a matrix corresponding to the various types of study objectives and levels. Our goal is to enhance the specialized skills of each employee and to foster the comprehensive abilities of our professionals.
Employment of Disabled Persons

We make our workplace friendly to disabled personnel, and offer job openings for disabled personnel throughout the year as well as working to expand the employment opportunities for disabled people. In FY2010, our ratio of disabled personnel was 1.75% and this is below our legal requirement to have 1.8% of our workforce consist of disabled people. Given the current difficult business environment, we will continue to work hard in this regard.
Lifestyle illness prevention seminar (Amagasaki Plant)
The same seminar (Tokyo Office)
Hierarchical Study In order to increase job performance with each year, we conduct training for new employees as well as core employee training, supervisor training, administrator training, etc., as needed. Training by Function Specialized training particular to each area (administration, sales, technologies, manufacturing) is being conducted. International Training In order to expand our consciousness and capabilities on an international scale, we are providing support for foreign language studies, studies for dealing with other cultures, studies for employees being stationed overseas, etc. Life Design Training To help our employees enjoy long and healthy lives, we provide time for implementing life plan seminars organized by the employees themselves. Common Training, Occupational Training The Kansai Paint Training Center, a vocational training center certified by the Ministry of Health, Labor and Welfare, conducts common training for safety, improvement activities, basic training, skill improvement training, craftsman training related to each type of coating, etc. We also promote participation in outside seminars for each type of occupation and hierarchical level.
The same seminar (Kanuma Plant)
Benefit Programs
We provide benefit programs based on the idea of respecting individual lifestyles and individuality. Our benefit programs include annual paid holidays, special paid holidays, accumulated paid holidays used for nursing care, volunteer work, and sick leave, refreshing holidays, in addition to 28 half-day paid holidays (amounting to 14 workdays) per year to encourage our employees to utilize their paid holidays. Recent additions to our benefit program support child-rearing, one example being an employee with a small child, until said child starts their elementary school education, shall be permitted to work shorter hours, etc. We aim to support our employees at work and with their families.
Antismoking campaign
As the next step in the separation of smoking areas that was completed in FY2005, we have started an antismoking campaign that helps smokers quit smoking, with the goal of eliminating the risk factors of diseases and enhancing the health of our employees. For instance, we have introduced several how-to books, and distributed nicotine gum to participants to help them quit smoking. At the new employee seminar, support for quitting smoking is on hand in the form of industrial doctors, who can connect with those looking to cut down on the amount they smoke.
A Mental Health Workshop (at the Ono Office)
Transition in the ratio of smokers (Kansai Paint)
(%) 100
Privacy Protection
A privacy protection administrator was assigned to each division, and privacy protection guidelines set forth in order to prevent private information from being leaked, and to handle such information correctly in this IT era. The auditing of compliance with such guidelines is carried out by auditors who are appointed by the Compliance Committee, thus ensuring the protection of privacy in the organization.
50
39.4
38.1
37.5
35.8
35.5
2006
2007
2008
2009
2010 (FY)
27
Social Activities
Occupational Safety and Health
Consumer Protection
Activities for Occupational Safety and Health

Kansai Paint conducts various activities each year with the goal of realizing zero accidents and disasters. In July, all employees across the whole Group are involved in a comprehensive safety inspection. During September and October, central environmental safety diagnoses by central safety personnel were conducted at 17 worksites. Moreover, safety diagnoses are also conducted at 44 CCs (color centers) around the country every year and at our overseas locations once every 2 to 3 years. In conjunction with the implementation of risk prediction training, which includes other non-regular types of work, seminars regarding zero accidents in the workplace are used to disseminate information horizontally and efforts are also being made to thoroughly implement safe work. There were no cessations of work caused by accidents during FY2010 so the frequency of industrial accidents and severity rates for Kansai Paint are currently at zero. We will continue to work towards keeping these levels at zero.
Annual Changes in Accidents at Work
Number of industrial accidents 20 11 10 5 2 2001 13 8 5 1 2002 1 2003 5 0 2004 4 2005 9 7 1 2006 9 5 1 2007 2 2008 5 1 2009 3 0 2010 (FY) Minor injuries Lost-work injuries
color centers, stressing the status of promoting countermeasures to prevent static electricity, the status of controlling poisonous and deleterious substances as well as specially controlled substances, the current progress and situation of daily inspections and intensified measures, safety measures for electrical equipment and machinery facilities and 3A KYT practical training (actual place, actual goods, actual conditions). These diagnoses, led by the central safety and environmental management officer, are being performed by a ten-person team, including the central hygiene managers, a general management team as well as a team of experts in machinery and electricity. They found that there was an overall improvement in safety awareness levels, and evaluation points were raised compared to the previous year. Especially, the safety awareness level of the technical division and the affiliated company are improving as a result of our continuous diagnoses every year.
Principle of Consumer Protection
In order to ensure product safety for consumers when conducting market development for new products and when using new materials, the Kansai Paint Group implements investigations based on internal company standards related to safety verification, providing customers with safe products. The provision of safer products is also linked to improvements in the working environments of our coatings manufacturers.
Safety Information
Based on the idea that even a safe product could lead to an accident if used incorrectly, we provide MSDSs (material safety data sheets), product catalogs and technical information. Also, usage precautions are described on our product labels to ensure safe use by consumers.
Internal Chemical Substance Management System (Material MSDS, Documentation, etc.)
Legal Information (Enactment, Revision)
MSDS
In order to promote the safe and correct use of our coatings, which are chemical products, as well as preventing accidents, Kansai Paint issues MSDSs to provide detailed product information. Placing emphasis on the importance of compliance, Kansai Paint reviews the content of these MSDSs and incorporates the latest legal information into the documents.
Product MSDS
Material Selection Automatic Document Creation
Safety Diagnoses at Foreign Affiliated Companies

With the goal of preventing accidents and disasters at foreign affiliated companies, safety diagnoses are conducted in each region every year, limiting the number of affiliates subject to these diagnoses. In November of fiscal 2010, China was subject to a safety diagnosis, followed by India in December, with the focus on safety work practices, static electricity counter measures and the 5S standards. We will also continue to conduct diagnoses in the future.
Safety diagnosis (TIANJIN WINFIELD KANSAI PAINT & CHEMICALS CO., LTD.)
Product Design
Branch Office, Automatic Publication System Sales Outlet, etc. Customers, Users, etc.
2000
Labels and MSDS in Compliance with GHS (Global Hazard Standard)

Exploding bomb Flame Flame over circle
Annual Changes in Frequency Ratios for Accident

Frequency ratio 2 1.01 1 0.44 0.24 2002 0.25 2003 0.30 0.00 2004 2005 2006 2007 2008 2009 0.28 Frequency ratio for accidents = (Lost-work accidents (number of victims)/ Total man-hours) 1,000,000 1.20 0.56 0.29 0.00 2010 (FY)
2000
2001
Change in Severity
Severity
0.2 0.17 2.29 Severity = (Lost-work days / Total man-hours) 1,000
Safety Measures of Overseas Affiliates

Currently, the number of plants run by overseas affiliates stands at 38 and this increases each year. Kansai Paint employees are stationed at our overseas production plants and work in safety, production or quality management and support.
Number of Overseas Safety Diagnosis Sites
0.1 0.01 0.00 2000 2001 2002 0.01 2003 0.00 2004 0.03 2005 2006 0.01 0.02 2007 2008 0.01 2009 0.00 2010 (FY)
Environmental Safety and Health Inspections by Management

In fiscal 2010, the slogan Lets Find Hidden Dangers at the Earliest Stage and Eliminate them to Create a Safe and Secure Workplace! was adopted for the central environmental, safety and hygiene diagnoses. Diagnoses were conducted in September and October at 7 operation plants, 1 center, 6 affiliated companies, and 3
Fiscal Year 2004 2005 2006 2007 2008 2009 2010
Number of Sites (Countries Visited) 9 (ASEAN, India, China) 8 (ASEAN, China, Taiwan) 8 (ASEAN, China) Training seminars held in Japan, India 9 (ASEAN, China, Taiwan) 6 (Thailand, India) 12 (China, India)
In preparation for the United Nations recommendations on 2008 goals, Japan has been implementing a partial introduction of GHS in conjunction with the December 2006 revisions to the Industrial Safety and Health Laws. Kansai Paint has achieved compliance with the revised Labor Safety Law enacted December 2006 with product labels and an MSDS publication system that are based on Japan Paint Manufacturers Association guidelines. In fiscal 2010, one part of the Poisonous Materials Control Law was revised and some toxic substances were added to those regulated under this law, and a revision to the Industrial Health and Safety Law has added some items to the number of substances that require labeling in the public domain and as a company we will work to accurately comply with these new regulations. Moreover, with GHS implemented overseas, we plan to coordinate with our overseas affiliates with regard to compliance. Looking forward, with regard to revisions and updates to laws both at home and overseas, etc, we plan to perform regular reviews of our labeling and MSDS compliance.
Explosive Autoreactive substance Organic peroxide
Flammable and combustible Autoreactive substance Auto-ignition and self-heating substances
Oxidizer Organic peroxide
Gas cylinder
Corrosion
Skull and crossbones
High pressure gas
Metal corrosive substance Skin corrosive Serious damage to eyes
Acute toxicity High toxic substance
Exclamation mark
Health hazard
Environment
Acute toxic substance (low toxicity) Skin irritating substance Eye irritating substance Skin sensitizing substance
Mutagen Carcinogenic substance Reprotoxic substance Respiratory sensitizing substance Organ toxic substance
Aquatic ecotoxic substance
Note) The titles of the pictograms are those defined by JISZ7251.
29
Social Activities
Social Action Programs
Status of Presentations at Product Explanatory Meetings, Exhibits, etc.

To promote understanding by our customers of the efforts Kansai Paint is making to create products that reduce environmental burden, Kansai Paint holds explanatory meetings as well as exhibiting at different types of events about its eco-friendly products, with a focus on decorative coatings, automotive re-finishing coatings and industrial coatings. In FY2010, Kansai Paint held a total of 283 product explanatory meetings and exhibited products 69 times at exhibitions.
Attending the 14th Asian Paint Industry Council International Conference

On October 19 and 20, 2010 the Asian Paint Industry Council (APIC) held an international conference in Suzhou, China. A total of 8 countries and regions were represented by the Paint Industry Council and the International Paint and Printing Ink Council (IPPIC, USA) was also in attendance, and the participants met to discuss topics such as the current status and future compliance issues relating to chemical substance management in Asia (GHS, lead, VOC). Our Group of companies was well represented at the conference (Kansai Paint representatives attending from India, Malaysia, Singapore and Japan (as observers)).
Financial Section
32
Interior Festival
Financial Review
34 36 38 39
Consolidated Balance Sheets
36
The KANSAI PAINT SCHOLARSHIP program for Foreign Students to Study in Japan
Kansai Paint grants scholarships to students from Asian countries with the expectation that the students will focus on their studies and make contributions to the development of international societies after they return to their countries. 2010 is the 12th year of the KANSAI PAINT SCHOLARSHIP program and since the program began we have granted funds to 52 students in total. It is our sincere hope that these scholarships and their recipients, including scholarship alumni, will create cultural bridges with other countries and promote international exchange.
Consolidated Statements of Income
Plaque of Excellence in Waste Reduction

Since fiscal 1999, Osaka City has awarded a plaque proclaiming excellence in waste reduction to be displayed on buildings where organizations have excelled in reducing the amount of waste and kept a clean living environment. Kansai Paint was inspected by the Osaka City Environmental Business Center and as a result the company was awarded the Osaka City Plaque of Excellence in Waste Reduction.
Consolidated Statement of Comprehensive Income
37
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
54
Independent Auditors Report
Kansai Paint Co., Ltd. Corporate Report Kansai Paint Co., Ltd. Corporate Report 2011
31
Financial Review
Overview of the Fiscal Year Ended March 2011
Looking at the global economy for the term in review, a gradual recovery is continuing as the economic stimulus packages implemented by each country reap results. In the Asian region, domestic demand, particularly in India and China, continues to grow. In Europe and North America, there are high levels of unemployment and unease about the financial system, but a gradual recovery is also taking hold in these regions. On the other hand, political unrest in the Middle East and North Africa has triggered a steep rise in the price of crude oil and so inflation concerns have come to the fore. The domestic Japanese economy continues its gradual recovery following the results of a broad range of government policies but at the end of the term, the impact of the Great Eastern Japan Earthquake posed enormous challenges for economic activity. Amidst these economic conditions, with regard to the consolidated business results of the Kansai Paint Group, sales in India and the Asian region have increased, but the price hike in raw materials combined with the continuing yen's appreciation has negatively impacted our results, as has the Great Eastern Japan Earthquake. Overall, consolidated net sales increased by 6.6%, consolidated operating income increased by 2.9% and consolidated net income increased by 7.1% from the previous term. bridge repair market, sales decreased due to lower investment in both the public and private sector. Overall, sales in this segment totaled 146,809 million, an increase of 2.3% from the previous term.
India In the field of automotive OEM coatings, sales increased as new assembly lines operated by both local and Japanese automakers moved into full production. Furthermore, with the expansion of the Indian economy centered on domestic demand, we strove to develop the market for decorative coatings and sales in this area increased. As a result, sales in this segment totaled 40,410 million, an increase of 12.8% from the previous term.
Dividends
The Companys basic policy is to share profits in proportion to business results, striving to provide stable and regular dividends to shareholders while enhancing the Companys profitability by forming a stronger corporate constitution. With respect to internal reserves, we are effectively utilizing these to invest in research and development and to improve production and sales systems in Japan and abroad in order to establish a stable, long-term business foundation while working toward further growth. The Company is maintaining its policy of paying dividends biannually based on the record date at the end of the second and the fourth quarters respectively. For the term under review, annual dividends were 10 per share, the same amount as the previous term.
(China) Investment Co., Ltd., to promote control and governance of the group operations in China and the effective utilization of management resources under its prospective business strategy in the region. In the second quarter of the current term, for the purpose of full entry into the African market, we purchased 27.6% of the issued shares of a South African paint manufacturer, Freeworld Coatings Ltd. (Freeworld Coatings), which became an equity-method affiliate of the Company. In the third quarter of the current term, we started acquisition procedures to purchase all the remaining issued shares of Freeworld Coatings. Upon obtaining approval under the Competition Act from the authorities with regard to this acquisition procedure, the Company now owns more than 90% of the shares in Freeworld Coatings. Consequently, Freeworld Coatings became the Companys consolidated subsidiary in April 2011.
Asia In the field of automotive OEM coatings, sales increased supported by rising demand in China coupled with a significant increase in auto production in Thailand and Indonesia, etc. Sales for industrial coatings also increased, mainly for construction machinery in China and Thailand. As a result, sales in this segment totaled 40,169 million, an increase of 18.1% from the previous term.
Europe Sales in Turkey increased as a consequence of the steady progress of our customers production activities. As a result, sales in this segment totaled 9,100 million, an increase of 6.2% from the previous term. Other Sales for this segment totaled 497 million, a decrease of 10.8% from the previous term.
Financial Position
Current assets increased to 140,749 million, up 735 million (0.5%) from the end of the previous term. This was due primarily to increases in finished goods, raw materials and supplies. Tangible fixed assets, intangible fixed assets, investments and other assets amounted to 130,495 million, an increase of 136 million (0.1%) from the end of the previous term. The main factor for this rise was an increase in investment securities. Current liabilities amounted to 65,922 million, a decrease of 4,513 million (6.4%) from the end of the previous term. This decrease was attributable mainly to a fall in notes and accounts payable and income tax payables. Long-term liabilities amounted to 17,698 million, a decrease of 1,204 million (6.4%) from the end of the previous term, owing mainly to a decrease in deferred tax liabilities in relation to the fall in the fair value of investment securities. Owners equity amounted to 167,195 million, an increase of 5,965 million (3.7%) from the end of the previous term. This increase was caused mainly by a 8,909 million increase in retained earnings. The shareholders equity ratio rose from 59.6% at the end of the previous term to 61.6% at the end of the current term. The return on equity (ROE) remained the same as the previous term at 7.7%, and the return on assets (ROA) increased from 4.6% to 4.7%.
Outlook for the Fiscal Year Ending March 2012

Although economic growth in developing nations, especially those in Asia, is expected to continue, there are concerns that the rising price of raw materials and exchange rate fluctuations could exert pressure on corporate profit. Moreover, the Great Eastern Japan Earthquake has had a huge impact on the domestic and overseas economy over a considerable area and we believe that the long-term effects of this catastrophe will be felt through difficult economic times ahead. Under these circumstances, we will still continue to stress the core policies of the Group, represented by the slogans further promotion of globalization and strengthen profitability in domestic business. For the time being, however, our first priority is to contribute to the recovery effort following the Great Eastern Japan Earthquake while developing our business activities. As for the outlook for this term (fiscal year 2011), we estimate net sales of 270,000 million (an increase of 13.9% from the current term), operating income of 20,000 million (a decrease of 5.2% from the current term) and a net income of 14,000 million (an increase of 10.5% from the current term) on consolidated basis.
Status of Sales
Sales results by geographical segment.
Japan In the area of automotive OEM coatings, we focused on developing new technologies and worked to expand markets for our Waterborne 3-Wet Coating System, which provides superior appearance combined with low CO2 emissions, as well as for our clear coat with excellent scratch resistance. In the second half of the term, the government subsidy program for the purchase of eco-cars came to an end and even though this reduced vehicle production numbers, we still managed to increase sales in this area. In the field of auto refinishing paint, we strove for further expansion of sales by bolstering our range of environmentally friendly coatings along with our upgraded color-matching information distribution system. As a result, sales in this field increased. In the field of industrial coatings, sales increased as a result of a recovery in demand, supported by firm exports of construction machinery, and growth in production of coated beverage cans due to the intensely hot summer. In the area of decorative coatings, despite the stagnation that remains in new housing constructions and capital investment by corporations, sales increased as we more actively concentrated on repainting projects. In the area of marine coatings, we have put our effort into expanding sales, in particular, sales of our highperformance touch-up paints and anti-fouling paints for ship repair work. However, due to the slump in new shipbuilding, sales in this area decreased. In the field of heavy duty coatings, although we worked on promoting our high value-added products aimed at the
Cost of Sales, SG&A, and Operating Income

Cost of sales amounted to 167,777 million, an increase of 12,715 million (8.2%) from the previous term. The gross profit margin for this term was 29.2%, down from 30.3% for the previous term. Selling, general and administrative expenses amounted to 48,106 million, an increase of 1,272 million (2.7%) from the previous term. As a result, operating income rose to 21,102 million, an increase of 597 million (2.9%) and the ratio of operating income to sales was 8.9%, down from 9.2% for the previous term.
Cash Flow
Net cash provided by operating activities was 18,252 million, and net cash used in investing activities was 14,246 million. Net cash used in financing activities was 4,741 million. As a result, cash and cash equivalents at the end of the year stood at 39,738 million, a decrease of 810 million (2.0%) from the end of the previous term.
Other Income and Expenses

Other income (net total profit offset by expenses) for the term was 2,273 million compared with 1,896 million for the previous term. This resulted from a significant increase in equity in earnings of unconsolidated subsidiaries and affiliates, despite an increase in foreign currency exchange loss.
Mid-Term Business Plan Progress

The Kansai Paint Group adopted the slogans further promotion of globalization and strengthen profitability in domestic business to represent the core policies of the three-year mid-term plan that got underway in fiscal 2010. In fiscal 2010, we implemented the following measures: In response to the sustained expansion of the paint business in China, we have established Kansai Paint
Net Income for the Term

Net income for the term amounted to 12,675 million, up 844 million (7.1%) from the previous term. Return on sales (ROS) was 5.3%. There was also an increase in earnings per share (EPS), rising to 47.73 from 44.56 for the previous term.
32 Kansai Paint Co., Ltd.
33
Consolidated Balance Sheets

Kansai Paint Co., Ltd. and Consolidated Subsidiaries March 31, 2011 and 2010
Millions of yen Thousands of U.S. dollars (Note 1) Millions of yen Thousands of U.S. dollars (Note 1)
Assets
Current assets: Cash and cash equivalents (Notes 4 and 7) ......................................................... Receivables (Note 4): Trade notes and accounts: Unconsolidated subsidiaries and affiliates ................................................... Other .......................................................................................................... Loans (Note 4) ................................................................................................ Other .............................................................................................................. Allowance for doubtful receivables ................................................................
2011 39,738
2010 40,548 $
2011 477,907
Liabilities and Net Assets

Current liabilities: Short-term borrowings (Notes 4 and 6) .............................................................. Long-term debt due within one year (Notes 4 and 6) ......................................... Payables (Note 4): Trade notes and accounts: Unconsolidated subsidiaries and affiliates ................................................... Other .......................................................................................................... Other ..............................................................................................................
2011 843 433
2010 1,321 590 $
2011 10,138 5,208
10,875 57,125 829 1,231 (1,624) 68,436
12,051 58,111 529 1,382 (1,072) 71,001
130,788 687,011 9,970 14,805 (19,531) 823,043
1,162 46,473 3,400 51,035
1,251 48,791 3,703 53,745 4,605 7,082 17 3,075 70,435
13,975 558,905 40,890 613,770 36,452 85,364 156 41,720 792,808
Inventories (Note 7): Finished goods ................................................................................................ Work-in-process ............................................................................................. Raw materials and supplies .............................................................................
14,411 2,932 8,092 25,435
13,757 3,064 6,816 23,637
173,313 35,262 97,318 305,893
Income and enterprise taxes payable .................................................................. Accrued expenses .............................................................................................. Deferred income tax liabilities (Note 13) ............................................................ Other current liabilities ...................................................................................... Total current liabilities ............................................................................ Long-term liabilities: Long-term debt due after one year (Notes 4 and 6) ............................................ Employees severance and retirement benefits (Note 12) .................................... Retirement benefits for directors and corporate auditors .................................. Deferred income tax liabilities (Note 13) ............................................................ Other long-term liabilities ................................................................................... Total long-term liabilities ........................................................................ Total liabilities ................................................................................................... Contingent liabilities (Note 8)
3,031 7,098 13 3,469 65,922
Deferred income tax assets (Note 13) ................................................................ Other current assets (Note 4) ............................................................................. Total current assets ......................................................................................
3,278 3,862 140,749
3,223 1,605 140,014
39,423 46,446 1,692,712
372 6,160 167 8,809 2,190 17,698 83,620
811 6,090 587 9,400 2,014 18,902 89,337
4,474 74,083 2,009 105,941 26,338 212,845 1,005,653
Fixed assets: Property, plant and equipment (Note 7): Land ................................................................................................................... Buildings, machinery and equipment .................................................................. Construction in progress ..................................................................................... Accumulated depreciation .................................................................................
16,890 168,964 2,197 188,051 (131,418) 56,633
17,008 168,985 508 186,501 (128,073) 58,428
203,127 2,032,038 26,422 2,261,587 (1,580,493) 681,094
Investments and other assets: Investments in and loans to unconsolidated subsidiaries and affiliates ............... Investment securities (Notes 4, 5 and 7) ............................................................ Loans receivable (Note 4) .................................................................................... Prepaid pension costs (Note 12) ......................................................................... Deferred income tax assets (Note 13) ................................................................ Other .................................................................................................................. Allowance for doubtful receivables .................................................................... Intangible assets ............................................................................................. Total fixed assets .......................................................................................... Total assets ...........................................................................................................
See accompanying notes.
21,875 44,816 12 2,658 870 1,301 (260) 71,272 2,590 130,495 271,244
16,786 48,158 9 2,537 900 1,601 (439) 69,552 2,379 130,359 270,373
263,079 538,978 144 31,966 10,463 15,647 (3,127) 857,150 31,149 1,569,393 $ 3,262,105
Net Assets (Note 10): Shareholders equity: Common stock: Authorized 793,496,000 shares in 2011 and 2010 Issued 272,623,270 shares in 2011 and 2010 ........................................... Capital surplus .................................................................................................... Retained earnings .............................................................................................. Treasury stock, at cost: 7,035,127 shares in 2011 7,110,603 shares in 2010 ............................................................................... Total shareholders equity ...................................................................... Accumulated other comprehensive income Net unrealized holding gains on securities .......................................................... Deferred gain on derivatives under hedge accounting ........................................ Foreign currency translation adjustments ............................................................ Total accumulated other comprehensive income ................................. Minority interests ............................................................................................. Total net assets ..................................................................................................... Total liabilities and net assets ...........................................................................
25,659 27,154 116,914
25,659 27,154 108,005
308,587 326,567 1,406,061
(5,703) 164,024
(5,704) 155,114
(68,587) 1,972,628
12,277 388 (9,494) 3,171 20,429 187,624 271,244
13,092 (6,976) 6,116 19,806 181,036 270,373
147,649 4,666 (114,179) 38,136 245,688 2,256,452 $ 3,262,105
35
Consolidated Statements of Income

Kansai Paint Co., Ltd. and Consolidated Subsidiaries Years ended March 31, 2011 and 2010
Consolidated Statements of Changes in Net Assets

Millions of yen Shareholders equity Common stock Capital surplus Retained earnings Treasury stock Total shareholders equity Valuation and translation adjustments Net Deferred gain (loss) on unrealized holding gains derivatives under on securities hedge accounting Foreign currency translation adjustments Total valuation and translation adjustments Minority interests Total net assets
2011 Net sales ............................................................................................................... Cost of sales ......................................................................................................... Selling, general and administrative expenses .................................................. Operating income .............................................................................................. Other income (expenses): Interest and dividend income ................................................................................. Interest expense ...................................................................................................... Gain on sale of marketable and investment securities, net ..................................... Write-down of marketable and investment securities ............................................. Loss on disposal of inventories ................................................................................ Loss on sale or disposal of property, plant and equipment, net .............................. Foreign currency exchange loss ............................................................................... Equity in earnings of unconsolidated subsidiaries and affiliates .............................. Other, net ............................................................................................................... Income before income taxes and minority interests ......................................... Income taxes (Note 13): Current ................................................................................................................... Deferred .................................................................................................................. 236,985 167,777 48,106 21,102
2010 222,401 155,062 46,834 20,505
2011 $ 2,850,090 2,017,763 578,545 253,782
1,198 (98) 139 (33) (326) (322) (468) 1,480 703 2,273 23,375
1,205 (106) 126 (343) (178) (45) 694 543 1,896 22,401
14,408 (1,179) 1,672 (397) (3,921) (3,873) (5,628) 17,799 8,455 27,336 281,118
Balance at March 31, 2009 ......... Cash dividends paid 9.00 per share ......................... Net income .................................... Purchase of treasury stock ............. Disposal of treasury stock .............. Net changes in items other than shareholders equity .................. Balance at March 31, 2010 ......... Cash dividends paid 10.00 per share ....................... Net income .................................... Purchase of treasury stock ............. Disposal of treasury stock .............. Changes in scope of equity method companies .................... Changes in treasury stock due to changes in interest in equity method companies .................... Net changes in items other than shareholders equity .................. Balance at March 31, 2011 .........
25,659 25,659
27,154
98,573 (2,398) 11,831 (1)
(5,671) 145,715 (36) 3 (2,398) 11,831 (36) 2
8,555 4,537 13,092
(8,540) 1,564
15 6,101 6,116
16,753 162,483 3,053 (2,398) 11,831 (36) 2 9,154
27,154 108,005 (2,664) 12,675 (0) (1,102)
(5,704) 155,114 (33) 3 (2,664) 12,675 (33) 3 (1,102)
(6,976)
19,806 181,036 (2,664) 12,675 (33) 3 (1,102)
25,659
31
31
(815) 12,277
388 388
(2,518) (9,494)
(2,945) 3,171
623
31 (2,322)
7,425 (71) 7,354 (3,346) 12,675
7,283 59 7,342 (3,228) 11,831
89,296 (854) 88,442 (40,241) 152,435

U.S. dollars (Note 1)
27,154 116,914
(5,703) 164,024
20,429 187,624
Thousands of U.S. dollars (Note 1)
Minority interests in net income of consolidated subsidiaries ........................ Net income ...........................................................................................................
Shareholders equity Common stock Capital surplus Retained earnings Treasury stock Total shareholders equity
Valuation and translation adjustments Net Deferred gain unrealized (loss) on holding gains derivatives under on securities hedge accounting Foreign currency translation adjustments Total valuation and translation adjustments Minority interests Total net assets
Yen
Net income per share .......................................................................................... Cash dividends per share ....................................................................................
2011 47.73 10.00
2010 44.56 10.00
$ $
2011 0.57 0.12
Consolidated Statement of Comprehensive Income

Years ended March 31, 2011 and 2010
Balance at March 31, 2010 ......... $ 308,587 $ 326,567 $1,298,917 $ (68,599) $1,865,472 $ 157,450 $ Cash dividends paid 10.00 per share ....................... (32,038) (32,038) Net income .................................... 152,435 152,435 Purchase of treasury stock ............. (397) (397) Disposal of treasury stock .............. (0) 36 36 Changes in scope of equity method companies .................... (13,253) (13,253) Changes in treasury stock due to changes in interest in equity method companies .................... 373 373 Net changes in items other than shareholders equity .................. (9,801) Balance at March 31, 2011 ......... $ 308,587 $ 326,567 $1,406,061 $ (68,587) $1,972,628 $ 147,649 $
$ (83,896) $
73,554 $ 238,196 $ 2,177,222 (32,038) 152,435 (397) 36 (13,253)
4,666 4,666
(30,283) $(114,179) $
(35,418)
7,492
373 (27,926)
38,136 $ 245,688 $ 2,256,452
2011 Income before minority interests ....................................................................... Other comprehensive income (Note 11): Adjustments for unrealized losses on available-for-sale securities ........................... Deffered gain on derivatives under hedge accounting ............................................ Foreign currency translation adjustments ................................................................ Share in other comprehensive income of asssociates applied for equity method .... Comprehensive income attributed to (Note 11): .............................................. Owners of the parent ............................................................................................ Minority interests ...................................................................................................
2010 $
2011 192,676 (14,889) 4,666 (39,868) 1,383 (48,708) 143,968 117,017 26,951
16,021 (1,238) 388 (3,315) 115 (4,050) 11,971 9,730 2,241
37
Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Kansai Paint Co., Ltd. and Consolidated Subsidiaries
1. Basis of Presenting Consolidated Financial Statements

The accompanying consolidated financial statements of Kansai Paint Co., Ltd. (the Company) and its consolidated subsidiaries (together the Companies) have been prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Law and their related accounting regulations and in conformity with accounting principles generally accepted in Japan (Japanese GAAP), which are different in certain respects as to application and disclosure requirements from International Financial Reporting Standards. The accompanying consolidated financial statements have been restructured and translated into English, with some expanded descriptions, from the consolidated financial statements of the Company prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Law. Certain supplementary information included in the statutory Japanese language consolidated financial statements, but not required for fair presentation, is not presented in the accompanying consolidated financial statements. The translations of the Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan, using the prevailing exchange rate at March 31, 2011, which was 83.15 to U.S. $1.00. The translations should not be construed as representations that the Japanese yen amounts have been, could have been or could in the future be converted into U.S. dollars at this or any other rate of exchange.
2011 Cash flows from operating activities: Income before income taxes and minority interests ............................................... Depreciation and amortization ................................................................................ Amortization of goodwill ........................................................................................ Decrease in provision for severance and retirement benefits .................................. Increase in allowance for doubtful receivables ........................................................ Interest and dividend income ................................................................................. Interest expense ...................................................................................................... Equity in earnings of unconsolidated subsidiaries and affiliates .............................. Write-down of marketable and investment securities ............................................. Loss on sale or disposal of property, plant and equipment ...................................... (Increase) decrease in trade receivables ................................................................... Increase in inventories ............................................................................................. Increase (decrease) in trade payables ...................................................................... Other ...................................................................................................................... Interest and dividends received ............................................................................... Interest paid ........................................................................................................... Income taxes paid ................................................................................................... Net cash provided by operating activities ................................................................ Cash flows from investing activities: Purchase of marketable securities ........................................................................... Proceeds from sale of marketable securities ............................................................ Purchase of property, plant and equipment ............................................................ Proceeds from sale of property, plant and equipment ............................................. Purchase of intangible assets ................................................................................. Purchase of investment securities ............................................................................ Proceeds from sale of investment securities ............................................................ Loans receivable advanced ...................................................................................... Collection on loans receivable ................................................................................. Other ...................................................................................................................... Net cash used in investing activities ........................................................................ Cash flows from financing activities: Proceeds from short-term debt ............................................................................... Payment of short-term debt .................................................................................... Proceeds from long-term debt ................................................................................ Payment of long-term debt ..................................................................................... Purchase of treasury stock ...................................................................................... Proceeds from sale of treasury stock ....................................................................... Cash dividends paid ................................................................................................ Cash dividends paid to minority shareholders ......................................................... Other ...................................................................................................................... Net cash used in financing activities ........................................................................ Effect of exchange rate changes on cash and cash equivalents ..................... Increase (decrease) in cash and cash equivalents .............................................. Cash and cash equivalents at beginning of year .............................................. Increase in cash and cash equivalents due to changes in scope of consolidation ............................................................................... Increase in cash and cash equivalents due to merger ...................................... Cash and cash equivalents at end of year .........................................................
2010 22,401 7,053 42 (516) 274 (1,205) 106 (694) 240 (7,880) (3,447) 3,374 2,394 22,142 1,364 (106) (3,817) 19,583 $
2011 281,118 83,909 818 (253) 4,991 (14,408) 1,179 (17,799) 397 3,873 19,760 (30,283) (26,242) 4,113 311,173 17,017 (1,191) (107,492) 219,507
23,375 6,977 68 (21) 415 (1,198) 98 (1,480) 33 322 1,643 (2,518) (2,182) 342 25,874 1,415 (99) (8,938) 18,252
2. Summary of Significant Accounting Policies

Principles of consolidation
The consolidated financial statements in the fiscal year ended March 31, 2011 include the accounts of the Company and its 37 (36 in March, 2010) significant subsidiaries. Intercompany transactions and accounts have been eliminated. Investment in 17 unconsolidated subsidiaries and 25 affiliates in the fiscal year ended March 31, 2011 (17 and 29, respectively, in March, 2010) are stated at cost, adjusted for equity in undistributed earnings and losses since acquisition. The accounts of 20 consolidated subsidiaries in the fiscal year ended March 31, 2011 (17 in March, 2010) are included on the basis of their respective fiscal years, one of which ends on February 28 and the others on December 31. These subsidiaries do not prepare for consolidation purposes statements for the period which corresponds with the fiscal year of the Company, which ends March 31. For these consolidated subsidiaries, when there are significant transactions between their respective fiscal year ends and that of the Company, necessary adjustments are made to reflect the transactions in the consolidated financial statements. In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries, including the portion attributable to minority shareholders, are evaluated using the fair value at the time the Company acquired control of the respective subsidiaries. The difference between the cost of an investment in a subsidiary and the equity in the fair value of net assets at the date of acquisition is amortized over five years in principle. are prepared in accordance with IFRS or U.S. GAAP, they may tentatively be used for the consolidation process. However, if the specific six items are material to the group's consolidated financial statements, then they should be adjusted for in the consolidation process. The Company applied this accounting standard from the year ended March 31, 2009, the effect of which has been insignificant.
(31,891) 31,891 (5,647) 124 (515) (30,889) 24,516 (1,036) 683 (1,482) (14,246)
(51,449) 51,449 (5,038) 114 (470) (10,781) 8,691 (1,378) 1,136 52 (7,674)
(383,536) 383,536 (67,914) 1,491 (6,194) (371,485) 294,841 (12,459) 8,214 (17,823) (171,329)
Cash and cash equivalents

In preparing the consolidated statements, cash on hand, readily available deposits and short-term highly liquid investments with maturities not exceeding three months at the time of purchase are considered to be cash and cash equivalents.
Allowance for doubtful receivables

The allowance for doubtful receivables is determined by adding the estimated uncollectible amounts of individual receivables to an amount calculated using a rate based on past experience.
1,997 (2,417) (595) (32) 2 (2,664) (1,182) 150 (4,741) (344) (1,079) 40,548 269 39,738
2,028 (1,326) 200 (664) (36) 2 (2,398) (1,026) (3,220) 372 9,061 31,422 65 40,548 $
24,017 (29,068) (7,156) (385) 24 (32,038) (14,215) 1,804 (57,017) (4,138) (12,977) 487,649 3,235 477,907
Securities
The Companies do not hold trading securities. Held-tomaturity debt securities are stated at amortized cost. Equity securities issued by subsidiaries and affiliated companies which are not consolidated or accounted for using the equity method are stated at moving average cost. Availablefor-sale securities with available quoted market price are stated at quoted market price. Unrealized gains and losses on these securities are reported, net of applicable income taxes, as a separate component of accumulated other comprehensive income. Realized gains and losses on the sale of such securities are computed using moving average cost. Securities with no available quoted market price are stated mainly at moving average cost. If quoted market price of equity securities issued by unconsolidated subsidiaries or affiliated companies not on the equity method or quoted market price of available-forsale securities declines significantly, the securities are stated at quoted market price, and the difference between quoted market price and the carrying amount is recognized as loss in the period of the decline. If quoted market price of equity securities issued by unconsolidated subsidiaries or affiliated companies not on the equity method is not readily available,
Unification of accounting policies applied to foreign subsidiaries for the consolidated financial statements
On May 17, 2006, Accounting Standards Board of Japan (ASBJ) issued ASBJ Practical Issues Task Force (PITF) No.18, Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements. PITF No.18 prescribes that the accounting policies and procedures applied to a parent company and its subsidiaries for similar transactions and events under similar circumstances should in principle be unified for the presentation of the consolidated financial statements. Moreover, if the financial statements of foreign subsidiaries
39
the securities are written down to net asset value with a corresponding charge in the consolidated statements of income in the event the net asset value declines significantly. In these cases, quoted market price or the net asset value will be the carrying amount of the securities at the beginning of the next year.
Inventories
Inventories held for the purpose of ordinary sale are stated principally at the lower of moving average cost or net realized value.
Property, plant and equipment and depreciation

Property, plant and equipment are stated at cost. Depreciation is computed primarily using the declining balance method for the Company and the domestic consolidated subsidiaries and the straight-line method for overseas consolidated subsidiaries. For the Company and the domestic consolidated subsidiaries, buildings acquired after March 31, 1998 are depreciated using the straight-line method. Depreciation of fixed assets whose acquisition costs are between 100 thousand and 200 thousand is provided using the straight-line method over three years.
basic salary at the time of retirement or termination and certain other factors. Liabilities and expenses for severance and retirement benefits are actuarially calculated using certain assumptions. The Company and some of the consolidated subsidiaries provide for employees' severance and retirement benefits based on the estimated amounts of projected benefit obligation and the fair value of plan assets. Actuarial gains and losses and prior service costs are recognized in expenses using the straight-line method mainly over 13 years, which is within the average of the estimated remaining service years of the employees. (2) Retirement benefits for directors and corporate auditors Retirement benefits for directors and corporate auditors of the certain domestic consolidated subsidiaries are provided on the accrual basis in accordance with the companies' established rules. (Accounting change) Effective from the fiscal year ended March 31, 2010, the Company and the domestic consolidated subsidiaries have adopted the Partial Amendments to Accounting Standard for Retirement Benefits (Part 3) (ASBJ Statement No.19, issued on July 31, 2008). The new accounting standard requires domestic companies to use the rate of return on long-term government or gilt-edged bonds as of the end of the fiscal year for calculating the projected benefit obligation of a defined benefit plan. Previously, domestic companies were allowed to use a discount rate determined by taking into consideration fluctuations in the yield of longterm government or gilt-edged bonds over a certain period. This change had no material impact on the consolidated financial statements for the year ended March 31, 2010. (Additional information) To provide for retirement benefits for directors and corporate auditors, the Company had set aside the allowance for the retirement benefits in compliance with the companies established rules. However, based on the resolution of the annual shareholders meeting, the Company decided to eliminate the system of retirement benefits for directors and corporate auditors, but to pay retirement benefits for the existing directors and corporate auditors until the annual shareholders meeting on June 29, 2010. The unpaid amount for the consolidated fiscal year is disclosed in Other long-term liabilities.
contracts are used as hedges and meet certain hedging criteria, the foreign currency receivables or payables are translated at the contracted rate. (2) Hedging instruments and hedged items Hedging instruments - Forward foreign exchange contracts Hedged items - Receivables and payables denominated in foreign currencies and forecasted transactions denominated in foreign currencies. (3) Hedge policy The Company utilizes derivative financial instruments to hedge the risks of exchange rate fluctuation associated with the Companys operations. (4) Assessment method for hedge effectiveness Hedge effectiveness is not assessed for forward exchange contracts as the substantial terms and conditions of the hedging instruments and hedged items are the same and they are considered highly interrelated. (5) Transaction risk management structure The finance department of the Company administers the hedge transactions based on the Company's rules and with the approval of the management.
Development Cost (ASBJ Statement No. 23, issued on December 26, 2008), the revised Accounting Standard for Business Divestitures (ASBJ Statement No. 7, issued on December 26, 2008), the revised Accounting Standard for Equity Method of Accounting for Investments (ASBJ Statement No. 16, issued on December 26, 2008), and the revised Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures (ASBJ Statement No. 10, issued on December 26, 2008).
Presentation of Comprehensive Income

Effective for the fiscal year ended March 31, 2011, the Companies have applied the Accounting Standard for Presentation of Comprehensive Income (ASBJ Statement No. 25, issued on June 30, 2010). However, the amount of accumulated other comprehensive income and total accumulated other comprehensive income for the previous fiscal year respectively represented the amount of valuation and translation adjustments and total valuation and translation adjustments.
Software costs
Internal use software, recorded in intangible assets, is amortized using the straight-line method over the estimated useful life of five years.
Net income and cash dividends per share

The computation of net income per share is based on the weighted average number of shares outstanding during the period. Diluted net income per share of common stock for the years ended March 31, 2011 and 2010 is not shown since there were no outstanding convertible bonds or other common stock equivalents. Cash dividends per share presented in the accompanying consolidated statements of income are dividends applicable to the respective years, including dividends to be paid after the end of the year.
Research and development expenses

Research and development expenses are charged to income as incurred. Research and development expenses for the years ended March 31, 2011 and 2010 were 5,583 million ($67,144 thousand) and 5,516 million, respectively.
Income taxes
Income taxes comprise corporation tax, prefectural and municipal inhabitants taxes and enterprise tax. Enterprise tax is deductible from taxable income when paid. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Changes in accounting principles, procedures and presentation methods for the year ended March 31, 2011 Application of accounting standard for asset retirement obligations
Effective for the fiscal year ended March 31, 2011, the Companies have applied the Accounting Standard for Asset Retirement Obligations (ASBJ Statement No.18, issued on March 31, 2008) and the Guidance on Accounting Standard for Asset Retirement Obligations (ASBJ Guidance No. 21, issued on March 31, 2008). The change had no material impact on the consolidated financial statements.
Finance leases
Finance leases which do not transfer ownership of the lease assets are capitalized and depreciated by the straight-line method over the term of the lease with the assumption of no residual value.
Derivatives
The Companies state derivative financial instruments at fair value and recognize any change in the fair value as gain or loss, unless the derivative financial instruments are used for hedging purposes.
Retirement benefits
(1) Employees severance and retirement benefits The Company and some of the consolidated subsidiaries have defined benefit plans, corporate pension funds and lump-sum payment plans. Several of the other domestic consolidated subsidiaries have defined benefit plans in the form of lump-sum payment plans. Most of the overseas consolidated subsidiaries have various types of pension benefit plans, mainly defined contribution plans and defined benefit plans. The amount of the retirement benefit is, in general, based on the length of service,
Significant hedge accounting methods

(1) Hedge accounting method If derivative financial instruments are used as hedges and meet certain hedging criteria, the Companies defer recognition of gain or loss resulting from changes in the fair value of a derivative financial instrument until the related loss or gain on the hedged item is recognized. However in cases where forward foreign exchange
Application of accounting standard for Business Combinations

Effective for the fiscal year ended March 31, 2011, the Companies have applied the Accounting Standard for Business Combinations (ASBJ Statement No. 21, issued on December 26, 2008), the Accounting Standard for Consolidated Financial Statements (ASBJ Statement No. 22, issued on December 26, 2008), the Partial Amendments to Accounting Standard for Research and
41
3. Finance Leases
Finance lease transactions that commenced on and before March 31, 2008 and which did not transfer ownership are accounted for in the same manner as operating leases. Non-capitalized finance leases at March 31, 2010 were as follows:
Millions of yen
2. Fair values of financial instruments

Book values of the financial instruments included in the consolidated balance sheets and their fair values at March 31, 2011 and 2010 were as follows (Financial instruments for which the fair values were extremely difficult to determine were not included.):
2011 Book value Total Millions of yen Fair value Difference
2010 Original lease obligations (including finance charges) ......................................... Payments remaining: Payments due within one year ........................................................................ Payments due after one year ..........................................................................
Machinery, equipment and vehicles
Tools and fixtures
517 64 51 115
452 68 26 94
969 132 77 209
Lease payments under non-capitalized finance leases for the years ended March 31, 2010 were 241 million. Non-capitalized finance leases at March 31, 2011 were not noted here due to their insignificance.
(1) Cash and deposits ..................................................................................... (2) Trade receivables - notes and accounts ...................................................... (3) Investment securities Subsidiaries and affiliates .......................................................................... Other securities ......................................................................................... (4) Trade payables - notes and accounts ......................................................... (5) Derivative transactions ...............................................................................
41,491 68,000 7,929 43,841 47,635 660

2010
41,491 68,000 7,878 43,841 47,635 660
(51)
Millions of yen Fair value Difference
Book value
4. Financial Instruments
Effective from the fiscal year ended March 31, 2010, the Company adopted the revised Accounting Standard, Accounting Standard for Financial Instruments (ASBJ Statement No. 10, revised on March 10, 2008) and the Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ Guidance No. 19, revised on March 10, 2008).
(1) Cash and deposits ..................................................................................... (2) Trade receivables - notes and accounts ...................................................... (3) Investment securities ................................................................................ (4) Trade payables - notes and accounts ......................................................... (5) Derivative transactions ...............................................................................
41,184 70,162 47,415 50,042 (19)

2011
41,184 70,162 47,415 50,042 (19)
1. Status of financial instruments

(1) Policies on financial instruments The Companies procure funds necessary for capital investment and raise short-term working capital mainly through bank loans. The Companies manage temporary surplus funds through financial assets that have a high level of safety. The Companies utilize derivative financial instruments to hedge foreign currency exchange rate fluctuation risk and do not enter into derivative transactions for trading or speculative purposes. (2) Details of financial instruments and associated risks Trade notes and accounts receivable are exposed to customer credit risk. In addition, receivables denominated in foreign currencies in the overseas operations are exposed to the risk of exchange rate fluctuations. Investment securities are primarily the stocks of business partners and customers and are exposed to market price fluctuation risk. Most trade notes and accounts payable are due for payment within one year. Those denominated in foreign currencies are exposed to the risk of exchange rate fluctuations. The Companies use forward exchange contracts to hedge the risk of exchange rate fluctuations associated with receivables, payables and forecasted transactions denominated in foreign currencies. (3) Risk management framework for financial instruments 1) Credit risk management (counterparty risk) The Company has established internal rules and procedures for receivables under which the Business Planning & Administration Division and Finance and Accounting Department are primarily responsible for monitoring counterparty status. The departments manage amounts and settlement dates by counterparties and work to quickly identify and mitigate payment risk that may result from situations such as the deterioration of the financial condition of counterparties. Consolidated subsidiaries of the Company are subject to the same risk management rules. In using derivative transactions, the Company mitigates counterparty risk by conducting transactions with financial institutions with high credit ratings. 2) Market risk management (risk of exchange rate and interest rate fluctuations) For some receivables and payables denominated in foreign currencies, the Companies use forward foreign exchange contracts to hedge the risk of exchange rate fluctuations on a monthly and a currency-by-currency basis. For investment securities, the Companies periodically examine fair values and the financial condition of the issuing entities. In addition, the Companies regularly revise the portfolio based on the relationships with the issuing entities. For derivative transactions, the Finance & Accounting Department handles the transactions after receiving approval from those with final approval authority in accordance with the Company's internal rules. Administrative reports on the results are periodically provided to the Management Committee, etc. 3) Management of liquidity risk associated with capital procurement (payment default risk) In the Companies, the Financial & Accounting Department manages liquidity risk by creating and updating a capital deployment plan based on reports from each division and maintaining adequate liquidity. (4) Supplementary explanations about matters concerning fair value of financial instruments Fair values of financial instruments are based on their market prices and, in cases where market prices are not available, reasonably calculated prices. Such prices are calculated using certain assumptions and may differ if the assumptions change. (1) Cash and deposits ..................................................................................... (2) Trade receivables - notes and accounts ...................................................... (3) Investment securities Subsidiaries and affiliates .......................................................................... Other securities ......................................................................................... (4) Trade payables - notes and accounts ......................................................... (5) Derivative transactions ............................................................................... Derivative assets and liabilities were on net basis
Thousands of U.S. dollars (Note 1) Fair value Difference
Book value
$ 498,990 817,799 95,358 527,252 572,880 7,937
$ 498,990 817,799 94,744 527,252 572,880 7,937
(614)
Fair value measurement of financial instruments (1) Cash and deposits Book value approximates the fair value due to the short maturity. (2) Trade receivables - notes and accounts Book value approximates the fair value due to the short maturity. (3) Investment securities The fair values of equity securities are determined by the quoted market price. The fair values of debt securities are determined by the quoted market price or the price provided by financial institutions. (4) Trade payables - notes and accounts Book value approximates the fair value due to the short maturity. (5) Derivative transactions The fair values of derivative transactions are determined at the quoted price obtained from the relevant financial institutions.
43
Book values of financial instruments for which the fair values were extremely difficult to measure
Classification
(2) Information on securities of the Companies at March 31, 2010: (a) The following table summarizes acquisition costs, book values and fair values of available-for-sale securities with available fair values as of March 31, 2010.
Securities with book values exceeding acquisition costs: Equity securities .............................................................................................. Investment trust funds .................................................................................... Total ................................................................................................................ Securities with book values not exceeding acquisition costs: Equity securities .............................................................................................. Investment trust funds .................................................................................... Total ................................................................................................................
Acquisition cost Millions of yen Book value Difference
2011 Non-listed equity securities ..................................................................................... Non-listed investment securities of unconsolidated subsidiaries and affiliates ........ 974 7,327
2010 743 8,096 $
2011 11,714 88,118 14,105 6,506 20,611 4,073 1,913 5,986
35,978 6,603 42,581 2,923 1,911 4,834
21,873 97 21,970 (1,150) (2) (1,152)
The redemption schedule for money claims subsequent to the consolidated balance sheet date
Millions of yen Millions of yen Thousands of U.S. dollars (Note 1)
2011
Cash and deposits Receivables -trade notes and accounts Cash and deposits
2010
Receivables -trade notes and accounts Cash and deposits
2011
Receivables -trade notes and accounts
Within 1 year .............................. From 1 year to 5 years ................ From 5 years to 10 years ............. Over 10 years ..............................
41,491
68,000
41,184
70,162
498,990
817,799
(b) The following table summarizes book values of available-for-sale securities with no available fair values as of March 31, 2010.
Non-listed equity securities .......................................................................................................
743
7,986
5. Securities
(1) Information on securities of the Companies at March 31, 2011: (a) The following table summarizes acquisition costs, book values and fair values of available-for-sale securities with available fair values as of March 31, 2011.
Securities with book values exceeding acquisition costs: Equity securities .............................................................................................. Investment trust funds .................................................................................... Total ................................................................................................................ Securities with book values not exceeding acquisition costs: Equity securities .............................................................................................. Investment trust funds .................................................................................... Total ................................................................................................................ Securities with book values exceeding acquisition costs: Equity securities .............................................................................................. Investment trust funds .................................................................................... Total ................................................................................................................ Securities with book values not exceeding acquisition costs: Equity securities .............................................................................................. Investment trust funds .................................................................................... Total ................................................................................................................
Acquisition cost Millions of yen Book value Difference
(c) Total sales of available-for-sale securities in the year ended March 31, 2010 amounted to 60,140 million, and the related gains and losses amounted to 126 million and 1 million respectively.
6. Short-Term Borrowings and Long-Term Debt

20,005 131 20,136 (1,385) (1,385)
11,555 6,172 17,727 6,512 851 7,363
31,560 6,303 37,863 5,127 851 5,978
Short-term borrowings consisted principally of bank loans with interest rates ranging from 0.13% to 4.23% at March 31, 2011 and from 0.19% to 13.00% at March 31, 2010. Long-term debt at March 31, 2011 and 2010 consisted of the following:
2011 Loans from banks and insurance companies at 1.200% - 1.800% in 2011 ( at 1.219% - 3.630% in 2010) maturing serially through 2016 ....................... Less amounts due within one year ........................................................................... 805 433 372
2010 1,401 590 811 $ $
2011 9,681 5,207 4,474
Thousands of U.S. dollars (Note 1) Acquisition cost Book value Difference
$ 138,966 74,227 $ 213,193 $ $ 78,316 10,235 88,551
$ 379,555 75,803 $ 455,358 $ $ 61,660 10,235 71,895
$ 240,589 1,576 $ 242,165 $ (16,656) $ (16,656)
The aggregate annual maturities of long-term debt were as follows:

Years ending March 31 Millions of yen Thousands of U.S. dollars (Note 1)
2012 .................................................................................................................................................. 2013 .................................................................................................................................................. 2014 .................................................................................................................................................. 2015 .................................................................................................................................................. 2016 and thereafter ..........................................................................................................................
433 245 117 10 805
5,207 2,947 1,407 120 9,681
(b) The following table summarizes book values of available-for-sale securities with no available fair values as of March 31, 2011.
Non-listed equity securities .......................................................................................................
974
11,714
(c) Total sales of available-for-sale securities in the year ended March 31, 2011 amounted to 55,722 million ($670,138 thousand), and the related gains and losses amounted to 73 million ($878 thousand) and 38 million ($457 thousand) respectively.
45
7. Pledged Assets
The carrying amounts of assets pledged as collateral for certain trade notes and accounts payable, short-term borrowings of 90 million ($1,082 thousand), long-term debt due within one year of 433 million ($5,207 thousand), long-term debt due after one year of 372 million ($4,474 thousand), other current liabilities of 78 million ($938 thousand), other long-term liabilities of 75 million ($902 thousand) of long-term liabilities at March 31, 2011 were as follows:
9. Derivative Transactions
1. Derivative transactions to which the Companies didnt apply hedge accounting as of March 31, 2011 and 2010 were as follows:
Millions of yen
2011 Foreign currency forward contracts Buy U.S. dollar ........................................ Japanese yen ................................... Sell U.S. dollar ........................................
Contract amount
Fair value
Unrealized gain (loss)
Thousands of U.S. dollars (Note 1) Contract Unrealized Fair value amount gain (loss)
Cash and cash equivalents ..................................................................................................................... Property, plant and equipment ............................................................................................................... Investment securities ..............................................................................................................................
2011 20 2,668 9 2,697
2011 241 32,086 108 $ 32,435
215 697 150 1,062
(2) 14 (0) 12
(2) 14 (0) 12
$ 2,586 8,382 1,804 $ 12,772

Contract amount
(24) 168 (0) 144
(24) 168 (0) 144
2010 Foreign currency forward contracts Buy U.S. dollar ........................................ Japanese yen ................................... Sell U.S. dollar ........................................
The carrying amounts of assets pledged as collateral for certain trade notes and accounts payable, short-term borrowings of 564 million ($6,062 thousand), long-term debt due within one year of 539 million ($5,793 thousand), long-term debt due after one year of 811 million ($8,717 thousand), other current liabilities of 89 million ($957 thousand), other long-term liabilities of 151 million ($1,623 thousand) of long-term liabilities at March 31, 2010 were as follows:
Millions of yen
Millions of yen Fair value Unrealized gain (loss)
2010 Cash and cash equivalents ............................................................................................................................................. Inventories ..................................................................................................................................................................... Property, plant and equipment ....................................................................................................................................... Investment securities ...................................................................................................................................................... 20 1,260 2,784 9 4,073
19 814 84 917
(0) (18) (1) (19)
(0) (18) (1) (19)
2. Derivative transactions to which the Companies applied hedge accounting as of March 31, 2011.
Millions of yen
8. Contingent Liabilities
Information on contingent liabilities of the Companies at March 31, 2011 and 2010 was as follows:
Millions of yen
2011 Classification Deferral hedge accounting Forecasted transactions denominated in foreign currencies Foreign currency forward contracts Buy South African Rand
Contract amount Fair value
Thousands of U.S. dollars (Note 1) Contract amount Fair value
2011 As endorser of notes endorsed ................................................................................................................ As guarantor of indebtedness of unconsolidated subsidiaries and affiliates .............................................
2010 117 3 120
9,000
647
$ 108,238
7,781
There were no applicable items for derivative transactions to which the Companies applied hedge accounting as of March 31, 2010.
10. Net Assets

Under Japanese laws and regulations, the entire amount paid for new shares is required to be designated as common stock. However, a company may, by a resolution of the Board of Directors, designate an amount not exceeding one half of the price of the new shares as additional paid-in capital, which is included in capital surplus. Under the Japanese Corporate Law, in cases in which a dividend distribution of surplus is made, the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% of common stock over the total of additional paid-in capital and legal earnings reserve must be set aside as additional paid-in capital or legal earnings reserve. Legal earnings reserve is included in retained earnings in the accompanying consolidated balance sheets. Legal earnings reserve and additional paid-in capital may be used to eliminate or reduce a deficit by a resolution of the shareholders meeting. All additional paid-in capital and all legal earnings reserve may be transferred to other capital surplus and retained earnings, respectively, which are potentially available for dividends. The maximum amount that the Company can distribute as dividends is calculated based on the unconsolidated financial statements of the Company in accordance with Japanese laws and regulations. At the annual shareholders meeting held on June 29, 2011, the shareholders approved cash dividends of 5.0 ($0.06) per share amounting to 1,332 million ($16,019 thousand). This appropriation has not been accounted in the consolidated financial statements at March 31, 2011. Such appropriations are recognized in the period in which they are approved by the shareholders.
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11. Consolidated Statements of Conprehensive Income

1. Comprehensive income for the year ended March 31, 2010 Comprehensive income attributed to :
Owners of the parent ............................................................................................................................. Minority interests ...................................................................................................................................
13. Deferred Income Taxes

The following table summarizes the significant differences between the statutory tax rate and the Companies' effective income tax rate for financial statement purposes for the years ended March 31, 2011 and 2010.
Statutory tax rate .............................................................................................................................. Nondeductible expenses ................................................................................................................... Nontaxable dividend income ............................................................................................................. Elimination of dividends from subsidiaries ........................................................................................ Equity in earnings of affiliates ........................................................................................................... Undistributed foreign earnings ......................................................................................................... Difference in statutory tax rates of foreign subsidiaries .................................................................... Deductible taxes and other ............................................................................................................... Effective tax rate ............................................................................................................................... 2011 40.0% 0.4 (0.6) 3.9 (2.5) 0.8 (4.5) (6.0) 31.5% 2010 40.0% 0.4 (1.0) 3.0 (1.3) 1.7 (4.9) (5.1) 32.8%
17,932 3,978 21,910
$ 215,659 47,841 $ 263,500
2. Other comprehensive income for the year ended March 31, 2010
Adjustments for unrealized gains (losses) on available-for-sale securities ............................................... Foreign currency translation adjustments ............................................................................................... Shares in other comprehensive income of equity method affiliates ........................................................
4,355 2,150 347 6,852
52,375 25,857 4,173 82,405
Significant components of the Companies' deferred tax assets and liabilities as of March 31, 2011 and 2010 were as follows:
2011
2010 128 530 306 239 316 1,287 2,230 1,159 6,195 (243) 5,952 $
2011 1,636 7,817 6,254 2,502 2,766 15,658 23,885 18,075 78,593 (4,053) 74,540
12. Employees Severance and Retirement Benefits

The liability for severance and retirement benefits included in the liability section of the consolidated balance sheets as of March 31, 2011 and 2010 consisted of the following:
2011 Projected benefit obligation ................................................................................ Unrecognized prior service costs ......................................................................... Unrecognized actuarial differences ..................................................................... Prepaid pension costs ......................................................................................... Less fair value of pension assets .......................................................................... Liability for severance and retirement benefits ................................................ 44,661 1,146 (10,203) 2,658 (32,102) 6,160
2010 45,653 1,448 (11,040) 2,537 (32,508) 6,090
2011 $ 537,114 13,782 (122,706) 31,966 (386,073) $ 74,083
Deferred tax assets: Valuation loss on inventories .......................................................................... Elimination of unrealized profit on inventories ................................................ Excess allowance for doubtful receivables ....................................................... Excess accrued expenses ................................................................................. Accrued enterprise tax .................................................................................... Excess bonuses accrued .................................................................................. Retirement benefits ........................................................................................ Other .............................................................................................................. Subtotal .............................................................................................................. Valuation allowance ........................................................................................ Total deferred tax assets ...................................................................................... Deferred tax liabilities: Adjustments to allowance for doubtful accounts in the consolidation resulting from elimination of receivables and payables ............................... Deferred gain on derivatives under hedge accounting .................................... Adjustments to fixed assets based on corporate tax laws ............................... Net unrealized holding gains on securities ...................................................... Tax effect of foreign subsidiaries' and affiliates' undistributed earnings .......... Total deferred tax liabilities ................................................................................. Net deferred tax liabilities ...................................................................................
136 650 520 208 230 1,302 1,986 1,503 6,535 (337) 6,198
The expenses for severance and retirement benefits included in the consolidated statements of income for the years ended March 31, 2011 and 2010 comprised the following:
2011 Service costs ....................................................................................................... Interest cost on projected benefit obligation ....................................................... Expected return on plan assets ........................................................................... Amortization of prior service costs ...................................................................... Amortization of actuarial differences .................................................................. Severance and retirement benefit expenses .................................................... 1,457 811 (765) (293) 1,735 2,945
2010 1,490 822 (649) (300) 1,970 3,333 $
2011 17,523 9,753 (9,200) (3,524) 20,866 35,418
13 259 1,150 7,492 1,958 10,872 (4,674)
16 1,186 8,278 1,766 11,246 (5,294)
156 3,115 13,830 90,102 23,548 130,751 $ (56,211)
The discount rate and the rate of expected return on plan assets used by the Companies were mainly 1.8% and 2.5%, respectively, for the year ended March 31, 2011 and 1.8% and 2.5%, respectively, for the year ended March 31, 2010. The estimated amount of all retirement benefits to be paid at future retirement dates is allocated equally to each service year using the estimated total number of service years. Prior service costs and actuarial gains and losses were recognized in expenses using the straight-line method over mainly 13 years, which is within the average of the estimated remaining service years of the employees, commencing with the current and the following period, respectively.
49
14. Segment Information

(1) General information about reporting segments The business segments reported by the Company are the business units for which the Company is able to obtain separate financial information in order for the Board of Directors to conduct periodic monitoring to determine the distribution of business resources and evaluate business results. The Company is primarily engaged in the manufacture and sale of paints and coatings in Japanese domestic market. Locally incorporated overseas subsidiaries and affiliates are engaged in their own oversea markets. Locally incorporated subsidiaries and affiliates are independent business units that develop their own business activities and establish their own comprehensive strategies in each region. Effective for the fiscal year ended March 31, 2011, the Company has applied the Revised Accounting Standard for Disclosures about Segments of an Enterprise and Related Information (ASBJ Statement No. 17, issued on March 27, 2009) and Guidance on Accounting Standard for Disclosures about Segments of an Enterprise and Related Information (ASBJ Guidance No. 20, issued on March 21, 2008). In accordance with new accounting standard in the fiscal year ended March 31, 2011, the Company modified the classification of reporting segments which consisted of geographic segments and independently implemented both the functions of manufacturing and sale activities. Reporting segments have been reclassified into five segments (Japan, India, Asia, Europe and other), which were previously composed of four geographic segments (Japan, Asia, America and Europe). India was previously included in Asia. America, which was previously an independent segment, has been included in other. The segment information for the year ended March 31, 2010, has been reclassified to conform to the presentation based on the current segmentation. (2) Basis of measurement about sales, profit and loss, assets and other items by reporting segment The accounting methods applied to reporting segments are the same as those that provided the basis for Summary of Significant Accounting Policies. Intersegment transactions and transfers are based on prevailing markets prices. (3) Information about sales, profit and loss, assets and other material items Segment information as of and for the fiscal years ended March 31, 2011 and 2010 was as follows:
Millions of yen
Millions of yen
2010
Japan India
Reporting Segment Asia Europe Total Other *1 Total
Adjustment *2
Consolidated financial statements*3
Net sales Sales to customers ................................. Intersegment sales and transfers ........... Total sales .............................................. Segment income .................................... Segment assets ...................................... Other items Depreciation and amortization .............. Amortization of goodwill ....................... Amortization of negative goodwill ........ Interest income ...................................... Interest expense ..................................... Equity in earnings (losses) of unconsolidated subsidiaries and affiliates ................................... Investments in unconsolidated subsidiaries and affiliates ................ Increase in tangible fixed assets and intangible fixed assets ....................
143,446 35,821 12,093 13 155,539 35,834 12,041 4,965 190,424 27,131 4,727 67 70 92 40 925 58 0 58 25
34,008 314 34,322 4,878 49,066 1,207 61 65 68 10
8,569 32 8,601 660 6,361 194 10 41 31
221,844 12,452 234,296 22,544 272,982 7,053 186 145 259 106
557 557 59 752 0 4
222,401 12,452 234,853 22,603 273,734 7,053 186 145 263 106
222,401 (12,452) (12,452) 222,401 (0) 22,603 (3,361) 270,373 7,053 186 145 263 106
444 7,193 2,993
19 134 1,612
315 8,725 455
(95) 10 115
683 16,062 5,175
11 260
694 16,322 5,175
694 16,322 5,175
Thousands of U.S. dollars (Note 1)
2011
Japan India
Adjustment *2
2011
Japan India
Adjustment *2
146,809 40,410 13,092 12 159,901 40,422 12,494 4,936 182,760 27,948 4,681 71 30 47 41 919 58 36 16
40,169 240 40,409 5,390 50,275 1,212 44 65 88 28
9,100 26 9,126 418 5,679 165 10 15 18
236,488 13,370 249,858 23,238 266,662 6,977 173 105 186 103
497 497 296 8,774 0 1
236,985 13,370 250,355 23,534 275,436 6,977 173 105 187 103
236,985 (13,370) (13,370) 236,985 0 23,534 (4,192) 271,244 (7) (5) 6,977 173 105 180 98
$ 1,765,592 $ 485,989 157,451 144 1,923,043 486,133 150,258 59,363 2,197,956 336,115 56,296 854 361 565 493 11,052 698 433 192
$ 483,091 2,886 485,977 64,823 604,630 14,576 529 782 1,058 337
$ 109,441 313 109,754 5,027 68,298 1,985 120 181 217
$2,844,113 160,794 3,004,907 279,471 3,206,999 83,909 2,081 1,263 2,237 1,239
5,977 5,977 3,560 105,521 0 12
$ 2,850,090 160,794 3,010,884 283,031 3,312,520 83,909 2,081 1,263 2,249 1,239
$2,850,090 (160,794) (160,794) 2,850,090 0 283,031 (50,415) 3,262,105 (84) (60) 83,909 2,081 1,263 2,165 1,179
6,482 76,849 $ 25,556 $
180 28,479 $
9,104 82,995 16,741 $
(1,034) 108 4,726 $
14,732 159,952 75,502 $
3,067 100,337 0 $
17,799 260,289 75,502 $
17,799 260,289 75,502
539 6,390 2,125
15 2,368
757 6,901 1,392
(86) 9 393
1,225 13,300 6,278
255 8,343 0
1,480 21,643 6,278
1,480 21,643 6,278
Notes: *1 The "Other" category includes business activities of subsidiaries and affiliates in the U.S. and South Africa, etc. *2 Adjustments for segment income and segment assets represents the elimination of intersegment transactions. *3 The segment income was based on operating income coupled with interest and dividend income, equity in earnings of unconsolidated subsidiaries and affiliates, interest expense, loss on disposal of inventories and foreign currency exchange profit or loss. *4 Reporting segments other than Japan and India include the following countries: Asia : Thailand, China and Malaysia, etc. Europe : Turkey and United Kingdom, etc.
51
(Related Information) 1. Product and services

2011 Sales to customers Millions of yen ..................... Thousands of U.S. dollars ....
Automotive Industrial Decorative Marine and protective Other Total
16. Subsequent Events

Changes in subsidiaries (company acquisition)
Based on the resolution of Board of Directors on December 10, 2010, the Company decided to make a takeover bid to acquire additional shares of Freeworld Coatings Limited (Freeworld Coatings), which had been previously accounted for by equity method. After the closing of the takeover bid, Freeworld Coatings became a consolidated subsidiary of the Company effective April 26, 2011. (1) Purpose of acquisition 1) Freeworld Coatings is a leading paint company in the African region that has a strong portfolio of brands especially for decorative coatings. The Company recognizes Freeworld Coatings as the foundation for developing its business strategy in Saharan Africa and southward. 2) Following this acquisition, Freeworld Coatings will significantly benefit from being part of the Kansai Paint Group in terms of capital and personnel resources, technology and advanced products such as environmentally friendly products that are made available to Freeworld Coatings, thereby supporting its further growth and enhancing its competitiveness. 3) The synergistic effect of the Company and Freeworld Coatings enables both companies to outline long term strategies for growth, improve shareholder return and create job opportunities. Together with the respect for the broad-based black economic empowerment (BBBEE), the Company is certain that the effect will contribute to the local community and society. (2) Profile of the subsidiary 1) Name: Freeworld Coatings Limited 2) Location: Johannesburg, Republic of South Africa 3) Name and title of Representative: Chairman Robert Michael Godsell, CEO Andre Jacobus Lamprecht 4) Line of business: Manufacturing and sales of paints, coatings and paint related products. 5) Consolidated operational results and consolidated financial status (year ended September 30, 2010): Consolidated Sales ZAR 2,765 million Consolidated Total Assets ZAR 4,595 million Consolidated Net Assets ZAR 3,005 million 6) Total number of share issued: 203,871,939 shares 7) Stock listing: Johannesburg Stock Exchange (3) Purchase period: December 15, 2010 to February 18, 2011 (South African time) (4) Purchase price: ZAR 12 per share (5) Number of shares acquired, acquisition cost and percentage of voting rights after acquisition: 1) Number of shares acquired: 127,928,057 shares 2) Acquisition cost: ZAR 1,535 million 3) Percentage of voting rights after acquisition: 90.3% (6) Sources of acquisition fund: Cash reserves
93,990 $ 1,130,367
64,517 775,911
46,026 553,530
19,274 231,798
13,178 158,484
236,985 $ 2,850,090
2. Geographical segments
2011 (1) Total sales (2) Tangible fixed assets Millions of yen ..................... Thousands of U.S. dollars .... Millions of yen ..................... Thousands of U.S. dollars ....
Japan India Asia Europe Other Total
136,028 $ 1,635,935 39,349 $ 473,229
40,413 486,025 6,723 80,854
47,601 572,471 7,721 92,856
9,839 118,328 2,839 34,143
3,104 37,331 0 0
236,985 $ 2,850,090 56,632 $ 681,082
3. Major customers No information is disclosed as there were no customers accounting for 10% or more of the Companys total net sales. Less on impairment of fixed assets There were no applicable related items for the fiscal year ended March 31, 2011. Amortization and unamortized balance of goodwill
Reporting Segment
2011 Millions of yen ..... Thousands of U.S. dollars ... $
Japan
India
Asia
Europe
Total
Other
Total
Adjustment
Consolidated financial statements
Balance at the end of the period
64 769
141 1,696
34 409
239 2,874
239 2,874
239 2,874
Unamortized balance of negative goodwill attributed to business combinations prior to April 1, 2010
Reporting Segment
2011 Millions of yen ..... Thousands of U.S. dollars ... $
Japan
India
Asia
Europe
Total
Other
Total
Adjustment
Consolidated financial statements
Balance at the end of the period
71 854
2 24
14 168
87 1,046
87 1,046
87 1,046
Negative goodwill in other income The amortization of negative goodwill in the amount of 205 million ($2,465 thousand) was presented in other income for the Japan segment for the fiscal year ended March 31, 2011 as a result of the acquisition of additional stocks of a subsidiary.
15. Related Party Transactions

Sales to unconsolidated subsidiaries and affiliates for the years ended March 31, 2011 and 2010 were as follows:
Sales to unconsolidated subsidiaries and affiliates ..............................................
2011 14,055
2010 14,599
2011 $ 169,032
Receivables from unconsolidated subsidiaries and affiliates as of March 31, 2011 and 2010 were as follows:
Receivables from unconsolidated subsidiaries and affiliates ................................
2011 5,448
2010 6,553
2011 65,520
53
Directory
HEAD OFFICE 6-14, Imabashi 2-chome, Chuo-ku Osaka 541-8523, Japan Tel: 81-6-6203-5531 / Fax: 81-6-6203-5018 TOKYO OFFICE 24-15, Higashi-Ohi 5-chome, Shinagawa-ku Tokyo 140-8520, Japan Tel: 81-3-3472-3131 / Fax: 81-3-3458-0525 R&D CENTER 17-1, Higashi-Yawata 4-chome, Hiratsuka-shi, Kanagawa 254-8562, Japan Tel: 81-463-23-2100 / Fax: 81-463-24-0637
Overseas
KANSAI PAINT (AMERICA), INC. 5455 Corporate Drive, Suite 205 Troy, MI 48098, U.S.A. Tel: 1-248-952-0533 / Fax: 1-248-952-0538 PPG KANSAI AUTOMOTIVE FINISHES U.S., LLC Troy-Automotive Technical Center, 5875 New King Court Troy, MI 48098, U.S.A. Tel: 1-248-641-2010 / Fax: 1-248-641-2266 KANSAI PAINT EUROPE LTD. 20th Floor, Wembley Point, 1 Harrow Road Wembley, Middlesex HA9 6DE, UK Tel: 44-20-8900-5933 / Fax: 44-20-8900-5966 PPG KANSAI AUTOMOTIVE FINISHES UK, LLP 4th Floor, Trigate 210-222 Hagley Road West Birmingham, B68 ONP, UK Tel: 44-12-1423-7300 / Fax: 44-12-1434-5346 KANSAI ALTAN BOYA SANAYI VE TICARET A.S Ankara Asfalti 25, km 35177 Kemalpasa IZMIR, Turkey Tel: 90-232-877-0071 / Fax: 90-232-877-0070 KDK AUTOMOTIVE COATINGS CO., LTD. 679-12 Naegi-ri, Poseung-eup, Pyeongtaek-si, 451 821, South Korea Tel: 82-31-684-6186 / Fax: 82-31-684-6190 KANSAI PAINT H. K. LTD. Suite 1018, 10th Floor, Ocean Centre Harbour City, No.5 Canton Road, Kowloon Hong Kong Tel: 852-2891-1280 / Fax: 852-2891-0890 COSCO KANSAI PAINT & CHEMICALS (SHANGHAI) CO., LTD. No.5589-5689 Hutai Road Shanghai 201907, China Tel: 86-21-5602-5077 / Fax: 86-21-5602-0852 COSCO KANSAI PAINT & CHEMICALS (TIANJIN) CO., LTD. 42, 5th Avenue, TEDA Tianjin, 300457, China Tel: 86-22-2529-2009 / Fax: 86-22-2532-0902 COSCO KANSAI PAINT & CHEMICALS (ZHUHAI) CO., LTD. Zhuhai Gaolan Port Economic Zone Fine Chemical Area, Zhuhai City, 519050, China Tel: 86-756-3986270 / Fax: 86-756-3986276 CHONGQING KANSAI PAINT CO., LTD. 9 Danlong Road, Nanping, Nanan District, Chongqing, 400060, China Tel: 86-23-6283-4824 / Fax: 86-23-6283-7094 KANSAI PAINT (SHENYANG) CO., LTD. No.18, Shenxi Four East Road, Economic & Technology Development Zone, 110143, Shenyang, China Tel: 86-24-2532-6390 / Fax: 86-24-2532-6395 TIANJIN WINFIELD KANSAI PAINT & CHEMICALS CO., LTD. No.95 Taihua Road, TEDA, Tianjin, 300457 China Tel: 86-22-6623-0159 / Fax: 86-22-6623-0152 HUNAN XIANGJIANG KANSAI PAINT CO., LTD. #16, Lixiang Road (W), Changsha Economy & Technology, Hunan 410100, China Tel: 86-731-8403-7050 / Fax: 86-731-8487-8159 GUANGZHOU KANSAI PAINT CO., LTD. 26 Huangge East 2nd Road, Huangge Nansha, Guangzhou, Guangdong, China Tel: 86-20-3468-4900 / Fax: 86-20-3468-4930 SUZHOU KANSAI PAINT CO., LTD. No.12 Fengxia-lu, Lujia Town, Kunshan City, Jiangsu Province, 215331 China Tel: 86-512-5756-3372 / Fax: 86-512-5756-3374 CHONGQING ALESCO KANSAI PAINT CO., LTD. 801, Building 4, Long Hu MOCO, No.166, Xinnan, Yubei, Chongqing, 401147, China Tel : 86-23-8678-9456 / Fax : 86-23-8684-5046 KANSAI PAINT (CHINA) INVESTMENT CO., LTD. Room 1506, Grand Ocean Tower, No.1200, Pudong Avenue, Shanghai, 200135, China Tel : 86-21-5093-9636 / Fax : 86-21-5093-9616 TAIWAN KANSAI PAINT CO., LTD. No.6, Yungkong 2nd Road, Yung-an Industrial District, Yung-an Hsiang Kaohsiung Hsien, Taiwan R.O.C. Tel: 886-7-622-3171 / Fax: 886-7-623-0155 KANSAI PAINT (SINGAPORE) PTE. LTD. 57 Penjuru Road, Jurong Singapore 609141, Singapore Tel: 65-6261-8621 / Fax: 65-6265-0301 KANSAI PAINT PHILIPPINES, INC. C2-9, Carmelray Industrial Park(CIP) II, Brgy. Punta, Calamba City, Laguna 4027, Philippines Tel: 63-2-584-4512 / Fax: 63-2-584-4512 THAI KANSAI PAINT CO., LTD. 180 Moo 3 Taparuk Road, Amphur Muang Samutprakarn 10270, Thailand Tel: 66-2-753-2377 / Fax: 66-2-753-2774 KANSAI RESIN (THAILAND) CO., LTD. 34 Moo 4, Eastern Seaboard Industrial Estate (Rayong), Yudhasart Road, Tumbol Pluakdaeng, Amphur Pluakdaeng, Rayong 21140, Thailand Tel: 66-3-895-4750 / Fax: 66-3-895-4751 SIME KANSAI PAINTS SDN. BHD. 2, Solok Waja, 2 Kawasan Perindustrian Bukit Raja 41710 Klang, Selangor D.E. Malaysia Tel: 60-3-3348-7805 / Fax: 60-3-3348-7806 KANSAI COATINGS MALAYSIA SDN. BHD. 4, Solok Waja, 2 Kawasan Perindustrian Bukit Raja, P.O. Box 159, 41710 Klang, Selangor D.E., Malaysia Tel: 60-3-3341-5333 / Fax: 60-3-3342-7223 P.T. KANSAI PAINT INDONESIA Kawasan Industri MM 2100 Blok DD-7 & DD-6, Desa Danau Indah, Cikarang Barat, Bekasi 17520, Indonesia Tel: 62-21-8998-2370 / Fax: 62-21-8998-2369 KANSAI NEROLAC PAINTS LTD. Ganpatrao Kadam Marg, Lower Parel Mumbai 400013, India Tel: 91-22-2493-4001 / Fax: 91-22-2493-6296 KANSAI PAINT MIDDLE EAST FZCO Emaar Business Park, Building 1, Sheikh Zayed Road, P.O. Box 262460, Dubai, U.A.E. Tel: 971-4-368-9963 / Fax: 971-4-368-9962 FREEWORLD COATINGS LIMITED Balvenie, Kildrummy Office Park Umhlanga Avenue, Paulshof, Gauteng, South Africa Tel: +27-11-549-8000 / Fax: +27-11-234-3236
55
6-14, Imabashi 2-chome, Chuo-ku, Osaka 541-8523, Japan Tel: 81-6-6203-5531 Fax: 81-6-6203-5018 http://www.kansai.co.jp
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2011

Five-Year Summary of Selected Financial Data

2010 222,401 20,505 22,401 11,831

2009 229,989 13,424 16,602 10,786

2008 256,586 23,756 26,397 13,755

2007 231,214 22,090 24,287 13,267

2011 $ 2,850,090 253,782 281,118 152,435

Income before income taxes

26,397 22,401 23,375

23,756 22,090 20,505 21,102

13,755 12,675 11,831 10,786

300,000 250,000 200,000 150,000

299,299 282,884 270,373 271,244 240,666

161,230 167,195 145,730

6,000 4,000 2,000 100,000 50,000 50,000

Kansai Paint Co., Ltd.

Corporate Report 2011

A Message from the President

Outlook for the Fiscal Year Ending March 2012

Overview of the Fiscal Year Ended March 2011

Yuzo Kawamori President, Representative Director

Kansai Paint Co., Ltd.

Corporate Report 2011

Kansai Paint Co., Ltd.

Corporate Report 2011

Management Philosophy and Vision

The Kansai Paint concept of corporate social responsibility

Kansai Paint Stakeholders

Internal Controls Risk Management Disclosure of Information

Sound Business Activities

Kansai Paint Group

Basic activity guidelines (Established January 2001)

Corporate Governance Committee Management Headquarters Legal Department Review Office

Corporate governance organization (As of June 2011)

Corporate Governance Organization

External Auditor Board of Auditors

Executive Officers Company Departments and Affiliate Companies

Corporate Governance Committee*

Kansai Paint Co., Ltd.

Corporate Report 2011

Kansai Paint Co., Ltd.

Corporate Report 2011

Executive Vice President

Business Overview by Segment

(as of June 30, 2011) 6

Marine and Protective Coatings

Main Products and Services

Main Products and Services

Main Products and Services

Main Products and Services

Kansai Paint Co., Ltd.

Corporate Report 2011

Kansai Paint Co., Ltd.

Corporate Report 2011

Business Overview by Segment

10 Kansai Paint Co., Ltd. Corporate Report 2011

Kansai Paint Co., Ltd.

Corporate Report 2011

Research and Development Operations

12 Kansai Paint Co., Ltd. Corporate Report 2011

Kansai Paint Co., Ltd.

Corporate Report 2011

800 Estimated amount of VOC (g/L)

Solvent-based 600 High-solid type High-solid type 400 High-solid type