Highlights for the 1st Half of FY2010(Ended September 30, 2010)

Kao Corporation

President and CEOMotoki Ozaki

October 26, 2010

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These presentation materials are available on ourwebsite in PDF format:http://www.kao.com/jp/en/corp_ir/presentations.html

These presentation materials contain forward-looking statements that are based on management's estimates, assumptions and projections as of October 26, 2010. Certain factors, which include, but are not limited to, the risks and uncertainty associated with the worldwide economy, competitive activity, and fluctuations in currency exchange and interest rates, could cause actual results to differ materially from expectations.

Note: The yen amounts in these presentation materials are rounded down.

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Agenda

Initiatives Toward Medium-to-long-term Growth

Summary of the 1st Half of FY2010

Summary of FY2010 Forecast

Focal Issues and Progress in the 1st Half of FY2010

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Summary of the 1st Half of FY2010Summary of the 1st Half of FY2010

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Amid global economic recovery, results grew year-on-year and surpassed Kao’s forecast1, led by consumer-driven product development, efficient marketing and cost reduction activities.In Japan, a shift in consumer preference to lower priced products in the prestige cosmetics market and deflation in the household and personal care market continued.Kao responded by working to rebuild its cosmetics business and launching high-value-added products.The performance of the Consumer Products Business outside Japan and the Chemical Business was steady.

Amid global economic recovery, results grew year-on-year and surpassed Kao’s forecast1, led by consumer-driven product development, efficient marketing and cost reduction activities.In Japan, a shift in consumer preference to lower priced products in the prestige cosmetics market and deflation in the household and personal care market continued.Kao responded by working to rebuild its cosmetics business and launching high-value-added products.The performance of the Consumer Products Business outside Japan and the Chemical Business was steady.

Financial Overview – 1st Half of FY2010

Net sales: +0.4%

Net income: ¥27.8 billion +10.3%

¥601.3 billionYear-on-year

Net income per share: ¥51.93 +10.3%1. Forecast announced on April 26, 2010 2. Operating income before amortization of goodwill and intellectual property rights related to M&A

EBITA2: ¥75.1 billion +18.7%

4.6%

% of sales

12.5%Operating income: ¥57.8 billion +27.0%9.6%

+¥2.8 billion

+¥0.3 billion

+¥5.29

+¥8.8 billion

Versus forecast1

-

-

-

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Summary by Business – 1st Half of FY2010

Consumer Products excluding prestige cosmetics in Japan Consumer Products excluding prestige cosmetics in Japan

Prestige cosmetics in JapanPrestige cosmetics in Japan

Consumer Products in Asiaand OceaniaConsumer Products in Asiaand Oceania

Consumer Products inNorth America and EuropeConsumer Products inNorth America and Europe

ChemicalChemical

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Summary of Sales by Business – 1st Half of FY2010

Consumer Products in Japan: -3.2% (Includes effect of approximately \10 billion decrease in sales of Econa and related products)

Consumer Products excluding prestige cosmetics performed generally in line withour plan, with aggressive product launches in response to consumer and market changesRebuilding of prestige cosmetics business is underway

Consumer Products in Japan: -3.2% (Includes effect of approximately \10 billion decrease in sales of Econa and related products)

Consumer Products excluding prestige cosmetics performed generally in line withour plan, with aggressive product launches in response to consumer and market changesRebuilding of prestige cosmetics business is underway

Consumer Products in Asia and Oceania: +8.8% (Like-for-like* +7.7%)Sales continued to expand with further progress of integration of business operations in Asia, including Japan

Consumer Products in Asia and Oceania: +8.8% (Like-for-like* +7.7%)Sales continued to expand with further progress of integration of business operations in Asia, including Japan

Consumer Products in North America: -3.7% (Like-for-like* +1.4%)Consumer Products in Europe: -0.1% (Like-for-like* +6.9%)

New products led to a sales increase year-on-year on a like-for-like basis amid severe market conditions

Consumer Products in North America: -3.7% (Like-for-like* +1.4%)Consumer Products in Europe: -0.1% (Like-for-like* +6.9%)

New products led to a sales increase year-on-year on a like-for-like basis amid severe market conditions

Chemical: +14.3% (Like-for-like* +16.6%)Sales volume increased reflecting recovery of demand from customer industries, with Asia in particular driving growth

Chemical: +14.3% (Like-for-like* +16.6%)Sales volume increased reflecting recovery of demand from customer industries, with Asia in particular driving growth

* Change excluding effect of currency translation

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Focal Issues and Progress in the 1st Half of FY2010Focal Issues and Progress in the 1st Half of FY2010

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Three Focal Issues and Countermeasures in FY2010

High-value-added productsResponse to aging populationResponse to increasing health consciousnessResponse to rising environmental consciousness

Measures against deflation in the Japanese household and personal care market

Efforts for relaunch of functional healthy cooking oilExpansion of unique health solutions business combining a support program for healthy lifestyles and functional foods thathelp prevent lifestyle-related diseases

Revitalization of functional health food business and expansion of health solutions business

Reform of brands and marketingReform of sales methodsSynergy within the Kao Group

Rebuilding cosmetics business

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Focal Issues and Progress in the 1st Half of FY2010

Measures against deflation in the Japanese household and personal care market

Rebuilding cosmetics business in Japan

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Measures Against Deflation in the Japanese Household and Personal Care Market

New and improved products that contributed to results in the 1st half of FY2010

Beauty Care- Improved Merit hair care series- Essential Damage Care hair care series

Human Health Care- Laurier Speed Plus sanitary napkins- Deep Clean toothpaste and toothbrushes

Fabric and Home Care- Improved Attack Neo eco conscious liquid

laundry detergent - Resesh gel air freshener

Merit

Laurier Speed Plus

Attack Neo

Essential Damage Care

Deep Clean

Resesh gel air freshener

Launch of new and improved products with high added valuefrom the aspects of function, emotion and environmentLaunch of new and improved products with high added valuefrom the aspects of function, emotion and environment

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Prestige Cosmetics in Japan in the 1st Half of FY2010

The cosmetics market in Japan continues to shrink year-on-yearalthough the rate of contraction is decreasing.

The cosmetics market in Japan continues to shrink year-on-yearalthough the rate of contraction is decreasing.

Prestige cosmetics market in Japan -3.2% -4.1%Prestige cosmetics market in Japan -3.2% -4.1%

Source: SLI survey by INTAGE Inc. (Data based on tracking service of 40,060 female consumers nationwide in Japan)The database for Apr. 09-Mar. 10, including the number of female consumers, is different from the current SLI surveyand the data are presented for reference.

[Year-on-year growth in value terms] Apr.-Sept. 10 Apr. 09-Mar. 10

High-priced segment (over 5,000 yen): -5.3% -5.3%High-priced segment (over 5,000 yen): -5.3% -5.3%

Mid-priced segment (2,000-5,000 yen): -3.7% -5.6%Mid-priced segment (2,000-5,000 yen): -3.7% -5.6%

Low-priced segment (below 2,000 yen): +0.6% +1.1%Low-priced segment (below 2,000 yen): +0.6% +1.1%

(Reference)

Kao Group total (Kanebo Cosmetics + Kao Sofina) -1.1% -8.3%Kao Group total (Kanebo Cosmetics + Kao Sofina) -1.1% -8.3%

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Rebuilding Cosmetics Business in Japan

Reform of brands

Reform of marketing

Reform of sales methods

Maximization of cost synergy

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Reorganize and Integrate Skin Care Brands of Kao Sofina in Japan

Before reorganizationand integration Current focus brands

Department stores

Drugstores/G

MS

Over 50s

30s to 40s

20s

Whitening

By age bracket

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Nurture Priority Skin Care Brands of Kanebo Cosmetics in Japan

Departmentstores

Specialtystores

DrugstoresGMS

Nurture and strengthen megabrands* by distribution channelNurture and strengthen megabrands* by distribution channel

DrugstoresGMSSpecialty stores

Self-selection

Counseling

Expand product lines in response to market changes

GMS

Brands specificto distributionchannel

Build strong brands in growing segments

Enhance brand structure

Reinforce the brand through renewal

* Brands with annual sales of more than ¥10 billion

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Reinforce Makeup Brands of Kanebo Cosmetics in Japan

August 2010

Evolution of leading self-selection makeup brand in JapanCarry out promotions focusing on eyemakeup

December 2010

Full renewal of the brand to establish a solid position in the mid-priced counseling makeup marketShift of core target from the late 20s to the early 30sEmpathic communication with consumers

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Reform of Marketing

Focus marketing spending on nurturing strong brands in growing segments

Aging careGRACE SOFINA, EVITA, DEW SUPERIOR, suisai, Freshel Moist Lift

WhiteningBLANCHIR SUPERIOR, SOFINA beauté whitening aging care, Freshel White C

Sensitive skinfreeplus

Skin care priced around ¥1,000Fréshel THE BASIC

Efficient marketing spending by Integrated Brand Communications (IBC)

Optimize communication mix (mass advertising, Web, in-store counseling, etc.) for each product

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Reform of Sales Methods

Offer counseling on demand tailored to the ability of consumers to choose cosmetics by themselves

Optimize total deployment of beauty counselorsImprove counseling skills and thoroughly carry out basic customer service activitiesSupport and promote light counseling (simple counseling) by shop staff of retailers

Strengthen collaboration in sales function of Kao and Kanebo Cosmetics

Review and propose optimized SKUs for each storeReinforce maintenance of store displays of self-selection cosmetics of Kanebo Cosmetics in collaboration with Kao Merchandising ServiceShare sales offices

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Maximization of Cost Synergy

Reduce costs by consolidating logistics centers

Optimize media buying

Reduce cost of production and procurement

Estimated cumulative cost-cutting synergy from FY2006 toFY2010: Approximately ¥13 billionEstimated cumulative cost-cutting synergy from FY2006 toFY2010: Approximately ¥13 billion

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Initiatives Toward Medium-to-long-term GrowthInitiatives Toward Medium-to-long-term Growth

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Kao’s Mid-term Growth Strategies

Profitable growth driven by high-value-added productsProfitable growth driven by high-value-added products

Accelerate growth in the Beauty Care and Human Health Care* businesses

Further strengthen and develop Fabric and Home Care, a core business

Further enhance the Chemical Business globally and locally with distinctive products that meet customer needs

* The scope of “Human Health Care” does not include pharmaceuticals.

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Achieve Growth of Business Globally

R&D Production SalesBeauty CareBeauty Care

Human Health CareHuman Health Care

Fabric and Home CareFabric and Home Care

ChemicalChemical

Functional Units

Business U

nits

Corporate

Shift to ecology-centered management

Global “matrix management”

Establish corporate identity

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Global Expansion of BusinessAccelerate growth in the Asian region where Kao already operatesAccelerate growth in the Asian region where Kao already operates

Establishment of integrated global business operations

(including Kanebo Cosmetics Inc. and Beauty Care Business in North America and Europe)

Establishment of integrated global business operations

(including Kanebo Cosmetics Inc. and Beauty Care Business in North America and Europe)

Full-scale business development in BRICsFull-scale business development in BRICs

Integration of business operations in Asia, including Japan(Standardize business processes, cooperate, share The Kao Way)Reinforcement of focus brands in Asia(Bioré, Curél, Laurier, Attack)Expansion of target consumer base(From affluent to middle-class)

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[Consumer Products excluding prestige cosmetics]Sept. 2010 -Launch of cost-competitive Attack Instant Clean

Liquid water-saving type laundry detergenttargeting middle-class consumers

[Prestige cosmetics]Sept. 2009 -Launch of AQUA SPRINA brand manufactured in

China and sold in department stores-Launch of COFFRET D’OR makeup brand

Sept. 2010 -Launch of KATE makeup brand

Topics in Emerging Nations of Focus (2009-2010)

China

[Consumer Products excluding prestige cosmetics]Feb. 2009 - Introduction of Merries baby diapers through

an agencyMar. 2009 - Start of sales of John Frieda hair care brand

through an agency[Prestige cosmetics]

Sept. 2009 - Start of operation of subsidiary of KaneboCosmetics

- Reinforcement of SENSAI super-prestige brand

Russia

Attack Instant Clean Liquid

AQUA SPRINA

In-store display of KATE

SENSAI counter in Russia

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Summary of FY2010 ForecastSummary of FY2010 Forecast

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An uncertain business environment persists, stemming from factors such as the economic outlook and volatility in exchange rates and market prices of raw materials.Kao will reinforce its foundation for profitable growth with continuous development of high-value-added products in the Consumer Products Business excluding prestige cosmetics in Japan and the Chemical Business.Prestige cosmetics in Japan will aim to improve its profitability by structural reform.Kao will expand its businesses in Asia, driven by China.Kao has revised its operating income forecast upward by ¥8 billion from its forecast announced in April 2010.

An uncertain business environment persists, stemming from factors such as the economic outlook and volatility in exchange rates and market prices of raw materials.Kao will reinforce its foundation for profitable growth with continuous development of high-value-added products in the Consumer Products Business excluding prestige cosmetics in Japan and the Chemical Business.Prestige cosmetics in Japan will aim to improve its profitability by structural reform.Kao will expand its businesses in Asia, driven by China.Kao has revised its operating income forecast upward by ¥8 billion from its forecast announced in April 2010.

Summary of FY2010 Forecast

1. Operating income before amortization of goodwill and intellectual property rights related to M&A2. Net income per share and ROE are calculated reflecting the purchase of the Company’s stock up to 8.5 million shares

or ¥15 billion during the period from October 27 to December 20, 2010

Net sales: +0.1%

Net income: ¥53.0 billion +30.8%

¥1,185.0 billionYear-on-year

Net income per share2: ¥99. 37 +31.5%

Consolidated payout ratio:

EBITA1: ¥139.5 billion +7.7%

4.5%

% of sales

11.8%

Shareholder returnsROE2: +210bps9.4%

¥5858.4%

Cash dividends per share:

Operating income: ¥105.0 billion +11.7%8.9%

¥1 increase

Share repurchase: Up to 8.5 million shares or ¥15 billion

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2. Steady and continuous cash dividends2. Steady and continuous cash dividends

Use steadily generated free cash flow effectively from an EVA standpoint toward further growth.Use steadily generated free cash flow effectively from an EVA standpoint toward further growth.

Use of Free Cash Flow*

* Free cash flow = Net cash provided by operating activities + Net cash used in investing activities

1. Capital expenditures and M&A for future growth1. Capital expenditures and M&A for future growth

3. Share repurchases and repayment of interest-bearingdebt including borrowings

3. Share repurchases and repayment of interest-bearingdebt including borrowings

Cash dividends per share: ¥58Consolidated payout ratio: 58.4%

FY2010forecast

Share repurchasesUp to 8.5 million shares or ¥15 billion during the period from October 27 to December 20, 2010Share repurchases totaling approximately ¥30 billion, including the above,by March 31, 2011 are under consideration

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AppendicesAppendices

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Fabric and Home Care 1H/FY2010 sales: ¥141.0 billion

Chemical1H/FY2010 sales: ¥115.0 billion

Beauty Care1H/FY2010 sales: ¥272.5 billion

Human Health Care1H/FY2010 sales: ¥89.2 billion

Business Segments and Main Product Categories

Consumerdriven

Consumerdriven

Laundry detergents and fabric treatmentsProducts for kitchen, bath, toilet and living room care

Oleo chemicalsPerformance chemicalsSpecialty chemicals

Note: Sales include intersegment sales. Share of net sales is calculated based on sales to customers.

Beauty salon productsPrestige cosmeticsPremium skin carePremium hair care

BeveragesOral careBlood circulation enhancement products(incl. bath additives and thermal pads )Sanitary products

Consum

er Products B

usinessC

hemical B

usiness

Consum

er Products B

usiness

[-1.1% year-on-year / Share of net sales: 45.3%] [-8.9% year-on-year / Share of net sales: 14.8%]

[-0.0% year-on-year / Share of net sales: 23.5%] [+14.3% year-on-year / Share of net sales: 16.4%]

Consum

er Products B

usiness

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FY2010 Breakdown of Beauty Care Business

1. Increase (decrease) in percent for net sales and billion yen for operating income2. Includes amortization of goodwill and intellectual property rights related to M&A

- Beauty Care: ¥17.2 billion- Prestige cosmetics: ¥14.3 billion- Premium mass products and professional hair care products: ¥2.9 billion

3. Operating income ratio before deduction of royalties

Kanebo CosmeticsNet sales:Slightly more than ¥90 billionEBITA as a % of sales3 :Approx. 2%

Billion yenIncrease

(Decrease)1

Net sales 272.5 (1.1%)

Operatingincome2 5.2 +4.1

Operatingmargin 1.9% +150bps

Prestige cosmetics Net sales 126.8 (3.0%)

Operatingincome2 (15.8) +1.1

Operatingmargin (12.5%) +50bps

Premium mass products andprofessional hair care products Net sales 145.7 +0.5%

Operatingincome2 21.1 +2.9

Operatingmargin 14.5% +200bps

Beauty Care

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SRI Indexes and External CSR Evaluation

SRI indexes for which Kao has been selected

CSR: Corporate Social Responsibility SRI: Socially Responsible Investment

CSR-related evaluation from external organization

(As of October 26, 2010)