Rakuten, Inc.
Annual Report 2011``Creating
Annual Report

Fiscal Year Ended December 31, 2011

Rakuten, Inc. TEL: +81-3-6387-1111 URL: http://global.rakuten.com/investor/
Shinagawa Seaside Rakuten Tower, 4-12-3 Higashishinagawa, Shinagawa-ku, Tokyo 140-0002, Japan''
New Value
Annual Report
Fiscal Year Ended December 31, 2011

Our
Presence

Scaling our proven
Internet-services business globally

Our
Operations

Our
Backbone

Our
Performance

Corporate Information

Company Overview

Rakuten’s business model is more comprehensive than many of ourglobal peers. Rakuten is not an online retailer, instead, we provide amarketplace, applying our advanced systems to benefit both online
customers and our merchants, resulting in gross merchandise sales(GMS) of over ¥1 trillion (US$12.9 billion) in fiscal 2011.
In Japan, our brand recognition approaches 100%, and some 70%
of online individuals have used one of our services, which extend fromgeneral e-commerce to travel, credit card, banking and other services.
We are now expanding our services via this unique business modelto new markets around the world. We see 2012 as the opening year oftrue globalization. It means greater empowerment for all, by fulfilling
more of the Internet’s true potential.

Our
Strategies

Name

Rakuten, Inc.

FoundedFebruary 7, 1997

Service Launched

May 1, 1997

IPO

April 19, 2000

Capital107,959 million yen(As of December 31, 2011)

Employees

7,615 (Consolidated)

Headquarters

Shinagawa Seaside Rakuten Tower,
4-12-3
Higashishinagawa, Shinagawa-ku,
Tokyo 140-0002, Japan

Stock Information
Stock Code4755 (Osaka Securities Exchange)

Fiscal Year

January 1 to December 31

Month of Annual General
Shareholders’ Meeting

March

Shareholder
Record Date

December 31

Transfer Agent

Sumitomo Mitsui Trust Bank, Limited

Contact

Sumitomo Mitsui Trust Bank, Limited
Stock Transfer Agency Department
1-10 Nikko-cho, Fuchu-shi,
Tokyo 183-8701, Japan

Number of Shares and Shareholders(As of December 31, 2011)
Number of Shares Authorized

39,418,000 (common stock)Total Number of Shares Issued

13,194,578 (common stock)76,508

Number of Shareholders

Main Shareholders(As of December 31, 2011)
Number ofsharesPercentage
held

Crimson Group, Inc.

2,264,190

17.16

Hiroshi Mikitani

2,175,720

16.49

Haruko Mikitani

Name

1,458,750

11.06

CBNY-ORBIS FUNDS

352,641

2.67

Masuda and Partners Inc.

344,610

2.61

THE CHASE MANHATTAN BANK 385036

314,004

2.38

The Master Trust Bank of Japan, Ltd.
(Trust Account)

288,227

2.18

MELLON BANK, N.A. AS AGENT FOR ITS
CLIENT MELLON OMNIBUS US PENSION

264,120

2.00

Japan Trustee Services Bank, Ltd.
(Trust Account)

256,768

1.95

CBNY-ORBIS SICAV

214,600

1.63

Classification by Type of Shareholder(As of December 31, 2011)

IndividualsContents

Foreign financial institutions
and individuals

Inquiry

Other domestic corporations
Domestic financial institutions

Our Message

Our Backbone

01 To Our Shareholders
02 An Interview with the CEO

16 Our Social Responsibility
20 Board of Directors and Company Auditors
21 Corporate Governance

Our Strategies
06 Domestic E-Commerce Business

Our Performance

10 Worldwide Expansion

25	Financial Section
32 Consolidated Subsidiaries and Affiliated Companies
34 Corporate History
35 Corporate Information

Our Operations
12 Financial Highlights
13 Review of Operations

Investor Relations, Rakuten, Inc.
URL http://global.rakuten.com/investor/

Securities firms
Others37.11%
34.93%
20.13%
6.90%
0.46%
0.47%

Cautionary Statement
Origins of the Name Rakuten
Rakuten Ichiba is named after Rakuichi-Rakuza , the first free and open marketplacein Japan, opened in the 16th century.
When used as a verb, raku is written with a Chinese character meaning to enjoy
oneself (楽). The same character is used in Rakuten, which means “positive spirit.” The
name Rakuten Ichiba literally means a “market of positive spirit,” where shopping isentertainment. These words symbolize the driven, forward-looking nature of ourbusiness. That is why we named our company Rakuten, Inc.

In this report, unless indicated otherwise, references to “Rakuten”, “Rakuten Group”,“we”, ”our” and “us” are to Rakuten, Inc. and its consolidated subsidiaries and consolidated affiliates. Statements regarding current plans, strategies, beliefs and other statements that are not historical facts of the Rakuten Group are forward-looking statements.
Such forward-looking statements are based on management’s assumptions and beliefs
in light of information currently available, and it should be noted that risks and unforeseen
factors could cause actual results to differ significantly from those discussed in the report.
We do not intend to update these forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by applicable laws.
“Rakuten”,
andare registered trademarks of Rakuten, Inc. in Japan.

35

Our
Message

Our
Strategies

Our
Operations

Our
Backbone

Our
Performance

To Our Shareholders

Creating
New Valuearound theWorld

In the current recessionary trend around the world, Rakuten intends topursue growth through investing in fast-rising services and fast-growing
markets. We will strengthen our dominance in Japan and, by creating asingle global management platform, accelerate our expansion into newgeographic markets. Our marketplace business approach is expected tobring more services to more consumers in the near term and higher returns
to shareholders over the long term.

Hiroshi Mikitani
Chairman and CEO

1

An Interview with the CEO“The most important point in taking
this type of international expansion to a
succession of countries is how quickly
we can implement the Rakuten Shugi.”

Q1. How were the Rakuten Group’s results for fiscal 2011?
In fiscal 2011 (the 12 months ended December 31, 2011), the Rakuten Group swiftly

A1. implemented measures directed at enhancement of added value and user conveniencein domestic Internet services. In domestic financial services, we restructured the segment centering
on a reorganization of the credit card business and had to take an extraordinary loss as a result.
But this move enabled us to put in place a solid platform for launching into a new growth stage.
Overseas, the Group carried over its expansion from 2010 and sped up its pace, as well as moving
forward on augmenting its marketplace business and developing technology for overseas. We
also got started in the e-book business. The results of these efforts are Rakuten Ichiba annual
GMS that topped the ¥1 trillion mark, accompanied by consolidated net sales of ¥379,901 million(9.8% growth from the previous fiscal year), operating income of ¥71,344 million (an 11.9% annual
increase)—all record high results.

2011 was a year of great changes for the Japanese economy.

Q2. What kind of business environment did you face in the domestic market?
In fiscal 2011, the Japanese economy went into a temporary stall from the effects of

A2. the Great East Japan Earthquake but then gradually picked up speed. Meanwhile, in
the Internet shopping market, many residents rediscovered the necessity and convenience of
the Internet. In the aftermath of the earthquake, the Tohoku and Kanto regions saw shortages at
physical stores, so many consumers purchased daily consumables like rice and water through theInternet. This started a trend that continues to today of users who are not accustomed to Internet
shopping becoming repeat purchasers as a result of its convenience. In addition, the worldwide
spread of smartphones has created an environment in which goods can be purchased on theInternet anywhere and anytime, which has been a positive force for our Group. Due to thesereasons, I believe that the shift in consumer purchasing behavior from real stores to the Internet willcontinue its upward trend.

2

Our
Message

Our
Strategies

Our
Operations

Our
Backbone

Our
Performance

Q3. What is your next target for Rakuten Ichiba’s GMS?
Rakuten Ichiba has shown rapid growth since our founding. We now stand shoulder to

A3. shoulder in size with the large department stores. But we aren’t finished yet. We haveraised our target for annual GMS to ¥10 trillion. Today, the total retail market accounts for roughly¥174 trillion, according to the Ministry of Economy, Trade and Industry. This means that we havegrabbed only a 0.5% share of the total retail market in Japan. In the future, e-commerce will evolvefrom all angles, including the purchasing process, product lineup and logistics. As the market
grows, prices will fall and shipping fees too. And a dedicated logistics platform may also come into
place. To have their “we need it now” demand taken care of, households could shift a large partof their spending to e-commerce. We intend to set out diverse strategies in our quest for the ¥10trillion milestone.

In just a few years, Rakuten has moved rapidly into overseas markets. What will you

Q4. turn your attention to in order to ensure that Rakuten’s business techniques are
firmly in place in a number of countries?

The Group’s overseas expansion started out with our e-commerce business moving

A4. into Taiwan in 2008 and Thailand in 2009, followed by the U.S. and France in 2010.

Then in 2011 we acquired Tradoria in Germany, Play.com in the UK, and Ikeda in Brazil andmade these leading local e-commerce operators into subsidiaries. We also opened the Rakuten
Belanja Online Internet shopping mall in Indonesia.
We are prioritizing implanting the same B2B2C (business-to-business-to-consumer)
marketplace model as Rakuten Ichiba in all of these acquired businesses. Companies like Buy.
com and Play.com who follow a direct-sales model of selling goods out of their own inventories
are changing their model to the same marketplace model of Rakuten Ichiba. Naturally, we arealso rolling out a variety of measures to support our merchants in the same way we do herein Japan at Rakuten Ichiba. We will add to this by introducing our most effective marketing
tool, the Rakuten Super Points program, in each country. From our experience in Taiwan and
Thailand, we have learned that introducing points programs boosts customers’ purchases.
The most important point in taking our international expansion to a succession of countries
is how quickly we can share the philosophy we call Rakuten Shugi (Rakuten basic principles).
These steps will not be limited to thorough sharing of KPI management and know-how by thebusiness segments; they will extend to nurturing a corporate culture that allows the formationof highly agile teams capable of achieving their goals.

3

“In January 2012, we completed theacquisition of Kobo Inc., a company that deals
in e-book readers and content, an essential
growth area.”

Q5. Could you tell us about your entry into the e-book business?
We had thought that we must enter the e-book business with its highA5. worldwide growth potential. In January 2012, we completed the acquisition of Kobo
Inc., a company that deals in e-book readers and content. Kobo has taken its business intoa dozen countries in North America, Europe, and Oceania and offers e-book content in over
100 countries. We have plans to enter Japan’s e-book market in 2012. Kobo is constructing
a leading edge e-book business model that includes installation of their own social networkfeature and support for a wide range of devices and languages. In addition, Kobo is building
win-win alliances with major retailers and book stores in numerous locales. Since theirbusiness concept and direction are remarkably similar to Rakuten’s, they will be a new arrow in
our quiver for extending our worldwide expansion. On top of this, there are certain countries wewish to enter with e-books faster than with e-commerce. This is significant in that we foresee arole for Kobo as a trailblazer for some countries.

Q6. What major initiatives does Rakuten have in mind for 2012?
The Rakuten Group in 2012 will take on the following initiatives that emphasize theA6. strengthening of our dominance in Japan and putting a global management platform
in place.
1. Strengthen Dominance in Japan
Internet innovation and the Internet revolution will move forward in 2012, even if the global
economy stays challenging. So we need to strengthen our presence in Japan. We have thelargest market share in the major business verticals of e-commerce, travel, online banking, etc.
2. Create Single Management Platform Globally
To make more progress in our globalization project, we need to change the way we think.
To do so, we need to create a single management platform globally. Irrespective of our4

Our
Message

Our
Strategies

Our
Operations

Our
Backbone

Our
Performance

Englishnization success, global management is a little bit segregated, so in 2012 we would liketo encourage more communication amongst our global management to share best practices.
We will create a new corporate governance structure with regional headquarters and openly
discuss matters within our global management team.
2011 was the completion year for the first step of the global Rakuten Group. 2012 will be theopening year for our true globalization.

Q7. What is Rakuten’s outlook for 2012?
In the year ending December 31, 2012, we anticipate further expansion in the use of ourA7. services in Japan including e-commerce and travel, resulting in continued high growth.

In financial services, we expect the unsettled market conditions to persist, but neverthelessanticipate sustained earnings growth created from synergies within the Rakuten Group. We will
also continue to make strategic allocations of resources and active investments in high-growthareas such as e-books in order to open up more mid- and long-term earnings opportunities. While
making these advance investments, Rakuten intends to surpass the financial results of 2011.
In addition to our activities in the rapidly changing environment of Internet-related businessin Japan and overseas, Rakuten, Inc. and our group companies are also involved in the
securities business and other finance-related business activities, with the result that businessperformance is affected by financial market trends and other factors. This precludes us frommaking earnings forecasts.

Q8. Could you explain Rakuten’s policy on shareholder returns?

Dividend per Share(Yen)

Our basic policy on returns to shareholders reflects our commitment
to the maximization of shareholder value. Healthy growth in income
is a core management priority for the Rakuten Group, and we continually strive
to maximize business performance and strengthen our financial fundamentals.
For this reason, our policy to maintain stable dividends runs alongside ourdesire to retain sufficient income to build the reserves needed to develop ouroperations and maintain a sound financial structure. On this basis, we havesought to maintain stable dividends. In keeping with this basic policy, we paid
a dividend of ¥250 per share for fiscal 2011 (versus a dividend of ¥200 per
share for fiscal 2010).

A8.

250

200

150

100

50

0

FY

’07

’08

’09

’10

’11

5

Domestic E-Commerce Business

Rakuten Ichiba
Empowering
Merchants
Rakuten Ichiba started its life 15 years ago, conceived not as a place for Internetsavvy users to do business, but rather as a place where business people canmake use of the Internet to market their goods.
Ever since, Rakuten and its honored group of merchants have been clearing theway for the Japanese e-commerce market, culminating in the recent surpassing ofthe ¥1 trillion mark in GMS.

The Concept behind Rakuten Ichiba
Rakuten Ichiba has a rich user experience produced by the pleasure of buying products at
a variety of shops, each with its own features. Shopping itself has traditionally been a formof entertainment; yet this entertainment aspect is not found at other e-commerce sites,
which tend to be product-centric, employing a passive model. Rakuten Ichiba, in contrast,
has transported a bustling shopping district onto the Internet, where merchants design theirown sites and give users a pleasurable experience by communicating with them throughe-mail and social media. These features give our site a more captivating charm than othere-commerce sites. In fact, in one 24-hour period, during the Rakuten Super Sale on March
4, 2012, the site recorded GMS of ¥13 billion. This is a clear example of Rakuten and ourmerchants reaping synergistic effects through a festival-like shopping event. Rakuten
focuses on a B2B2C marketplace model, and with a few exceptions like books, Rakuten does
not do direct sales of its own goods. Other e-commerce companies will make direct sales ofthe same products that are sold by their listed merchants, creating a conflict of interest. This
does not happen at all at Rakuten, where participating merchants have no limits placed on
their direct access to customers. This is Rakuten, the Empowerment Company.

6

Our
Message

Our
Strategies

Our
Operations

Our
Backbone

GMS ofRakuten Ichiba
and Books

Our
Performance

2011
Rakuten Ichiba
surpassed¥1 trillion

2009
Rakuten Bank,
Ltd. becomes a
subsidiary

2008
Logistics businessis started

1997
Rakuten Ichibacommences
operation

2000

2005

Rakuten listedon the JASDAQ
marketCore credit card
“Rakuten Card” islaunched

2002“Rakuten Super
Points Program”
is introduced

2001
Rakuten Travel
starts online
reservation
services

’01

’02

’03

’04

’05

’06

’07

’08

’09

’10

’11

Empowering Merchants

Merchant Recruitment and Support

E-Commerce Consultants (ECC): Rakuten boasts a set of
500 or so e-commerce consultants to support its merchants
at 15 branches across Japan. Their mission is simple: sales
growth at more than 38,000 listed merchants. This mission
goes beyond simply sharing goals with assigned merchants
and puts the merchants and the consultants squarely in thebusiness of solving problems together. Consultants advise
merchants on best practices and also share marketingstrategies designed by consultants who are e-commerce
experts in that product genre.

Rakuten University: Seminars are held under the name of“Rakuten University,” where instruction revolves aroundcase studies that allow attendees to learn numerous lessons
from both success stories and failures. Merchants that haveattended Rakuten University have seen a more than triplingof net sales per merchant compared to those not attending.
A total of 17 courses ranging from the fundamentals ofcustomer service for Internet users to business operations
are offered. We plan to increase the number of attending
merchants and provide even better quality customer service.

7

Domestic E-Commerce Business

Rakuten IchibaEntertaining
Consumers
Entertaining Consumers
Rakuten members: Rakuten runs a wide set of initiatives to enliven shopping on Rakuten
Ichiba. One example is member status. Members can have their status lifted to silver, gold,or platinum depending on frequency of purchases and accumulated points. The number ofmembers with preferred status of silver or higher has been climbing every year. We are also
cultivating high-loyalty, gold and platinum members who benefit from such privileges as
invitations to exclusive sales.
Rakuten Super Points: The most popular rewards program in Japan is Rakuten Super Points,
which normally rewards each 100 yen of purchases with 1 point. Points can then be spent at
1 yen = 1 point, not only for future purchases but also for other Rakuten services like travelbookings and even banking services.
Also, since Rakuten card members are rewarded 1% of their total card payment
additionally in points, members of Rakuten Ichiba who have become Rakuten Card members
have significantly increased their purchase value on Rakuten Ichiba. In this way, Rakuten Card
has been a big help in raising user loyalty.
Product lineup and price: Rakuten Ichiba offers products from well-known companies
and also local specialty merchants. This rich variety of offerings makes Rakuten Ichiba a
shopping mall with a “long tail”. At the end of fiscal 2011, roughly 90 million SKUs (Stock
Keeping Units) were listed. Many of them have lower prices than other big e-commerce sites(according our internal surveys). We will enhance our product line-up by acquiring largescale (or large) merchants.

Examples of large-sized merchants on Rakuten Ichiba (as of April 2012)
Department stores/Supermarkets; Takashimaya, MARUI, SEIYU
Apparel; WORLD, FOREVER21, adidas, ABC-MART
Consumer electronics; edion, BIC CAMERA, HP, Dell, lenovo, Sony, TOSHIBA, PanasonicHome goods; TOKYU HANDS, Shell, DHC

8

Our
Message

Our
Strategies

Our
Operations

Our
Backbone

Our
Performance

New ChallengesinMasato Takahashi
Senior Executive Officer,
Rakuten Ichiba Business2012

Rakuten Ichiba surpassed ¥1 trillion in GMS for 2011 toestablish a commanding position with over 25% share of
the Japanese B2C e-commerce market. Rakuten Ichiba’s
next long-term goal is ¥10 trillion in GMS, and we haveembarked on the paths below to reach this goal.

1

Strengthening our relationship with loyal customers

2

Augmenting our smartphone and tablet solutions

3

Improving delivery service

Japan has about 95 million Internet users. Rakuten members number roughly 75 million,and 11.72 million of these users made at least one purchase on Rakuten Ichiba each quarter(data from the fourth quarter of 2011). By attracting new users and leveraging existing ones,
we can cultivate this market even further. Private sales for preferred status members werea big hit during the year and helped raise frequency of purchases and purchase value. In
2012, we will develop more high-loyalty customers through more fine-grained analysis ofcustomer segmentation.

The spread of smartphones has moved at a blazing pace and we are likely to see a switch indominance from feature phones to smartphones in the near future. Rakuten Ichiba is seeing
rapid growth in GMS transacted through smartphones. Statistics show that smartphoneusers have higher purchase value per person than do traditional feature phone users and that
customers who begin using a smartphone in combination with a PC or tablet computer will
increase their purchase value. For these reasons, we will enrich our services for smartphones
and tablet devices in 2012.

The “Asuraku” next day delivery service experienced major growth in usage during 2011.
Meanwhile, people started to rely more on e-commerce after the Great East Japan Earthquake,and became aware of Rakuten Ichiba’s role in the community as a quick and reliable supplierof daily consumables like rice and water. During the year, we also improved Rakuten logistics
services as a means to support deliveries by listed merchants. While e-commerce steadily
increases in popularity, Rakuten is making a solid effort to expand our services and productline-up, particularly in areas like food.

9

Worldwide Expansion

UK

Rakutenhead office,Japan
Germany

FranceEuropeAsia

Reaching
Our Potential
With a Global Business Platform

ThailandTaiwanIndonesia

The Rakuten group is accelerating overseas growth, taking know-how
from each country and building synergy under global management bestpractices—all to become the No.1 Internet services business in the world.

Rakuten Shugi as a single flag fordifferent European cultures

Pierre Kosciusko-Morizet
CEO, PriceMinister S.A.S.

10

Europe’s consumer life is becoming more and more centered around the digital
economy. But Europe has many distinct local cultural habits, languages, taxes
and legal environments, which we have to accommodate. The confidence ine-businesses, delivery systems and payment preferences also varies widely
across Europe. I think that one single Rakuten brand and some shared principles,
like Rakuten Shugi, will help the Rakuten Group to build a truly No. 1 e-commercegroup in Europe. When we apply the Rakuten vision of “Empowerment”
everywhere in Europe, it will powerfully unify Rakuten, our merchants andconsumers under the same Rakuten red and white win-win flag.

Our
Message

Our
Strategies

Our
Operations

Our
Backbone

Our
Performance

CanadaAmericas
United States

Yuichi Ejiri
President, Taiwan Rakuten Ichiba Inc.

United States

BrazilShopping mall businessTravel business
Performance marketing business
Rakuten Institute of Technology
Development Center

Taiwan Rakuten Ichibadeveloping high quality
services
Taiwan Rakuten Ichiba, our first overseas e-commerce
venture, has outstripped its competitors since its launch
in 2008, and seized the No.1 position in the Taiwan
e-commerce marketplace. It is fully utilizing the businessresources of its parent companies Rakuten, and President
Chain Store Corp, to build a unique, unrivalled Rakuten
ecosystem in Taiwan. Fans on its Facebook site have growninto one of the largest in the Rakuten Group. We also havelinks between Taiwan Rakuten Ichiba and Rakuten Ichiba inJapan and promote cross-border shopping experience inboth countries.

Buy.com significantly opening up
its Marketplace

Neel Grover
CEO and President, Buy.com Inc.

Buy.com provides merchants in North America with the best online marketplacesolution, and customers with the best value for the widest selection of retailgoods. We have significantly opened up our Marketplace to sellers of all sizes,
giving us much broader product coverage, to become the one-stop online
destination in the U.S., with highly sophisticated social shopping experiences.
Further, we have begun a “white label” offering with large traffic sites (major
retailers and portals), allowing Buy.com to power their web sites and to sell
SKUs from the Buy.com Marketplace. This will make Buy.com a key integration
component for other merchants to sell on any other major Marketplace in the U.S.

11

Financial Highlights

Thousands of
U.S. dollars

Millions of yen

Fiscal Year

2009

2010

2011

2011

Income and Loss
Net sales¥ 298,252¥ 346,144¥ 379,901$4,886,811

Operating income

56,64963,766

71,344

917,724

Net income (loss)

53,56434,956(1,140)(14,659)

27,586$ 354,849

Cash FlowsNet cash provided by (used in) operating activities¥(55,219)¥30,305¥

Net cash provided by (used in) investment activities

217,160(60,538)

56,351

724,871

Net cash (used in) provided by financing activities(174,157)

27,609(34,648)(445,695)

Total assets¥1,759,237¥1,949,517¥1,914,561$24,627,752

Total liabilities

1,540,617

1,700,283

1,679,576

21,605,040

Total net assets

218,620249,234

234,986

3,022,712¥15,527.21¥18,160.62¥17,390.59$223.7(1.11)

Assets and Liabilities

Per Share (in yen and U.S. dollars)
Total net assets
Net income (loss)
Basic4,092.17

2,666.28(86.80)

Diluted

4,077.62

2,657.43——

Dividend

100.00200.00250.003.21

Notes:	U.S. dollar figures have been translated from yen, for convenience only, at the rate of ¥77.74 to US$1, the approximate rate of exchange at December 31, 2011.

Net Sales

Operating Income

Operating Margin(Billions of yen)(Billions of yen)

(%)

379.9

400

71.3

20

300

60

15

200

40

10

100

20

5

0

FY

’09

’10

’11

0

FY

ROE

Total Assets(%)(Billions of yen)

30

’10

’11

-0.5
FY

’09

’10

’11

0

’09

’10

’11

234.9

250
200
150
100

500

0

FY

(Billions of yen)

1,914.5

1,000

10

0

18.8

Net Assets

1,500

20

-10

’09

2,000

40

12

80

50
FY

’09

’10

’11

0

FY

’09

’10

’11

Our
Message

Our
Strategies

Our
Operations

Our
Backbone

Our
Performance

Review of Operations

Internet Services
Rakuten Ichiba, Travel Business, Other Domestic Internet Services, Overseas Businesses

Net Sales

Rakuten Ichiba
Rakuten Travel
Others(Billions of yen)

’10
’11
0

50

100

150

200

250

60

80

Operating Income(Billions of yen)

’10
’11
0

20

40

During fiscal 2011, we made an aggressive rollout on Rakuten Ichiba of services for
190,849
smartphones, enriched its set of listed stores, and made improvements in logistics
service. Together with strong marketing efforts, these actions led to another high228,567
growth year in domestic e-commerce GMS with a 16.4% year-on-year surge. We also
undertook an aggressive expansion in the international marketplace, including theconstruction and opening of an Internet shopping mall in Indonesia together with turning
e-commerce operators in Brazil, Germany, and the U.K. into consolidated subsidiaries
and the decision to add a Canadian e-book operator as a subsidiary. Thanks to a fruitfulmarketing strategy to spur demand, the travel business showed solid growth in gross
58,128 transaction volume (GTV).
booking
These good showings yielded overall Internet Services segment results of ¥228,568
65,782
million in net sales, a 19.8% increase from the previous fiscal year, and ¥65,783 million
in segment operating income, a 13.2% year-on-year increase.

Rakuten Ichiba

Solid Growth in Unique Buyers
Unique buyers of Rakuten Ichiba (buyers
who made any purchase during the quarter)grew solidly in fiscal 2011, reaching 15.1%
year-on-year growth in the fourth quarterto over 11.72 million buyers. There are over
75 million Rakuten members today, andindications show that the number of active
buyers among them is expanding steadily.

While the Japanese e-commerce market
achieved 11.4% annual growth in 2011*,
Rakuten Ichiba (Rakuten Books included)
turned in even higher growth with a 17.1%
year-on-year increase in GMS, resulting in a
29.9% market share.
* Data from Fuji-Keizai Research

Rakuten Ichiba
Number of Unique
Buyers(Millions)

12
9
6
3
0

Q4/’10 Q4/’11

Rakuten Travel

Strong Trend in Gross Booking Transaction Value
Rakuten Travel, one of Japan’s largest
travel companies, with more than 25,000
registered accommodations, stands
apart from its competitors through its useof Rakuten Super Points and practicalsmartphone applications. With the growing
popularity of Dynamic Packages, whichallows travelers to search and reserve

airplane tickets, accommodations, andrental cars in a single package, GTV(before cancellation) rose a solid 14.9%
over the previous year. Aiming to become
Asia’s top travel site, Rakuten Travel isdeveloping a richer lineup of services inJapan, leveraging its 15 overseas locations
centering on Asia (December 31, 2011).

Rakuten Travel
GTV(Billions of yen)

500
400
300
200
100
0

’10

’11

13

Review of Operations

Internet Finance
Credit Card Business, Banking Business, Securities Business, E-money Business and others
Credit Card Business
Rakuten Bank
Rakuten Securities
OthersNet Sales(Billions of yen)

’10
’11
0

30

60

90

120

150

9

12

15

Operating Income(Billions of yen)

’10
’11
0

3

6

In credit-related services, we had a solid increase in Rakuten Card membership
137,234
applications, leading to large growth in shopping transaction volume and revolving
shopping balances as of December 2011. In the banking business, an effective
141,160
marketing campaign aimed at Rakuten members increased personal loan balancesand helped lift the bank to a strong increase in earnings. In the securities business, weachieved top industry status in new accounts for 2011 and increased the number ofcomprehensive accounts by 17.5% over the previous fiscal year. It managed to remain
firmly in the black, despite weak trading commissions and a bearish mood in the stock
market.
12,011Overall, the Internet Finance segment had 2.9% growth in net sales to ¥141,161
million compared to the previous fiscal year, while segment operating income grew
13,326
10.9% year on year to ¥13,326 million after recording a ¥4,264 million provision as aresult of recalculation of interest repayments.

Rakuten Card

Reorganization of Credit Card Business
The Internet Finance business capitalizes
on synergies within the Rakuten Group to
realize steady growth. In August 2011, we
reorganized the credit card business inorder to concentrate corporate resourceson Rakuten Card, a core business. The
Rakuten Card-related business of theformer Rakuten KC Co., Ltd., a Rakuten
consolidated subsidiary, was transferredto the former Rakuten Credit Co., Ltd.,

another Rakuten consolidated subsidiary,
and renamed Rakuten Card Co., Ltd. We
also sold our shareholdings in Rakuten KC,
which runs the remaining businesses not
related to Rakuten Card. Rakuten Card ishighly valued by its cardholders for Rakuten
Super Points Program linkage. As a result,the Rakuten Card shopping transaction
volume grew by 44.4% year on year.

Rakuten Card
Credit Card Shopping
Transaction Volume(Billions of yen)

1,500
1,200
900
600
300
0

’10

’11

Rakuten Bank

High-Risk Assets Eliminated, Now Fully in Growth Orbit
In 2011, Rakuten Bank disposed of its
remaining high-risk assets, especiallycommercial mortgage-backed securities(CMBS) held prior to its acquisition by
Rakuten, and has reinforced its structure
for producing reliable profits. Meanwhile,
Rakuten Bank concentrated its efforts on
programs to create synergies within theGroup, such as launching the Money Bridge

14

service to link accounts with Rakuten
Securities and marketing campaigns
aimed at Rakuten Ichiba members. These
initiatives brought about 6.9% annual
growth in the number of accounts to 3.91
million, and high 25.0% growth to ¥146.8
billion for the loan receivables balance ofRakuten Bank Super Loans, a personalloan program.

Rakuten Bank
Outstanding
Super Loans(Billions of yen)

150
120
90
60
30
0

’10

’11

Our
Message

Our
Strategies

Our
Operations

Our
Backbone

Our
Performance

OthersTelecommunications Business, Professional Sports and others

Net Sales(Billions of yen)

’10
’11
0

10

20

30

40

900

1,200

Operating Income(Millions of yen)

’10
’11
0

300

600

36,461In the telecommunications business, we achieved growth in new subscribers in its
Internet service provider business, although harsh conditions in IP telephony caused
34,174net sales to continue on a downward slope. By also making headway on reducing fixed
costs and through retroactive settlements of interconnection fees with other carriers, thesegment was able to achieve record-high operating income. In the professional sportsbusiness, The Tohoku Rakuten Golden Eagles professional baseball team had good
corporate sales to sponsors and for broadcast rights, while home-game attendance
grew despite the impact of the Great East Japan Earthquake, leading to an overall
193 growth in net sales.
1,142 As a result of these factors, the Others Segment’s results consisted of a 6.3%
decline in net sales to ¥34,175 million and a 489.6% rise in segment operating income to¥1,142 million.

Telecommunications

Favorable Results from Internet Connections and New Services
In 2011, the telecommunications businessturned its attention to attracting new
subscribers to the Rakuten Broadband
Internet connection service.
In another newly launched service, westarted offering the Fusion Connect cloud
telephony service that features low-coststart-up and short system construction
times. The system has already been
installed at the Rakuten Ichiba call center.
Not limiting itself to existing services, but
seeking new growth paths, we aim to offer
new services that respond to market needsin the telecommunications field.

Professional Sports

Higher Revenues in Spite of the Earthquake
In 2011, the Tohoku Rakuten Golden
Eagles baseball club adopted the slogan“Gambarou Tohoku!” (We’re Behind You
Tohoku!) for a series of support activities
created for earthquake recovery efforts(which are centered in the team’s homearea in east Japan). These include visits

by Eagles players and exhibition games indisaster-stricken areas as well as sales ofcharity goods.
Such activities brought in the TohokuSendai area fans, leading to increased
attendance at home games and higher
revenues compared with last season.

15

Our Social Responsibility

Company Philosophy

The fundamental philosophy of the Rakuten Group is empowering
people and society through the Internet.
What is the intrinsic value of the Internet? In a single
word: Fairness. If you use the Internet, you candramatically narrow the gaps between informationand knowledge. For consumers, this means that you
are able to easily choose the products and services
that best fit your needs from among a multitude ofoptions. For business owners, it means that you can
instantly expand your market to all of Japan and theworld at low cost, providing business opportunities
that previously had been inconceivable. The Rakuten

16Group wants to help all consumers and businessowners take advantage of opportunities, fairly
provided in various ways by the Internet.
The Rakuten Group has enjoyed healthy growthfrom the days of its founding, thanks to support fromthe broad range of consumers and businesses, alike.
And it is this relationship of trust with our stakeholders
that permits our sustainable growth. We sincerely
endeavor to do even more.

Our
Message

Our
Strategies

Our
Operations

Our
Backbone

Our
Performance

Rakuten’s CSR
Rakuten Social Responsibility Project
The Rakuten Social Responsibility Project is closely linked to
the Rakuten Group’s business activities. Through it, we hope to
implement CSR programs that will benefit individuals and society.
Our aim is to develop this project into something that will
eventually become the foundation for vital infrastructure services tosociety. With our belief in the social significance of continuing thisproject, we are carrying out initiatives around energy issues andthree other priority themes.
In addition to communicating the current situation of these
initiatives with every person connected to Rakuten, we aim to carryout activities that will put faces to the name Rakuten to people
around the world.

http://global.rakuten.com/csr/

New Future
We, along with the children who will inherit our
future, are responsible for preparing a positive
horizon for the world to walk toward. As acorporation, Rakuten is fully committed to realizing
a variety of measures to support our future.

Eco Operation
We are working to ensure effective use of limited
resources by steadily reducing environmentalloads. In response to unreliable electrical power
supplies resulting from the nuclear incident wehave launched Project 60 and Rakuten Smart
Green Project, two initiatives to reduce power
consumption. In addition to efforts made in
the area of electric power, we have also taken
up the “Eco Operation” challenge involving aseries of corporate activities aimed at reducing
wastage. We will promote these activities from theperspectives of preventing global warming, and ofprotecting the environment.

Green Energy
Modern society is dependent upon electric power
generated by fossil fuels and nuclear power.
We believe that the nuclear incident in Japan
has triggered a rethink of energy issues. As acorporation, Rakuten will consider implementing
services aimed at promoting green energy that isboth people- and environment-friendly.

Company's Mission
Through our business operations to date, Rakuten
has developed strong relationships with many
people including service users, Rakuten shop
owners, hotel owners, and municipal governments.
Rakuten considers it our responsibility to provide
more personal and direct forms of reconstruction
support to those in need, and to continue
providing our services under all kinds of situations.
We aim to be a corporation that creates value tosociety through our main businesses

17Our Social Responsibility

Relationships with Our Stakeholders
A place to build relationships with business partners“Helping the business partners make use of the Internet”—Having founded the company
with this idea close at heart, Rakuten offers empowerment through a web of contacts
with business partners. For example, we hold offline events for our Rakuten E-Commerce
partners in Japan, Taiwan, U.S., Germany and other regions. At these events, we seek
to create a valuable dialogue between Rakuten and its partners through such means as
sharing Rakuten business strategies and awarding Shop of the Year recognition to our
top merchants.

Services to reassure customers about using Rakuten
To reassure customers about using Rakuten Ichiba, we offer an Internet shopping
guarantee for undelivered items to Rakuten members of up to ¥500 thousand one time
per year. Rakuten Card members also have a guarantee for undelivered items without
any limitation on amounts and other generous services assuring safe shopping.

Employee relations
So that all Rakuten Group employees come to work in pursuit of the same goal, we
instituted ways to share our business strategy in action.
First, to make sure that our business philosophy is spread throughout the company,
we have translated the Rakuten Shugi (Rakuten basic principles) and distributed it to
our group companies. Now in English, Simplified Chinese and Traditional Chinese, theprinciples lay out Rakuten philosophy, code of conduct and how we wish to conduct ourbusiness every day.
Furthermore, as a forum for sharing information, we hold the Asa-kai, an all-hands
meeting every Tuesday at 8 am (JST), as well as a semi-annual meeting for presenting
the operating plan. We make absolutely sure that information and strategy are sharedwith all employees, who gather at 50 domestic and overseas offices for the live
broadcast, regardless of their position in the company. The presentation style is oneof sharing with the full body of employees and includes not only a talk by the CEO, butalso presentations on strategy and results in our various businesses and reports from
specialty fields like technology and marketing. To facilitate a global meeting, we moved
the time from Monday morning Japan time to Tuesday morning, when the whole world
has begun the workweek, and conduct it completely in English.

Diversity
At Rakuten Inc., we believe that sustainable growth can only be supported with adiverse workforce. To this end, our ratios of foreign employees, females in managerial
posts, female employees and employees with disabilities are 6.8%, 14.6%, 36.5%, and
2.1%, as of December 31, 2011, respectively.

Risk Management
Information security
The Rakuten Group puts its highest priority on running a business that ensuresinformation security, and is always strengthening its measures to achieve this.

18

Our
Message

Our
Strategies

Our
Operations

Our
Backbone

Our
Performance

In November 2006, Rakuten, Inc. was the first group company to be awarded ISO/IEC
27001 certification for compliance with international Information Security Management
System (ISMS) standards, followed by application to the entire Rakuten Group in March
2007. Today, all 18 companies in the Rakuten Group hold ISO/IEC 27001 certification in
their ongoing efforts to ensure information security.
Furthermore, seven Rakuten Group companies have been accredited with the Privacy
Mark under the Japanese Industrial Standard (JIS Q 15001) “Personal information
protection management systems—Requirements” for business that have establishedsystems for appropriate protection of personal information.

Rakuten Smart Green Project
During the summer of 2011, to help fight peak-season power shortages in the wake of
the March 2011 earthquake and nuclear plant accident, the government requested a cut
in power consumption of 15%. In response, we launched Project 60, an initiative to cut
power use per employee by 40% from the previous year and successfully implemented
it at all 15 Japanese business sites. The success of this project has led to the current
Rakuten Smart Green Project, which aims for a permanent cut of 40%.
The Rakuten Group consumes power through its Internet services, and as many as
100,000 partners run their businesses on Rakuten services. In consideration of the heavysocial responsibility this entails, Rakuten is moving forward with energy efficiency initiatives,
pursued from the viewpoint of business sustainability. The aim is to maintain reliable sourcesof electrical power and a healthy working environment and to tackle energy use without
sacrificing productivity, while keeping on eye on the coming shift to green energy.

Electric Power Savings
Under Project 60
*1

*2

*3

Overall reductions realized

42.6% (April 2011)*1	Lighting power consumption: as of midApril 2011*2	Electric power consumption: as of midApril 2011*3	Air-conditioning: last week of July 2011

Contributing through Rakuten’s Services to Society
Rakuten Tasuke-Ai (Love and Aid)
With the assistance of local governments, Rakuten selected products available on
Rakuten Ichiba that matched the needs of people in the disaster areas, and worked
with Rakuten Ichiba merchants to supply those items ordered by Rakuten users at
special non-profit prices. Relief goods purchased under this system were distributed topeople in the disaster areas through local governments.
Before this campaign ended on March 31, 2012, Rakuten made 50 shipments ofrelief supplies to the disaster-stricken areas.

Rakuten IT School
Rakuten launched the Rakuten IT School social contribution project under the keywords“Do Something Good by Rakuten” on the occasion of the company’s 10th anniversary in
2008. The school operates in all regions of Japan for the purpose of conveying the power
and potential of the Internet to students, who are posed to lead the next generation.
Activities that are characteristic of the Rakuten Group, including workplace experiencethrough industry-academic partnerships and Internet-literacy instruction to foster safeand proper use of the Internet, are sponsored by the school.

http://global.rakuten.com/csr/education/it-school/

19

Board of Directors and Company Auditors(As of March 30, 2012)

Shares owned(Thousands)

Position

Name

Chairman and CEO
Representative Director and Vice President Executive Officer
Senior Executive Officer and Director
Senior Executive Officer and Director
Senior Executive Officer and Director
Senior Executive Officer and Director
CFO, Senior Executive Officer and Director
Senior Executive Officer and Director
Senior Executive Officer and Director
Senior Executive Officer and Director
Director
Director
Director
Director
Director
Director
Company Auditor
Company Auditor
Company Auditor
Company Auditor

Hiroshi Mikitani
Atsushi Kunishige
Masatada Kobayashi
Toru Shimada
Akio Sugihara
Hisashi Suzuki
Ken Takayama
Kazunori Takeda
Hiroaki Yasutake
Yoshihisa YamadaCharles B. Baxter
Koichi Kusano * 1
Ken Kutaragi * 1
Hiroshi Fukino * 1
Jun Murai * 1
Joshua G. James * 1
Tanekiyo Kunitake * 2, 3
Yoshiaki Senoo * 2Takeo Hirata * 2
Katsuyuki Yamaguchi * 2

2,072
0
35
3
77
3
40
3
4
0
—
13
0
1
—
—
0
—
—
—

*1: Outside director*2: Outside company auditor*3: Independent company auditor

Corporate Governance Structure
Shareholders’ Meeting
Appointment / Dismissal

Appointment /Dismissal
Audit

Board of Directors

Board of Auditors

Appointment /Dismissal

AssistCompany
Auditors’ Office

Representative Directors
Cooperation
ReportDirect businessexecution

ReportCooperation

Internal Audit
Department

Supervision
Conduct
internal audit

Executive Officers

20

Audit report

Audit

Accounting Auditor

Our
Presence

Our
Strategies

Our
Operations

Our
Backbone

Our
Performance

Corporate Governance

1. Basic Approach to Corporate Governance
The Rakuten Group gives top priority to effective corporate
governance. The Group has implemented a range of measures
to strengthen its competitiveness and maximize corporate value
by maintaining effective internal control and risk management
systems, with a view to realizing its goal of becoming the world’s
leading Internet services company.

Corporate Governance
1.	Basic Structure of Corporate Governance andReasons for Adoption
Rakuten, Inc. supervises management by using a Company
Auditor System. In March 2003, the Company adopted an
Executive Officer System to separate the supervisory andexecutive roles of management. Under that system, functions
previously performed by the Board of Directors were separated,with directors retaining responsibility for management decisionmaking and supervision, while executive functions were transferredto the Executive Officers.
A Business Unit system was introduced in 2006 with the dual
aims of speeding up executive processes and strengthening thesupervisory functions of the Board of Directors and Company
Auditors. In addition, Rakuten Inc. created a group-wide risk
management structure by establishing Functional Teams to
manage risk comprehensively across all Rakuten Groupbusinesses.

2. Corporate Organization(1) Directors, Board of Directors, Executive Officers, etc.
The Board of Directors consists of 16 Directors, including fiveOutside Directors. Resolutions to appoint Directors must be
approved by a majority of voting rights at a General Meeting of
Shareholders attended by shareholders holding at least one-thirdof voting rights.
In addition to regular monthly meetings, the Board of
Directors holds extraordinary meetings as required. At thesemeetings, Directors make decisions on important management
matters and supervise Executive Officers’ activities. To ensure
appropriate decision-making by the Board of Directors, mediumand long-term management plans, basic policies and other key
strategies are first discussed at Corporate Strategy Meetings,
which are held before the Board of Directors meetings andconsists mainly of executives at Senior Executive Officer level
and above.
Board decisions are delegated to the Executive Officers’
Meeting, which consists of Executive Officers. Individual
Executive Officers carry out their respective duties in accordancewith these decisions. To ensure appropriate and efficient
conduct of business operations, activities in individual segments
are supervised by management councils convened within eachsegment, as well as by Functional Teams responsible for humanresources, financial management, accounting, organizational
management and other management aspects across the
Rakuten Group.

(2) Company Auditors and the Board of Auditors
Rakuten, Inc. has four Company Auditors, including two full-time
auditors. All four are outside auditors.
A two-member Company Auditors’ Office assists theCompany Auditors in the performance of their duties. In addition
to its regular meetings, the Board of Auditors holds extraordinary
meetings as required.
In accordance with audit policies and plans established by
the Board of Auditors, the Company Auditors attend Board of
Directors meetings and other important management meetings,
and receive reports about the state of the Company’s operations
from Directors, the Internal Audit Department and other sources.
In addition, they conduct on-site inspections of the Company’shead office and other important business sites, and check theoperations of subsidiaries. In addition, the Company Auditors
receive audit reports from the independent auditors and peruse
financial statements and business reports. They also discussvarious matters with the CEO.

3. Internal Control Systems
Basic internal control policies for Rakuten, Inc. are determinedby the Board of Directors. The Company has declared its
intention to comply with all regulatory requirements, and to apply
high ethical standards to its business activities.
The performance of business operations by Directors andemployees is subject to regular operational audits by the Internal
Audit Department, an independent unit reporting directly to theCEO. The Compliance Committee also helps to ensure that all
operations are conducted appropriately by implementing
group-wide compliance initiatives.
Compliance training is provided for all Directors andemployees to enable them to develop the knowledge and ethicalperceptions needed to perform their duties. In addition, Rakuten
has set up a hotline, the Rakuten Hotline, for reporting ofcompliance violations.
Directors are closely supervised in the performance of theirduties by the Outside Directors and Outside Company Auditors.
Attorneys have been appointed to help each of the outside
directors and outside auditors verify compliance with the Articles
of Incorporation and regulatory requirements from an objective
perspective based on expert knowledge.
Rakuten, Inc. is also expanding the Rakuten Group Regulations(RGR) as the basis for integrated group management, with theaim of strengthening corporate governance and paving the way
for further growth.

4. Risk Management Systems
Rakuten has established a Group Risk Management Committee
chaired by the CEO for the comprehension of risks, from aunifed perspective, that may have a material adverse effect on
the Rakuten Group and for providing an appropriate response
to such risks. Under the Group Risk Management Committee,
we have established risk control sections within business units,
responsible for 10 risk categories including compliance risk,
information security risk, and market risk. Each section
conducts regular risk assessments and related measures21

through the leadership of the Risk Management Department, agroup-wide department in charge of risk management. In
accordance with these assessments, the Group Risk
Management Committee examines policies to reinforce risk
management, ensures that policies are made into concretemeasures by the Risk Management Department and risk
control sections, and develops and implements measures at
each business unit and group company.
Rakuten, Inc., in accordance with RGR, consolidates risk
information and ensures thorough and consistent application ofrisk management through such actions as obtaining approval
from the Board of Directors for proposed business investments
by each business unit that exceed a set amount, and receives
reports on risks related to business execution presented at theManagement Conferences held in each business unit.
Each group subsidiary has also established its own risk
management system and instituted the PDCA cycle to handle
company-specific risks other than group-wide risks.
Information management risk is rigorously controlled under
the leadership of the Risk Management Department. Our efforts
to minimize this risk factor throughout the Rakuten Group
include acquisition of Information Security Management
System (ISMS) certification (ISO/IEC 27001).

Internal Audits, Company Auditor Organization,
Personnel and ProceduresInternal audits are conducted by the 18-member Internal Audit
Department, which is an independent unit reporting directly to theCEO. Head office divisions, business units and group companies
are all subject to internal auditing. Audits are implemented underplans approved by the Board of Directors with the aim of verifying
the legality, appropriateness and efficiency of operations. The
purpose of the internal audit process is to ensure that business
operations are conducted in an appropriate manner by identifying
any improvements that may be required, and by monitoring theimplementation of those improvements. Audit results are reported
to the Board of Directors, the CEO, the Compliance Committee
responsible for areas covered by audits. The Internal Audit
Department also cooperates with the Board of Auditors.
The Internal Audit Department is also working to enhancethe effectiveness of internal audits throughout the Rakuten
Group by working closely with audit units in group companies.
Information about audits by Company Auditors can be foundunder Corporate Organization 2-(2) Company Auditors and theBoard of Auditors.

Outside Directors and Outside Auditors
Rakuten’s 16-member Board of Directors currently includes fiveOutside Directors, and all four Company Auditors are Outside
Auditors. One of the Outside Directors, Mr. Koichi Kusano, is a
representative partner in Nishimura & Asahi, a law firm withwhich Rakuten has a business relationship that includes theprovision of services. An Outside Auditor, Mr. Katsuyuki
Yamaguchi, is a partner in the same firm. There are no otherpersonal, capital or business relationships or significant interests.
As described above, Rakuten appoints highly independent
Outside Directors and Outside Auditors whose expertise and22

objective viewpoints strengthen supervision of the Board of
Directors in the performance of its duties. They also enhance theeffectiveness of corporate governance by allowing a wide rangeof discussion with the Board of Directors.
The five Outside Directors include attorneys, notably Mr.
Koichi Kusano, who can contribute wide-ranging knowledge andexperience of corporate law. Another, Mr. Ken Kutaragi, has
extensive knowledge of the entertainment business andtechnology and wide-ranging experience in business management.
Mr. Hiroshi Fukino also has extensive experience of business
management and expertise as a business consultant. Mr. Joshua
G. James and Mr. Jun Murai were each appointed for their ability
to provide management with advice and recommendations basedon their experience and expert knowledge. Mr. James has
specialized knowledge of Internet services and a wealth ofexperience in management of Internet service businesses in North
America; Mr. Murai has a distinguished background as an
academic expert in Internet technology.
There are four Outside Auditors. Mr. Takekiyo Kunitake has
wide-ranging expertise and experience, especially in the fields ofbusiness management and finance. Mr. Yoshiaki Senoo has
extensive knowledge and experience relating primarily tofinance, business management and compliance. Mr. Takeo
Hirata brings wide-ranging expert knowledge and experience
relating to sport and education. Mr. Katsuyuki Yamaguchi wasselected as a person who could contribute to Rakuten’s audit
systems through his extensive knowledge and experience,
especially as an attorney, and through his perspectives as anexpert on corporate law.
Documents for meetings of the Board of Directors areforwarded in advance to the Outside Directors and Outside
Directors, who, if necessary, can also seek advance briefings
from and consultations with the units concerned. As noted
above, the Outside Auditors also actively exchange views with
the Internal Audit Department and the independent auditors.
Rakuten, Inc. has signed an agreement with each of its
Outside Directors and Outside Auditors under the provisions ofArticle 427, Paragraph 1 of the Corporate Law. This agreement
is summarized below:
Provided that duties have been carried out in good faith andwithout gross negligence, the total liability in situations as definedin Article 423, Paragraph 1 of the Corporate Law will be limited tothe sum of the amounts stipulated in the following items:i. 	Two times the bigger of the sum of fees, bonuses and otherpayments received or asset benefits received in the year that
includes the date on which the event that resulted in theliability occurred, and in the preceding year, or the value of
asset benefits to be received (excluding benefits stipulated
under Item ii below).
ii. 	Two times the smaller of the sum of retirement bonuses orasset benefits that are in the nature of retirement bonuses,or that amount divided by the number of years during which
the office of Outside Director was held.
iii.	The amounts stipulated below if stock options, as definedin Article 238, Paragraph 3 of the Corporate Law, were
exercised or transferred after the person was appointed as
an Outside Director.

Our
Presence

Our
Strategies

1. If the options have been exercised		An amount calculated by subtracting the sum of theissue price of the stock options and the paid-in value
per share on the exercise date from the market price pershare on the exercise date and multiplying the result by
the number of shares granted through the exercise of

Our
Operations

Our
Backbone

Our
Performancethe stock options.
2. If the options have been transferred		An amount calculated by subtracting the issue price ofthe options from the transfer price and multiplying theresult by the number of stock options.

Remuneration for Directors and Auditors
1. Total amounts of fees, etc., for each category of the filing company’s officers, total amount of each type of remuneration paid,
and number of officers eligible
Category of officer

Total amount of fees, etc.
(millions of yen)

Directors (excluding Outside Directors)
Auditors (excluding Outside Auditors)
Outside Directors and Auditors

597
—
98

Total amount of each type of remuneration (millions of yen)
Basic fees
Stock options
Bonuses
442
56
97
—
—
—
94
3
—

Number ofrecipients
13—
10

2. Consolidated total amount of fees, etc., for directors and auditors of the filing company
For purposes of full disclosure, we declare that no person in the filing company received a consolidated total amount of fees ofmore than 100 million yen this fiscal year.
3. Total amount of significant items included in salaries and bonuses paid to directors who are also employees
Total amount (millions of yen)210

Number of recipients
10

Details
Salaries (including bonuses) paid to directors who are also employees

4. Policies concerning amounts of remuneration for Directors and Auditors, the adoption of methods for calculating those amounts,
and the establishment of those policies
Business performance is taken into account in decisions concerning remuneration for Directors and Auditors. A resolution of the
13th Regular General Meeting of Shareholders, held on March 30, 2010, set the upper limit for total remuneration over the year at¥1,100 million (including ¥100 million for Outside Directors). Total remuneration for Company Auditors is within the upper limit of¥120 million as stipulated in a resolution of the 10th Regular General Meeting of Shareholders, held on March 29, 2007.

Shareholdings
1. Shares held for purposes other than pure investment
Number of companies: 12
Total amount shown in balance sheet: ¥2,541 million
2. Name of company, number of shares held, amount shown in balance sheet and purpose of holding for each shareholding held forreasons other than pure investment
December 31, 2010
Company

Shares held

Tokyo Broadcasting System Holdings, Inc.
Synergy Marketing, Inc.
F@N Communications, Inc.
IMJ Corporation
FreeBit Co., Ltd.
Alpen Co., Ltd.

37,770,700
568,000
5,779
5,500
498
18,000

Amount shown inbalance sheet(millions of yen)
48,875
3,709
595
176
162
26

Reason for holding
Strategic investment (note)
Reinforcement of business relationship
Reinforcement of business relationship
Reinforcement of business relationship
Reinforcement of business relationship
Reinforcement of business relationship

Note: Rakuten acquired and held shares in this company with the aim of establishing a capital and business partnership. However, after the company became a Certified
Broadcast Holding Company, Rakuten exercised its right to a demand the repurchase of the shares. As a result of this action, Rakuten sold the shares on May 10, 2011.

December 31, 2011
Company
Synergy Marketing, Inc.
F@N Communications, Inc.
FreeBit Co., Ltd.
IMJ Corporation
Alpen Co., Ltd.

Shares held
1,136,000
5,779
498
5,500
18,000

Amount shown inbalance sheet(millions of yen)
1,217
533
107
93
24

Reason for holding
Reinforcement of business relationship
Reinforcement of business relationship
Reinforcement of business relationship
Reinforcement of business relationship
Reinforcement of business relationship

3. There are no investment stocks held purely for investment purposes.

23

Audits by Independent Auditors
Rakuten, Inc. has entered into an auditing agreement with Ernst& Young ShinNihon LLC, which conducts financial audits inaccordance with Japan’s Corporate Law and the Financial
Instruments and Exchange Law.
In fiscal 2011, audits were conducted by the following charteredpublic accountants and assistants.

2. Audit Fees, etc.
Audit Fees Paid to Chartered Public Accountants, etc.
Item

[Chartered public accountants]

Fiscal year ended
December 31, 2011

millions of yen

millions of yen

Fees paid
for audit
certification
services

Fees paid
for non-audit
services

Fees paid
for audit
certification
services

Fees paid
for non-audit
services

149

35

128

72

Designated limited liability partner,
executive partner

Masaharu Sugiyama

Designated limited liability partner,
executive partner

Companysubmitting
financialreports

Kenichi Ishida

Consolidated
subsidiaries

231

19

176

19

* Since these accountants have conducted audits for fewer than seven years, thenumber of years has been omitted.

Total

380

54

304

91

[Names of assistants]

Other Important Matters Pertaining to Fees

21 chartered public accountants and 30 others

Other Provisions of the Articles of Incorporation
1.	Matters Requiring Resolutions ofGeneral Meetings of Shareholders
that Can Be Implemented by Resolutions of
the Board of Directors
The Articles of Incorporation of Rakuten, Inc. state that, unlessotherwise stipulated in laws and regulations, the Board of
Directors is authorized to pass resolutions on matters pertaining
to the distribution of surpluses and other matters, as stipulated
in the items of Article 459, Paragraph 1 of the Corporate Law,
without resolutions of General Meetings of Shareholders. The
purpose of this provision is to allow the Board of Directors to
implement a flexible dividend policy.

2.	Items Requiring Special Resolutions ofGeneral Meetings of Shareholders
The Articles of Incorporation of Rakuten, Inc. state that mattersrequiring resolutions of General Meetings of Shareholders, as
stipulated in Article 309, Paragraph 2 of the Corporate Law,require resolutions supported by at least two-thirds of voting
rights at General Meetings of Shareholders attended byshareholders holding at least one-third of voting rights. The
purpose of this provision is to facilitate the administration ofGeneral Meetings of Shareholders by easing the quorum
requirements for special resolutions.

24

Fiscal year ended
December 31, 2010

Fiscal year ended December 31, 2011
Some consolidated subsidiaries of Rakuten, Inc. are audited by
Ernst & Young, which belongs to the same network as Ernst &Young ShinNihon LLC, the company providing certified public
accountants and other audit personnel for Rakuten, Inc. Fees
paid to Ernst & Young in fiscal 2011 amounted to ¥70 million.

Non-Audit Services Provided to the Company
Submitting Financial Reports by Certified Public
Accountants and Other Audit Personnel
Fiscal year ended December 31, 2011
The non-audit services for which Rakuten, Inc. pays fees tocertified public accountants and other audit personnel consist
primarily of advisory services relating to advice on IFRS.

Policy on Setting of Audit Fees
The policy of Rakuten, Inc. regarding audit fees paid to certified
public accountants and other audit personnel is to pay fees thatare appropriate based on relevant factors, including the size of
Rakuten, Inc., the characteristics of its business activities, andthe number of days required for audits.

Our
Presence

Our
Strategies

Our
Operations

Our
Backbone

Our
Performance

Financial Section
Results of Operations and Financial Condition
For the fiscal year ended December 31, 2011

Business Performance
In 2011, the Rakuten Group sought to raise user convenienceand improve customer satisfaction through new smartphoneservices and additions to the store lineup. Our overseas
expansion accelerated and included the opening of an Internet
shopping mall in Indonesia and the incorporation of e-commercesubsidiaries in Brazil, Germany, and the UK. Furthermore, we
acquired Kobo Inc. of Canada in a move into the e-bookbusiness, a market with high worldwide growth potential. Our
Internet Finance businesses leveraged group synergies forcontinued growth. We reorganized the credit card businessduring the third quarter to focus resources on the Rakuten Cardbusiness, a core business with prospects tied to the expansion ofInternet shopping. The Rakuten Card-related business of theformer Rakuten KC Co., Ltd., was transferred to Rakuten Card
Co., Ltd. (formerly Rakuten Credit Co., Ltd.) in an absorption-type
split among consolidated subsidiaries. We then sold our holdingsof Rakuten KC stock and took other financial measures.
As a result, net sales for the year ended December 31, 2011,
grew at a steady pace, despite the earthquake, amounting to¥379,901 million (9.8% year-on-year growth). Operating income
was ¥71,344 million (up 11.9%) after recording a ¥4,264 million
provision as a result of recalculating interest repayments prior to
the reorganization of the credit card business. These figures arerecord results. There was a loss before income taxes and minority
interests of ¥14,462 million due to a ¥84,093 million extraordinary
loss in connection with the credit card business reorganization,
while net loss amounted to ¥1,140 million (compared to net
income of ¥34,956 million in 2010, the previous fiscal year) afterrecording deferred income taxes of ¥21,418 million.

Financial Position
AssetsTotal assets at the end of the fiscal year, amounted to ¥1,914,561
million, a decrease of ¥34,955 million from the ¥1,949,517 million
at the end of 2010. Among the primary factors were increases of¥41,090 million in short-term investment securities such as
negotiable certificates of deposit, ¥38,229 million in other current
assets in conjunction with increased call loans for banking
business, and ¥29,797 million in loans and bills discounted forbanking business.
Primary decreases included ¥94,563 million in operatingloans receivables due to the credit card business reorganizationand ¥47,150 million in investment securities mainly due to saleof investments in Tokyo Broadcasting System Holdings, Inc.
Liabilities
Total liabilities were ¥1,679,576 million, a decrease of ¥20,707
million from the ¥1,700,283 million at the end of 2010. The main
factors were increases of ¥63,264 million for long-term debt and¥28,229 million for deposits for banking business together withdecreases of ¥49,717 million in short-term debt, ¥30,200 million incommercial papers, ¥17,099 million in margin transactions liabilities
for securities business, and ¥13,610 million in income taxes payable.
Net Assets
Net assets at the end of 2011, came to ¥234,986 million, adecrease of ¥14,248 million from the ¥249,234 million at the endof 2010. A major contributor was a ¥3,404 million decrease inshareholders’ equity arising from the ¥1,140 million loss charged
to income for the fiscal year and dividend paid of ¥2,624 million.
Additional decreases stemmed from a ¥3,567 million valuationdifference on available-for-sale securities, a ¥3,161 million
foreign currency translation adjustments, and ¥4,595 million inminority interests in conjunction with the sale of shares in theformer Rakuten KC.

Cash Flows
Cash and cash equivalents were ¥149,752 million, an increaseof ¥49,015 million from the end of 2010. Cash flow conditions
and their major factors are as follows.
Cash Flows from Operating Activities—Cash flows fromoperating activities had an outflow of ¥14,462 million from theloss before income taxes and minority interests, as opposed to
an inflow of ¥60,717 million in 2010. Net loss includes non-cash
flow items of ¥16,934 million for depreciation and amortization,compared with ¥16,813 million for 2010; and ¥77,122 million forloss on business restructuring of the credit card business, whichhave been adjusted by stating a corresponding cash inflow of
the same value. At Rakuten Bank, a net increase in deposits
contributed ¥28,229 million in cash inflows, up from ¥14,919
million in 2010, while a net increase in loans for banking business
was responsible for ¥29,797 million in cash outflows, down from
¥33,004 million in 2010. Rakuten Card had a cash outflow of¥88,644 million from a net increase in beneficial interest in
securitized assets, an increase from ¥43,405 million in 2010, anda cash inflow of ¥22,697 million from a net decrease in operatingloans receivable, up from ¥20,847 million in 2010.
As a result, net cash provided by operating activities fell
to a net inflow of ¥27,586 million from a ¥30,305 million net
inflow in 2010.
Cash Flows from Investing Activities—Major cash flows frominvesting activities included net outflows of ¥390,828 million forpurchase of securities for banking business, up from ¥370,844
million in 2010, and ¥15,163 million for purchase of intangible
assets such as software, up from ¥14,947 million. Cash inflows
included proceeds from sale and redemption of securities forbanking business of ¥455,813 million, compared with ¥372,267
million in 2010.
As a result, net cash provided by investing activities showeda net inflow of ¥56,351 million, a reversal of the ¥60,538 million
net outflow in 2010.
Cash Flows from Financing Activities—Cash flows from financing
activities included a net inflow of ¥173,350 million proceeds fromlong-term loans payable, compared with a ¥83,385 million inflow
in 2010. Net cash outflows included ¥143,538 million for
repayment of long-term loans payable, up from ¥92,550 million
in 2010; ¥30,200 million for a net decrease in commercial
papers, compared with a net inflow of ¥31,400 million in 2010;and ¥19,235 million from a net decrease in short-term loans
payable, compared with a net inflow of ¥29,032 million in 2010.
As a result, net cash flows for financing activities were a net
outflow of ¥34,648 million, a reversal of the ¥27,609 million net
inflow in 2010.

25

Consolidated Balance Sheets
Rakuten, Inc. and Consolidated Subsidiaries
December 31, 2011 and 2010

Thousands of
U.S. dollars

Millions of yen

2010

ASSETS2011

2011

88,99049,66866,2192,153
88,960207,503
115,634
62,38776,600537,791
155,678
33,319189,815(14,385)
1,660,332$ 1,144,711
638,898
851,803
27,6991,144,324
2,669,194
1,487,440
802,507985,336
6,917,811
2,002,547
428,598
2,441,664(185,038)
21,357,494

Current assets:

Cash and deposits
Notes and accounts receivable — trade
Accounts receivable — installment
Accounts receivable — installment sales — credit guarantee
Beneficial interests in securitized assets
Cash segregated as deposits for securities businessMargin transactions assets for securities business
Operating loans
Short-term investment securities
Securities for banking business
Loans for banking business
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets¥

72,86645,354
100,9092,466
66,601
223,114
126,779
156,950
35,510535,087
125,881
13,340151,586(27,012)
1,629,432¥

Non-current assets:

Property, plant and equipment

21,89015,805203,303

Intangible assets
Goodwill
OthersTotal Intangible assets

127,456
54,041
181,496

115,064
58,223
173,287

1,480,114
748,9442,229,059

67,83425,45926,454(3,049)116,698
320,084

20,68525,731
33,630(14,908)
65,138254,230

266,078
330,988432,597(191,766)
837,897
3,270,258¥ 1,949,517¥ 1,914,561$ 24,627,752

Investments and other assets:

Investment securities
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments assets and other assets
Total non-current assets
Total assets

The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been
made at ¥77.74 to $1, the rate of exchange prevailing at December 31, 2011.

26

Our
Presence

Our
Strategies

Our
Operations

Our
Performance

Our
Backbone

Thousands of
U.S. dollars

Millions of yen

2011

2011

97,04259,03059,202
741,501
2,295
3,981
139,483
38,23079,81828,73518,988204,530
1,472,835$ 1,248,290
759,326
761,537
9,538,222
29,527
51,206
1,794,222
491,764
1,026,729
369,629244,251
2,630,946
18,945,649

134,256
4,694
10,5695,027
154,546

192,425
4,762
1,434
6,246
204,867

2,475,244
61,25318,44480,346
2,635,287

1,965
13
1,977
1,700,283

1,839
35
1,874
1,679,576

23,653452
24,104
21,605,040

107,779

107,959

1,388,720

119,851
13,183(3,626)
237,188

120,0319,420(3,626)
233,784

1,544,003
121,168(46,637)
3,007,254

Subscription rights to shares
Minority interests
Total net assets

6,001
(198)
(4,694)
1,109
958
9,979
249,2342,433
54(7,854)(5,367)
1,185
5,384
234,986

31,303693(101,035)(69,039)
15,242
69,256
3,022,712

Total liabilities and net assets¥ 1,949,517¥ 1,914,561$ 24,627,752

2010

LIABILITIESCurrent liabilities:

Short-term debts
Current portion of long-term debts
Notes and accounts payable — trade
Deposits for banking businessAccounts payable — credit guarantee
Income taxes payable
Deposits received for securities businessMargin transactions liabilities for securities business
Guarantee deposits received for securities businessBorrowings secured by securities for securities business
Provisions
Other
Total current liabilities¥

143,507
92,57336,835713,273
2,466
17,590145,973
55,32977,77332,775
15,686
209,980
1,543,760¥

Non-current liabilities:

Long-term debts
Deferred tax liabilities
Other non-current provisions
Other
Total non-current liabilities
Reserves under the special laws:

Reserve for financial instrument transaction liabilities
Reserve for commodities transaction liabilities
Total reserves under the special laws
Total liabilities
NET ASSETS
Shareholders’ equity:

Common stock
Authorized: 39,418,000 shares
Issued: 13,194,578 shares in 201113,181,697 shares in 2010
Capital surplus
Retained earnings
Treasury stock — at cost, 60,079 shares in 2011 and 60,079 shares in 2010
Total shareholders’ equity
Accumulated other comprehensive (loss) income

Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustments
Total accumulated other comprehensive (loss) income27Consolidated Statements of Income
Rakuten, Inc. and Consolidated Subsidiaries
Years Ended December 31, 2011 and 2010

Thousands of
U.S. dollars

Millions of yen

2011

2011

379,901
75,232
304,669
233,325
71,344$ 4,886,811
967,740
3,919,071
3,001,347
917,724

65
209
17
337
(1,629)
(369)
—
1,700
764
107
262
(402)
—
—
—
(1,867)(1,303)(942)(3,050)60,717

105
137
(25)
399
(1,677)(1,717)
124
—
126
177
374
(1,157)(1,725)(77,122)(2,151)——(1,672)(85,806)(14,462)

1,350
1,760
(324)
5,132
(21,575)(22,091)
1,597
—
1,618
2,272
4,809
(14,883)(22,196)(992,051)(27,665)——(21,512)(1,103,757)(186,033)

25,888(760)
25,12835,589633
34,956

6,979(21,418)(14,439)(24)
1,116(1,140)89,775(275,505)(185,730)(303)
14,356(14,659)2010
Net sales¥

Cost of sales

Gross profit
Selling, general and administrative expenses

Operating income

346,144
75,251
270,893
207,127
63,766¥

Other Income (Expenses)

Interest income
Dividend income
Foreign exchange (loss) gain
Equity in earnings of affiliates
Interest expense
Commission fee expense
Gain on negative goodwill
Gain on step acquisitions
Reversal of reserve for financial instruments transaction liabilities
Gain on change in equity
Gain on sales of subsidiaries and affiliates’ stocks
Loss on disposal of non-current assets
Loss on disaster
Loss on business restructuring
Provision of allowance for doubtful accounts
Loss on investment securities
Impairment loss
Other — net
Other expenses — net(Loss) income before income taxes and minority interests
Income taxes

Income taxes — current
Income taxes — deferred
Income tax (benefit) expense(Loss) income before minority interests
Minority interests in income
Net (loss) income

¥

¥

$

The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been
made at ¥77.74 to $1, the rate of exchange prevailing at December 31, 2011.

28

Our
Presence

Our
Strategies

Our
Operations

Our
Performance

Our
Backbone

Consolidated Comprehensive Income Statement
Rakuten, Inc. and Consolidated Subsidiaries
Year Ended December 31, 2011

Thousands of
U.S. dollars

Millions of yen

2011

2010
Loss before minority interests

—

¥

2011

(24)

$

(303)

Other comprehensive loss

Valuation difference on available-for-sale securities
Deferred gains on hedges
Foreign currency translation adjustments
Share of other comprehensive loss of affiliates accounted
for using equity method
Total other comprehensive loss
Comprehensive loss

(Comprehensive income (loss) attributable to)
Owners of the parent
Minority interests———(3,557)264(3,222)(45,757)
3,392(41,450)

—

(20)

(255)

—
—

(6,536)(6,559)(84,070)(84,373)——(7,616)¥ 1,056(97,962)$ 13,589

Consolidated Statement of Changes in Net Assets
Rakuten, Inc. and Consolidated Subsidiaries
Year Ended December 31, 2011

Millions of yen
As of Dec. 31,
2010
Issuanceof commonstock

Common stock
Capital surplus
Retained earnings
Treasury stock
Shareholders’ equity
Valuation difference on
available-for-sale securities
Deferred gains orlosses on hedges
Foreign currencytranslation adjustments
Total accumulated othercomprehensive income (loss)
Subscription rights to shares
Minority interests
Net assets
Net assets, Dec. 31, 2011
thousands of U.S. dollars¥¥

Net changes
in items otherthan those inshareholders’equityCashdividends
paid

Net loss

180
180
—
—
360

—
—
¥ (2,624)—(2,624)——¥ (1,140)—(1,140)

6,001

—

—

— ¥

(198)

—

—

(4,694)

—

1,109
958
9,979
249,234

107,779
119,851
13,183(3,626)
237,188$ 3,205,993

As of Dec. 31,
2011

Changes in fiscal year 2011

¥

180 ¥
180
(3,764)—(3,404)

107,959
120,0319,420(3,626)
233,784(3,567)(3,567)

2,433

—

252

252

54

—

—

(3,161)(3,161)(7,854)———(6,476)(6,476)(5,367)

—
—
360

—
—
¥ (2,624)

—
227
227
—
(4,595)(4,595)¥ (1,140) ¥ (10,844) ¥ (14,248) ¥$ 4,630$ (33,758)$ (14,659) $ (139,494) $ (183,281) $ 3,022,712

¥

— ¥
—
—
—
—

Total ofchanges infiscal 2011

1,185
5,384
234,986

The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been
made at ¥77.74 to $1, the rate of exchange prevailing at December 31, 2011.

29

Consolidated Statements of Cash Flows
Rakuten, Inc. and Consolidated Subsidiaries
Years Ended December 31, 2011 and 2010

Thousands of
U.S. dollars

Millions of yen

2010

2011

2011

Net cash provided by operating activities(Loss) income before income taxes and minority interests¥ 60,717¥ (14,462)

Depreciation and amortization

16,813

16,934

217,826

Amortization of goodwill

7,035

7,848

100,952(10,889)(769)(9,887)

Decrease in allowance for doubtful accounts
Loss on valuation of securities for banking business
Loss on business restructuring$(186,033)

2,935

2,214

28,477—

77,122992,051

Other loss

7,941

5,513

70,913

Increase in notes and accounts receivable — trade(5,986)(4,266)(54,881)

Decrease (increase) in accounts receivable — installment(7,798)13,539174,155

Increase in beneficial interests in securitized assets(43,405)(88,644)(1,140,268)

Decrease in operating loans receivable

20,847

22,697

291,964

Increase in notes and accounts payable — trade

6,697

21,218272,936

Increase in accounts payable — other and accrued expenses

3,696

21,770280,034

Increase in deposits for banking business

14,91928,229363,119(Increase) decrease in call loans for banking business

4,000(24,000)(308,721)

Increase in loans for banking business(33,004)(29,797)(383,291)

Decrease (increase) in operating assets for securities business(16,192)

28,983372,821

Decrease in operating liabilities for securities business(11,664)(21,544)(277,130)(Decrease) increase in borrowings secured
by securities for securities business

22,663(4,040)(51,973)

Other — net

14,239(8,356)(107,491)

Subtotal

53,56350,187645,573

Increase in guarantee deposits for business operation(5,540)(392)(5,036)

Decrease in guarantee deposits for business operation

3,333

2,176

27,995(20,801)(23,165)(297,986)—(1,220)(15,696)

(250)

—

—

¥ 30,305¥ 27,586

Income taxes paid
Payments for business restructuring
Other
Net cash provided by operating activities$

354,849

The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been
made at ¥77.74 to $1, the rate of exchange prevailing at December 31, 2011.

30

Our
Presence

Our
Strategies

Our
Operations

Our
Performance

Our
Backbone

Thousands of
U.S. dollars

Millions of yen

2011

2010

2011

Net cash provided by (used in) investing activities

Increase in time deposits
Decrease in time deposits¥(7,351)¥(9,946)$(127,934)

11,001

5,573

71,688Purchase of securities for banking business(370,844)(390,828)(5,027,370)

Proceeds from sales and redemption of securities for banking business

372,267

455,813

5,863,302

Purchase of investments in subsidiaries(18,825)(7,497)(96,438)

Purchase of investments in subsidiaries resulting inchange in scope of consolidation(40,159)(7,483)(96,258)—

33,554

431,618

Proceeds from sales of investments in subsidiaries resulting inchange in scope of consolidation
Purchase of property, plant and equipment(5,758)(3,825)(49,206)

Purchase of intangible assets(14,947)(15,163)(195,042)

Other payments(4,435)(6,499)(83,600)

Other proceeds

17,7642,207

28,388Interest and dividends received

748

445

5,724

(60,538)

56,351

724,871

Net (decrease) increase in short-term loans payable

29,032(19,235)(247,429)(Decrease) increase in commercial papers

31,400(30,200)(388,474)

Proceeds from long-term loans payable

83,385

173,350

2,229,869(1,846,383)

Net cash provided by (used in) investing activities
Net cash (used in) provided by financing activities

Repayment of long-term loans payable(92,550)(143,538)

Redemption of bonds(18,280)(4,800)(61,749)

Interest paid

(1,639)(1,575)(20,262)

Cash dividends paid

(1,314)(2,630)(33,831)

Other
Net cash (used in) provided by financing activities
Effect of change in exchange rates oncash and cash equivalents(2,425)(6,020)(77,435)

27,609(34,648)(445,695)(984)(1,172)(15,074)

Net increase (decrease) in cash and cash equivalents(3,609)48,117

618,951

Cash and cash equivalents at beginning of the year

103,618

100,737

1,295,817

727¥ 100,737

898¥ 149,752

11,554$ 1,926,321

Cash and cash equivalents of newly consolidated subsidiaries
Cash and cash equivalents at end of the year31Consolidated Subsidiaries and Affiliated Companies(As of December 31, 2011)

Name

Location

Ownership (%)

Note

Consolidated Subsidiaries
Internet Services Segment

32

Rakuten Auction, Inc.

Japan

60.0

Signature Japan Co., Ltd.

Japan

100.0

Fine Trading Co., Ltd.

Japan

100.0

LinkShare Corporation

U.S.A.

100.0

2

LinkShare International LLC

U.S.A.

100.0

2

LinkShare Ltd.

U.K.

100.0

2

Rakuten USA, Inc.

U.S.A.

100.0

Keiba Mall, Inc.

Japan

100.0

Rakuten Europe S.a.r.l.

Luxembourg

100.0

Taiwan Rakuten Ichiba Inc.

Taiwan51.0

Net’s Partners Co., Ltd.

Japan

100.0

FreeCause, Inc.

U.S.A.

100.0

Rakuten (Thailand) Co., Ltd.

Thailand

100.0

6

2

TARAD Dot Com Co., Ltd.

Thailand

67.0

Rakuten Shigoto Shoukai, Inc.

Japan

100.0

LinkShare Hong Kong Ltd.

Hong Kong

100.0

LinkShare Japan K.K.

Japan

63.8

Rakuten Logistics, Inc.

Japan

100.0

Buy.com Inc.

U.S.A.

100.0

2

BuyServices Inc.

U.S.A.

100.0

2

PRICEMINISTER S.A.S.

France100.0

3Voyager moins Cher S.A.S.

France100.0

3

TMG MEDIA GROUP S.A.S.

France100.0

3

RakuBai Limited

Hong Kong

51.0

Lekutian Co., Limited

People’s Republic of China

100.0

Lekutian ICPPeople’s Republic of China—

Target, Inc.

Japan

100.0

Rakuten Research, Inc.

Japan

100.0

Rakuten Shashinkan, Inc.

Japan

100.0

RAKUTEN SHOWTIME, Inc.

Japan

100.0

PT Rakuten Indonesia

Indonesia

100.0

1

PT. Rakuten-MNC

Indonesia

51.0

1

China Rakuten Network Science and Technology Co.,Ltd

People’s Republic of China

100.0

1

Rakuten Brazil Holdings LTDA.

Brazil100.0

1

RAKUTEN BRASIL INTERNET SERVICE LTDA.

Brazil90.0

1

Tradoria GmbHGermany

100.0

1, 3

Ticket Star Inc.

Japan

66.7

1

Play Holdings Limited

U.K.

100.0

1

Play European Holdings Limited

U.K.

100.0

1, 4

Vanilla Limited

U.K.

100.0

1, 4

Play Trade S.a.r.l.

Luxembourg

100.0

1, 4

Play Media S.a.r.l.

Luxembourg

100.0

1, 4

Webworks Development Limited

U.K.

100.0

1, 4

Play Limited

U.K.

100.0

1, 4

Boa Limited

U.K.

100.0

1, 4

The Web Factory Limited

U.K.

100.0

1, 4

2

Our
Presence

Name

Our
Strategies

Our
Operations

Location

Our
Performance

Our
Backbone

Ownership (%)

NotePlay Payments Limited

U.K.

100.0

1, 4

Play Direct Limited

U.K.

100.0

1, 4

Rakuten Travel, Inc.

Japan

100.0

RAKUTEN TRAVEL KOREA CO., LTD.

Republic of Korea

100.0

TABIMADO CO., LTD SHANGHAI

People’s Republic of China—

Rakuten Bus Services Inc.

Japan

100.0

Rakuten Travel Guam Inc.

U.S.A.

100.0

RAKUTEN TRAVEL USA, INC.

U.S.A.

100.0

1

China Online Travel, Inc.

Japan

100.0

1

ET MOBILE (CHINA) CO., LTD

People’s Republic of China

100.0

1

ET Solution (China) Co., Ltd.

People’s Republic of China—

1

Beijing Happy Travel Business Service Co.,Ltd.

People’s Republic of China—

1

Beijing Happy Travel International Hotel Management Co.,Ltd.

People’s Republic of China—

1

Rakuten Bank, Ltd.

Japan

100.0

6

Rakuten Bank Systems, Ltd.

Japan

100.0

eBANK Capital Management (Cayman) Ltd.

Cayman Islands

100.0

Rakuten Mortgage Co., Ltd.

Japan

100.0

Rakuten Securities, Inc.

Japan

100.0

Rakuten Card Co., Ltd.

Japan

100.0

Kajiyama Warehouse Co., Ltd.

Japan

100.0

Rakuten Insurance Planning Co., Ltd.

Japan

100.0

Rakuten Investment Management, Inc.

Japan

100.0

Dot Commodity, Inc.

Japan

97.1

RS Empowerment, Inc.

Japan

100.0

bitWallet, Inc.

Japan

85.0

Rakuten Baseball, Inc.

Japan

100.0

FUSION COMMUNICATIONS CORPORATION

Japan

50.0

O-net, Inc.

Japan

100.0

Rakuten Sociobusiness, Inc

Japan

100.0

Internet Finance Segment

6

Others Segment

Equity-method Affiliates
OKWave

Japan

18.6

5

Drecom Co., Ltd

Japan

19.8

5

WORLD TRAVEL SYSTEMS INC.

Japan

27.0

Rakuten ANA Travel Online Co., Ltd.

Japan

50.0

TECHMATRIX CORPORATION

Japan

31.8

5

NEXT Co., Ltd.

Japan

16.0

5

SOURCENEXT CORPORATION

Japan

28.1

5

AIRIO Life Insurance Co., Ltd

Japan

34.0

Notes:

1. The company became a group member during the fiscal year ended December 31, 2011.
2. L inkShare Corporation, FreeCause, Inc. and Buy.com Inc. are subsidiaries of Rakuten USA, Inc. LinkShare International, LLC is a subsidiary of LinkShare Corporation, and LinkShare Ltd. and LinkShare Hong Kong Ltd. are subsidiaries of LinkShare International, LLC. BuyServices Inc. is a subsidiary of Buy.com Inc.
3. P
 RICEMINISTER S.A.S. and Tradoria GmbH are subsidiaries of Rakuten Europe S.a.r.l. In addition, Voyager moins Cher S.A.S. and TMG MEDIA GROUP S.A.S. are
subsidiaries of PRICEMINISTER S.A.S.
4. Play European Holdings Limited and Vanilla Limited are subsidiaries of Play Holdings Limited. Play Trade S.a.r.l., Play Media S.a.r.l., Webworks Development
Limited, Play Limited, Boa Limited, The Web Factory Limited, Play Direct Limited and Play Payments Limited are subsidiaries of Play European Holdings Limited.
5. Denotes companies required to submit financial reports and securities registration statements according to Japanese securities and exchange legislation.
6. This is a special-purpose company.

33

Corporate History

1997

Rakuten Ichiba, the Internet shopping mall,commences operation.

2000

Rakuten, Inc. goes public through an IPO on the
JASDAQ market.

2010

LinkShare Japan K.K. becomes a
subsidiary through a merger with Traffic Gate, Ltd.
Buy.com Inc. becomes a subsidiary through Rakuten
USA, Inc.

Rakuten Books is founded as a joint venture with
Nippon Shuppan Hanbai inc.

PRICEMINISTER S.A. (now PRICEMINISTER S.A.S.),an e-commerce site operator in France, becomes awholly owned subsidiary through Rakuten Europe
S.a.r.l.

Infoseek Japan K.K. is acquired by Rakuten, Inc. tocreate a portal service.

2001

Rakuten Travel starts online hotel reservation services.

2003

MyTrip.net is acquired by Rakuten, Inc. to spearhead
the travel business; later merged with Rakuten Travel,
Inc. in 2004.
Rakuten, Inc. acquires 96.7% of shares in DLJdirect
SFG Securities to create the current Rakuten
Securities, Inc.

2004

2005

Rakuten, Inc. acquires 96.5% of shares in
Aozora Card; the company is later renamed
Rakuten Credit, Inc.

2011

Rakuten, Inc. and Indonesia’s largest media group, PT
Global Mediacom Tbk., launched an Indonesia-basedInternet shopping mall, “Rakuten Belanja Online.”
Ikeda Internet Software LTDA., one of Brazil’s leading
e-commerce platform providers, becomes a
subsidiary of Rakuten, Inc.

Rakuten, Inc. acquires 100% of shares in LinkShare
Corporation to spearhead overseas push.

Play Holdings Limited, one of the UK’s mostsuccessful e-commerce businesses, becomes a
subsidiary of Rakuten, Inc.

Rakuten Auction, Inc. is founded as a joint venturewith NTT Docomo, Inc.

Rakuten, Inc. announcs the acquisition of Kobo, Inc.,
based in Canada, a leading global e-book business.

Rakuten KC Co., Ltd. transfers its auto loan businessto Orient Corporation to streamline its business.

2007

Rakuten, Inc. acquires 73.5% of the shares in
Fusion Communications to commence an IP
telephony business.
Rakuten Books is integrated into Rakuten Ichiba.
Rakuten Logistics, Inc. is founded to commence newlogistics business.
Rakuten, Inc. and President Chain Store establish a
joint venture and start a Taiwan-based internet
shopping mall business: Rakuten Ichiba Taiwan.
Rakuten, Inc. signs an agreement with eBANK
Corporation (now Rakuten Bank, Ltd.) regarding astrategic and capital alliance.

34

Rakuten launches an Internet shopping mall in China
as a joint venture with Baidu, Inc.

Tradoria GmbH., one of Germany’s leading online
e-commerce platform providers, becomes a
subsidiary of Rakuten, Inc.

2006

2009

Rakuten Bank Ltd. is made a wholly owned subsidiarythrough a stock swap.

 akuten Baseball, Inc. is founded to start aR
professional sports business.

Kokunai Shinpan Co., Ltd.
(later nemed Rakuten KC Co., Ltd.) is included in the
consolidation as a subsidiary of Rakuten Inc.

2008

bitWallet, Inc., the Edy e-money system operator,
becomes a subsidiary.

Rakuten Bank, Ltd. becomes a subsidiary.
TARAD Dot Com Co., Ltd., an Internet shopping mall
operator in Thailand, becomes a subsidiary throughRakuten (Thailand) Co., Ltd.

Our
Presence

Scaling our proven
Internet-services business globally

Our
Operations

Our
Backbone

Our
Performance

Corporate Information

Company Overview

Rakuten’s business model is more comprehensive than many of ourglobal peers. Rakuten is not an online retailer, instead, we provide amarketplace, applying our advanced systems to benefit both online
customers and our merchants, resulting in gross merchandise sales(GMS) of over ¥1 trillion (US$12.9 billion) in fiscal 2011.
In Japan, our brand recognition approaches 100%, and some 70%
of online individuals have used one of our services, which extend fromgeneral e-commerce to travel, credit card, banking and other services.
We are now expanding our services via this unique business modelto new markets around the world. We see 2012 as the opening year oftrue globalization. It means greater empowerment for all, by fulfilling
more of the Internet’s true potential.

Our
Strategies

Name

Rakuten, Inc.

FoundedFebruary 7, 1997

Service Launched

May 1, 1997

IPO

April 19, 2000

Capital107,959 million yen(As of December 31, 2011)

Employees

7,615 (Consolidated)

Headquarters

Shinagawa Seaside Rakuten Tower,
4-12-3
Higashishinagawa, Shinagawa-ku,
Tokyo 140-0002, Japan

Stock Information
Stock Code4755 (Osaka Securities Exchange)

Fiscal Year

January 1 to December 31

Month of Annual General
Shareholders’ Meeting

March

Shareholder
Record Date

December 31

Transfer Agent

Sumitomo Mitsui Trust Bank, Limited

Contact

Sumitomo Mitsui Trust Bank, Limited
Stock Transfer Agency Department
1-10 Nikko-cho, Fuchu-shi,
Tokyo 183-8701, Japan

Number of Shares and Shareholders(As of December 31, 2011)
Number of Shares Authorized

39,418,000 (common stock)Total Number of Shares Issued

13,194,578 (common stock)76,508

Number of Shareholders

Main Shareholders(As of December 31, 2011)
Number ofsharesPercentage
held

Crimson Group, Inc.

2,264,190

17.16

Hiroshi Mikitani

2,175,720

16.49

Haruko Mikitani

Name

1,458,750

11.06

CBNY-ORBIS FUNDS

352,641

2.67

Masuda and Partners Inc.

344,610

2.61

THE CHASE MANHATTAN BANK 385036

314,004

2.38

The Master Trust Bank of Japan, Ltd.
(Trust Account)

288,227

2.18

MELLON BANK, N.A. AS AGENT FOR ITS
CLIENT MELLON OMNIBUS US PENSION

264,120

2.00

Japan Trustee Services Bank, Ltd.
(Trust Account)

256,768

1.95

CBNY-ORBIS SICAV

214,600

1.63

Classification by Type of Shareholder(As of December 31, 2011)

IndividualsContents

Foreign financial institutions
and individuals

Inquiry

Other domestic corporations
Domestic financial institutions

Our Message

Our Backbone

01 To Our Shareholders
02 An Interview with the CEO

16 Our Social Responsibility
20 Board of Directors and Company Auditors
21 Corporate Governance

Our Strategies
06 Domestic E-Commerce Business

Our Performance

10 Worldwide Expansion

25	Financial Section
32 Consolidated Subsidiaries and Affiliated Companies
34 Corporate History
35 Corporate Information

Our Operations
12 Financial Highlights
13 Review of Operations

Investor Relations, Rakuten, Inc.
URL http://global.rakuten.com/investor/

Securities firms
Others37.11%
34.93%
20.13%
6.90%
0.46%
0.47%

Cautionary Statement
Origins of the Name Rakuten
Rakuten Ichiba is named after Rakuichi-Rakuza , the first free and open marketplacein Japan, opened in the 16th century.
When used as a verb, raku is written with a Chinese character meaning to enjoy
oneself (楽). The same character is used in Rakuten, which means “positive spirit.” The
name Rakuten Ichiba literally means a “market of positive spirit,” where shopping isentertainment. These words symbolize the driven, forward-looking nature of ourbusiness. That is why we named our company Rakuten, Inc.

In this report, unless indicated otherwise, references to “Rakuten”, “Rakuten Group”,“we”, ”our” and “us” are to Rakuten, Inc. and its consolidated subsidiaries and consolidated affiliates. Statements regarding current plans, strategies, beliefs and other statements that are not historical facts of the Rakuten Group are forward-looking statements.
Such forward-looking statements are based on management’s assumptions and beliefs
in light of information currently available, and it should be noted that risks and unforeseen
factors could cause actual results to differ significantly from those discussed in the report.
We do not intend to update these forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by applicable laws.
“Rakuten”,
andare registered trademarks of Rakuten, Inc. in Japan.

35

Rakuten, Inc.
Annual Report 2011``Creating
Annual Report

Fiscal Year Ended December 31, 2011

Rakuten, Inc. TEL: +81-3-6387-1111 URL: http://global.rakuten.com/investor/
Shinagawa Seaside Rakuten Tower, 4-12-3 Higashishinagawa, Shinagawa-ku, Tokyo 140-0002, Japan''
New Value
Annual Report
Fiscal Year Ended December 31, 2011