Rakuten, Inc.
Annual Report 2010

Annual Report

Fiscal Year Ended December 31, 2010

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

Rakuten, Inc.
Annual Report
Fiscal Year Ended December 31, 2010

The World Beckons.

Number of Shares Authorized

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

13,181,697 (common stock)

Number of Shareholders

95,478Main Shareholders (As of December 31, 2010)
Name

Number ofsharesPercentage
held

Crimson Group, Inc.

2,264,190

17.18

Hiroshi Mikitani

2,178,314

16.53

Haruko Mikitani

2.61

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

338,996

2.57

THE CHASE MANHATTAN BANK 38503G

313,616

2.38

Japan Trustee Services Bank, Ltd. (Trust Account)

304,260

2.31

CBNY-ORBIS SICAV

289,953

2.20

THE CHASE MANHATTAN BANK,
N.A. LONDON SECS LENDING OMNIBUS ACCOUNT

255,479

1.94

Japan Trustee Services Bank, Ltd. (Trust Account 9G)

208,158

1.58

Individuals
Foreign financial institutions and individuals
Other domestic corporations
Domestic financial institutions
Securities firms
Others40.40%
30.70%
20.33%
8.12%
0.44%
0.01%

Our
Backbone

11.07

344,610

Our
Operations

1,458,750

Masuda and Partners Inc.

Classification by Typeof Shareholder (As of December 31, 2010)

Our
Strategies

We AreMore Than
Ready.

Our
Presence

Number of Shares and Shareholders (As of December 31, 2010)

Monthly Stock Price Range (Osaka Securities Exchange)

Contents
Our Presence
02 This is Rakuten
06 Rakuten's Global Ambition

Our Strategies
08 To Our Shareholders

Our Operations

100,000
80,00060,000

Origins of the Name Rakuten

40,000

Rakuten Ichiba is named after Rakuichi-Rakuza , the first free and open
marketplace in 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 is entertainment. These words symbolize thedriven, forward-looking nature of our business. That is why we named ourcompany Rakuten, Inc.

20,00012 At a Glance
14 Review of Main Operations

Our Backbone
18 Our Philosophy and Social Responsibility
20 Corporate History
21 Corporate Governance

Our Performance25	Financial Section
34 Corporate Information

Our
Performance(Yen)
120,000

0(Thousands of shares)
9,000

6,000

3,000

Cautionary Statement
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 updatethese 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.

0

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
’06
’07
’08
’09
’10
’11

Inquiry
Investor Relations, Rakuten, Inc.
Tel +81-3-6387-0555
URL http://global.rakuten.com/investor/

35

Financial Highlights
Rakuten, Inc. and Consolidated Subsidiaries
Years Ended December 31

Fiscal Year

1

2008

2009

2010

2010

Our
Presence

Thousands of *U.S. dollars

Millions of yen

Profit and Loss
Net sales¥ 249,883¥ 298,252¥ 346,144$4,247,692

Operating income

47,151

56,64963,766

782,504

Net income (loss)(54,978)*

53,56434,956428,962

2

Our
Strategies

Cash FlowsNet cash provided by (used in) operating activities

30,305$ 371,885

Net cash (used in) provided by investment activities¥(13,467)(40,977)¥

217,160(55,219)¥(60,538)(742,895)

Net cash provided by (used in) financing activities

62,397(174,157)

27,609338,803

Total assets¥1,086,938¥1,759,237¥1,949,517$23,923,385

Total liabilities

928,211

1,540,617

1,700,283

20,864,925

Total net assets

158,727

218,620249,234

3,058,460¥11,439.86¥15,527.21¥18,160.62$222.86

Basic(4,203.55)

4,092.17

2,666.28

32.72

Diluted

—4,077.62

2,657.43

32.61

Dividend

100.00100.00200.002.45

Assets and Liabilities
Our
Operations

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

Our
Backbone

Notes:	*1 U.S. dollar figures have been translated from yen, for convenience only, at the rate of ¥81.49 to US$1, the approximate rate of exchange at December 31, 2010.
		*2 T he fiscal 2008 net loss included loss on valuation of investment securities of ¥67,177 million.

Operating Income

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

(%)

400

346.1

300

70

63.7

60
40

18.4

10

30
20

100

20
15

50

200

Our
Performance

Net Sales

5

10
0

FY

’08

’09

’10

0

FY

ROE

Total Assets(%)(Billions of yen)

40

’09

15.8

0
-20

FY

’08

’09

’10

’10

0

’09

’10

1,000

150

1,000

100

500

50
’08

’09

’10

249.2

250
200

FY

’08

(Billions of yen)

1,949.5

1,500

0

FY

Net Assets

2,000

20

-40

’08

0

FY

’08

’09

’10

1

This is Rakuten

01
Solid

2,693.2

Success

1,859.1

Group Gross Transaction Volume
Reaches ¥2.6 Trillion
Rakuten is a world-class Internet Service Company. Since
our foundation in 1997, we have expanded into a wide
range of business areas. These include Rakuten Ichiba,
Japan’s largest Internet shopping mall, a unique BtoBtoC
e-commerce platform that is hard to replicate, as well as
online travel, finance-related services and more.
Continuing the rapid growth that we have sustained
from the very beginning, in fiscal 2010 e-commerce andtravel transactions increased by 18.6% year on year to 1.4
trillion, while e-money and credit card transactions grewby 92.8% to ¥1.2 trillion.

1,473.9

1,154.7

832.3
Group Gross Transaction Volume(Billions of yen)
Edy E-Money and Credit Card Shopping Transaction Volume
Domestic E-Commerce and Travel

478.7
329.1

153.0
52.3
’01
2

79.1

’02

’03

’04

’05

’06

’07

’08

’09

’10

Rakuten Eco-System- Shopping Mall
- Auction

Our
Presence- Hotels and Facilities- Air Tickets- Long Distance Bus- Dynamic Packages- Credit Card

E-Commerce
Business
TravelBusiness

Portaland Media
Business

Our
Strategies- Portal- Advertising- Marriage Consultant

Credit Card
Business- Edy Prepaid
E-Money System

E-Money
Business

Membership
Database- Banking- Personal Finance

Securities
Business

Telecommunications
Business- Professional
BaseballOur
Backbone- Stocks- Bonds- Trust Funds- FX- IP Telephony

Our
Performance

02
Total

Our
Operations

ProfessionalSportsBusiness

Banking
Business

Integration
A Business Model Offering Unmatched Online Service Convenience
Rakuten is powered by a strong and defendable business model, a unique value creation system offering
one-stop shopping in an organically linked range of services, most of them under the Rakuten brand. We
call this circulatory system the “Rakuten Eco-System.”
By using our growing member database to enhance marketing, and by maximizing inter-service
synergies to stimulate service cross-use, we can continuously accelerate the growth of the Rakuten EcoSystem. We are constantly exploring new approaches to value creation, including convergence with off-line
business activities.
3

This is Rakuten

03
Powerful
Brand

We Are Now Japan’s No. 1 in Internet Services
Rakuten is the market leader of many Internet services in Japan. In e-commerce, Rakuten Ichiba is thebiggest Internet shopping mall.
While continuously bolstering services in areas where we hold the top market share, we are putting
more management resources into other key growth areas where we are ranked two or below, with theaim of achieving the top position in these services too. In this way, Rakuten moves toward its ultimate
goal of becoming the leader of not only the Japanese Internet service industry, but also the world’s top
Internet Service Company.
Rankings in Domestic IT-Related Markets
E-Commerce (BtoC GMS)

Online Travel (GTV)

1

Rakuten Ichiba

1

Rakuten Travel

1

SBI Securities

2

Amazon2Jalan.net (Recruit)

2

Rakuten Securities

3

Yahoo! Shopping3

Rurubu Travel (JTB)

3

Matsui Securities

Online Books & Media (GMS)

Online Bank (Accounts)

E-Money Cards (Cards issued)

1

Amazon1

Rakuten Bank1

Edy ( Rakuten )2

Rakuten Books / Ichiba

2Japan Net Bank

2Suica (JR East)

3

-

3

Sony Bank

3

Pasmo (Private railways and buses)

Affiliate Marketing

Internet Search

Online Golf Reservations (GTV)

1

LinkShare Japan (Rakuten)

1

Yahoo!

1

Rakuten (GORA)

2

Value Commerce (Yahoo)2

Google

2

GDO

3

A8.net (F@n Communications)3

Rakuten Toolbar

3-

Source: C ompany disclosures, Fuji Keizai (EC), Nikkei (Travel, E-Money), Net Ratings (Search)
GMS : Gross merchandise sales
GTV : Gross booking transaction volume4

Online Brokerage (Trading)Our
Presence

Internet Access Ratios of Key Countries
(%)

100
80
70
60
50

Our
Strategies

Approximately 78% of the Japanese
population now has Internet access. This
number could climb to over 90%, thelevel currently seen in some of the
Scandinavian countries.

90

40
30
20
10
0

Iceland Norway Sweden Japan
Potential growth

USA

France Russia

BrazilChina Indonesia India

2010

Our
Operations*Source: 2010 Internet Penetration, Internet World Stats

Rakuten’s E-Commerce Market Share in Japan

40

3,500

35

3,000

30

2,500

25

2,000

20

1,500

15

1,000

10

500

5

0

Rakuten Ichiba continues to hold thebiggest share of Japan’s e-commerce(EC) market. To Japanese consumers,
the Internet has become a trustworthy
and acceptable media for shopping.

Our
Performance

(%)

4,000

Our
Backbone(Billions of yen)

0

’00

’01

’02

BtoC EC market (Left scale)

’03

’04

’05

’06

’07

’08

Rakuten Ichiba and Rakuten Books (Left scale)

’09

’10

’11

Rakuten share (Right scale)*Source: Fuji Keizai

Rakuten Ichiba Consumer Brand Survey Ranking(Position)

29

19

22

’06

’07

14

23

12

50

100

Rakuten Ichiba has risen rapidly in the
Brand Japan rankings of Nikkei BP, from167th position in 2004 to 12th position in2010. This powerful brand will be central
to our overseas expansion.

150

167
200

’04

’05

’08

’09

’10

*Source: Brand Japan, Consumer Brand, Nikkei BP Marketing, Inc5

Rakuten’s Global Ambition

Now We are Taking
That Success to the WorldIn fiscal 2010, we worked to strengthen our advantage in domestic markets
while continuing our evolution into a strong global company. We implemented
a variety of initiatives aimed at driving the expansion of our business globally,
resulting in rapid growth in the Group’s overseas operations.
Going forward, a key priority will be to ensure that the values defined in
our Rakuten Shugi (Rakuten basic principles) are assimilated by overseas
Group companies as they develop business models based on theirrespective strengths and areas of activity, including BtoBtoC, CtoC anddirect marketing, and matched to the local conditions of the country andregion. We will also continue to develop infrastructure to support theoverseas expansion of the highly successful Rakuten Eco-System.

EuropeEurope
PRICEMINISTER S.A.S., operator of one of France’s top e-commerce sites, is now a Rakuten
subsidiary. Alongside its presence in France, Europe’s fastest growing e-commerce market, weare dynamically expanding into other European markets. PRICEMINISTER’s advantages inthese markets include its emphasis on safety and security in the development of CtoC
business; its comprehensive approach to business management, which includes guarantees
against counterfeit goods, and the establishment of comparison sites for travel products.

FranceThailandTargets of the Rakuten Group Federation Strategy
Shopping mall businessTravel businessNo. of Operating Countries

GMS (BtoC E-Commerce)% of GTV from Overseas
7

Overseas
7%70Overseas

30

Japan

93
Today

6
2010

6

Ambition* As of December 31, 2010
GMS : Gross merchandise sales
GTV : Gross booking transaction volume

2010

2010

Rakuten Institute of Technology
Development Center

Japan
93%

27

Performance marketing business

AmbitionIn China, we have launched an Internet shopping mall inpartnership with Baidu, Inc., operator of the world’s No. 1
Chinese-language search engine. By combining Baidu’s
capacity to attract customers with Rakuten’s e-commerce
platform technology and management expertise, we aim to build
this mall into the biggest BtoBtoC e-commerce site in China.

Buy.com, one of the leading U.S. e-commerce companies,
has joined the Rakuten Group. In addition to its powerful firstparty sales model, which is based on direct selling without
inventories, Buy.com will be able to use Rakuten’s
e-commerce know-how to strengthen its marketplace
activities and develop its operations.

Rakutenhead office,
Japan

Our
Operations

Rakuten Ichiba
China

Our
Strategies

United States

Our
Presence

China

United States

Asia

Our
Backbone

United States

United States

Our
Performance

Rakuten Ichiba
TaiwanCOLUMN

Indonesia

Adopting English as Our
Official Language

Asia
In fiscal 2008, we launched Rakuten Ichiba Taiwan, our firstoverseas Internet shopping mall. Rakuten Ichiba Taiwan has
continued to grow steadily, thanks to the power of the
Rakuten brand. In fiscal 2009, we formed a capital andbusiness partnership with TARAD.com, operator of Thailand’sNo. 1 e-commerce site. TARAD.com already has over 2 million
members and aims to expand further by introducing various
functions and services from Rakuten Ichiba. We also launched
a new Internet shopping mall, Rakuten Belanja Online, inIndonesia on June 1, 2011.
* Belanja is Indonesian for “shopping.”

To maintain the speed of our global expansion,
we are developing the business know-how of our
subsidiaries in each country and sharing thisacross our organization. For this reason, we are
adopting English as the official Group language.
This will bring various benefits, including improved
understanding of our shared values, as expressedin the Rakuten Shugi (Rakuten basic principles),and better mutual understanding of the different
values and cultures of employees in othercountries. English will also increase the speed ofour business expansion by facilitating rapid anddirect communications about operational knowhow and technology development.

7

To Our Shareholders

Hiroshi Mikitani
Chairman and CEO

Rakuten has
Stepped onto the
Global StageI would like to begin by expressing our sincere gratitude for the continuing support of ourshareholders and investors. I would also like to express our heartfelt sympathy to everyone
affected by the Great East Japan Earthquake, and to offer our prayers for a rapid recovery.
Our focus in fiscal 2010 was to strengthen our advantage in the Japanese market while driving
Rakuten’s evolution as a strong global company through a variety of initiatives targeting both
domestic and global markets. In fiscal 2011, the 15th year since Rakuten’s establishment, we aim
to realize our vision of Rakuten as a strong global company by further accelerating the overseas
expansion of our unique business model, the Rakuten Eco-System.
8

Our
Presence

Overview of Fiscal 2010
In fiscal 2010, we further expanded the Rakuten Eco-System by accelerating
the growth of synergies within the Group through enhancements to our onestop shopping services, and by implementing a variety of initiatives designed
to improve customer convenience and satisfaction. We also took several
important steps toward the realization of our medium- to long-term vision of
becoming a strong global company.

Our
Strategies

We continued to develop an environment that encourages Rakuten
members to migrate within the Rakuten Eco-System and continuously use
multiple services, including e-commerce and finance-related services, so as tomaximize both group gross transaction volume and the lifetime value ofindividual members. As a result of these initiatives, we were able to set newrecords for both net sales and operating income in fiscal 2010. Net sales

Our
Operations

increased by 16.1% over the previous year to ¥346,144 million, while operating
income was 12.6% higher at ¥63,766 million.

Strengthening the Rakuten Eco-System in Japan
Our domestic E-Commerce Business is steady, high growth and consistently
outperforming the overall e-commerce market. We strengthened our advantages

Our
Backboneboth in the E-Commerce and Travel Businesses by adding our new E-Money
Business. The resulting enhancement of these services contributed to increased
synergies within the Group, further strengthened the Rakuten Eco-System andcontributed to growth in our group gross transaction volume.

Introducing New Services
We have continually kept pace with new trends in the Internet world by
Our
Performance

updating the Rakuten Group’s services to support access via smartphones
and tablet PCs. At the end of February 2011, we offered 17 smartphone
applications supported by 34 sites. We also used flash marketing via social
media, e-mail and other channels with considerable success.

Highlights in Fiscal 2010
TargetPerformance

Build structure to become a“Strong Global Company”■ Buy.com and PRICEMINISTER joined■ Lekutian (China) launched■ English-nization advanced■ Opened overseas R&D sites

Strengthen the Rakuten
Eco- System in Japan■ E-Commerce and Travel further
strengthened their positions■ Credit Card maintained growth■ Edy (e-Money) joined

Provide new services■ Smartphone, social projects and 
flash marketing initiatives

Project V3■ Controlled costs effectively

9Consolidating Our Foundation as a Strong Global Company
We rapidly expanded our overseas business activities through acquisitions andjoint ventures. Gross merchandise sales (GMS) at overseas subsidiaries
jumped to ¥66.8 billion in fiscal 2010*, versus ¥1.4 billion in fiscal 2009. We
also accelerated the adoption of English as our official corporate language tofacilitate the cross-organizational sharing of know-how from the various
countries in which we operate. These efforts allowed us to communicate
directly and promptly across multiple countries.
* Total GMS at overseas subsidiaries since the start of 2010.

Increased Emphasis on Japanese Internet Market
Consumer behavior in Japan has started to change in step with advances indevice technology and the communications environment. One particularly
significant development is the growth of mobile Internet access in Japan overthe past 10 years. GMS at Rakuten Ichiba made through mobile phones infiscal 2010 reached about 400 times the level achieved in fiscal 2001.
The continuing expansion of the mobile Internet market is being driven by
the emergence of smartphones and other new devices, and the emergence ofother trends, such as social shopping, are also expected to drive further
growth. We are continuing to develop our activities in the Japanese market,
which still offers a rich array of fields for the Rakuten Group to explore.

Establishment of a New Financial Service Brand
We are strengthening the potential of the Rakuten brand in the area of financerelated businesses, including credit cards, online banking, online brokerage
and e-money. Our services have already gained a high profile, and our goal
now is to achieve further growth in our user base. By building our financerelated businesses, we are further consolidating the Rakuten Eco-System byproviding Rakuten members with one-stop access to multiple services.

Building a Future as a Technology Company throughAccelerated Technology Development
A major R&D focus will be Internet-related technologies, such as cloudcomputing, as we aim to strengthen management information systems andglobalize our technology team. The Rakuten Institute of Technology (RIT) is
developing advanced technologies to support innovative new services. We plan
to build a more flexible development organization by shifting to a global R&D
structure with sites located overseas as well as in Japan. RIT opened a researchsite in New York in June 2010. We see dynamic technology development as the
key to our future as a company with a global reputation for unique technologies.

International Expansion of Points Strategy
The Rakuten Super Points Program is a highly effective marketing tool thathas become an established feature of the Rakuten Eco-System in Japan, andwe are now actively extending this system into other countries. In fiscal 2010,
we introduced the program through Buy.com in the United States and

10

Our
Presence

Rakuten Ichiba China, and we plan to develop it further by applying thelessons of success in Japan. We are also implementing points-based
marketing activities in other countries. We see this approach as a highly
efficient way to build user loyalty.

Building a Global Market Organization Based on
Our Corporate Philosophy
Our
Strategies

Rakuten Shugi (Rakuten basic principles) defines our code of conduct andvalues that are shared by all Rakuten Group executives and employees. We
will continue to enhance management speed and quality by ensuring that thisphilosophy is assimilated at our business sites in Japan and overseas. With
the increasing globalization of our business activities, human resource
development and the improvement of corporate information and accounting

Our
Operations

systems will also be priorities.

Forecasts for Fiscal 2011
In fiscal 2011, we anticipate continuing high growth driven by expanding
demand for our e-commerce, travel and other services in Japan. We will also
lay foundations for medium- to long-term revenue expansion by allocating
activities.

Dividend per Share

Our
Backbonestrategic management resources to the development of our overseas business(Adjusted for Stock Splits)

Returns to Shareholders
Maintaining sound corporate growth is a core management priority for the
Rakuten Group, and we continually strive to maximize business

(Yen)

200

performance and strengthen our financial position. Our basic policy on
150

Our
Performance

shareholder returns is to maintain stable increases in dividends, while also
retaining sufficient income to build the reserves needed to maximize ourcorporate value by maintaining financial soundness and pursuing dynamic

100

business development.
Accordingly, we set the dividend for fiscal 2010 at ¥200 per share,

50

compared with ¥100 in the previous year. We will use retained earnings to
expand our business activities, and to strengthen our financial position and0

operational infrastructure as the foundations for future business development.

FY ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10

Hiroshi Mikitani
Chairman and CEO

11

At a Glance

Sales Composition
E-Commerce
Business

Banking
Business

Credit Card
Business

Portal and MediaBusiness

E-Money
Business

E-Commerce
Business

Share ofNet Sales

41.6%

The number of new merchants on Rakuten Ichiba grew steadily with a
13.7% year-on-year increase to over 37,000 as of December 31, 2010. We
also conducted marketing programs based on our Rakuten Super Points
Program and developed new services. These efforts resulted in high growthin orders and the number of unique purchasers, and group gross transaction
volume (including Rakuten Books). We also expanded overseas into theUnited States, France and China. Net sales increased by 25.3% year
on year to ¥144,082 million. Despite a ¥1,031 million increase in goodwill
amortization due to the acquisitions, operating income rose 13.3% to¥41,040 million.

Credit Card
Business

Share ofNet Sales

18.2%

We made excellent progress with the transition to a business model
centered on the Rakuten Card. There was clear evidence of groupsynergies, including a steady increase in the number of card applications
via Rakuten Ichiba, the expansion of transaction volume, a rising shopping
revolving credit balance, and increased commission revenues. These
factors helped to lift net sales by 9.4% year on year to ¥63,116 million.
However, operating income was 24.2% lower at ¥2,510 million due toadditional spending on sales promotion activities to attract new members
for this strategic card service.

E-Money Newly established)
Business ( in FY2010

Share ofNet Sales

1.5%

We launched this new segment in the first quarter. A key priority was toincrease the number of locations at which payments can be made using
the Edy e-money system operated by bitWallet, Inc. We also took steps toenhance group synergies, including the introduction of e-money settlements
for Rakuten Ichiba. These initiatives were very successful, and there wassustained growth in the value of settlements processed. Net sales in thissegment reached ¥5,263 million, but there was an operating loss of ¥598
million because of increased expenditure, including sales promotion andmerchant recruitment expenses.

Banking
Business

Share ofNet Sales

9.6%

Performance benefited from initiatives in the previous year, including
improvements to the financial structure and changes to charges for existing
services. Income from financial assets grew strongly as a result of lending
activities, and service income, including commissions, was also higher. We
also worked to maximize synergies within the Rakuten Group, including thecapture of settlement transactions for Rakuten Ichiba. Net sales increased
by 9.9% year on year to ¥33,289 million. However, operating income fell
31.5% to ¥1,657 million due to a ¥3,317 million valuation loss on marketablesecurities, and a ¥558 million increase in goodwill amortization resulting fromthe acquisition of Rakuten Bank, Ltd. as a wholly owned subsidiary.

12

Net
Sales

Securities
Business

TravelBusiness+25.3%(Millions of yen)

Telecommunications
Business

Professional Sports
Business

Operating
Income+13.3%(Millions of yen)

45,000150,000

36,000100,000

27,00018,00050,0009,000
0

FY ’08

Net
Sales

’09

0

’10

+9.4%

(Millions of yen)

Operating
Income3,500

60,0003,000

50,0002,500

40,0002,000

30,0001,500

20,0001,000

10,000’09’10

0-24.2%

FY ’08Operating
Loss(Millions of yen)

(Millions of yen)

6,000

0

5,000

-100

4,000

-200

3,000

-300

2,000

-400

1,000

-500
FY ’08

Net
Sales

’09

’10

+9.9%

-600

FY ’08Operating
Income(Millions of yen)

(Millions of yen)

35,0002,500

30,000

’09

’10

’09

’10

-31.5%

2,000

25,00020,0001,500

15,0001,000

10,000

500

5,000
0

’10

500
FY ’08

Net
Sales

0

’09

(Millions of yen)

70,0000

FY ’08

FY ’08

’09

’10

0

FY ’08’09’10

Share of
Net Sales

6.6%

There was an increase in advertising revenue from the Rakuten Toolbar,
which allows Rakuten Ichiba users to search for products and information
more efficiently. This helped to lift net sales by ¥29.0% year on year to¥22,730 million. Operating income was 104.1% higher at ¥2,377 million.

Net
Sales

+29.0%(Millions of yen)

25,00002,50020,000

2,000
1,500

15,000

1,000

6.7%

0

0

-500

Net
Sales

6.9%

Our efforts for this segment in fiscal 2010 included the expansionof our product line-up, the establishment of new accounts via the
Rakuten Group, including Rakuten Ichiba, and the improvement of our
trading tools for smartphones. Stock-related commission revenues
were lower because of the stagnation of the Japanese stock market,
but commissions from other areas, including mutual funds and foreignexchange, were higher, with the result that net sales increased by 1.7%
to ¥23,961 million, and operating income by 16.6% to ¥5,204 million.

2.2%

Our team was less successful than in the preceding year. This and otherfactors combined to push sales down by 7.4% to ¥7,743 million. There
was an operating loss of ¥1,332 million, compared with an operating lossof ¥617 million in the previous year.

FY ’08Operating
Income’09’10+16.9%(Millions of yen)

25,00012,00010,0008,000

15,000

6,000

10,000

4,000

5,000

2,000
FY ’08

Net
Sales

’09

’10

+1.7%

(Millions of yen)0

FY ’08Operating
Income’09’10+16.6%(Millions of yen)

25,0006,000

20,000

5,000
4,000

15,0003,000

10,000

2,000

5,000

1,000
FY ’08

Net
Sales

’09

’10

-7.4%

(Millions of yen)0

FY ’08’09

Our
Performance

Share ofNet Sales+20.5%

20,0000ProfessionalSports Business

’10

Our
Backbone

Share ofNet Sales’09(Millions of yen)0

Securities
Business

FY ’08

Our
Operations

In this segment, a key priority was to work with transportation companies
to enhance and expand our travel services in Japan. We also developed
smartphone applications and improved the attractiveness of our overseas
travel services. These initiatives, combined with the growth of leisurerelated travel, allowed us to achieve 20.0% year-on-year growth in grossbooking transaction volume. Net sales increased by 20.5% year on yearto ¥23,285 million, and operating income by 16.9% to ¥10,285 million.

500

5,000

Our
Strategies

Share ofNet Sales+104.1%(Millions of yen)

10,000Travel Business

Operating
IncomeOur
Presence

Portal andMedia Business’10—

Operating
Loss(Millions of yen)

9,000

0
-300

6,000

-600
-900

3,000

-1,2000

Telecommunications
Business

Share ofNet Sales

6.7%

The business environment was challenging, and net sales were 14.1%
lower year on year at ¥22,676 million. However, our efforts to reduce thecost of sales and overheads enabled to us to increase operating income
by 196.0% to ¥1,074 million.

FY ’08

Net
Sales

’09

’10

-14.1%(Millions of yen)

-1,500Operating
Income’09’10+196.0%(Millions of yen)

35,0001,200

30,0001,000

25,000800

20,000600

15,00010,000

400

5,000

200

0

FY ’08

FY ’08

’09

’10

0

FY ’08

’09

’10

13

Review of Main Operations

E-Commerce Business
Healthy Gross Merchandise Sales
Growth in Japan

Rapid Growth in Mobile Transactions

Our priority was to raise customer satisfaction with Rakuten

devices were around 400 times*1 higher than in fiscal 2001.

Ichiba, our flagship business in this segment, by expanding

The extremely rapid growth of mobile transactions on

product ranges and recruiting new merchants, including

Rakuten Ichiba is apparent from the fact that total mobile

popular retailers and manufacturers. We also implemented

e-commerce*2 sales in Japan increased nearly 65 times

dynamic sales promotion initiatives based on our Rakutenover the same period. In December 2010, GMS throughSuper Points program and developed new services for

smartphones were approximately eight times higher thansmartphones and social media. The success of these efforts

the total for December 2009, indicating that the emergence

was reflected in continued high growth in our domesticof new mobile devices can be expected to drive further

E-Commerce Business. Gross merchandise sales (GMS)

growth in GMS.

In fiscal 2010, GMS on Rakuten Ichiba through mobile

increased by 18.1% year on year.
*1 Including sales through smartphones*2 Based on research by the Fuji Keizai Group

Domestic E-Commerce GMS

Mobile Commerce GMS(Billions of yen)(Times: 2001=1.0)

1,200

500
400

900

300
600
200
300

0

100

’08

’09

’10

* Domestic E-Commerce = Mall (Fixed-price, Group purchase), Mobile, Business,
Golf, Books, Auction (Flea market), download, tickets, Internet Supermarket, Check
Out, Off-track betting, toto, ShowTime, Media rental

0

’01

’02

’03

’04

’05

’06

’07

’08

’09

’10

Rakuten Ichiba Mobile GMS (including smartphones)
Japan mobile commerce GMS (Source: Fuji Keizai)

Rakuten Fulfillment Center Raises Logistical Efficiency
The Rakuten Fulfillment Center (RFC) was established as a consignment business to strengthen distribution agency
services, including logistics and support for merchants. The center is already providing packaging services to Rakuten
Ichiba merchants and has also become the distribution center for Rakuten Books. It
will soon be able to provide same-day deliveries in the Tokyo Metropolitan Area.
Improved logistical efficiency is also expected to bring cost savings. When the RFC
becomes fully operational, we expect to achieve further growth in group grosstransaction volume through the resulting reinforcement of our logistics business.

14

RFC at the Prologis Park Ichikawa Ⅰ

OurPresence

Travel BusinessIn the Travel Business, Rakuten works in partnership with airlines, railroads

We continued to offer a wide range ofand other transportation companies. In fiscal 2010, we further enhanced

services. These include the ANA Raku Pack,our domestic travel services by expanding the range of options availableof which we have sold over 1 million since

to customers, including through expressway bus services and rental cars.

their introduction, as well as accommodation

We also reinforced our business in other areas, for instance by developing

plans linked with products provided bysmartphone applications and enhancing our overseas travel products.

East Japan Railway Company and

Online booking is gaining wide acceptance among individual travelers, a

Hokkaido Railway Company. In September

trend that helped us achieve a substantial 20.0% year-on-year increase in2010, we launched the JAL Raku Packgross booking transaction volume (GTV).

service, and in December 2010 we further

Our
Operations

Extending Our Range ofTravel Packages

Our
Strategies

Achieving a Substantial Increase in
Gross Booking Transaction Volume

enhanced our dynamic package tour range
by extending the ANA Raku Pack lineup to

Rakuten Travel GTV*(Millions)

12

100

10

80

8

60

6

40

4

20

2

0

Q1

Q2

Q3

’08
GTV (Left scale)Nights booked (Right scale)

Q4

Q1

Q2

Q3

Q4

’09

Q1

Q2

Q3

Q4

have proven extremely popular and are
expected to contribute to further growthin GTV.

Our
Performance120

include international travel. Both products

Our
Backbone(Billions of yen)

0’10* Travel GTV = Booking base (before cancellations, excl. tax) = Domestic / International hotel room booking, International tickets, Domestic /International DP, Domestic Bus, Rental car service

The Japanese Rakuten Travel website
http://travel.rakuten.co.jp/

Expanding Our Overseas Presence
Rakuten Travel, Inc. opened its first overseas office in 2002. Today, it has offices
in Shanghai, Beijing, Guangzhou, Dalian and Hong Kong in China, as well as inSeoul in South Korea, Taipei in Taiwan, Bangkok in Thailand, and in Guam and
Hawaii in the United States. It has also established a U.S. subsidiary, Rakuten
Travel U.S.A. Inc., and opened a branch in New York. Rakuten Travel aims tobe the world’s premier travel site operator and is using a variety of strategies tocapture travel demand internationally as well as in Japan.

The English-language Rakuten Travel site
http://travel.rakuten.co.jp/kaigai/

15

Review of Main Operations

Credit Card Business
Shopping Transaction Volume
Reaches ¥1 Trillion

Credit Card Shopping
Transaction Volume

Revolving
Credit Balance(Billions of yen)(Billions of yen)

1,200

100

Rakuten KC Co., Ltd. recorded a substantial
increase in the number of Rakuten Card holders.
This was the result of successful marketing

1,000

80

strategies, including a points program designed
to reinforce synergies within the Rakuten Group.

800
60

The high level of card usage by individual
cardholders is also apparent from Internet

600

research showing that the Rakuten Card is now

40400

the second most widely used credit card after
JCB cards. This growth was reflected in a steep

20

200

increase in the Rakuten Card shoppingtransaction volume, which grew by 55.8% year0

on year to over ¥1 trillion, while revolving credit
increased by 55.1% to ¥97.9 billion.

0
FY ’08’09’10

FY ’08

’09

’10

’09

’10

Banking Business
Sustained Growth in Lending
Rakuten Bank, Ltd. made effective use of groupsynergies in the marketing of its Rakuten Bank
Super Loans, which are card loan services forindividuals. By December 31, 2010, membership
had increased by 14.8% year on year to

Loan Receivables

Total Customers(Billions of yen)

(Persons)

150,000

120

100

120,00080

138,000, and the balance of loans was 21.5%
higher at ¥117.4 billion. In December 2010,

90,00060

Rakuten Bank further strengthened its productlineup by taking over the Rakuten Mortgage

60,00040

business. This new addition will help Rakuten
Bank meet the financing needs of its customers

30,00020

while building a solid customer base.
00
FY ’08

16

’09

’10

FY ’08Our
Presence

E-Money Business

By expanding the number of partner companies forTransaction Volume of E-Money Settlements(Billions of yen)80

the Edy e-money system, we were able to increase70

the number of locations at which the Edy card is60

accepted, especially convenience stores. We also
used the Rakuten Group network to introduce various
including adding Edy functions to Rakuten Cards

30

and introducing Edy settlements on Rakuten Ichiba.

20business through linkage with our Rakuten Super

Our
Operations

40

volume. We will continue to strengthen the settlement

Consolidation Started

50

enhancements to convenience and service quality,

These initiatives brought strong growth in transaction

Our
Strategies

Strong Growth inTransaction Volume

100

to customer convenience.

Q4

Q1

’09

’10

Q2

Q3

Q4

Our
Backbone

Points Program, and introduce further enhancements

Our
Performance

Securities Business
Emphasis on Customer Satisfaction
Rakuten Securities, Inc. launched a new version of its iSPEED mobile
trading tool, allowing it to be used on tablet PCs and smartphones.
For added user-friendliness, support for iPhone motion functions was
also introduced. The aim was to create an easy-to-use investment
environment with advanced information tools, including stock pricesearching and chart displays. Rakuten Securities also continued to
expand its product lineup. The number of overseas ETFs reached
129 as of March 1, 2011, making it the largest number among Internet
securities companies in Japan.
Committed to raising customer satisfaction, the company
also launched services that match today’s increasingly global
investment needs. For example, it became the first major Internet

The iSPEED mobile trading tool
for tablet PCs and smartphones

securities company to offer foreign futures (stock price indexes andcommodities), initially with a range of 28 products.

17

Our Philosophy and Social Responsibility

Empower Japan. Empower the World.
From the day Rakuten was founded, we have dedicated ourselves to empowering people and society
through the Internet. This principle has driven the growth and development of our business, and isreflected in our efforts to empower Japan and the world through our activities. All Rakuten Group
employees, in Japan as well as overseas, adhere to this philosophy and work to realize the ideal of asustainable society by implementing it in all their activities.

Rakuten Social Responsibility Project

Four Points that Rakuten Group Should Consider
In response to the hardship brought to the Tohoku region of Japan by the Great East Japan Earthquake
on March 11, 2011, and the difficulties that the struggling Japanese economy imposes on many people,
Rakuten has formulated four central tenets that will guide our contributions to society.

1Creation of Value for Society through Our Main Businesses

2

Energy Conservation in Consideration of the Environment

3

Contribution toward a Bright Future for Japan

4

Energy that is Friendly to Both People and the Environment

Through our wide-ranging business activities, we have helped to empower people throughout Japan and built up
many strong relationships with people and businesses in various regions of Japan, including local residents,
owners of Rakuten Ichiba shops, hotel owners and municipal governments. We will continue to contribute throughour activities to the development of the Japanese economy and regional economies, including the Tohoku region,
to meet the needs of people in an ever more personal and direct manner together with our partners.

In response to the unstable electric power supply resulting from the incident at the nuclear power stations inFukushima, we have launched major power-saving efforts under an initiative called Project 60. This project was
launched immediately after the earthquake and aims at reducing per-employee power consumption this summer
by 40% compared to 2010 levels.

We are determined to work for the future of Japan through a variety of measures, especially by helping to build
communities that properly support children, who are Japan’s future.

Rakuten will thoroughly reflect upon the possibilities of green energy and consider how to best promote it.
For more on the Rakuten Social Responsibility Project, see:

http://corp.rakuten.co.jp/en/csr/philosophy/
18

Our
Presence

Support for Disaster Recovery
Business-Based Support Activities—Rakuten Tasuke-Ai
With the assistance of local governments, Rakuten has selected products available on Rakuten Ichibathat match the needs of people in the disaster area, and is working with Rakuten Ichiba merchants to
supply those items ordered by Rakuten users at special non-profit prices. Relief goods purchased

Our
Strategies

under this system are distributed to people in the disaster area through local governments.

Our
Operations

Acceptance of Donations through Rakuten Bank, Edy, Point Cards
Our
BackboneThe Rakuten Group has started to accept donations through various channels, including the
Rakuten Bank, Edy, credit cards linked to Rakuten membership IDs, and the Rakuten Super
Points Program. The aim of this initiative is to use the Internet to channel large amounts ofassistance into the disaster area as quickly as possible. Rakuten forwards all donations for use
in relief and recovery activities through charitable organizations, such as the Japan Red Cross
Society, and through local governments. As the result of these activities, total donations
reached about ¥336.1 million at the end of May 2011. In addition to this, ¥300 million was

Our
Performance

contributed by the Rakuten Group.

Recovery Support Campaign by Tohoku Rakuten Golden Eagles
The Tohoku Rakuten Golden Eagles are highly motivated by their role as a symbol of recovery efforts in
the Tohoku region, and the entire team is working hard to provide encouraging news for the region. Team
members are taking part in street appeals for donations and using baseball to help people in the disasterarea, such as by visiting evacuation centers to play catch-ball, batting and baseball with children. In
addition, we invited people in the disaster area to come to baseball games at our Kleenex Stadium Miyagi.

For more on Rakuten’s CSR initiatives, governance and stakeholder relations, see:

http://corp.rakuten.co.jp/en/csr/
19

Corporate History
1997

1998

1999

2000

2001

2002

1997

2001

Internet Shopping Mall

Online Book Store

2003

2004

2005

2006

2007

2008

2005

2006

2008

Performance Marketing

AuctionInternet Shopping
Mall in Taiwan

2009

2010
2010

E-Commerce
Business
Internet Shopping
Internet Shopping
Mall in United States Mall in Europe

Internet Shopping
Mall in China

2005

Credit Card
Business
Credit Card2010

E-Money
Business
E-Money System
2004

2009

Banking
Business
Personal Loan

Internet Banking

2000

2001

2005

2008

Portal Site

Blog

Internet Research

Marriage Consultant

2009

Portal and MediaBusiness
Pay-per-view Video Service

2001

TravelBusiness
Online Hotel Reservation
2003

Securities
Business
Online Securities Brokerage
2004

Professional Sports
Business
Professional Baseball2007

Telecommunications
Business
IP Telephony

Ichiba, the Internet shopping
1997 Rakuten
mall, commences operation.

Inc. acquires 100% of shares2005 Rakuten,
in LinkShare Corporation to spearhead
overseas push.

Inc. goes public through an IPO
2000 Rakuten,
on the JASDAQ market.
Rakuten Books is founded as a joint
venture with Nippon Shuppan Hanbai inc.
Infoseek Japan K.K. is acquired by
Rakuten, Inc. to create a portal service.
Travel starts online hotel
2001 Rakuten
reservation services.

Rakuten Auction, Inc. is founded as a
joint venture with NTT Docomo, Inc.
Kokunai Shinpan Co., Ltd.
(now Rakuten KC Co., Ltd.) is included in
the consolidation as a subsidiary of
Rakuten Inc.
KC Co., Ltd. transfers its auto
2006 Rakuten
loan business to Orient Corporation to
streamline its business.

is acquired by Rakuten, Inc.
2003 MyTrip.net
to spearhead the travel business; later
merged with Rakuten Travel, Inc. in 2004.
Rakuten, Inc. acquires 96.7% of sharesin DLJdirect SFG Securities to create thecurrent Rakuten Securities, Inc.

2004

Rakuten, Inc. acquires 96.5% of sharesin Aozora Card; the company is later
renamed Rakuten Credit, Inc.
 akuten Baseball, Inc. is founded to startRa professional sports business.

20

Inc. acquires 73.5% of the2007 Rakuten,
shares in Fusion Communications tocommence an IP telephony business.
Rakuten Books is integrated into Rakuten
Ichiba to improve business efficiency.
Logistics, Inc. is founded to2008 Rakutencommence new logistics business.
Rakuten, Inc. and President Chain Storeestablish a joint venture and start a
Taiwan-based internet shopping mallbusiness: Rakuten Ichiba Taiwan.
Rakuten, Inc. signs an agreement witheBANK Corporation (now Rakuten Bank,Ltd.) regarding a strategic and capitalalliance.

Bank, Ltd. becomes2009 Rakuten
a subsidiary.
Japanese pay-per-view video service
provider SHOWTIME, Inc. is made awholly owned subsidiary by stockacquisition.
TARAD Dot Com Co., Ltd., an Internet
shopping mall operator in Thailand,
becomes a subsidiary through Rakuten(Thailand) Co., Ltd.
Inc., the Edy e-money system
2010 bitWallet,
operator, becomes a subsidiary.
LinkShare Japan K.K. becomes a
subsidiary through a merger with Traffic
Gate, Ltd.
Buy.com Inc. becomes a subsidiarythrough Rakuten USA, Inc.
PRICEMINISTER S.A. (now PRICEMINISTER S.A.S.), an e-commerce site operator
in France, becomes a wholly owned
subsidiary through Rakuten Europe S.a.r.l.
Rakuten Bank Ltd. is made a wholly
owned subsidiary through a stock swap.
Rakuten launches an Internet shopping
mall in China as a joint venture with
Baidu, Inc.

Corporate Governance

The Rakuten Group gives top priority to effective corporate governance. The Group has implemented a range of measures tostrengthen 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 service company.

1.	Basic Structure of Corporate Governance andReasons for Adoption

Basic internal control policies for Rakuten, Inc. are determined by
the Board of Directors. The Company has declared its intention tocomply with all regulatory requirements, and to apply high ethicalstandards 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 groupwide 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, withthe aim of strengthening corporate governance and paving theway for further growth.

Our
Performance(1) Directors, Board of Directors, Executive Officers, etc.
The Board of Directors consists of 16 Directors, including four
Outside 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 these meetings,
Directors make decisions on important management matters andsupervise Executive Officers’ activities. To ensure appropriate
decision-making by the Board of Directors, medium- and long-term
management plans, basic policies and other key strategies are
first discussed at Corporate Strategy Meetings, which consists
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 accordance with thesedecisions. To ensure appropriate and efficient conduct of business
operations, activities in individual segments are supervised bymanagement councils convened within each segment, as well as
by Functional Teams responsible for human resources, financial
management, accounting, organizational management and othermanagement aspects across the Rakuten Group.

3. Internal Control Systems

Our
Backbone

2. Corporate Organization

Our
Operations

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 weretransferred to 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 Group businesses.

Our
Strategies

Corporate Governance(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 three-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.

Our
Presence

1. Basic Approach to Corporate Governance4. Risk Management Systems
Under the Rakuten Group Regulations (RGR), the units responsible for each business area also manage the risk factors
associated with their respective business activities.
Information management risk is rigorously controlled under
the leadership of the Risk Management Department. Our efforts
to minimize risk throughout the Rakuten Group include Infor-

21

mation Security Management System (ISMS) certification. We
have also strengthened our emergency reporting systems toensure that risk information is gathered promptly.
To ensure proper supervision of the performance of Directors’
duties in relation to business risk, business investments above acertain amount are subject to approval by the Board of Directors.
In addition, management councils in each business segment
gather risk information and maintain effective risk management
by requiring thorough reporting of risks that could affect theperformance of their business operations.
Management of group-level risk is unified under the Group
Risk Management Committee. Chaired by the CEO, this committee
is responsible for integrated monitoring of potential risk factorsthat could have a serious impact on the Rakuten Group.

Internal Audits, Company Auditor Organization,
Personnel and ProceduresInternal audits are conducted by the 17-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
and the Executive Officers responsible for areas covered byaudits. The Internal Audit Department also cooperates with theBoard of Auditors.
The Internal Audit Department is also working to enhance theeffectiveness 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 four
Outside 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 with which
Rakuten has a business relationship that includes the provision ofservices. An Outside Auditor, Mr. Katsuyuki Yamaguchi, is apartner in the same firm. There are no other personal, capital or
business relationships or significant interests.
As described above, Rakuten appoints highly independent
Outside Directors and Outside Auditors whose expertise andobjective 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.

22

The four 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 experienceof business management and expertise as a business consultant.
Mr. Joshua G. James was appointed as a person able to provide
management with advice and recommendations based on his
specialized knowledge of Internet services and wide-ranging
business management experience.
There are four Outside Auditors. Mr. Takekiyo Kunitake has
wide-ranging expertise and experience, especially in the fieldsof business 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 theInternal 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 issummarized 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, orthat amount divided by the number of years during which theoffice of Outside Director was held.
iii.	The amounts stipulated below if stock options, as defined in
Article 238, Paragraph 3 of the Corporate Law, were
exercised or transferred after the person was appointed as
an Outside Director.
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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.

Our
Presence

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 thestock options.

Remuneration for Directors and Auditors

Category of officer

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

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

Total amount of each type of remuneration (millions of yen)
Basic fees

Stock options

BonusesNumber ofrecipients

823

582

65

176

12

—

—

—

—

—

82

77

5

—

8

Our
Strategies

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

2. Consolidated total amount of fees, etc., for directors and auditors of the filing company

Hiroshi Mikitani, Chairman and CEO

Consolidated total
amount of fees, etc.

Company category

107

Filing company

Our
Operations

Name (title)

Consolidated total amounts for each type of fees, etc.
Basic fees

Stock options

Bonuses70

927

3. Total amount of significant items included in salaries and bonuses paid to directors who are also employees
Total amount (millions of yen)

Number of recipients

Details

93

7

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

Our
Backbone

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.

Our
Performance

Shareholdings
1. Shares held for purposes other than pure investment
Number of companies: 12
Total amount shown in balance sheet: ¥53,723 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
Company

Shares held

Amount shown inbalance sheet(millions of yen)

Tokyo Broadcasting System Holdings, Inc.

37,770,700

48,875Strategic investment (note)

568,000

3,709

Reinforcement of business relationship

F@N Communications, Inc.

5,779

595

Reinforcement of business relationship

IMJ Corporation

5,500

176

Reinforcement of business relationship

FreeBit Co., Ltd.

498

162

Reinforcement of business relationship

Alpen Co., Ltd.

18,00026

Reinforcement of business relationship

Synergy Marketing, Inc.

Reason for holding

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.

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 in accordance with Japan’s Corporate Law and the Financial Instruments
and Exchange Law.
In fiscal 2010, audits were conducted by the following charteredpublic accountants and assistants.
[Chartered public accountants]
Designated limited liability partner,
executive partner

Masaharu Sugiyama

Designated limited liability partner,
executive partner

Kenichi Ishida

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

Fiscal year ended
December 31, 2009

Fiscal year ended
December 31, 2010

Fees paid forFees paid forFees paid forFees paid for
audit
non-audit
audit
non-audit
certification
services
certification
services
services(millions of yen) services(millions of yen)(millions of yen)(millions of yen)Companysubmitting
financialreports

149

4

149

35

Consolidated
subsidiaries

227

25

231

19

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

Total

376

30

380

54

[Names of assistants]
21 chartered public accountants and 29 others

Other Important Matters Pertaining to Fees

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 by shareholders holding at least one-third of voting rights. The purpose ofthis provision is to facilitate the administration of General Meetingsof Shareholders by easing the quorum requirements for special
resolutions.

Fiscal year ended December 31, 2009
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 2009 amounted to ¥8 million.
Fiscal year ended December 31, 2010
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 2010 amounted to ¥42 million.

Non-Audit Services Provided to the Company
Submitting Financial Reports by Certified Public
Accountants and Other Audit Personnel
Fiscal year ended December 31, 2009
The non-audit services for which Rakuten, Inc. pays fees tocertified public accountants and other audit personnel consist
primarily of advisory services relating to the preparation of English
financial statements.
Fiscal year ended December 31, 2010
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, and thenumber of days required for audits.

24

Financial Section
Results of Operations and Financial Condition
For the fiscal year ended December 31, 2010

Net Assets
Total net assets amounted to ¥249,234 million as of December
31, 2010, an increase of ¥30,614 million from the previous

Our
Performance

Liabilities
From ¥1,540,617 million as of December 31, 2009, total liabilities
increased by ¥159,666 million to ¥1,700,283 million as ofDecember 31, 2010. This resulted mainly from a ¥31,400 million
increase in commercial paper issued by Rakuten KC, and a¥30,703 million increase in short-term debt.

The cash flow position in the year ended December 31, 2010 was
as follows:
Net cash provided by operating activities—Cash inflows included¥60,717 million from income before income taxes and minority
interests (¥52,530 million in the previous year). In the Banking
Business, the net growth of deposits resulted in a cash inflow of¥14,919 million, compared with a ¥73,047 million net outflow inthe previous year, but the net growth of lending produced an
outflow of ¥33,004 million, compared with a ¥4,669 million inflow
in the previous year. Rakuten KC recorded a cash outflow of¥43,405 million relating to a net increase in beneficial interests insecuritized assets, compared with the ¥39,798 million inflow inthe previous year, and a cash inflow of ¥20,847 million resulting
from the net reduction of operating loans receivable, comparedwith a ¥81,434 million outflow in the previous year.
On this basis, net cash provided by operating activities
amounted to ¥30,305 million, compared with net cash used of¥55,219 million in the previous year.
Net cash used in investing activities—There was a cash outflow of¥40,159 million, compared with ¥3,293 million in the previous
year, relating to the purchase of shares in two newly acquiredcompanies, Buy.com and PRICEMINISTER, which became
consolidated subsidiaries as a result of changes to the scope of
consolidation. The cash outflow relating to the acquisition ofshares in subsidiaries amounted to ¥18,825 million, comparedwith ¥1,670 million in the previous year. These acquisitions include
a tender offer for shares in Rakuten Bank, Ltd., a consolidated
subsidiary.
On this basis, net cash used in investing activities amounted
to ¥60,538 million, compared with a cash inflow of ¥217,160
million in the previous year.
Net cash provided by financing activities—There was a cash
inflow of ¥29,032 million, compared with a ¥77,600 million cash
outflow in the previous year, resulting from a net increase in shortterm loans payable by Rakuten Inc. and Rakuten KC. A net
increase in commercial paper issued by Rakuten KC resulted in acash inflow of ¥31,400 million, compared with ¥4,600 million in
the previous year.
On this basis, net cash provided by financing activities
amounted to ¥27,609 million, compared with net cash used of¥174,157 million in the previous year.
These figures add to cash and cash equivalents of ¥100,737
million for the year ended December 31, 2010, a reduction of¥2,882 million compared with the previous year’s figure.

Our
Backbone

AssetsTotal assets of December 31, 2010 amounted to ¥1,949,517
million, up by ¥190,280 million from the previous year-end figureof ¥1,759,237 million. This increase consisted primarily of¥33,004 million in loans for the Banking Business, ¥24,827
million in asset securitization gains resulting from the securitization of installment receivables of Rakuten KC Co., Ltd., and a¥40,408 million increase in goodwill.

Cash Flows

Our
Operations

Financial Position

year-end total of ¥218,620 million. The main reasons for the higher
figure were net income of ¥34,956 million, and a ¥34,105 million
increase in shareholders’ equity.

Our
Strategies

The Rakuten Group continued to focus on improving user convenience and satisfaction and on maximizing group-level synergies.
We also moved forward on the international front under our
medium- to long-term global growth strategy. For example, we
acquired the U.S. company Buy.com Inc. and the French company
PRICEMINISTER S.A. as consolidated subsidiaries in the third
quarter, while in the fourth quarter we opened the LekutianInternet shopping mall in China as a joint venture with Baidu, Inc.
These efforts were reflected in year-on-year growth of over
20% in net sales in several segments: 25.3% for the E-Commerce
Business, 29.0% for the Portal and Media Business, and 20.5%
for the Travel Business.
In finance-related services, we began to reap the benefits ofour concentrated investment in management resources for our
Credit Card Business, which is based on the Rakuten Card, andnet sales increased by 9.4% year on year. The Banking and
Securities Businesses also grew, despite difficult market conditions. In addition, we acquired bitWallet, Inc. as a consolidated
subsidiary and launched a new segment, the E-Money Business.
Total net sales for fiscal 2010 increased by 16.1% year on
year to ¥346,144 million. Despite a ¥1,645 million increase ingoodwill amortization resulting from the acquisitions of Buy.com
and PRICEMINISTER, operating income was 12.6% higher year
on year at ¥63,766 million, while income before income taxes andminority interests increased by 15.6% to ¥60,717 million. Net
income declined by 34.7% year on year to ¥34,956 million
because of an ¥18,059 million income tax adjustment resulting
from inclusion of deferred tax assets in the consolidated accounts
for the previous fiscal year, when net income was very high.

Our
Presence

Business Performance25

Consolidated Balance Sheets
Rakuten, Inc. and Consolidated Subsidiaries
December 31, 2010 and 2009

Thousands of
U.S. dollars

Millions of yen

ASSETS

2009

2010

2010

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
Non-current assets:

Property, plant and equipment
Intangible assets
Goodwill
OthersTotal intangible assets
Investments and other assets:

Investment securities
Deferred tax assets
Other
Allowance for doubtful accounts
Investments assets and other assets
Total non-current assets
Total assets¥
96,233¥72,866 $894,176
		
37,842 		
45,354 		
556,554
		
93,111 		
100,909 		 1,238,298
		
2,834 		2,466 		30,255
		
41,774 		
66,601 		
817,296
		
223,909 		
223,114 		 2,737,930
		
119,060 		
126,779 		 1,555,765
		
177,806 		
156,950 		 1,926,001
		
18,014 		
35,510 		
435,765		
524,379 		
535,087 		 6,566,296
		
92,877 		
125,881 		 1,544,741
		
13,680 		
13,340 		
163,702		
114,682 		
151,586 		 1,860,183
		
(42,078) 		
(27,012) 		
(331,472)
		 1,514,125 		 1,629,432 		 19,995,489
				
19,525 		
21,890 		
268,624						
87,047 		
127,456 		 1,564,064
		
33,481 		
54,041 		
663,156
		
120,528 		
181,496 		 2,227,220
						
59,314 		
67,834 		
832,427
		
26,136 		
25,459 		
312,416
		
23,990 		
26,454 		
324,627
		
(4,381) 		
(3,049) 		
(37,418)
		
105,059 		
116,698 		 1,432,052
		245,112 		
320,084 		 3,927,896¥ 1,759,237¥ 1,949,517$ 23,923,385

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 ¥81.49 to $1, the rate of exchange prevailing at December 31, 2010.

26

2009

2010

2010

¥
83,090		
89,810		
28,232
		698,354
		
2,834
		
12,565
		
142,600
		
59,016
		
89,122
		
10,112
		
12,318
		
138,993		 1,367,044
						
158,067		
10,275
		
460
		
357
		
1,674
		
170,833
		
		
		
2,728
		
11
		
2,740
		 1,540,617
		
		
		

¥ 143,507
		
92,573
		
36,835
		
713,273
		
2,466
		
17,590		
145,973		
55,329		
77,773
		32,775
		
15,686
		209,980		 1,543,760
						
134,256
		
10,176
		
4,694
		
393
		
5,027
		
154,546
		
		
		
1,965
		
13
		
1,977
		 1,700,283
		
		
		

$ 1,761,039
		 1,136,004
		452,020
		 8,752,885
		
30,263
		
215,860
		 1,791,304
		
678,961		954,383		
402,200		
192,488		 2,576,753
		 18,944,161
				
		 1,647,516
		124,872		
57,598
		
4,826
		
61,687
		 1,896,500
						
24,108
		157
		
24,265
		 20,864,925
		
		
		

LIABILITIESOurPresence

Thousands of
U.S. dollars

Millions of yen

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

Common stock - authorized, 39,418,000 shares ;		issued, 13,181,697 shares in 2010 and 13,096,980 shares in 2009
Capital surplus
		Retained earnings		Treasury stock - at cost, 60,079 shares in 2010 and 979.50 shares in 2009 		
Total shareholders’ equity
				Valuation and translation adjustments		Valuation difference on available-for-sale securities		
Deferred gains or losses on hedges
		Foreign currency translation adjustments
		
Total valuation and translation adjustments		

107,606 		

107,779 		

1,322,606

115,899 		
(20,411) 		
(11) 		203,083 						
1,842 		(305) 		(1,275) 		
261 		

119,851 		
13,183 		
(3,626) 		
237,188 						
6,001 		(198) 		(4,694) 		
1,109 		1,470,743
161,780(44,491)2,910,638

Subscription rights to shares		

609 		

958 		

11,753

Minority interests		

14,666 		

9,979 		122,462

Total net assets

		
218,620 		
249,234 		 3,058,460
						¥ 1,759,237¥ 1,949,517 $ 23,923,385

Total liabilities and net assets

Our
Performance

NET ASSETS
Shareholders’ equity:

Our
Backbone

Long-term debts
Provision for loss on interest repayments
Deferred tax liabilities
Other non-current provisions
Other
Total non-current liabilities

Our
Operations

Non-current liabilities:

Our
Strategies

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

73,638(2,431)(57,600)
13,60727

Consolidated Statements of Income
Rakuten, Inc. and Consolidated Subsidiaries
Years Ended December 31, 2010 and 2009

Thousands of
U.S. dollars

Millions of yen

Net sales
Cost of sales

Gross profit
Selling, general and administrative expenses

Operating income
Other Income (Expenses)

Interest income
Dividend income
Foreign exchange gain
Equity in earnings of affiliates
Interest expense
Commission fee expense
Gain on step acquisitions
Reversal of reserve for financial instruments transaction liabilities
Loss on retirement of non-current assets
Loss on investment securities
Impairment loss
Other - net
Other expenses - net
Income before income taxes and minority interests
Income taxes

Income taxes - current
Income taxes - deferred
Income taxes
Minority interests in income (loss)
Net income

¥
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
¥

2009

2010

298,252
70,039228,213
171,564
56,649346,144
75,251
270,893
207,127
63,766

¥
		
		
		
		
		
183 		
185 		
15 		527 		
(2,216) 		
(645) 		287 		
478 		
(1,087) 		
— 		(2,125) 		
277 		
(4,119) 		
52,530 				
17,452 		
(18,059) 		
(607) 		(427) 		53,564¥2010$ 4,247,692
		923,440
		 3,324,252
		 2,541,747
		
782,504
		
65 		
801
209 		
2,567
17 		
211
337 		
4,141
(1,629) 		
(19,995)(369) 		(4,527)1,700 		20,866764 		
9,373(402) 		(4,932)(1,867) 		
(22,909)(1,303) 		
(15,988)(573) 		(7,031)(3,050) 		
(37,424)
60,717 		
745,080
		
25,888 		
317,686(760) 		(9,330)25,128 		
308,356633 		
7,762
34,956$ 428,962

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 ¥81.49 to $1, the rate of exchange prevailing at December 31, 2010.

28

Consolidated Statements of Changes in Net Assets
Rakuten, Inc. and Consolidated Subsidiaries
Years Ended December 31, 2010

Our
Presence

Millions of yen
As of Dec. 31,
2009

As of Dec. 31,
2010

Changes in fiscal year 2010

Issuance
Increaseof common by sharestock
exchanges

Cashdividends
paid

Net changes
Changes in Purchase in items other Total of
Net income
scope ofof treasury than those in changes inshareholders’ fiscal 2010
consolidation
stock
equity

¥173

—

—

—

—

—

—

173

¥107,779

115,899

173¥3,778

—

—

—

—

—

3,951

119,851

Retained earnings(20,411)——¥(1,310) ¥34,956

¥(52)

—

—

33,594

13,183

(11)

—

—

—

—

—

¥(3,614)—(3,614)(3,626)

203,083

347

3,778

(1,310)34,956(52)(3,614)—

34,105

237,188

Valuation difference on
available-for-sale securities

1,842

—

—

—

—

—

—

¥ 4,159

4,159

6,001

Deferred gains orlosses on hedges

(305)

—

—

—

—

—

—

107

107

(198)

Foreign currencytranslation adjustments(1,275)

—

—

—

—

—

—

(3,419)(3,419)(4,694)

Valuation andtranslation adjustments

261

—

—

—

—

—

—

848

848

1,109

Treasury stock
Shareholders’ equity

Subscription rights to shares
Minority interests

Net assets, Dec. 31, 2010
thousands of U.S. dollars

609

—

—

—

—

—

—

349

349

958

14,666

—

—

—

—

—

—

(4,687)(4,687)

9,979¥218,620¥347¥3,778¥(1,310) ¥34,956¥(52)¥(3,614)¥(3,490) ¥30,614¥249,234$2,682,780$4,257 $46,361 $(16,071) $428,962

Our
Backbone

Net assets¥

Our
Operations¥107,606

Our
Strategies

Common stock
Capital surplus$(642) $(44,355) $(42,833) $375,680 $3,058,460

Our
Performance

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 ¥81.49 to $1, the rate of exchange prevailing at December 31, 2010.

29

Consolidated Statements of Cash Flows
Rakuten, Inc. and Consolidated Subsidiaries
Years Ended December 31, 2010 and 2009

Thousands of
U.S. dollars

Millions of yen

2010

2009

2010

Net cash provided by (used in) operating activities

Income before income taxes and minority interests
Depreciation and amortization
Amortization of goodwill
Decrease in allowance for doubtful accounts
Decrease in provision for loss on interest repayments
Interest expense
Loss on valuation of securities for banking business
Other loss (gain)
Increase in notes and accounts receivable-trade(Increase) decrease in accounts receivable-installment(Increase) decrease in beneficial interests in securitized assets
Decrease (increase) in operating loans receivable
Increase in notes and accounts payable-trade
Increase (decrease) in deposits for banking business
Decrease in call loans for banking business(Increase) decrease in loans for banking business
Increase in operating assets for securities business(Decrease) increase in operating liabilities for securities business
Increase in borrowings secured
by securities for securities business
Other - net
Subtotal
Increase in guarantee deposits for business operation
Decrease in guarantee deposits for business operation
Income taxes paid
Other
Net cash provided by (used in) operating activities¥

52,53014,361
5,524(6,919)(5,090)
2,216
2,478
(652)
(3,470)520
39,798(81,434)
7,138(73,047)
21,0004,669(45,687)
5,842

¥

5,505
		

¥

17,489(37,228) 		
(2,665)41(15,366)—(55,219) ¥60,717
16,813
7,035(10,889)
(99)
1,625
2,935
6,415
(5,986)(7,798)(43,405)
20,847
6,697
14,9194,000(33,004)(16,192)(11,664)$

745,080
206,325
86,336(133,628)(1,217)
19,94136,01878,718(73,460)(95,688)(532,638)
255,819
82,182
183,074
49,086(405,010)(198,703)(143,139)

22,663

278,111

17,93553,563 		
(5,540)3,333(20,801)(250)
30,305$220,090657,297(67,981)
40,899(255,261)(3,068)371,885

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 ¥81.49 to $1, the rate of exchange prevailing at December 31, 2010.

30

2010

2009

Our
Presence

Thousands of
U.S. dollars

Millions of yen

2010

Net cash (used in) provided by investing activities¥(10,982)
8,386(526,820)
723,626(10)
40,000(1,670)¥(7,351)
11,001(370,844)
372,267(3,376)
8,875(18,825)$(90,209)
135,001(4,550,788)
4,568,253(41,423)
108,913(231,014)(492,809)

—

7,038

86,373(2,886)(10,030)(2,161)2,300
700
217,160(5,758)(14,947)(1,059)1,850
748(60,538)(70,657)(183,417)(12,996)
22,6999,180(742,895)(77,600)
4,600
49,650(135,204)
1,234(6,010)—(4,116)(2,246)(1,309)(3,155)(174,157)

29,032
31,40083,385(92,550)
1,400(18,280)(3,614)(415)(1,639)(1,314)204
27,609356,264
385,323
1,023,254(1,135,718)
17,180(224,324)(44,355)(5,089)(20,109)(16,123)2,500
338,803

(37)

(984)

(12,079)(12,253)
81,284
34,587
103,618(3,609)103,618
727
100,737(44,285)
1,271,548
8,923$ 1,236,186

Our
Backbone(40,159)

Our
Operations(3,293)Our
Strategies

Increase in time deposits
Decrease in time deposits
Purchase of securities for banking business
Proceeds from sales and redemption of securities for banking business
Purchase of investment securities
Advance receipt related to stock appraisal rights
Purchase of investments in subsidiaries
Purchase of investments in subsidiaries resulting
in change in scope of consolidation
Proceeds from purchase of investments
in subsidiaries resulting in change in scope of consolidation
Purchase of property, plant and equipment
Purchase of intangible assets
Other payments
Other proceeds
Interest and dividends received
Net cash (used in) provided by investing activities
Net cash provided by (used in) financing activities

Effect of change in exchange rates oncash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents of newly consolidated subsidiaries
Cash and cash equivalents at end of the year

¥

¥

Our
Performance

Net increase (decrease) in short-term loans payable
Increase in commercial papers
Proceeds from long-term loans payable
Repayment of long-term loans payable
Proceeds from issuance of bonds
Redemption of bonds
Purchase of treasury stock
Purchase of treasury stock of consolidated subsidiaries
Interest paid
Cash dividends paid
Other
Net cash provided by (used in) financing activities

31

Consolidated Subsidiaries and Affiliated Companies(As of December 31, 2010)

Name

Voting rights orownership (%)

Note

Location

Type of business

Rakuten Auction, Inc.

Shinagawa-ku, Tokyo

E-Commerce Business

60.0

Rakuten Enterprise, Inc.

Shinagawa-ku, Tokyo

E-Commerce Business

100.0

Signature Japan Co., Ltd.

Shinagawa-ku, Tokyo

E-Commerce Business

100.0

Fine Trading Co., Ltd.

Shinagawa-ku, Tokyo

E-Commerce Business

100.0

LinkShare Corporation

U.S.A.

E-Commerce Business

LinkShare International, LLC

U.S.A.

E-Commerce Business

LinkShare Ltd.

U.K.

E-Commerce Business

100.0(100.0)100.0(100.0)100.0(100.0)

Rakuten USA, Inc.

U.S.A.

E-Commerce Business

100.0

Keiba Mall, Inc.

Shinagawa-ku, Tokyo

E-Commerce Business

100.0

Rakuten Europe S.a.r.l.

Luxembourg

E-Commerce Business

100.0

Taiwan Rakuten Ichiba Inc.

Taiwan

E-Commerce Business

51.0

Net’s Partners CO., Ltd.

Shinagawa-ku, Tokyo

E-Commerce Business

100.0

FreeCause, Inc.

U.S.A.

E-Commerce Business

100.0(100.0)

Rakuten (Thailand) Co., Ltd.

Thailand

E-Commerce Business

100.0

TARAD Dot Com Co., Ltd.

Thailand

E-Commerce Business

67.0(67.0)

6

Rakuten Shigoto Shoukai, Inc.

Shinagawa-ku, Tokyo

E-Commerce Business

100.0

2

LinkShare Hong Kong Ltd.

Hong Kong

E-Commerce Business

100.0

2, 5

LinkShare Japan K.K.

Shinagawa-ku, Tokyo

E-Commerce Business

63.8(27.5)

Rakuten Logistics, Inc.

Shinagawa-ku, Tokyo

E-Commerce Business

100.0

2

100.0
(100.0)100.0(100.0)100.0(100.0)100.0(100.0)100.0(100.0)100.0(100.0)2, 5

Consolidated Subsidiaries

32

5
5
5

2, 15

5

Buy. com Inc.

U.S.A.

E-Commerce Business

BuyServices Inc.

U.S.A.

E-Commerce Business

PRICEMINISTER S.A.S.

France

E-Commerce BusinessVoyager moins Cher S.A.S.

France

E-Commerce Business

A Vender A Louer S.A.S.

France

E-Commerce Business

TMG MEDIA GROUP S.A.S.

France

E-Commerce Business

RakuBai Limited

Hong Kong

E-Commerce Business

51.0

2

Lekutian Co., Limited

People’s Republic of China

E-Commerce Business

2, 8

Lekutian ICPPeople’s Republic of China

E-Commerce Business

100.0(100.0)—[100.0]

Rakuten KC Co., Ltd.

Fukuoka-shi, Fukuoka

Credit Card Business

97.3

16
9

2, 5
2, 7
2, 7
2, 7
2, 7

2

Kajiyama Warehouse Co., Ltd.

Kitakyusyu-shi, Fukuoka

Credit Card Business

bitWallet, Inc.

Shinagawa-ku, Tokyo

E-Money Business

100.0(100.0)55.4(0.1)

Rakuten Credit, Inc.

Shinagawa-ku, Tokyo

Banking Business

100.0

Rakuten Mortgage Co., Ltd.

Shinagawa-ku, Tokyo

Banking Business

100.0

10

Rakuten Bank, Ltd.

Shinagawa-ku, Tokyo

Banking Business

100.0

14, 1558.3(58.3)
100.0(100.0)10

Rakuten Bank Systems, Ltd.

Shinagawa-ku, Tokyo

Banking Business

eBANK Capital Management (Cayman) Ltd.

Cayman Islands

Banking Business

2

10Location

Type of business

Voting rights orownership (%)

Shinagawa-ku, Tokyo

Portal and Media Business

100.0

Rakuten Research, Inc.

Shinagawa-ku, Tokyo

Portal and Media Business

100.0

Rakuten Shashinkan, Inc.

Shinagawa-ku, Tokyo

Portal and Media Business100.0

O-net, Inc.

Shinagawa-ku, Tokyo

Portal and Media Business

100.0

SHOWTIME, Inc.

Shinagawa-ku, Tokyo

Portal and Media Business

100.0

Rakuten Travel, Inc.

Shinagawa-ku, Tokyo

Travel Business

100.0

RAKUTEN TRAVEL KOREA CO., LTD.

Republic of Korea

Travel Business

TABIMADO CO., LTD SHANGHAI

People’s Republic of China

Travel BusinessTravel BusinessTravel Business

Rakuten Securities, Inc.

Shinagawa-ku, Tokyo

Securities Business

100.0

Rakuten Realty Management Co., Ltd.

Shinagawa-ku, Tokyo

Securities Business

100.0

Rakuten Investment Management, Inc.

Shinagawa-ku, Tokyo

Securities Business

100.0

Dot Commodity, Inc.

Shibuya-ku, Tokyo

Securities Business

58.1

RS Empowerment, Inc.

Shinagawa-ku, Tokyo

Securities Business

100.0

Rakuten Baseball, Inc.

Sendai-shi, Miyagi

Professional Sports Business

100.0

FUSION COMMUNICATIONS CORPORATION

Chiyoda-ku, Tokyo

Telecommunication Business

75.1

Rakuten Sociobusiness, Inc

Sendai-shi, Miyagi

11
11

Our
Backbone

Shinagawa-ku, Tokyo
U.S.A.

11

Our
Operations

Rakuten Bus Services Inc.
Rakuten Travel Guam Inc.

100.0
(100.0)—[100.0]100.0(100.0)100.0(100.0)Note

OurStrategies

Target, Inc.

Our
Presence

Name

100.0

Equity-method Affiliates
OKWaveShibuya-ku, Tokyo

E-Commerce Business

18.6

14
2, 12
14

Shibuya-ku, Tokyo

E-Money Business

Drecom Co., Ltd

Shinjuku-ku, Tokyo

Portal and Media Business

19.8

WORLD TRAVEL SYSTEMS INC.

Shinjuku-ku, Tokyo

Travel Business

20.0

Rakuten ANA Travel Online Co., Ltd.

Shinagawa-ku, Tokyo

Travel Business

50.0

TECHMATRIX CORPORATION

Minato-ku, Tokyo

31.8

14

NEXT Co., Ltd.

Chuo-ku, Tokyo

16.0

14

SOURCENEXT CORPORATION

Minato-ku, Tokyo

28.1(28.1)

2, 13, 14

AIRIO Life Insurance Co., Ltd

Minato-ku, Tokyo

34.0

2

Notes:

Securities Business

Our
Performance

E-Money Marketing United, LLP

50.0(50.0)

1. Business segments are used to indicate the type of business.
2. The company became a group member during the fiscal year ended December 31, 2010.
3. Indirectly held voting rights are shown in parentheses.
4. Voting rights held by parties close to Rakuten or that support Rakuten’s policies, but not included in the voting rights percentage, are shown in square brackets.
5. 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.
6. TARAD Dot Com Co., Ltd is a subsidiary of Rakuten (Thailand) Co., Ltd.
7. P
 RICEMINISTER S.A.S. is a subsidiary of Rakuten Europe S.a.r.l. In addition, Voyager moins Cher S.A.S., A Vender A Louer S.A.S. and TMG MEDIA GROUP S.A.S.
are subsidiaries of PRICEMINISTER S.A.S.
8. Lekutian Co., Limited is a subsidiary of RakuBai Limited.
9. Kajiyama Warehouse Co., Ltd., is a subsidiary of Rakuten KC Co., Ltd.
10. Rakuten Mortgage Co., Ltd., Rakuten Bank Systems, Ltd. and eBANK Capital Management (Cayman) Ltd. are subsidiaries of Rakuten Bank, Ltd.
11. RAKUTEN TRAVEL KOREA CO., LTD., Rakuten Bus Services Inc. and Rakuten Travel Guam, Inc. are subsidiaries of Rakuten Travel, Inc.
12. E-Money Marketing United, LLP is an equity-method affiliate of bitWallet, Inc.
13. SOURCENEXT CORPORATION is an equity-method affiliate of RS Empowerment, Inc.
14. Denotes companies required to submit financial reports and securities registration statements according to Japanese securities and exchange legislation.
15. This is a special-purpose company.
16. Net sales of Rakuten KC Co., Ltd. (excluding internal sales between consolidated subsidiaries) account for over 10% of consolidated net sales.

33

Corporate Information

Company Overview
Name

Rakuten, Inc.

FoundedFebruary 7, 1997

Service Launched

May 1, 1997

IPO

April 19, 2000

Capital107,779 million yen (As of December 31, 2010)

Employees

7,119 (Consolidated)

Headquarters

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

Board of Directors and Corporate Auditors (As of March 30, 2011)
Position

Name

Responsibilities

Chairman and CEO

Hiroshi Mikitani

E-Commerce Business Unit (BU), Banking BU,
Development Unit

Deputy President and Director

Atsushi Kunishige
Akio Sugihara
Hiroaki Yasutake
Hisashi Suzuki
Kazunori Takeda
Ken Takayama
Masatada Kobayashi
Takao Toshishige
Takeshi Hanai

Senior Executive Officer and Director

Toru Shimada
Director

Company Auditor

Sharesowned(Thousands)

2,178
0
86

Sub-head of Development Unit

4

Content BU, Community BU

3Business Directorate Department

3

CFO

45

Sub-head of E-Commerce BU

42Content Business0

Securities and Investment BU, Credit and Payment BUGroup Marketing, Advertising BU, Global Marketing,
Performance Marketing BU, Professional Sports BU, Telephony BU—Charles B. Baxter
Hiroshi Fukino
Joshua G. JamesKen Kutaragi
Kouichi Kusano
Katsuyuki Yamaguchi
Takeo Hirata
Tanekiyo Kunitake
Yoshiaki Senoo

3
—
1
—
0
13
—
—
0
—

Note: Mr. Kusano, Mr. Kutaragi, Mr. Fukino, and Mr. James are Outside Directors as stipulated in Paragraph 15, Article 2 of the Corporate Law of Japan.
Mr. Kunitake, Mr. Senoo, Mr. Hirata, and Mr. Yamaguchi are Outside Company Auditors as stipulated in Paragraph 16, Article 2 of the Corporate Law of Japan.

Stock Information

34

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

The Sumitomo Trust and Banking Co., Ltd.

Contact

The Sumitomo Trust and Banking Co., Ltd.
Stock Transfer Agency Department
1-10 Nikko-cho, Fuchu-shi, Tokyo 183-8701, Japan

The World Beckons.

Number of Shares Authorized

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

13,181,697 (common stock)

Number of Shareholders

95,478Main Shareholders (As of December 31, 2010)
Name

Number ofsharesPercentage
held

Crimson Group, Inc.

2,264,190

17.18

Hiroshi Mikitani

2,178,314

16.53

Haruko Mikitani

2.61

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

338,996

2.57

THE CHASE MANHATTAN BANK 38503G

313,616

2.38

Japan Trustee Services Bank, Ltd. (Trust Account)

304,260

2.31

CBNY-ORBIS SICAV

289,953

2.20

THE CHASE MANHATTAN BANK,
N.A. LONDON SECS LENDING OMNIBUS ACCOUNT

255,479

1.94

Japan Trustee Services Bank, Ltd. (Trust Account 9G)

208,158

1.58

Individuals
Foreign financial institutions and individuals
Other domestic corporations
Domestic financial institutions
Securities firms
Others40.40%
30.70%
20.33%
8.12%
0.44%
0.01%

Our
Backbone

11.07

344,610

Our
Operations

1,458,750

Masuda and Partners Inc.

Classification by Typeof Shareholder (As of December 31, 2010)

Our
Strategies

We AreMore Than
Ready.

Our
Presence

Number of Shares and Shareholders (As of December 31, 2010)

Monthly Stock Price Range (Osaka Securities Exchange)

Contents
Our Presence
02 This is Rakuten
06 Rakuten's Global Ambition

Our Strategies
08 To Our Shareholders

Our Operations

100,000
80,00060,000

Origins of the Name Rakuten

40,000

Rakuten Ichiba is named after Rakuichi-Rakuza , the first free and open
marketplace in 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 is entertainment. These words symbolize thedriven, forward-looking nature of our business. That is why we named ourcompany Rakuten, Inc.

20,00012 At a Glance
14 Review of Main Operations

Our Backbone
18 Our Philosophy and Social Responsibility
20 Corporate History
21 Corporate Governance

Our Performance25	Financial Section
34 Corporate Information

Our
Performance(Yen)
120,000

0(Thousands of shares)
9,000

6,000

3,000

Cautionary Statement
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 updatethese 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.

0

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
’06
’07
’08
’09
’10
’11

Inquiry
Investor Relations, Rakuten, Inc.
Tel +81-3-6387-0555
URL http://global.rakuten.com/investor/

35

Rakuten, Inc.
Annual Report 2010

Annual Report

Fiscal Year Ended December 31, 2010

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

Rakuten, Inc.
Annual Report
Fiscal Year Ended December 31, 2010