Sharing
the Brand
Annual Report
Fiscal Year Ended December 31, 2013

Empowerment
Ever since its founding in 1997, Rakuten has been developing a unique,original business model with the goal of becoming the world’s leading
Internet services company.
By applying this business model, we have created the “Rakuten
Ecosystem” for the provision of one-stop access to wide-ranging Internet
Services, Internet Finance and Digital Content businesses. At the heart ofthe business is membership and brand. In fiscal 2013, the Rakuten Group’s
gross transaction volume reached ¥5 trillion, and the number of members
is approximately 200 million. We also have business operations in Japan,
Asia, North and South America and Europe.
In these markets, we will seek to create a global Rakuten Ecosystemby sharing with overseas group companies expertise cultivated in Japanthrough implementation of our domestic business model, and by adheringto the corporate philosophy of empowering people and society throughthe Internet.

Contents
2 Message from the Chairman and CEO

27 Managing Executive Officers

7 Message from the Executive Director of Finance Business28 Corporate Governance

8 Review of Operations

33 Financial Section

14 Financial Highlights

39 Major Consolidated Subsidiaries and Affiliated Companies

22 Value Creation for Sustainable Growth

40 Corporate History

26 Board of Directors and Company Auditors

41 Corporate Information

¥ 5.2

H i g h l i g h t s o f t h e Ye a r

trillion

Rakuten Group gross transaction volume, including domestic and overseas
e-commerce, travel, credit card and Edy, maintained a high growth rate of
26.6% year on year, rising to ¥5.2 trillion; Rakuten members increased globally
to approximately 200 million, and trade volume grew, especially for Rakuten
Ichiba and the Internet Finance business.

Group Gross Transaction Volume
Domestic E-Commerce, Overseas Marketplace, Travel,
Credit Card Shopping and Edy E-Money

’03

’04

’05

’06

’07

’08

’09

’10

’11

’12

’13

Group Gross Transaction Volume: ¥5.2 trillion
Most Powerful Web Brand in Japan
Rakuten Ichiba was selected as Japan’s leading Web brand for the third
consecutive year in Nikkei BP Consulting’s Web brand survey.
Maintaining the Top Web Brand Position in Japan
Rank

Former Rank

Site Name1

1

2

Global Developmentof the Digital Content
Business
Rakuten proactively developed e-bookScore

services as well as video streaming

Rakuten Ichiba

120.1

services in Japan and abroad with the2Yahoo! Japan

119.3

3

4

Amazon.co.jp

105.7

4

5

EC Navi

101.2

5

3

Google96.8

aim of strengthening digital content
services, which are positioned as one ofthe pillars of our future growth strategy.

Nikkei BP Consulting, Inc. “Web Brand Survey 2013—Autumn/Winter” December 2013
Change in rank compared to previous survey in April 2013

Japan Series Championshipfor the Tohoku Rakuten Golden Eagles
The Tohoku Rakuten Golden Eagles(“Golden Eagles”) became the number
one baseball team in Japan for
the first time in the nine years since
their formation. Within Japan,
the Rakuten Group’s brand profile
received a major boost
from that event.

Change of Stock
Market Listing to
the First Section of
the Tokyo Stock
Exchange
In December 2013, Rakuten, Inc. moved
its listing from the JASDAQ exchange to
the First Section of the Tokyo Stock
Exchange. Rakuten was also selected
for inclusion in the JPX 400 index.
1

Message from the Chairman and CEO

We are at the top
in Japan, with a brandand vision created toserve the whole worldEver since the founding of Rakuten, Inc. in 1997, we have made “Empowerment”
our corporate philosophy and aimed to become the world’s leading Internet
services company. We have developed an original, unique business model andgrown to become the leading brand in Japan’s e-commerce market.
Rakuten’s key strength is the successful creation of a business model thatsatisfies consumers and merchants alike. At our foundation is Rakuten Ichiba, amerchant-centered, marketplace-based Internet shopping mall that is unique inthe world. We have also successfully implemented in Japan initiatives based on
the “Shopping is Entertainment” concept for the realization of the formula Happy
Merchants + Happy Shoppers = Happy Commerce. This business model andexpertise are being cross-implemented in the Rakuten Group’s overseas
e-commerce marketplaces and generating tremendous synergies in the countries
in which we operate.
With the e-commerce business as a source of stable earnings, we will work tocreate a global Rakuten ecosystem by undertaking global expansion of thecontinuously growing Internet Finance business and the Digital Content
business, which we have designated as a third core business.

2

Leveraging Brand Power toAchieve Great Things in Fiscal 2013
From our company foundation in 1997 through to 2000, our first stage ofdevelopment, we focused on building our corporate culture and a uniquebusiness model of Internet shopping. Our second stage, from 2001 through 2013,
worked to establish solid brand power in Japan and lay a foundation on which
to build a truly global company. We positioned 2013 as the final year of thisstage of Rakuten’s growth.
In Japan, the Tohoku Rakuten Golden Eagles professional baseball club won
its first Japan Series championship in only its ninth season since establishment.
Thanks to the resulting enhancement of the Group’s brand power coupled withmarket expansion fueled by an increase in the number of e-commerce users, theRakuten Group’s gross transaction value exceeded ¥5.0 trillion for the first time.
Domestic e-commerce gross merchandise sales (GMS) reached ¥1.7 trillion, justtwo years after first surpassing the ¥1.0 trillion milestone in Rakuten Ichiba infiscal 2011. In the Internet Finance business, we established solid positions inJapan’s financial markets for the credit card, securities, banking, and insurance
businesses, and earnings capacity increased substantially.

Rankings in Domestic
IT-Related Markets
E-Commerce 1 (B2C GMS)
1

Rakuten Ichiba

2

Amazon3Yahoo! Shopping(FY 2013)

Travel 2 (Domestic GTV)

Hiroshi Mikitani
Chairman and CEO

1

JTB Group2

Rakuten Travel

3

Nippon Travel Agency(April 2012–March 2013)

Online Bank 3 (Accounts)
1

Rakuten Bank

2

Aeon Bank

3

Japan Net Bank(as of Sep. 30, 2013)

E-Money Card 4 (Issued numbers)1

Edy (Rakuten)

2Suica (JR East)

3

WAON (Aeon)(as of Sep. 30, 2013)
Source:1) Fuji-Keizai, 2) JTA, 3) Company disclosures, 4) Nikkei, Company disclosures3

Message from the Chairman and CEO

In developments overseas, GMS in overseas marketplaces is steadily
increasing as a result of the conversion of operations in each country to amarketplace-based business model and the introduction of success stories fromJapan such as “Rakuten Super Points,” our loyalty points program, and Rakuten
Super Sales.
As a result of these initiatives, in fiscal 2013 revenue was ¥518.6 billion (up 30%
from the previous fiscal year), operating income before one-off items was ¥97.4
billion (up 22%), and net income was ¥43.5 billion (up 106%), all record highs.
In addition, Rakuten’s presence in the stock market was greatly enhanced infiscal 2013. We changed the stock market listing from JASDAQ to the First Sectionof the Tokyo Stock Exchange in December 2013, and the stock was selected as a
JPX-Nikkei Index 400 constituent issue. At the same time, we established asponsored Level I American Depositary Receipt (ADR) program in the UnitedStates with the aim of increasing name recognition overseas and broadening
the investor base.

“	We aim to speedily undertake creation of a global Rakuten
Ecosystem to consist of three core businesses: Internet Services,
Internet Finance, and Digital Content. ”
Initiatives and Growth Story for 2014
In 2014, global-scale transformation of behavior of people, definition of country,
currency, national security, and media features is expected to advance beyond

Rakuten Long-term
Growth Vision

anything previously experienced. Notably, the importance of the Internet as

New Businesssocial infrastructure is likely to further increase due to the spread of cloudInternational Businessservices and smart devices.

Finance Business

Against this backdrop, the period, from 2000, when the company went public,
to 2013, can be considered the second stage of Rakuten’s growth story.

Core Internet BusinessWe consider the period beginning in 2014, when evolution of the Internet industry
is expected to accelerate, as a third growth stage during which we aim to speedily
undertake creation of a global Rakuten Ecosystem to consist of three corebusinesses: Internet Services, Internet Finance, and Digital Content. And, we strive
to pursue long-term growth by undertaking the creation of high-value-added, safe
and secure Internet services that anticipate constantly changing times.
In our domestic e-commerce business, we aim to accelerate our GMS growthwith the firm membership platform, especially as a result of members newly
acquired through Rakuten Super Sales and the Baseball Victory Sales.
In the overseas e-commerce businesses, as in Japan, our e-commerce
consultants are providing strong support to merchants. In addition, we are
4

’97

’00

’10

’20

Rakuten Ecosystem:
Three Pillars for Growthenhancing Rakuten University to enable merchants to study online sales
techniques starting with the basics. We are also proceeding with introduction of
Rakuten Super Sales and the Rakuten Super Points loyalty points program inoverseas markets.

Finance

We are continuing efforts to deepen understanding among overseas
employees of the Rakuten Group’s corporate culture and Rakuten Shugi in order todevelop a global group structure characterized by strong desire to work together toBrand Strategy

achieve objectives on the basis of awareness of and pride in the Rakuten Group. At

Membership Strategy

the same time, we are working to build strong brand power overseas. To that end,

Baseball

we are developing the regional headquarters system and further strengthening

E-Commerce

DigitalContent

Kobo
Viki
Wuaki.tv

the governance structure, management structure, and R&D structure.
A key strength of the Rakuten Group’s internet Finance business is groupsynergies generated by the Rakuten Ecosystem. Rakuten Super Points, theGroup’s shared loyalty points program, contributes to credit card member
acquisition, and the financial services business is growing at an accelerated
pace as a result of collaborative operations such as a highly convenient intragroup settlement system and Money Bridge, a service linking Rakuten Bank and
Rakuten Securities accounts.

“	We will continue efforts to deepen understanding among all theoverseas employees of the Rakuten Group’s corporate culture and
Rakuten Shugi in order to develop a global group structure. ”
In September 2013, Rakuten acquired Viki, a U.S. company that operates a global
video streaming service with 28 million monthly viewers, as a wholly owned
subsidiary. Further enhancement of the Rakuten Ecosystem and acceleration of
our three pillars growth, came in March 2014 when we acquired another wholly
owned subsidiary, Viber Media, which operates mobile messaging and VoIP

Rakuten Group Membership*
Users

services with approximately 300 million global registered users around theworld. We have developed the Rakuten Ecosystem, through which members areable to access a range of services through common ID numbers and the500m

enormously popular and successful online Rakuten Super Points rewards
program. Viber’s fun approach to messaging and high quality VoIP services is aperfect marriage with Rakuten’s Internet service offerings and its “Shopping is

200m

Entertainment” philosophy lays the foundation for the world’s mostcomprehensive and engaging daily online platform. The combination also
opens massive new potential markets for Viber through Rakuten Group’s roughly
200 million global members.
At the same time, the company is implementing Project V4, cost reduction

March 2014
* As of end of 2013: Rakuten Members (Japan) 90
million, Overseas E-commerce IDs 60 million, Viki
MAU 28 million, Kobo IDs 18 million.

measures aimed at further profitability improvement. The aim of the project is to5

Message from the Chairman and CEO

achieve a cost reduction target of one billion yen per month by implementing
four key initiatives: 1) cost reduction through optimization of expenses, 2)
introduction of a global common e-commerce platform, 3) speedy, agile
business operation by means of small teams, and 4) strengthening of business
operation by changing management, if necessary.

“ We seek to balance a consistent dividend payout with maintaining
a sound financial structure and providing internal reserves for futurebusiness development, ultimately to maximize corporate value.”
With Thanks and Gratitude
to Our Investors and Shareholders
I would like to take this opportunity to once again express thanks and gratitude
to our shareholders and other stakeholders, whose support made possible the
Tohoku Rakuten Eagles’ first Japan Series championship and the listing of
Rakuten shares on the First Section of the Tokyo Stock Exchange in fiscal 2013. As
an expression of our gratitude, we have decided to pay a year-end dividend offour yen per share, including one yen a commemorative dividend to celebratethese two gratifying milestones.
Under its basic policy for return of profit, the Rakuten Group will aim toconsistently pay stable and increasing dividends, while fully aware of the necessity
to maintain a sound financial structure, and to provide sufficient internal reserves,etc. for active business development in the future, with the ultimate aim to
maximize its corporate value. I ask your continued steadfast support as we
continue our efforts to increase corporate value and shareholder value.

Hiroshi Mikitani
Chairman and CEO

6

Message from the Executive Directorof Finance Business“ All financial services
aim to become No.1”
Masayuki Hosaka
Executive Vice President and Representative Director,
Executive Director of Finance Business

All Financial Services Aim to be Become No. 1 in Their Respective Industries
Shopping transactions through Rakuten Card are sharply rising, and stood at over ¥2.5 trillion in 2013.
This was driven by synergies with Rakuten Ichiba and acceleration in cardholder acquisition thanks
to Eagles Japan Series victory. However, Rakuten Card assumed to rank around No. 5 in the credit card
industry in terms of shopping transaction value, so there is still enough room to catch up with the top
players. The number of accounts at Rakuten Securities is currently positioned in second place among
the five major online brokerage companies* in the industry. In this way, Rakuten’s financial services
have a great opportunity to become first place from now on. In future, all of them, not only Rakuten
Card, but also Rakuten Securities, Rakuten Bank, Rakuten Edy, Rakuten Smartpay and Rakuten
Insurance, are aiming to become No. 1 in their respective industries and to increase the presence offinancial business in all Rakuten businesses.
*SBI Securities Co., Ltd., Matsui Securities Co., Ltd., Kabu.com Securities Co., Ltd., Monex, Inc. and Rakuten Securities

Accelerating Expansion of the Rakuten Ecosystem
The “Money Bridge” service of Rakuten Bank and Rakuten Securities allows for the easy transfer offunds between accounts held with the bank and the securities firm, and it has generated great cash
flow. In March 2014, Rakuten started exchanges between Rakuten Super Points and E-Money “Rakuten
Edy.” Rakuten Card introduced the “Rakuten Super Business Loan” financing service to Rakuten
Ichiba merchants in 2013. In these ways, while complying with regulations, we aim to provide a variety
of financial services accessed by a single ID and password, which increases convenience. To this end,

Rakuten Smartpay:
Smartphone Payment
Service

we are also enhancing each organization, such as the Finance Business Operations Office, to address
this expanding direction. Rakuten will also further bolster its Rakuten Ecosystem in 2014.

A Day Will Come When Everyone Will Use Rakuten Cards as a Main Card
When Rakuten KC, now Rakuten Card, joined the Rakuten Group in 2005, the scale of business was
so small that it was hard to imagine becoming No. 1 in the industry. Under such circumstances, I still
remember telling employees that they had to break free of this attitude. I told them, “Right now, there
are very few people who have Rakuten Cards, but there will come a time when it will become normal
for everyone to have one.”
Back then, it seemed like an impossible dream, but that has changed now. According to the survey*of the cardholder ranking by each annual income category, Rakuten Card is ranked No. 1 amongpeople of all annual income segments. I want everyone to believe that Rakuten Card will grow into acore business of the Rakuten Group. I also want everyone to be confident of Rakuten’s ability to
become a leader in the industry. This is on the verge of actually happening. One success will lead toanother, triggering acceleration. 2014 will be a year in which the entire Financial Group will accelerate.
*Ranking in a special issue of a popular Japanese monthly magazine entitled, Card, E-money & Smartphone Effective Utilization7

Review of Operations

Group Synergy

Rakuten
Card

RakutenBank

Internet Finance

Synergy

Rakuten
Securities

RakutenInsurance

Higher Profits at Finance Business Operating Companies
In the Internet Finance business, Rakuten supports customers’ lifestyles by enhancing services
through group synergies. In fiscal 2013, both revenue and operating income increased substantially.
Credit Card Business: Rakuten Card was the top-ranked card in customer satisfaction for the fifth
consecutive year* in March 2014. Rakuten card member acquisition accelerated thanks to active
television advertising and various promotion campaigns. Card members grew by a net 54.7% YoY.
Rakuten Card shopping transaction value reached ¥2.5 trillion.
Banking Business: The number of accounts at Rakuten Bank reached 4.5 million in fiscal 2013, themost of any Internet bank in Japan. Deposits and the balance of loan receivables also increased,
exceeding ¥1.0 trillion and ¥230 billion, respectively. The bank has won Asian Banker magazine’s
Direct Bank award for three consecutive years. To meet the diverse funding needs of customers, thebank began offering Rakuten housing loans (floating interest rate loans).
Securities Business: Rakuten Securities achieved record-high profits in fiscal 2013, benefiting frombuoyant stock market conditions. Domestic stock trading value had notable growth of 236.9% YoY. The
company is steadily expanding its business operations, and as of the end of December 2013 the total
number of accounts increased to 1.6 million, assets under management rose to ¥2.8 trillion and theinvestment trust asset balance rose to ¥333.1 billion. The Rakuten FX trading tool, “MarketSpeed FX
Ver. 1.3” was newly released after MarketSpeed FX received a Good Design Award in 2012.
Others: E-money service provider Rakuten Edy upgraded functions of its Rakuten Edy Smart Coupon
and Itsudemo Edy Charge services and increased the number of available locations to 370,000 toraise user convenience. AIRIO Life Insurance changed its name to Rakuten Life Insurance in April 2013,
and the number of policies is steadily increasing, rising 25% in fiscal 2013.

Expanding Group Synergies
The Internet Finance business benefits enormously from synergies within the Rakuten Ecosystem.
Rakuten Super Points, the Group’s loyalty points program, contributes to credit card member
acquisition, and rapid financial services business growth is supported by a convenient intra-groupsettlement system and Money Bridge, which links Rakuten Bank and Rakuten Securities accounts.
8*Service Productivity & Innovation for Growth 2013 JCSI (Japan Customer Satisfaction Index)+

Accelerationin Cardholder
Acquisition

54.7%
YoY

54.7%

Rakuten Card
Shopping transaction value exceeded¥2.5 trillion

YoY

and revolving balance¥215 billion
’11

’12

’13

Rakuten Securities
Domestic stock trading

178%

value in FY2013 remained

Quick
Order
for FX

Forex
Rate

YoY

¥12.9
trillion

at a high level in the fourth
quarter at ¥12.9 trillion,
reflecting an active
Japanese stock market.

Rich
Charts
Q4/11

Q4/12

Q4/13

Rakuten Bank’s“Super Loan”

Rakuten Bank
Deposits reached a record ¥1
trillion in Dec. 2013, and by
year end, had increased
23.9% YoY.

¥1

trillion¥237 billion
and Super Loan
Customers Reached’09 ’10 ’11 ’12 ’13

297,500

Money Bridge Service

Rakuten Life Insurance

Make securities investment easily andNo. of Policies

anytime, using Money Bridge account.
Rakuten
Securities
Equities
Investment
TrustsBonds, etc.

RakutenBank
Easy moneytransfer

Sell / Buy

25.2% YoY

226

thousandcontracts

Annualized Insurance
Premiums

28.9% YoY

¥ 6,689
millionOrdinary
Deposit(Money Bridge)

Q4/12 Q1/13 Q2/13 Q3/13 Q4/13* excl. mutual and association

Q4/12 Q1/13 Q2/13 Q3/13 Q4/13

9

Review of Operations
89 million

C

Customer

Value Creation

M

Internet Ser vices

Improvement
Penetration of the Rakuten Brand in Japan
Since it opened in 1997, Rakuten Ichiba has enjoyed tremendous support from merchants and users
and domestic e-commerce gross merchandise sales (GMS) has reaccelerated from 15.4% in 2012 to
19.8% in 2013 as the top e-commerce brand in Japan. Rakuten’s selection as Japan’s leading Web
brand for three consecutive years in Nikkei BP Consulting’s Web brand survey attests to the power ofthe brand.
In fiscal 2013, the Rakuten Nihonichi Sale held to commemorate the Rakuten Eagles’ Japan Series
championship greatly boosted the power of the Rakuten brand and contributed to new user
acquisition at Rakuten Ichiba. Domestic e-commerce GMS has continued its steady rise, reaching ¥1.7
trillion in fiscal 2013. GMS per merchant at Rakuten Ichiba has also shown stable growth and quarterly
Ichiba GMS exceeded ¥10 million for the first time. Rakuten Ichiba continues to be an attractive andhealthy mall for merchants and all users.
Furthermore, Rakuten is working to provide a safe and secure shopping environment, working
together with merchants to establish a premium mall where users can shop with peace of mind.
Initiatives include formation of the Rakuten Ichiba Quality Enhancement Committee and theintroduction of a settlement agency system by which Rakuten serves as a receiving agent for
payments from users in January 2014.
In addition, the spread of smart devices has led to a rapid increase in Rakuten Ichiba transactions
made using smart devices, and Rakuten Ichiba GMS via smart devices such as mobile and tablet grewby 50.7% YoY.
At Rakuten Travel, gross booking transaction value rose 15% year on year to ¥547.3 billion resulting
from strong leisure travel sales, car rentals, and inbound services.

Expanding the Overseas E-Commerce Business
Overseas marketplace GMS is steadily increasing as a result of the nurturing of operations in eachcountry to a marketplace-based business model and the introduction of success stories from Japan,such as the loyalty points program and Rakuten Super Sales. In fiscal 2013, Rakuten opened Internet
shopping malls, Rakuten.es Shopping in Spain in October 2013 and Rakuten.com.sg in Singapore in
January 2014, spurring additional organic growth.
10

Merchant
42,000

Over

¥ 1.7

trillion

Domestic E-Commerce
GMS Surpassed

1.7trillion¥

in 2013’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13

Q4/2013

15.5

Number of
Unique Buyers*

millionRakuten unique buyers
increased 18.6% YoY
to more than 15.5 million.

* Unique buyers: Number ofbuyers sorted by e-mail address
with purchasing records during
the listed 3-month period.

Growth of

Q1

Q2 Q3
’11

Q1

Q2 Q3
’12

Q4

Q1

Q2 Q3
’13

Q4

Growth of Overseas
Marketplace GMS

Over

1,000
times

Mobile GMS

Q4Super Sales and other Ichibain Rakuten
Ichibaevents proving successful

65.3¥
billionoverseas; marketplace
GMS growth 16.7% YoY

2001=1(forex adjustedbase).

’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13

Rakuten Travel’s Gross
Booking Transaction
Value Increased

15.2%

¥

547.3
billionYoY’09 ’10 ’11 ’12 ’13

Q4/2013

10.5¥
millionRakuten Ichiba
GMS per Merchant
Rakuten Ichiba’s quarterly
GMS per merchantexceeded ¥10 million,
increasing 18.3% YoY.

’09 ’10 ’11 ’12 ’13

Q1

Q2 Q3
’11

Q4

Q1

Q2 Q3
’12

Q4

Q1

Q2 Q3
’13

Q4

11

Review of Operations

Kobo
Wuaki.tv

Content Business

Digital Content

PromiseViki

A New Linchpin for Growth
Rakuten has positioned the digital content business as a new mainstay of growth. Following theacquisition in 2012 of e-book subsidiary Kobo and the Spanish video streaming company Wuaki.TV,
in September 2013 Rakuten acquired wholly owned subsidiary Viki, an innovative video streaming
company in the U.S. Rakuten is accelerating full-scale global expansion of the digital content business.

Expanding the E-book Business Worldwide
Kobo’s user base has grown from 7 million at the time of its acquisition by Rakuten in January 2012and surpassed 18 million in December 2013. The number of titles has increased to 4 million, and thecompany now provides services in 190 countries around the world. In fiscal 2013, Kobo actively
pursued business expansion by means including the opening of One Store, a portal store formagazines and children’s titles, and the introduction of an Android tablet and other new devices.
Kobo worked to boost sales in Japan as well, opening an e-book store within Rakuten Books.

Accelerating the Global Content Strategy
New Rakuten Group member Viki provides a unique service involving distribution of TV programs,
movies, and other content from around the world subtitled by fans on a voluntary basis. Monthly
viewership has surpassed 28 million, and the company distributes entertainment popular among awide range of viewers. Viki’s community of viewers have crowdsourced subtitles in more than 160
languages and translated more than 400 million words to date. Future plans call for expansion ofViki’s business globally.
In addition to opening up new markets through digital content services, Rakuten will pursue
expansion of a global Rakuten Ecosystem by leveraging group synergies. In March 2014, Rakuten
acquired a wholly owned subsidiary Viber Media, operator of mobile messaging and VoIP services
around the world, as a platform for global content business.

12

One
Store

Number of users exceeded

18 million

from more than 190 countries.
Kobo’s global content revenue
increased rapidly at

42.1% YoY
Wuaki.tv
Wuaki.TV, S.L., provides on-demand
video services, featuring its premiermovie catalog and a unique hybrid
payment model in Europe. Wuaki.TV is
growing internationally in synergy with
Rakuten Group.

Monthly Active
Users (millions)28

millionViki
Viki is a one-of-a-kind company with an entirely unique approach
to video streaming that is truly global
and truly engaging. Their smart andcreative approach is bringing popular
content to global audiences.

Viki User
Growth Jan/12

Jan/13Global Digital Content Market
+15%

+23%
EU5

5,133 million+17%
SE Asia+24%

14,443 million

UV=Monthly Active Users (MM)Swelling DigitalContent Usage
Rakuten entered the global digitalcontent arena in 2012 by acquiring

US/CanadaJapan

Kobo Inc., one of the world’s fastestgrowing eReading services. Since

2,699 million
19,707 million

5,960 million

39,274 million

414 million
1,234 million

Dec/132012

then, international digital content use
has accelerated, driven by customeroriented content, complimentaryGroup synergies and multiple delivery

2017

platforms.
Source: PwC

13

Financial Highlights(IFRS)

Thousands of
U.S. dollars (Note 1)

Millions of yen

2011

2012

2013

2013

¥ 346,425
76,136644
9,631¥ 400,444
79,75850,055
21,136¥ 518,568$ 4,920,466

97,376923,960

90,244856,283

43,481

412,576¥

35,22260,260(47,405)¥ 104,687
67,444(56,820)¥¥1,959,765
1,747,419
212,346¥2,287,634
2,045,722
241,912

Income and Loss

Revenue
Operating Income before one-off items (Note 2)
Operating income
Net income
Cash FlowsNet cash flows from operating activities
Net cash flows from investing activities
Net cash flows used in financing activities

1,485

$

14,08730,584290,200

75,252714,030¥3,209,808$30,456,477

2,903,354

27,548,667

306,454

2,907,814

Assets and Liabilities

Total assets
Total liabilities
Total net assets

Yen

U.S. dollars

Earnings Per Share Attributable to Owners of the Company

Net income (basic)
Net income (diluted)

¥

6.08
6.06

¥

15.59
15.56

¥

32.60
32.41

$

0.31
0.31

Notes: 1. U.S. dollar figures have been translated from yen, for convenience only, at the rate of ¥105.39 to US$ 1, the approximate rate of exchange at December 31, 2013.
2.	Rakuten changed its accounting standard for reporting financial results from JGAAP to IFRS, including extraordinary profit/loss in operating income, to help
investors understand our ability to generate underlying operating profits from our business operations. Operating income before one-off items is shown above.

Overview
16th consecutive year of revenue growth

Rakuten Ichiba and other services

In the consolidated financial results forincreasing 19.8% year on year infiscal 2013, revenue increased by 29.5%

fiscal 2013.

to ¥518.6 billion year on year andoperating income before one-off items

Substantial increase in income

increased by 22.1% to ¥97.4 billion.

from Internet FinanceIn the Internet Finance business, income

14

19.8% year-on-year increase in domestic

grew at an accelerated pace owing to

e-commerce gross merchandise sales

active efforts to strengthen theHigh growth continues in the domestic

customer base centered on Rakuten

e-commerce business, with grossCard, which produces striking synergies

merchandise sales (transaction value) ofwith Internet services.

Revenue

Operating Income before
One-Off-Items(Billions of yen)

Operating Income(Billions of yen)(Billions of yen)

600

97.4

100

100

90.2

518.6
500

80

80

60

60

40

40

20

20

400
300
200
100
0

FY

’11

’12

0

’13

FY

’11

’12

0

’13

FY

’11

Net Income

Total Assets

Total Liabilities(Billions of yen)(Billions of yen)(Billions of yen)

43.5
40

3,209.8’13

2,903.4

3,000

4,000

50

’12

2,500

3,000
2,000

30
2,000

1,500

20
1,000
1,000

10

0

500

FY

’11

’12

0

’13

FY

’11

’12

0

’13

FY

’11

Total Net Assets

Earnings per Share (basic)

Return On Equity(Billions of yen)

(Yen)

(%)

400

40
306.5

300

16.0

32.6
15

200

20

10

100

10

5

FY

’11

’12

’13

0

’13

20

30

0

’12

FY

’11

’12

’13

0

FY

’11

’12

’13

15

Financial Review

Internet Services
Contribution
to revenue:
57.1%

YoY change
in revenue:
16.6% increase

YoY change inoperating income:
87.5% increase

The Internet Services segment consists of the

Revenue(Billions of yen)’12

e-commerce business, travel business, overseas
e-commerce business, e-book business, and other’13

domestic and overseas Internet services. Revenue for050

100 150 200 250 300 350

the segment was ¥315.2 billion, rising by 16.6% year on
year. The contribution ratio to total revenue was 57.1%.

Operating Income(Billions of yen)

’12

Segment operating income increased by 87.5% to ¥47.5
billion thanks to a healthy increase in income from

’13
0

10

20

30

40

50

60

Operating income
Operating Income before one-off items

Revenue and Operating Incomeof Rakuten Ichiba(Billions of yen)
’12

existing businesses, despite continued forward-looking
investments in future growth sectors.
Rakuten Ichiba
E-commerce transacted using smart devices is taking hold at Rakuten Ichiba, as
indicated by a 50.7% increase year on year in gross transaction volume via mobile
devices and tablets. In this business environment, Rakuten successfully implemented
activities such as personalized marketing utilizing big data analysis, Rakuten Super

’13
0

20

40

60

80

100 120 140

Revenue
Operating Income before one-off items

Sale large-scale sale events, and a sale to commemorate the Tohoku Rakuten Golden
Eagles’ first Japan Series championship and utilized these activities to acquire newusers. The number of new buyers increased by 50% year on year in the fourth quarter,
the number of unique buyers rose to more than 15.5 million, and domestic
e-commerce gross merchandise sales continue to grow at a high rate. Consequently,
revenue from Rakuten Ichiba increased by 20.7% to ¥137.3 billion. Operating income
before one-off items increased by 13.4% to ¥73.8 billion.

Rakuten Travel
Rakuten Travel is a travel services company that ranked second in domestic travel
revenue among travel agents in Japan in fiscal 2012*. The company saw strong
16

Revenue and Operating Incomeof Rakuten Travel(Billions of yen)
’12

demand for leisure travel sales, car rentals, and inbound services (booking services
from foreign-language websites), and gross booking transaction value grew by 15.2%
year on year to ¥547.3 billion. Although revenue at Rakuten Travel rose by 11.8% to¥34.7 billion year on year, operating income before one-off items increased by 5.0% to¥13.0 billion, reflecting investment to strengthen marketing.

’13
0

10

20

30

40

*Source: Japan Tourism Agency, “Fiscal 2012 Annual Total Revenue of Major Travel Agents ”

Revenue
Operating Income before one-off items

Other Internet Services
Overseas Businesses
In the overseas e-commerce business, Rakuten focused on marketplace-model
services and cross-implemented strategies and expertise that have proven successful
in Japan, such as the loyalty points program and Rakuten Super Sales. As a result,overseas operations contributed to business expansion, with GMS for these services
growing by 16.7% to ¥65.3 billion.
Logistics
Rakuten has decided to consolidate Rakuten Fulfillment Center (RFC) sites for the
purpose of reinforcing collaboration with the e-commerce business and optimizing
the logistics network. Other domestic e-commerce performance is steadily growing.
Digital Content Services
Rakuten positions digital content services as one of the pillars of its future growthstrategy. To strengthen these services, Rakuten offered new products and services
through the Kobo e-book service and video streaming services “Viki.” Meanwhile,
while medium-to long-term profit growth is expected, Rakuten plans to make strategic
advance investments in these services, for which, profit is expected to grow in future.

Rakuten Super Sale
The first Rakuten Super Sale was held in March 2012 as thelargest sale and loyalty points campaign event ever at
Rakuten Ichiba. In the eighth Super Sale, held in March
2014, GMS reached a record high of ¥64.4 billion. The Super
Sale has developed into a major sale event involving avariety of Rakuten Group services, centered on Rakuten
Ichiba. The Super Sale’s appealing user incentives such as

Rakuten Members Making First
Purchases at Rakuten Ichiba (YoY)

(%)

+

50.0%
YoY

60
50
40
30
20
10
0
-10

Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13

products discounted with extra points, and up to 20-times
more points for use of the Rakuten Card or purchasing at

at Rakuten Ichiba increases during sales. To further boost

multiple shops have been highly successful. Super Sales

revenue from Super Sales and increase user satisfaction,

motivate new users to try Rakuten products and services

Rakuten will implement measures to assist merchants infor the first time, and the number of first-time purchasers

increasing their sales.

17Financial Review

Internet FinanceContribution
to revenue:
36.5%

YoY change
in revenue:
59.2% increase

YoY change inoperating income:
117.8% increase

The Internet Finance segment consists of credit cards,

Revenue(Billions of yen)

’12banking, securities, e-money, insurance, and others.
Revenue from the segment was ¥201.5 billion, an’13

increase of 59.2% year on year. The contribution to total
0

50

100

150

200

250

revenue was 36.5%, the ratio is getting larger due toenhanced synergy within Internet Services. Segment

Operating Income(Billions of yen)operating income increased by 117.8% to ¥44.2 billion.

’12

Each business continues notable growth in both

’13

revenue and profit.
0

10

20

30

40

50

Revenue and Operating Incomeof Rakuten Card
(Billions of yen)
’12

Rakuten Card
At Rakuten Card, a provider of credit card-related services, the number of credit card
members showed a sharp fourth-quarter net increase of 80.7% year on year partly
attributable to the impact of various promotion campaigns. For the year, the numberof card members rose by 54.7% as new cardholder acquisition proceeded favorably,

’13
0

20

Revenue
Operating Income

40

60

80

partly as a result of the advertising effect of the baseball championship. The credit
card utilization rate was stable, shopping transaction value increased substantiallyyear on year by 41.7% to ¥2.6 trillion, and the revolving balance rose by 33.2% to¥214.8 billion. Revenue at Rakuten Card increased by 35.1% to ¥76.8 billion, while
operating income increased by 14.6% to ¥12.5 billion.

Rakuten Securities
Rakuten Securities offers one of the most extensive ranges of investment trusts inJapan. As of March 2014, the number of investment trusts surpassed 1,500. Thebalance of investment trusts increased satisfactorily thanks to a diversity of productsthat includes foreign stocks, real estate, and bonds in addition to leading Japanese18

Revenue and Operating Incomeof Rakuten Securities (Billions of yen)
’12

stocks, and the year-end balance rose by 60.8% to a record high of ¥334.1 billion.
Supported by the buoyant stock market in Japan, revenue at Rakuten Securities
increased by 129.4% to ¥42.8 billion, and operating income surged by 530.9% to¥21.3 billion.

’13
0

10

20

30

40

50

Revenue

Rakuten BankAt Rakuten Bank, Rakuten Bank Super Loan receivables showed a solid increase, withthe balance of loans outstanding at the fiscal year-end increasing by 30.6% year on

Operating Income

year to ¥237.4 billion. The number of loan customers grew by 37.5% to reach 297,500.
The bank successfully prepared and provided products attractive to customers, such

Revenue and Operating Incomeof Rakuten Bank(Billions of yen)

as offering ordinary deposits with preferential interest rates to customers who registerfor the Money Bridge service, which links bank accounts with Rakuten Securities
accounts. The year-end deposit balance rose by 23.9% to ¥1,008.8 billion, surpassing’12

the ¥1 trillion milestone for the first time. As a result, revenue at Rakuten Bank
increased by 14.1% to ¥42.4 billion, and profit growth reaccelerated, with operating

’13
0

10

20

30

40

50

income increasing by 19.3% to ¥7.1 billion.

Revenue before one-off items
Operating Income

Rakuten Life Insurance
Rakuten Life Insurance got off to a new start in April 2013 as a hybrid life insurancecompany that offers insurance through both the Internet and insurance agent
channels. The number of insurance policies steadily increased thanks to the strengthof the Rakuten brand and synergies generated by the Rakuten Ecosystem.
Approximately 73,000 new policies were issued during the fiscal year, and the total
number of policies at the fiscal year-end rose by 25.2% year on year to approximately
226,000. Revenue at Rakuten Life Insurance was ¥27.0 billion, and operating income
was ¥1.1 billion.

Rakuten Smartpay
Released in December 2012, Rakuten Smartpay is a service
that converts a smartphone into a credit card reader, uponplugging a small credit card reader into the earphone jackof a smartphone. Rakuten offers a revolutionary credit
card transaction service with three key strengths for those

American Express, Diners Club and Discover credits cards

self-employed and small business owners who until now

starting from 2013, where in the past they had only

had put off signing up with a credit card company: a low-

accepted Visa, MasterCard, and Rakuten Card, the largest

cost card reader, a speedy credit cycle (payments received

brand line up of the industry.

in designated Rakuten Bank accounts the next day), anda flat transaction charge of 3.24%.
Bringing more satisfaction to more customers,
equipped card readers will be able to accept JCB,In October 1, 2013, Rakuten, Inc., received the 2013
Good Design Award and entered into the Good Design
Best 100 (Japan Institute of Design Promotion) for
Rakuten Smartpay.

19

Financial Review

OthersContribution
to revenue:
6.4%

YoY change
in revenue:
7.4% increase

YoY change inoperating income:
33.2% increase

The Others segment consists of telecommunications

Revenue(Billions of yen)

’12

(Fusion Communications), professional sports, andweddings. Revenue for the segment was ¥35.7 billion, a’13

rise of 7.4%. its contribution ratio to revenue was 6.4%.
0

10

20

30

40

Segment operating income increased by 33.2% to ¥3.8
billion thanks to the first victory of the Tohoku Rakuten

Operating Income(Billions of yen)

Golden Eagles baseball club in the Nippon Series.

’12
’13

0

1

2

3

4

Revenue and Operating Incomeof Fusion Communications(Billions of yen)

Telecommunications Services
Fusion Communications, a provider of telecommunications services, steadily
expanded its business in fiscal 2013. For instance, downloads of Rakuten Denwa, a
low-price voice calling service for smartphone users launched in December 2013,’12

exceeded 250,000 in just 16 days. The company’s operating income developed
favorably as well.

’13
0

5

Revenue
Operating Income

10

15

20

Rakuten Baseball
The Tohoku Rakuten Golden Eagles baseball club, which captured its first Japan
Series championship in its ninth season, achieved an 8.8% increase in attendance toa record high of 1,281,000. In addition, merchandise-related sales rose sharply thanks
to a commemorative sale held at shops operated by the team and Rakuten Ichiba. As
a result, this division became profitable.

20

Acquisition of Viber
Rakuten acquired Viber, a pioneering global messaging and VoIP
company, in March 2014. Viber has over 345 million global registeredusers. The main purpose to acquire Viber is to strengthen Rakuten’s
global platform through the use of Viber’s range of customers in ourInternet Services and Digital Content businesses.
As of the end of 2013, the Rakuten Group has approximately 200
million users, comprising some 90 million Rakuten members in Japan, 60 million
overseas E-Commerce IDs, 28 million Viki MAUs, and 18 million Kobo IDs. After theacquisition of Viber, Rakuten Group membership jumped to 500 million users.
With the synergy of using Viber’s user base, there should be great possibilities
to grow our membership business globally.

Growth Strategy
Rakuten believes that it can grow both Viber, as a stand-alone business, and our existing businesses
by implementing three major stages of growth. First, growing Viber’s stand-alone business such as
voice (Viber Out), stickers, and games. Second, realize business potential through synergies with
Rakuten. And third, full integration of Viber into the Rakuten Ecosystem, with Rakuten making full useof Viber’s product advantages.
Recently, Viber has started to charge for Viber Out calls and stickers. Viber has been accelerating
its growth strongly and is rapidly expanding its user base with competitive pricing. Currently, Viber isdeveloping a games platform.
The next strategy is to grow globally through synergies between Viber and Rakuten. Rakuten aims
to increase its global user base where it has e-commerce services or Viber has a strong user base.
Viber can create synergies with all of Rakuten businesses, including Internet Services, Internet
Finance, Digital Content and Others. Rakuten has developed the Rakuten Ecosystem and members
are able to access a range of services through common ID numbers and the enormously popular andsuccessful online Rakuten Super Points rewards program. Now Viber is developing various service tieups with Rakuten.
Viber incorporates all popular features in the messaging & VoIP field and supports all major
operating systems and platforms. Also, Viber apps on smartphones allow users to have conversations,and through its high quality functions users can send and receive messages and images, thus Viber
offers a hybrid range of services rarely found on competing platforms.
Viber’s fun approach to messaging and high-quality VoIP services marry perfectly with Rakuten’sInternet service offerings and its “Shopping is Entertainment” philosophy, laying the foundation for
the world’s most comprehensive and engaging daily online platform.

21

Value Creation for Sustainable Growth

Our Vision“Empowerment”— Empower Japan. Empower the World.
http://global.rakuten.com/corp/sustainability/

Corporate Philosophy“Empowerment” of individuals and society through the Internet
From the day Rakuten was founded, we have dedicated ourselves to empowering people andsociety through the Internet. This principle has driven the growth and development of our businessand is reflected in the mission “Empower Japan. Empower the world.” A commitment to contributing
to society through our business activities is our most important value. To achieve sustained growthfor Rakuten and a sustainable society, each Rakuten Group employee in Japan and overseas sharescommon values and puts the corporate philosophy into practice with a powerful sense of mission.

Our Value Creation Model“Rakuten Ecosystem” — a globally pioneering business model
The Rakuten Ecosystem, our unique business model, consists of three core businesses: Internet
Services, Internet Finance, and Digital Content. It is a user-friendly business model based on theconcept “Single brand, single membership,” under which Rakuten members are issued a single global
Rakuten ID that provides access to a wide variety of services offered by the Rakuten Group. In
addition, by promoting member migration within the Ecosystem through the Rakuten Super Points
reward program, we seek to maximize profit per member and simultaneously aim to maximize
corporate value by creating cross-business synergies.

Rakuten Ecosystem

Finance

Marketplace
TravelLogistics,
etc.

Rakuten Membership
Credit CardBank
Securities
Insurance
etc.

Brand Strategy&
MembershipE-commerceContents

1
RakutenMembership

E-BookVideo
TV Programs
etc.

3Redeem Rakuten
Super Point

22

Use Rakuten
Service2
Earn Rakuten
Super PointOur Brand Value on Customer Satisfaction
Maximization of lifetime value per member
Through the Rakuten Ecosystem, we utilize a member database, a key business asset, to provide
services that are fun and convenient for Rakuten members and pursue synergies among ourbusinesses, including expansion of gross merchandise sales (transaction value) and maximization of
lifetime value per member. In addition, under the concept of “Shopping is Entertainment,” weconstantly develop new services, such as our reward program and customer review system, that makeshopping a pleasant and entertaining experience for members. The results of these efforts arereflected in the high scores achieved by Rakuten Group companies in customer satisfaction surveys
in Japan and overseas.

Forbes 2013 World’s Most Innovative Companies
Forbes Ranking

1 Salesforce.com

6 Baidu2 Alexion Pharmaceuticals

7 Amazon.com

3 VMware

8 Intuitive Surgical

4 Regeneron Pharmaceuticals

9 Rakuten

5 ARM Holdings

10 Natura Cosmeticos

Our Membership
Results of value creation
Accompanying enhancement of brand value, the number of Rakuten members is increasing
dramatically, with membership in Japan exceeding 89.7 million at the end of 2013. The number of
unique buyers, members who have purchased multiple services during a quarter, exceeded 15.5
million in the fourth quarter of 2013. In addition, the cross-use ratio, the percentage of users ofservices for which Rakuten Super Points are awarded who also use other services, reached 55.4%.
These figures clearly indicate that impact of the Rakuten Ecosystem business model.

Number of Unique Buyers*

+

18.6%

(Million)

YoY

20

Cross-use Ratio*
(%)

55.4%

70
60

15

50
40

10

30
20

5

10
0

Q4/11

Q4/12

Q4/13

* Unique Buyers: Number of buyers sorted by e-mail address with purchasing
records during the listed 3 month period.

0

Q4/11

Q4/12

Q4/13

* Purchasing ratio of Rakuten members who have utilized two or more Rakuten
services during the past 12 months of the listed month. Applicable services
are limited to those which can earn Rakuten Super Points.

23

Value Creation for Sustainable Growth

Investments for Growth
Various supports for partners
We consider our business partners, who have worked alongside us and shared in our success, to be
essential to the Rakuten Group’s growth. Since the opening of Rakuten Ichiba in 1997, we haveprovided various forms of support for merchants. We provide consulting services for Rakuten Ichiba
merchants through EC consultants, whose task is to help our business partners increase their sales
and solve problems affecting their activities. In addition, we opened Rakuten University in 2000 as aprovider of EC service expertise for merchants. Furthermore, we hold Rakuten Conferences and
Rakuten Expos twice a year at six locations across Japan. We utilize these events as forums forsharing with merchants our business strategy for Rakuten Ichiba and communication between ourbusiness partners.

Rakuten Ichiba Number of Merchants

+

3.1%

44,000

Rakuten Ichiba GMS per Merchants¥10.5(Millions of yen)

YoY

million

14
12

42,00010
840,0006
438,0002
36,000

Q4/11

Q4/12

Q4/13

0

Q4/11

Q4/12

Q4/13

Development of safe and reliable systems
The Rakuten Group, a provider of wide-ranging Internet-based e-commerce and financial services,emphasizes research and development of state-of-the-art technologies in order to constantly provide
innovative new services to consumers and merchants. We engage in pioneering technicaldevelopment, such as development of applications for mobile phones, which have rapidly evolved inrecent years, and expansion and upgrading of services that apply cloud technology. In addition, bigdata that combines more than 150 million product items provided by approximately 42,000 merchants
and member information on more than 89 million users is utilized on Rakuten Ichiba. To ensure safe,
secure, highly convenient transactions, we constantly apply the latest technologies to update oursettlement and delivery systems. We consider information security assurance to protect customers’
personal information and other information assets a key management priority and continuously
reinforce information security.

Information Security Policy
1. Establishment of the Information Security Management System

Initiatives for Information
Security Enhancement

2. Appropriate management of Information Assets

1. Our effort with ISO/IEC 27001

3. Establishing Regulations, etc. for ensuring Information Security

2. Privacy Mark Certification

4. Compliance with laws and norms
5. Continuous improvement24Support and education for employees
Rakuten provides a variety of information-sharing
opportunities to enable all Rakuten Group employees to work
toward the same goal as members of one big team. Forums
for information sharing include morning meetings held at 8a.m. every Tuesday and half-yearly operating plan
presentation meetings streamed live to over 50 offices inJapan and overseas so that all employees are able to attend.
In addition, the Englishnization Project launched in 2012
to make English the official language throughout the
Rakuten organization has steadily produced results, andEnglishnization
The average TOEIC score of Rakuten
employees has jumped over 40%(more than 200 points) in three years.

+ 200 points
About 30% of new staff recruits at Tokyo HQin 2012-13 have been non-Japanese

30%

more than 90% of Japanese employees have attained their target TOEIC scores. This initiative has
contributed to the recruitment of personnel from overseas, and in fiscal 2013 approximately 30% of
new recruits in Japan were foreign nationals. This has yielded tremendous benefits, including therecruitment of highly capable engineers and activation of communication with overseas subsidiaries.

CSR Topics
The TOMODACHI Project – The Power of Music
2014. The project organized an opportunity for five

Rakuten is recognizedin METI’s Diversity Management
Selection 100 Program

students from Fukushima Prefecture, to visit a music

Rakuten was among the companies selected for theschool in New York to take part in an exchange

2013 Diversity Management Selection 100, a program

program with local high school students involvingof Japan’s Ministry of Economy, Trade and Industry

music. Rakuten launched the program in(METI) to recognize companies that have achieved

commemoration of “Tokyo Philharmonic Orchestra The

corporate value enhancement through management

100th Anniversary World Tour 2014 in NY.” It was held

practices that promote diversity. Rakuten was recognizedas part of “TOMODACHI Project” led by the U.S.

for initiatives such as the active hiring and promotion

Government and the US-Japan Council. Rakutenof foreign nationals, promotion of English as theGroup has been supporting the project as CSR.

Rakuten Group’s official language, and establishment

This was an activity held in New York on March 10.

of a global personnel system as well as the sharing of
information and technologies across borders andcultures and proactive engagement in management
practices that promote diversity and enable personnel
from diverse backgrounds to grow and succeed
together. To continue to grow as a truly global company,
Rakuten will continue to implement management
practices that promote diversity so that each andevery employee can demonstrate his or her abilities
and participate in innovation and value creation.

25

B o a r d o f D i r e c t o r s a n d C o m p a n y A u d i t o r s (As of April 22, 2014)

Masayuki Hosaka

Yoshihisa Yamada

Executive Vice President andRepresentative
Director

Executive Vice President,
Representative Director and
CFO

Masatada Kobayashi

Toru Shimada

Akio Sugihara

Managing Executive
Officer and Director

Managing Executive Officer
and Director

Managing Executive Officer
and Director

Kazunori Takeda

Kentaro Hyakuno

Hiroaki Yasutake

Managing Executive Officer
and Director

Managing Executive
Officer and Director

Managing Executive Officer
and Director

Charles B. Baxter

Koichi Kusano

Ken Kutaragi

Director

Director

Director

Hiroshi Fukino

Jun Murai

Joshua G. James

Director

Director

Director

Yoshiaki Senoo

Takeo Hirata

Katsuyuki Yamaguchi

Company Auditor

Company Auditor

Company Auditor

Hiroshi Mikitani
Chairman and CEO

26

M a n a g i n g E x e c u t i v e O f f i c e r s (As of April 22, 2014)

Takahito Aiki

Koji Ando

Yuji Kusunoki

Managing Executive Officer

Managing Executive Officer

Managing Executive Officer

Masato Takahashi

Kenichiro Nakajima

Kenji Hirose

Managing Executive Officer

Managing Executive Officer

Managing Executive Officer

B o a rd o f D i re c to r s a n d C o mp a ny Au d i to r s ,M a n a g i n g E x e c u t i v e O f f i c e r s (As of April 22, 2014)
Position

Name

Position

Name

Chairman and CEO

Hiroshi Mikitani

Company Auditor

Yoshiaki Senoo *2

Executive Vice President
and Representative Director

Masayuki Hosaka

Company Auditor

Takeo Hirata *2

Executive Vice President,
Representative Director, and CFO

Yoshihisa Yamada

Company Auditor

Katsuyuki Yamaguchi *2

Substitute Company Auditor

Hiroshi Takahashi *3

Managing Executive Officer
and Director

Masatada Kobayashi

Managing Executive Officer

Takahito Aiki

Managing Executive Officer
and Director

Managing Executive Officer

Koji Ando

Toru Shimada

Managing Executive Officer

Yuji Kusunoki

Managing Executive Officer

Masato Takahashi

Managing Executive Officer

Kenichiro Nakajima

Managing Executive Officer

Kenji Hirose

Managing Executive Officer
and Director

Akio Sugihara

Managing Executive Officer
and Director

Kazunori Takeda

Managing Executive Officer
and Director

Kentaro Hyakuno

Managing Executive Officer
and Director

Hiroaki Yasutake

Director

Charles B. Baxter

Director

Koichi Kusano *1

Director

Ken Kutaragi *1

Director

Hiroshi Fukino *1

Director

Jun Murai *1

Director

Joshua G. James *1*1: Outside directors stipulated under Corporate Law of Japan*2: Outside auditors stipulated under Corporate Law of Japan*3: Substitute company auditor stipulated under Corporate Law of Japan27

Corporate Governance

1. Basic Approach to Corporate Governancemaking and supervision,” while “executive functions” weretransferred to the Executive Officers.

The Rakuten Group gives top priority to effective corporate

In April 2012, the Company reviewed the scope of duties ofgovernance. The Group has implemented a range of measures to

Executive Officers to speed up their execution processes. In

strengthen its competitiveness and maximize corporate value byaddition, the Company has introduced Functional Teams, which

maintaining effective internal control and risk management

comprehensively manage all Group Companies businesses,

systems, with a view to realizing its goal of becoming the world’s

aiming to strengthen a group-wide internal control.

leading Internet services company.

2. Corporate Organization
Corporate Governance(1) Directors, Board of Directors, Executive Officers, etc.
The Board of Directors consists of 16 Directors, including five

1.	Basic Structure of Corporate Governance andReasons for Adoption

External Directors. It is stipulated in the Articles of Incorporation

Rakuten, Inc. supervises management by using a Company

to appoint Directors must be approved by a majority of voting

Auditor System. In March 2003, the Company adopted anrights at an Annual General Shareholders’ Meeting attended by

Executive Officer System to separate the super visor y andshareholders holding at least one-third of voting rights.

that the number of Directors shall be not more than 16. Resolutions

executive roles of management. Under that system, functions

In addition to regular monthly meetings, the Board of Directors

previously performed by the Board of Directors were separated,holds special meetings as required. At these meetings, Directors

with directors retaining responsibility for “management decision

make decisions on important management matters and supervise

Corporate Governance Structure
Shareholders’ Meeting
Appointment / Dismissal

Appointment /Dismissal

Audit

Board of Directors

Board of Auditors

Appointment /Dismissal

AssistRepresentative Directors

Discussion /Cooperation

Company
Auditors’ Office

ReportDirect businessexecution

ReportSupervision
ReportCorporate
Strategy
Meetings
Investment andLending
Committee

28Internal Audit
Department
Internal
audit

Executive Officers

Cooperation

Cooperation

Audit

Audit report

Accounting Auditor

Executive Officers’ activities. To ensure appropriate decision-

knowledge and ethical perceptions needed to perform theirmaking by the Board of Directors, medium and long-term

duties. In addition, Rakuten has set up a hotline, the Rakuten

management plans, basic policies and other key strategies are

Hotline, for reporting of compliance violations.

first discussed at Corporate Strategy Meetings, which are held

Directors are closely supervised in the performance of their

before the Board of Directors meetings and consists mainly of

duties by the External Directors and External Company Auditors.

executives at Senior Executive Officer level and above. To enhance

Attorneys have been appointed to help each of the external

the corporate value, as to a case that requires capital expenditure

directors and external auditors verify compliance with the Articles

including any investment, members, including External Directors,of Incorporation and regulatory requirements from an objectiveof the Investment Committee preliminarily deliberate on whether

perspective based on expert knowledge.

the case should be proceeded or not. The result of suchdeliberation shall be reported to the Board of Directors.
Board decisions are delegated to the Executive Officers’
Meeting, which consists of Executive Officers. Each Executive Officer

Ra ku t e n , I n c . i s a l s o ex p a n d i n g t h e Ra ku t e n G ro u pRegulations (RGR) as the basis for integrated group management,with the aim of strengthening corporate governance and paving
the way for further growth.

carries out their respective duties in accordance with thesedecisions. To ensure appropriate and efficient conduct of business

4. Risk Management Systems

operations, activities in individual segments are supervised by

Rakuten has established a Group Risk Management Committee

management councils convened within each segment, as well as

chaired by the CEO for the comprehension of risks, from a unified

by Functional Teams responsible for human resources, financial

perspective, that may have a material adverse effect on the

management, accounting, organizational management and other

Rakuten Group and for providing an appropriate response to suchmanagement aspects across the Rakuten Group.

risks. Under the Group Risk Management Committee, the Company
conducts risk management by establishing risk control sections(2) Company Auditors and the Board of Auditors

within business units, responsible for 10 risk categories including

Rakuten, Inc. has three Company Auditors, including one full-timecompliance risk, information security risk, and risks pertaining toauditor. All three are external auditors.

natural disasters, conflicts and accidents. The Risk Management

A three-member Company Auditors’ Office assists the Company

Department and risk control sections, which are group-wide

Auditors in the performance of their duties. In addition to its

department/sections in charge of risk management, draw up a

regular meetings, the Board of Auditors holds special meetings aspolicy under which each business unit and each group company

required. To prepare for when the number of Company Auditors

implements measures.

falls below the number stipulated in laws and regulations, theCompany appointed one Substitute Company Auditor.

Each business units, in accordance with the Rakuten Group
Regulations (RGR), consolidates risk information and ensures

In accordance with audit policies and plans established bythorough and consistent application of risk management throughthe Board of Auditors, the Company Auditors attend Board ofsuch actions as reporting on risks related to business execution at

Directors meetings and other important management meetings,

the Management Conferences held in each business unit, as welland receive reports about the state of the Company’s operations

as defining risks through risk assessments regularly conducted byfrom Directors, the Internal Audit Department and other sources.

the Risk Management Department. Each group company has also

In addition, they check the operations of the Company’s headestablished its own risk management system, especially in

office and subsidiaries. In addition, the Company Auditors receive

financial businesses, and instituted the PDCA cycle to handle

audit reports from the independent auditors and peruse financial

company-specific risks other than group-wide risks.

statements and business reports. They also discuss various
matters with the CEO.

In addition, measures for risks on information security andinformation systems are also implemented in development
divisions, and the Company makes efforts to minimize this risk

3. Internal Control Systems

factor throughout the group including the acquisition of ISMS

Basic internal control policies for Rakuten, Inc. are determined by(Information Security Management System) certification.

the Board of Directors. The Company has declared its intention to

As to risks pertaining to the occurrences of natural disasters,

comply with all regulatory requirements, and to apply high ethicaletc., the Company works to prepare emergency response measures

standards to its business activities.

including the formulation of business continuity plans.

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 and employees to enable them to develop the29Internal Audits, Company Auditor Organization,
Personnel and Procedures

te ch n o l o g y a n d w i d e - ra n g i n g ex p e ri e n c e i n b u s i n e s sInternal audits are conducted by the 22-member Internal Audit

business management and expertise as a business consultant.

Department, which is an independent unit reporting directly to

Mr. Joshua G. James and Mr. Jun Murai were each appointed for

the CEO. Head office divisions, business units and group

their ability to provide management with advice andcompanies are all subject to internal auditing. Audits arerecommendations based on their experience and exper t

implemented under plans approved by the Board of Directors withknowledge. Mr. James has specialized knowledge of Internet

the aim of verifying the legality, appropriateness and efficiency ofservices and a wealth of experience in management of Internet

operations. The purpose of the internal audit process is to ensureservice businesses in North America; Mr. Murai has a distinguishedthat business operations are conducted in an appropriate

background as an academic expert in Internet technology.

management. Mr. Hiroshi Fukino also has extensive experience ofmanner by identifying any improvements that may be required,

There are three External Company Auditors. Mr. Yoshiaki Senooand by monitoring the implementation of those improvements.

has extensive knowledge and experience relating primarily to

Audit results are reported to the Board of Directors, the CEO, thefinance business, business management and compliance. Mr.

Compliance Committee responsible for areas covered by audits,

Takeo Hirata brings wide-ranging exper t knowledge andand the Company Auditors. The Internal Audit Department also

experience relating primarily to sport and education. Mr. Katsuyuki

cooperates with the Board of Auditors. The Internal Audit

Yamaguchi was selected as a person who could contribute to the

Department is also working to enhance the effectiveness ofCompany’s audit systems through his extensive knowledge andinternal audits throughout the Rakuten Group by working closely

ex p e ri e n c e , e s p e c i a l ly a s a n a t to rn ey, a n d t h ro u g h h i swith audit units in the Group Companies.

perspectives as an expert on corporate law. Documents for

Information about audits by Company Auditors can be foundmeetings of the Board of Directors are forwarded in advance tounder Corporate Organization 2-(2), Company Auditors and thethe External Directors and External Company Auditors, who, if

Board of Auditors.

n e c e s s a r y, c a n a l s o s e e k a d v a n c e b r i e f i n g s f r o m a n d
consultations with the units concerned. As noted above, theExternal Directors and External Company Auditors

External Auditors also actively exchange views with the Internal

Rakuten’s 16-member Board of Directors currently includes five

Audit Department and the independent auditors.

External Directors, and all three Company Auditors are External

Rakuten, Inc. has signed an agreement with each of its

Company Auditors. Mr. Koichi Kusano, External Director, is a Senior

External Directors and External Company Auditors under thePartner in Nishimura & Asahi, a law firm with which the Company

provisions of Article 427, Paragraph 1 of the Companies Act. This

has a business relationship that includes provision of services. Mr.

agreement is summarized below:

Katsuyuki Yamaguchi, External Company Auditor, is a Partner in

Provided that duties have been carried out in good faith andthe same firm. Mr. Jun Murai, Director, is External Director ofwithout gross negligence, the total liability in situations as

BroadBand Tower, Inc., with which the Company has a business

defined in Article 423, Paragraph 1 of the Companies Act will be

relationship that includes provision of services. Mr. Katsuyuki

limited to the sum of the amounts stipulated in the following

Yamaguchi, Company Auditor, is External Company Auditor ofitems:

BrainPad Inc. with which the Company has a business relationshipi. 	Two times the bigger of the sum of fees, bonuses and other

involving provision of services. Mr. Koichi Kusano and Mr. Ken

payments received or asset benefits received in the year that

Kutaragi, both External Directors, and Mr. Katsuyuki Yamaguchi,

includes the date on which the event that resulted in theExternal Company Auditor, respectively hold the Company’s

liability occurred, and in the preceding year, or the value ofshares. There are no other personal, capital or businessasset benefits to be received (excluding benefits stipulated

relationships or significant interests.

ii. 	Two times the smaller of the sum of retirement bonuses orpolicies to ensure the independence from the Company for

asset benefits that are in the nature of retirement bonuses, orelecting External Directors and External Company Auditors,

that amount divided by the number of years during which the

Rakuten appoints highly independent External Directors andoffice of External Director was held.

External Company Auditors whose exper tise and objectiveiii.	The amounts stipulated below if Subscription Rights toviewpoints strengthen supervision of the Board of Directors in the

Shares, as defined in Ar ticle 238, Paragraph 3 of theperformance of its duties. They also enhance the effectiveness ofCompanies Act, were exercised or transferred after the person

corporate governance by allowing a wide range of discussion with

was appointed as an External Director.

the Board of Directors.

30

under Item ii below).

Although the Company has not established standards and1. If the Rights have been Exercised

The five External Directors include attorneys, notably Mr. Koichi		An amount calculated by subtracting the sum of the issue

Kusano, who can contribute wide-ranging knowledge andprice of the Subscription Rights to Shares and the paid-in

experience of corporate law. Another, Mr. Ken Kutaragi, hasvalue per share on the exercise date from the market priceextensive knowledge of the enter tainment business andper share on the exercise date and multiplying the result

by the number of shares granted through the exercise of the Subscription Rights to Shares.
2. If the Rights have been Transferred		An amount calculated by subtracting the issue price of the Subscription Rights to Shares from the transfer price and multiplying
the result by the number of Subscription Rights to Shares.

Remuneration for Directors and Company Auditors
1.	Total amounts of fees, etc., for each category of officers of the Company submitting financial reports, total amount of each type of
remuneration paid, and number of officers eligible category of officer total amount of fees, etc.
Total amount of fees, etc. Total amount of each type of remuneration (Millions of yen)
(Millions of yen)
Basic fees
Stock options
BonusesCategory of officer
Directors (excluding External Directors)
Company Auditors (excluding External Company Auditors)
External Directors and Company Auditors

Number ofrecipients

376

281

45

51

11

—

—

—

—

0

114

111

3

—

9

2. Consolidated total amount of fees, etc., for directors and company auditors of the Company submitting financial reports
For purposes of full disclosure, the Company has declared that no person in the filing company received a consolidated total amountof fees of more than ¥100 million this fiscal year.
3. Total amount of significant items included in salaries and bonuses paid to directors who are also employees
Total amount (Millions of yen)

Number of recipients

Details

394

8Salaries (including bonuses) paid to directors who are also employees

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

Status of Securities Held by the Company
1.	Shares held for other reasons than pure investment purpose
Number of stock names: 12
Total balance sheet amount: ¥9,986 million
2.	Nature of holdings, stock names, number of shares, total amount recorded in balance sheet, purpose of holdings of the shares held
for other reasons than pure investment purpose
Special Investment Securities
December 31, 2012
Stock name

Number of shares(shares)Amount recorded inbalance sheet(Millions of yen)

Purpose of holding

5,779

1,039

To enhance business relationship

1,136,000

580

To enhance business relationship

FreeBit Co., Ltd.

199,200

83

To enhance business relationship

Alpen Co., Ltd.

18,00027

To enhance business relationship

F@N Communications, Inc.
Synergy Marketing, Inc.

December 31, 2013
Number of shares(shares)Amount recorded inbalance sheet(Millions of yen)

F@N Communications, Inc.

2,311,600

7,235

To enhance business relationship

Synergy Marketing, Inc.

1,136,000

971

To enhance business relationship

FreeBit Co., Ltd.

199,200394

To enhance business relationship

Alpen Co., Ltd.

18,00034

To enhance business relationship

Stock namePurpose of holding

3.	Shares held purely for investment purposes
Not applicable.

312. Audit Fees, etc.

Audits by Independent Auditors
Rakuten, Inc. has entered into an auditing agreement with Ernst &Young ShinNihon LLC, which conducts financial audits inaccordance with Japan’s Companies Act and the Financial

Audit Fees Paid to Certified Public Accountants, etc.
Item

Instruments and Exchange Act.
public accountants and assistants.

Designated and Engagement Partner

Masaharu Sugiyama

Designated and Engagement Partner

Hiroshi Nishida

Designated and Engagement Partner

Kenji Takagi* Since these accountants have conducted audits for fewer than or equal toseven years, the number of years has been omitted.

2013
Millions of yen

Fees paid
for audit
certification
services

In fiscal 2013, audits were conducted by the following certified[Certified public accountants]

2012
Millions of yen
Fees paid
for non-audit
services

Fees paid
for audit
certification
services

Fees paid
for non-audit
services

Companysubmitting
financial reports

178

36

153

0

Consolidated
subsidiaries

203

11

218

17

Total

381

47

371

17

Other Important Matters Pertaining to Fees
[Names of Assistants]

Fiscal year ended December 31, 201320 certified public accountants and 27 others

Some consolidated subsidiaries of Rakuten, Inc. are audited by
Ernst & Young, which belongs to the same network as Ernst &Other Provisions of the Articles of Incorporation

Young ShinNihon LLC, the company providing certified public
accountants and other audit personnel for the Company. Fees

1.	Matters Requiring Resolutions of Shareholders’Meetings that Can Be Implemented by
Resolutions of the Board of Directors

paid to Ernst & Young in fiscal 2013 amounted to ¥81 million.

otherwise stipulated in laws and regulations, the Board of

Non-Audit Services Provided to the Company
Submitting Financial Reports by Certified Public
Accountants and Other Audit Personnel

Directors is authorized to pass resolutions on matters pertaining

Fiscal year ended December 31, 2013

to the distribution of surpluses and other matters, as stipulated in

The non-audit services for which Rakuten, Inc. pays fees tothe items of Article 459, Paragraph 1 of the Companies Act,certified public accountants and other audit personnel consist

without resolutions of shareholders’ meetings. The purpose of thisprimarily of advisor y ser vices, etc. relating to the systemprovision is to allow the Board of Directors to implement a flexible

management structure.

The Articles of Incorporation of Rakuten, Inc. state that, unlessdividend policy.

Policy on Setting of Audit Fees
2.	Items Requiring Special Resolutions ofShareholders’ Meetings

The policy of Rakuten, Inc. regarding audit fees paid to certified

The Articles of Incorporation of Rakuten, Inc. state that matters

are appropriate based on relevant factors, including the size of

requiring resolutions of shareholders’ meetings, as stipulated in

the Company, the characteristics of its business activities, and the

Article 309, Paragraph 2 of the Companies Act, require resolutions

number of days required for audits.

supported by at least two-thirds of voting rights at shareholders’meetings attended by shareholders holding at least one-third of
voting rights. The purpose of this provision is to facilitate theadministration of shareholders’ meetings by easing the quorum
requirements for special resolutions.

32

public accountants and other audit personnel is to pay fees that

Financial Section
Results of Operations and Financial Conditions (IFRS)For the fiscal year ended December 31, 2013

Business Results¥84,497 million increase in bonds and borrowings mainly due toIn the world economy during the fiscal year ended December 31,

an increase in commercial paper and the borrowing of call loans

2013 (fiscal 2013), the European debt crisis and slowdown inin the securities business.

economic growth in newly developing regions posed risks of an
economic downturn. Meanwhile, in the Japanese economy, theEquityrecovery trend has been strong, as consumer sentiment recovered

Equity at the end of fiscal 2013 stood at ¥306,454 million, an increase

and business confidence of companies improved against theof ¥64,542 million. Primary factors were a ¥40,353 million increase inbackdrop of a rise in stock prices in response to monetary easing

retained earnings resulting from factors including ¥42,900 million inmeasures and other factors.

net income attributable to owners of the parent company for fiscal

The Rakuten Group promoted Rakuten Ichiba’s B2B2C

2013 and cash dividends paid of ¥3,944 million, and a ¥18,273 million

marketplace model to the world mainly through enhancement of its

rise in foreign currency translation adjustments resulting fromservices for smart devices (smartphones and tablet devices) whose

fluctuations in the foreign exchange market.

users have been increasing in number at exponential rates,
marketing which utilizes big data, and execution of large-scale

Cash Flowssales events such as the Rakuten Super Sale. We also worked on

Cash and cash equivalents at year-end was ¥384,008 million, anenhancing logistics services such as Rakuten Super Logistics, ourincrease of ¥113,894 million from the end of the previous fiscal year.

logistics agency services for clients.

Cash flow conditions and their major factors for the fiscal year

In the Internet Finance business segment, we proactively

ended December 31, 2013 are as follows:

reinforced the membership base and expanded the business

Cash flows from operating activities—Net cash flows from operating

centering on Rakuten Card, which has notable synergies withactivities for the year under review resulted in a cash inflow of ¥1,485

Internet Services. The revitalization of the domestic stock market

million (compared with a cash inflow of ¥104,687 million for thealso contributed to the growth in profits of the finance services.

previous fiscal year). Primary factors included a cash outflow ofFurthermore, we proactively developed our e-book services as well¥141,895 million for an increase in loans for credit card business, a

as video streaming services in Japan and abroad with the aim ofnet cash outflow of ¥83,368 million following changes in financial

strengthening the digital content services which we position as one

assets and financial liabilities for securities business due to theof the pillars of our future growth strategy. Through these measures,

revitalization of the financial market (a cash outflow of ¥603,284

the Rakuten Eco-System continues to expand and growth.

million for an increase in financial assets and a cash inflow of

The Rakuten Group for fiscal 2013 achieved revenue of ¥518,568¥519,916 million for an increase in financial liabilities), a cash outflow

million (up 29.5% year on year), operating income of ¥90,244 millionof ¥50,149 million for an increase in loans for banking business, and(up 80.3% year on year), and net income attributable to owners ofa cash outflow of ¥32,000 million for an increase in call loans forthe parent company of ¥42,900 million (up 109.4% year on year).

banking business, a cash inflow of ¥150,429 million for an increasein deposits for banking business; a cash inflow of ¥88,610 million for

Financial Position
Assetsincome before income tax; and the recording of non-cash flow items

Total assets at the end of the fiscal year on December 31, 2013

Cash flows from investing activities—Net cash flows from investing

amounted to ¥3,209,808 million, an increase of ¥922,174 million.

activities resulted in a cash inflow of ¥30,584 million (comparedPrimary factors were a ¥98,429 million decline in investment

with a cash inflow of ¥67,440 million for the previous fiscal year).

securities for banking business, an amount offset by an increase ofPrimary factors included: a cash outflow of ¥30,198 million for¥603,284 million in financial assets for securities business backed

acquisition of subsidiaries; a cash outflow of ¥22,412 million forby lively trading in the financial markets, an increase of ¥141,896

purchase of intangible assets including software; and a net cash

million in loans for credit card business in conjunction with an

inflow of ¥100,666 million for proceeds from sales and redemption

increase of credit card receivables, an increase of ¥50,149 million in

of investment securities for banking business (a cash outflow ofloans for banking business associated with an increase in personal¥150,512 million for purchase of investment securities and a cash

loans, and an increase of ¥47,867 million in intangible assets

inflow of ¥251,178 million for proceeds from sales and redemption of

associated with factors such as the acquisition of Viki (USA) as wellinvestment securities).

as exchange rate fluctuations.

Cash flows from financing activities—Net cash flows from financing

including ¥26,086 million for depreciation and amortization.

activities resulted in a cash inflow of ¥75,252 million (compared

Liabilities

with a cash outflow of ¥56,820 million for the previous fiscal year).

Total liabilities at the end of fiscal 2013 were ¥2,903,354 million,

Primary factors included a cash outflow of ¥66,966 million for

an increase of ¥857,632 million. Primary factors were a ¥519,916

repayment of long-term debt, a cash inflow of ¥63,210 million for

million rise in financial liabilities for securities business due

proceeds from long-term debt, a cash inflow of ¥62,305 million for

mainly to an expansion in consignment trades for securities, an

net increase in short-term borrowings, and a cash inflow of ¥23,000

increase of ¥150,429 million in deposits for banking business, amillion for an increase in commercial paper.

33

C o n s o l i d a te d Sta te m e n t o f Fi n a n c i a l Po s i t i o n
Rakuten, Inc. and Consolidated Subsidiaries
December 31, 2013 and 2012

Thousands of
U.S. dollars

Millions of yen

December 31,
2012

December 31,
2013

December 31,
2013

ASSETSCash and cash equivalents¥ 270,114¥ 384,008$ 3,643,687

Accounts receivable — trade65,49373,443696,868

Financial assets for securities business

615,703

1,218,987

11,566,434

Loans for credit card business

402,418

544,314

5,164,755

Investment securities for banking business

296,326

197,897

1,877,758
2,275,525

Loans for banking business

189,669

239,818

Investment securities for insurance business

13,623

10,23397,098Derivative assets

10,674

12,588

119,444

Investment securities

23,411

34,025322,844

Other financial assets

123,132

159,058

1,509,229

Investments in associates and joint ventures

6,601

8,189

77,706

Property, plant and equipment

24,14330,408288,524

Intangible assets

188,014

235,8812,238,169

Deferred tax assets

40,546

31,594

299,777

17,767¥2,287,634

29,365¥3,209,808

278,659$30,456,477

Other assets
Total assets
Liabilities
Accounts payable — trade79,965

115,357

1,094,576

Deposits for banking business

809,531959,960

9,108,642

Financial liabilities for securities business

10,228,397

558,055

1,077,971

Derivative liabilities

4,685

8,023

76,125

Bonds and borrowings

305,186

389,683

3,697,531

Other financial liabilities

2,151,731

210,048

226,771

Income taxes payable

2,873

30,191

286,472

Provisions

29,61441,020389,217
178,877

Policy reserves and others for insurance business

18,496

18,852

Deferred tax liabilities

6,416

9,123

86,568Other liabilities

20,853

26,403

250,530

Total liabilities

2,045,722

2,903,354

27,548,667

EquityEquity attributable to owners of the company
Common stock

108,255

109,530

1,039,286

Capital surplus

116,599

116,555

1,105,937

Retained earnings

20,873

61,226580,945

Treasury stock(3,626)(3,649)(34,623)

Other components of equity(6,159)16,401

155,626

235,942300,063

2,847,170

5,970

6,391

60,644

241,912306,454

2,907,814¥2,287,634¥3,209,808$30,456,477

Total equity attributable to owners of the company
Non-controlling interests
Total equity
Total liabilities and equity

The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been madeat ¥105.39 to $1, the rate of exchange prevailing at December 31, 2013.

34

C o n s o l i d a te d Sta te m e n t o f I n c o m e
Rakuten, Inc. and Consolidated Subsidiaries
Years ended December 31, 2013 and 2012

Millions of yen

Thousands of
U.S. dollars

Year ended
Year ended
December 31, 2012 December 31, 2013

Year ended
December 31, 2013

Continuing Operations
Revenue¥400,444¥518,568$4,920,466

Operating expenses

319,435

420,374

3,988,748

Other income

3,365

1,831

17,377

Other expenses

5,581

9,781

92,812

Additional line items(28,738)—

Operating income

50,05590,244

Financial income

193

197

856,283
1,872

Financial expenses

2,565

1,962

18,613

Share of income of associates and joint ventures

1,423

131

1,238

Income before income tax

49,106

88,610840,781

Income tax expense

27,97045,129428,210¥ 21,136¥ 43,481$ 412,576

Net income attributable to:
Owners of the company¥ 20,489¥ 42,900$ 407,061

Non-controlling interests
Net income

647¥ 21,136581¥ 43,481

5,516$ 412,576

Net income

Yen

Earnings per share attributable to owners of the parent company
Basic
Diluted

¥

15.59
15.56

U.S. dollars

¥

32.60
32.41

$

0.30
0.30

The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been madeat ¥105.39 to $1, the rate of exchange prevailing at December 31, 2013.

35

C o n s o l i d a te d Sta te m e n t o f C o mp re h e n s i ve I n c o m e
Rakuten, Inc. and Consolidated Subsidiaries
Years ended December 31, 2013 and 2012

Net income

Millions of yen

Thousands of
U.S. dollars

Year ended
Year ended
December 31, 2012 December 31, 2013

Year ended
December 31, 2013

¥21,136¥43,481$412,576

Gains (losses) on financial assets measured at fair value
through other comprehensive income

(72)

9,500

90,145

Income tax effect of gains (losses) on financial assets
measured at fair value through other comprehensive income(51)(3,330)(31,604)

Share of other comprehensive income ofassociates and joint ventures

28

54

516

Total items that will not be reclassified to net income

(95)

6,224

59,058Other comprehensive income
Items that will not be reclassified to net income

Items that will be reclassified to net income
Foreign currency translation adjustments

10,362

18,294

173,578

Gains (losses) on cash flow hedges
recognized in other comprehensive income

(447)

(407)

(3,858)

Income tax effect of gains (losses) on cash
flow hedges recognized in other comprehensive income

176

145

1,374

Gains (losses) on cash flow hedges reclassified fromother comprehensive income to net income

713

227

2,149

Income tax effect of gains (losses) on cash flow hedges
reclassified from other comprehensive income to net income

(271)

(83)

(787)

Total items that will be reclassified to net income

10,533

18,176

172,456

Other comprehensive income, net of tax

10,43824,400231,514¥31,574¥67,881$644,090

Owners of the company¥30,907¥67,253$638,131

Non-controlling interests
Comprehensive income

667¥31,574628¥67,8815,959$644,090

Comprehensive income
Comprehensive income attributable to:

The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been madeat ¥105.39 to $1, the rate of exchange prevailing at December 31, 2013.

36

C o n s o l i d a te d Sta te m e n t o f C h a n ge s i n E qu i t y
Rakuten, Inc. and Consolidated Subsidiaries
Years ended December 31, 2013 and 2012

Millions of yen
Other components of equity
Financial
instruments
measured atfair value
Foreignthrough othercurrencytranslation comprehensive
incomeadjustments

Cash flow
hedgesTotal othercomponentsof equity

Total equity
attributableto ownersof thecompany

Non-controllinginterests

Total
equityCommon stock

CapitalsurplusRetainedearnings

Treasurystock¥107,959¥116,864¥ 3,641¥(3,626)¥(18,123)¥ 2,026¥(374)¥(16,471)¥208,367¥3,979¥212,346

Net income——

20,489

—

—

—

—

—

20,489647

21,136

Other comprehensive income,net of tax

—

—

—

—

10,341(94)

171

10,418

10,41820

10,438

Total comprehensive income——

20,489—10,341(94)

171

10,41830,907667

31,574As of January 1, 2012
Comprehensive income

Transactions with owners
Contributions by anddistributions to owners
Issuance of common stock

296

296

—

—

—

—

—

—

592

—

592

Cash dividends paid——

(3,284)

—

—

—

—

—

(3,284)—(3,284)

Reclassification from othercomponents of equity toretained earnings

—

—

106

—

—

(106)

—

(106)

—

—

—

Others

—

334

(79)

(0)

—

—

—

—

255

—

255

296

630

(3,257)

(0)

—

(106)

—

(106)

(2,437)—(2,437)

Total contributions by anddistributions to owners
Changes in ownership interestsin subsidiaries
Issuance of common stock

—

—

—

—

—

—

—

—

—

30

30

Acquisitions and disposals of
non-controlling interests

—

(494)

—

—

—

—

—

—

(494)

1,380

886

Others

—

(401)

—

—

—

—

—

—

(401)

(86)

(487)

Total changes in ownershipinterests in subsidiaries

—

(895)

—

—

—

—

—

—

(895)

1,324

429

Total transactions with owners

296

(265)

(3,257)

(0)

—

(106)

—

(106)

(3,332)

1,324(2,008)¥108,255¥116,599¥20,873¥(3,626)¥ (7,782)¥ 1,826¥(203)¥ (6,159)¥235,942¥5,970¥241,912

Net income——

42,900

—

—

—

—

—

42,900581

43,481Other comprehensive income
net of tax

—

—

—

—

18,273

6,198

(118)

24,35324,35347

24,400Total comprehensive income——

42,900—18,273

6,198

(118)

24,353

67,253628

67,881

As of December 31, 2012
Comprehensive income

Transactions with owners
Contributions by anddistributions to owners
Issuance of common stock

1,275

1,275

—

—

—

—

—

—

2,550

—

2,550

Cash dividends paid——

(3,944)

—

—

—

—

—

(3,944)—(3,944)

Reclassification from othercomponents of equity toretained earnings

—

—

1,793

—

—

(1,793)(1,793)——

Others

—

812

(396)

(23)

—

—

—

—

393

—

393

1,275

2,087

(2,547)(23)—(1,793)—(1,793)(1,001)—(1,001)

Issuance of common stock

—

—

—

—

—

—

—

—

—

50

50

Acquisitions and disposals of
non-controlling interests—(2,135)

—

—

—

—

—

—

(2,135)(208)(2,343)

Others

—

4

—

—

—

—

—

—

4

(49)

(45)
(2,338)

Total contributions by anddistributions to owners
Changes in ownership interestsin subsidiaries

Total changes in ownershipinterests in subsidiaries—(2,131)

—

—

—

—

—

—

(2,131)

(207)

1,275

(44)

(2,547)(23)—(1,793)—(1,793)(3,132)(207)(3,339)As of December 31, 2013¥109,530¥116,555¥61,226¥(3,649)¥ 10,491¥ 6,231¥(321)¥16,401¥300,063¥6,391¥306,454

As of December 31, 2013
Thousands of U.S. dollars$1,039,286$1,105,937$580,945$(34,623)$99,548$59,125$(3,047)$155,626$2,847,170$60,644$2,907,814

Total transactions with owners

The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been madeat ¥105.39 to $1, the rate of exchange prevailing at December 31, 2013.

37

C o n s o l i d a te d Sta te m e n t o f C a s h F l ows
Rakuten, Inc. and Consolidated Subsidiaries
Years ended December 31, 2013 and 2012

Cash flows from operating activities
Income before income tax
Depreciation and amortization
Other loss
Decrease (Increase) in operating receivables
Decrease (Increase) in loans for credit card business
Increase (Decrease) in deposits for banking business
Decrease (Increase) in call loans for banking business
Decrease (Increase) in loans for banking business
Increase (Decrease) in operating payables
Increase (Decrease) in accounts payable— other and accrued expenses
Decrease (Increase) in financial assets for securities business
Increase (Decrease) in financial liabilities
for securities business
OthersIncome tax paid
Net cash flows from operating activities
Cash flows from investing activities
Increase in time deposits
Decrease in time deposits
Purchase of property, plant and equipment
Purchase of intangible assets
Acquisition of subsidiaries
Purchase of investment securities for banking business
Proceeds from sales and redemption of investment securities
for banking business
Purchase of investment securities for insurance business
Proceeds from sales and redemption of investment securities
for insurance business

Purchase of investment securities
Proceeds from sales and redemption of investment securities
Other payments
Other proceeds
Net cash flows from investing activities
Cash flows from financing activities
Net Increase (Decrease) in short-term borrowings
Increase (Decrease) in commercial papers
Proceeds from long-term debt
Repayment of long-term debt
Cash dividends paid
OthersNet cash flows (used in) from financing activities
Effect of change in exchange rates on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year

Millions of yen

Thousands of
U.S. dollars

Year ended
Year ended
December 31, 2012 December 31, 2013

Year ended
December 31, 2013¥49,106
21,22730,010(9,379)(96,287)
66,94142,000(35,113)
14,284¥

88,61026,086
5,509(3,035)(141,895)
150,429(32,000)(50,149)
29,464¥

840,781247,523
52,268(28,795)(1,346,384)
1,427,357(303,634)(475,843)
279,572

10,852

6,768

64,222(200,103)(603,284)(5,724,297)

193,565

519,916

4,933,257

24,501(6,917)¥ 104,687

16,374(11,308)¥
1,485

155,366(107,294)¥
14,087¥¥¥(6,349)12,431(5,162)(18,949)(35,076)(253,991)(8,089)5,155(10,018)(22,412)(30,198)(150,512)(76,753)
48,909(95,054)(212,661)(286,532)(1,428,142)

385,115251,178

2,383,317(750)(6,228)(59,095)

1,034

9,591

91,004(15,637)
3,324(3,450)4,900¥ 67,440(4,728)
5,654(10,418)
1,609¥ 30,584¥(44,863)
53,646(98,852)
15,267290,200

¥

¥

¥

6,607
14,00030,100(90,168)(3,286)(14,073)(56,820)
2,006
117,313
152,801¥ 270,114

62,30523,00063,210(66,966)(3,962)(2,335)75,252
6,573
113,894
270,114¥ 384,008

591,181
218,237
599,770(635,410)(37,595)(22,153)714,030
62,373
1,080,691
2,562,997¥ 3,643,687

The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been madeat ¥105.39 to $1, the rate of exchange prevailing at December 31, 2013.

38

Major Consolidated Subsidiaries and Affiliated Companies(As of December 31, 2013)

Name

Location

Ownership (%)

Note

Consolidated Subsidiaries

Internet Services
Rakuten Auction, Inc.

Japan

60.0

LinkShare Corporation

U.S.A.

100.0

LinkShare Japan K.K.

Japan

100.0

Rakuten Logistics, Inc.

Japan

100.0

Buy.com Inc.

U.S.A.

100.0

PRICEMINISTER S.A.S.

France100.0

Rakuten Travel, Inc.

Japan

100.0

2

Kobo Inc.

Canada100.0

3

Kenko.com, Inc.

Japan

51.8

3, 4

Viki, Inc.

U.S.A.

100.0

5

Rakuten Bank, Ltd.

Japan

100.0

3

Rakuten Securities, Inc.

Japan

100.0

Rakuten Card Co., Ltd.

Japan

100.0

Dot Commodity, Inc.

Japan

97.1

Rakuten Edy, Inc.

Japan

85.0

Rakuten Life Insurance Co., Ltd.

Japan

100.0

Rakuten Baseball, Inc.

Japan

100.0

FUSION COMMUNICATIONS CORPORATION

Japan

54.8

Rakuten ANA Travel Online Co., Ltd.

Japan

50.0

6

TECHMATRIX CORPORATION

Japan

32.0

6

1

Internet Finance3

OthersEquity-method Affiliates

Notes: 1. Rakuten Logistics, Inc will merge as a wholly-owned consolidated subsidiary of Rakuten, effective July 1, 2014.
2. Rakuten Travel, Inc was merged as a wholly-owned consolidated subsidiary of Rakuten, effective April 1, 2014.
3. This is a special-purpose company.
4. ‌Rakuten completed a company split (simplified absorption-type company split) of subsidiary Kenko.com. Inc. Kenko.com is the successor company,
with January 1, 2014 as the date of effectuation. As of March 31, 2014, the ownership ratio of Rakuten is 52.6%.
5. The company became a group member during the fiscal year ended December 31, 2013.
6. There are seven additional equity-method affiliates, excluding the above.
7. There are 75 additional consolidated subsidiaries, excluding the above.

39

Corporate History

1997

Rakuten Ichiba, the Internet shopping mall,commences operation.

2000

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

2001

Rakuten Travel starts online hotel reservation
services.

2003

MyTrip.net is acquired by Rakuten, Inc. tospearhead the travel business; later merged with
Rakuten Travel, Inc. in 2004.

2011

Ikeda Internet Software LTDA., one of Brazil’s
leading e-commerce platform providers, becomesa subsidiary of Rakuten, Inc.
Tradoria GmbH., one of Germany’s leading online
e-commerce platform providers, becomes a
subsidiary of Rakuten, Inc.
Play Holdings Limited, one of the UK’s mostsuccessful e-commerce businesses, becomes a
subsidiary of Rakuten, Inc.

Rakuten, Inc. acquires 96.7% of sharesin DLJdirect SFG Securities to create the current
Rakuten Securities, Inc.

2004

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

2005

Rakuten, Inc. announces the acquisition of Kobo,
Inc., based in Canada, a leading global e-bookbusiness.

2012

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

Kenko.com Inc., operator of a healthcare goods
online shopping site, is acquired through athird-party allocation of shares.
Wuaki.TV, S.L. (Spain), an emerging European
provider of on-demand video services is acquired
and is made a wholly owned subsidiary.

Rakuten, Inc. acquires 73.5% of the sharesin Fusion Communications to commence an
IP telephony business.

Acquisition of majority interest in equity-method
affiliate, AIRIO Life Insurance Co., Ltd. (nowrenamed Rakuten Life Insurance Co., Ltd.), whichbecomes a consolidated subsidiary.

Rakuten Books is integrated into Rakuten Ichiba.

2008

Start of Taiwan-based internet shopping mallbusiness: Rakuten Ichiba Taiwan.
Rakuten, Inc. signs an agreement with eBANK
Corporation (now Rakuten Bank, Ltd.) regarding astrategic and capital alliance.

2009

Rakuten Bank, Ltd. becomes a subsidiary.

2010

bitWallet, Inc., the Edy e-money system operator,
becomes a subsidiary.
Buy.com Inc. becomes a subsidiary throughRakuten USA, Inc.
PRICEMINISTER S.A. (now PRICEMINISTER S.A.S.), an
e-commerce site operator in France, becomes awholly owned subsidiary through Rakuten Europe
S.a.r.l.
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.

40

Rakuten, Inc. acquires 100% of shares in Kobo, Inc.
which offers e-book services worldwide.
Rakuten Malaysia Sdn. Bhd is established in
preparation for local e-commerce service launch.

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

2007

Rakuten, Inc. and Indonesia’s largest media group,
PT Global Mediacom Tbk., launch an Indonesiabased Internet shopping mall, “Rakuten Belanja
Online.”Rakuten Austria GmbH is established throughRakuten Europe S.a.r.l. to operate an e-commercesite in Austria.

2013

Viki, Inc., a global video streaming provider isacquired and becomes a wholly owned subsidiary.
The Tohoku Rakuten Golden Eagles (“Golden
Eagles”) becomes the number one baseball teamin Japan for the first time in the nine years since
their formation.
Rakuten, Inc. changes the listing of its shares fromthe JASDAQ (Standard) market to the First Sectionof the Tokyo Stock Exchange.

Corporate Information

Company Overview

Number of Shares and Shareholders(As of December 31, 2013)

Name

Rakuten, Inc.

FoundedFebruary 7, 1997

Service Launched

May 1, 1997

IPO

April 19, 2000
Listed to the First Section of the Tokyo
Stock Exchange in December 3, 2013

Capital109,530 million yen(As of December 31, 2013)

Employees

10,867 (Consolidated)

Headquarters

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

Stock Information

Number of Shares Authorized

3,941,800,000

Total Number of Shares Issued

1,323,863,100
79,850

Number of Shareholders

Major Shareholders(As of December 31, 2013)
Number ofsharesPercentage
held

Crimson Group, LLC.

226,419,000

17.10

Hiroshi Mikitani

175,572,000

13.26

Haruko Mikitani

132,625,000

10.02

JP MORGAN CHASE BANK 380055

57,990,726

4.38

STATE STREET BANK AND TRUST COMPANY

36,275,895

2.74

Masuda and Partners Inc.

27,461,000

2.07

25,451,900

1.92

Name

Stock Code4755 (Tokyo Stock Exchange 1st Section)

Fiscal Year

January 1 to December 31

The Master Trust Bank of Japan, Ltd(Trust account)Month of Annual General

March

THE CHASE MANHATTAN BANK 385036

24,337,900

1.84

GOLDMAN, SACHS & CO. REG

23,427,710

1.77

JP MORGAN CHASE BANK 385164

19,991,600

1.51

Shareholders’ Meeting
Shareholder

December 31

Record Date
Transfer Agent

Sumitomo Mitsui Trust Bank, Limited

Contact

Sumitomo Mitsui Trust Bank, Limited
Stock Transfer Agency Department
2-8-4, Izumi, Suginami-ku,
Tokyo 168-0063, JapanClassification by Type of Shareholder(As of December 31, 2013)

Individuals
Foreign financial institutions
and individuals

Inquiry

Other domestic corporations
Domestic financial institutions

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

Securities firms
Others30.82%
44.85%
19.38%
4.42%
0.52%
0.01%

Cautionary Statement
In this report, unless indicated otherwise, references to “Rakuten”, “Rakuten Group”, “we”,

Origins of the Name Rakuten”our” and “us” are to Rakuten, Inc. and its consolidated subsidiaries and consolidated

Rakuten Ichiba is named after Rakuichi-Rakuza, the first free and open marketplacethat are not historical facts of the Rakuten Group are forward-looking statements.

in Japan, opened in the 16th century.

affiliates. Statements regarding current plans, strategies, beliefs and other statements
Such forward-looking statements are based on management’s assumptions and beliefs

When used as a verb, raku is written with a Chinese character meaning to enjoy oneself

in light of information currently available, and it should be noted that risks and unforeseen( ). The same character is used in Rakuten, which means “positive spirit.” The namefactors could cause actual results to differ significantly from those discussed in the report.

Rakuten Ichiba literally means a “market of positive spirit,” where shopping is

We do not intend to update these forward-looking statements, whether as a result of newentertainment. These words symbolize the driven, forward-looking nature of our

information, future events or otherwise, except as required by applicable laws.
andare registered trademarks of Rakuten, Inc. in Japan.
“Rakuten”,

business. That is why we named our company Rakuten, Inc.

41

Annual Report

Fiscal Year Ended December 31, 2013

Rakuten, Inc.
TEL: +81-3-6387-1111 URL: http://global.rakuten.com/corp/investors/
Shinagawa Seaside Rakuten Tower, 4-12-3 Higashishinagawa, Shinagawa-ku, Tokyo 140-0002, Japan