Rakuten, Inc.
Annual Report 2009

Annual Report
Rakuten, Inc.

Fiscal Year Ended December 31,2009

TEL: +81-3-6387-1111

URL: http://corp.rakuten.co.jp/en/ir

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

Rakuten, Inc.
Annual Report
Fiscal Year Ended December 31, 2009

Contents
Number of Shares and Shareholders (As of December 31, 2009)

A brief introduction to the characteristics, strengths and market
position of the Rakuten Group.

Number of shares authorized

39,418,000 (common stock)Total number of shares issued

13,096,980 (common stock)

02 This is Rakuten
04 Rakuten in Numbers
06 Financial Highlights

Number of shareholders

Our Strategies

Main Shareholders (As of December 31, 2009)

Our
Group

Our Group

96,331

2,264,190

17.29

08 To Our Shareholders
13 Corporate History

Hiroshi Mikitani

2,171,722

16.58

Haruko Mikitani

1,458,750

11.14

Our Activities

The Master Trust Bank of Japan, Ltd. (Trust Account)549,262

4.19

Japan Trustee Services Bank, Ltd. (Trust Account)

456,250

3.48

An overview of our business operations and other activities, fromsegment performance to corporate governance.

Masuda and Partners Inc.

443,410

3.39

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

314,180

2.40

14 At a Glance
16 Review of Operations
16		 E-Commerce Business17		 Travel Business18		 Credit Card Business19		 Banking Business20		 Securities Business20		 Portal and Media Business21		 Professional Sports Business21		 Telecommunications Business
22 Technology
23 Philosophy
24 CSR Activities
25 Corporate Governance
28 Risk Factors

The Chase Manhattan Bank,
N.A. London SECS Lending Omnibus Account238,486

1.82

Other domestic corporations

The Chase Manhattan Bank 38503G

189,246

1.44

Domestic financial institutions

Mellon Bank N.A. as Agentfor its Client Mellon Omnibus US Pension

176,592

1.35

Individuals
Foreign financial institutions and individuals
Securities firms
Others40.82%
21.03%
24.77%
13.04%
0.32%
0.02%

Our
Year

Crimson Group, Inc.

Our
Activities

Number ofsharesOur
Strategies

Name

How we will build on our successes to date and continue to deliver
value to shareholders.

Percentage
heldClassification by Typeof Shareholder (As of December 31, 2009)

Monthly Stock Price Range (Tokyo Stock Exchange)(Yen)
140,000
105,000
70,00035,000Our Year0(Thousands of shares)
9,000

Full disclosure about how well we performed over the fiscal year
ended December 31, 2009.

6,000

36 	Financial Section and Corporate Data

3,000

0

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

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

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
’05
’06
’07
’08
’09
’10

Inquiry
Investor Relations, Rakuten, Inc.
Tel +81-3-6387-0555
URL http://corp.rakuten.co.jp/en/ir/

47

Profile
Our
Group
Our
Strategies
Our
Activities
Our
Year

Japan’s Leading Internet Service Company

Continues to Grow
Rakuten is an integrated Internet Service Company. Since our foundation in 1997, we have
expanded into a wide range of business areas, including e-commerce. Today, Rakuten holds
leading positions in key areas of Japan’s Internet service sector, and operates the country’s
largest Internet shopping mall, Rakuten Ichiba.
After more than a decade of continuous growth, Rakuten is now focused on expanding
beyond Japan into overseas markets, especially in Asia. Our ultimate goal: To become theworld’s leading Internet service enterprise.

01

This is Rakuten- Shopping Mall
- Auction- Hotels and Facilities- Air Tickets- Long Distance Bus- Dynamic Packages- Credit Card

E-Commerce
Business
TravelBusiness- Portal- Advertising- Marriage Consultant

Portaland Media
Business

Credit Card
Business

Membership
Database- Professional BaseballTelecommunications
Business

Banking
Business- Banking- Personal Finance

ProfessionalSportsBusiness

Securities
Business- Stocks- Bonds- IP Telephony- Trust Funds- FX

Fast Mover
In just over a decade, Rakuten has evolved into amarket-leading provider of integrated Internet services.

Rakuten provides one-stop access to a wide range of services via the Internet. Our member database serves as thefoundation for an enhanced marketing strategy based on the organic linkage of all Rakuten Group services, including
e-commerce, travel, portals and finance, under the Rakuten brand. We call this circulatory system (shown above) the“Rakuten Eco-System.”Continuing our evolution, we are now accelerating the expansion of this unique economic environment by maximizing
synergies and user migration between services. We are also constantly exploring ways of creating new value, including
convergence with off-line business activities.
02

Our
Activities

Rakuten is No. 1 in Japanese Internet
brand index rankings.

The Rakuten Group continues to achieve top
rankings in the Japanese markets for its various
service categories. Rakuten Ichiba holds the largest
share of the Japanese e-commerce market, while
Rakuten Travel is Japan’s top site in terms of online
hotel reservations. Similarly, eBANK (now RakutenBank) has the most accounts of any Internet-onlybank in Japan. In addition, the Rakuten Super Points
Program was voted the most convenient points
system in a recent user poll*.

Our
Strategies

Top
Rankings

Our
Group

By continually expanding the
Rakuten Eco-System, we will maximize
the lifetime value of each customer.

* Nikkei Trendy, December 15, 2009

* Web Brand Survey 2010-I, Nikkei BP Consulting (October 2009)

GlobalPotential
Our vision is to contribute to market
growth in Japan, and globally.

Brand
Power

Our
Year

Rakuten Ichiba took the number one position in
the Japanese Internet brand index rankings, whileother Rakuten Group services, including Rakuten
Travel, Rakuten Auction and Rakuten Books, earned
six of the top 20 rankings in a recent survey*. These
results are indicative of the high levels of recognitionand support that our services have gained among
Internet users in Japan.

We bring our world together under asingle powerful brand.

Our vision is to expand beyond Japan, and we are
now developing a strategy to drive our evolution on
the global stage. Our unique e-commerce expertise
has enabled us to contribute to regional economic
revitalization in Japan, and we are confident that thesame know-how will provide a foundation for successinternationally. We want to contribute to economic
growth in Japan and other countries by building
cross-border e-commerce in global markets.

03

Rakuten in Numbers

Group Gross Transaction Volume

1,186(Billions of yen)

’97

’98

’99

’00

’01

’02

’03

’04

’05

’06

’07

’08

’09

1Trillion
in Group Gross Transaction Volume after more than adecade of rapid, continuous growth.

Over the past decade, we have been steadily advancing toward our ¥1 trillion target for Group Gross Transaction
Volume* on websites operated by the Rakuten Group in Japan. In fiscal 2009, our Group Gross Transaction Volume
increased by 20.1% year on year. This growth rate, substantially higher than the rate of increase for the entire Japanese
e-commerce market, took the gross transaction volume for the Rakuten Group in Japan through the ¥1 trillion barrier to¥1.186 trillion. This figure is similar to the annual turnover of a major department store chain in Japan.
* The total volume of all e-commerce and travel transactions handled in Japan.

04

of Rakuten members use multiple services
in the Rakuten Eco-System.

31,000
Merchantson Rakuten Ichiba, making it Japan’slargest Internet shopping mall.

8.5

Our
Year

Japan has an online population of some 90
million people, of whom about 60 million are
Rakuten members. This total includes 8.5 million
unique users who make at least one purchase perquarter on Rakuten Ichiba. The number of quarterly
unique users increased by 21.5% year on year,
and we believe that there is still substantial growthpotential within the Japanese market alone.

Our
Activities%

In fiscal 2009, the cross-use ratio increased by
4.2 percentage points over the previous year’s levelto 40.7%. Factors contributing to this gain include
our continuing efforts to improve products andservices across the entire Rakuten Group, and theuse of our exclusive loyalty program, the Rakuten
Super Points Program, as the basis for a variety ofpoint campaigns.

Our
Strategies

40.7

Our
Group

By satisfying the increasing demandfor convenient online services,
we will continue to grow.

Millionunique users in the Rakuten Ichibauser base—and counting.

Rakuten Ichiba opened in May 1997 withjust 13 merchants. The number of merchants
exceeded 10,000 in 2004 and 20,000 in 2007. In
fiscal 2009, we continued to contract with new
merchants, especially among small and mediumsized enterprises, and also offered proposals
that matched the business formats of major
corporations. Through these efforts, we were able
to increase the total number of merchants to over
31,000. The fact that the latest 10,000 increase wasachieved in the shortest time so far clearly shows
the accelerating growth of our merchant base.

05

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

Thousands of
U.S. dollars * 1

Millions of yen

Fiscal Year

2007

2008

2009

2009

¥213,938

Profit and Loss

¥249,883¥298,252$3,241,518

Operating income

Net sales

119* 247,151

56,649615,683

Net income (loss)

36,899*(54,978)*

53,564582,155

3

4

Cash FlowsNet cash (used in) provided by operating activities¥42,967¥(13,467)¥(55,219)$ (599,553)

Net cash provided by (used in) investment activities

55,070(40,977)

217,160

2,357,877

Net cash (used in) provided by financing activities(113,628)

62,397(174,157)(1,890,959)

Total assets¥1,158,923¥1,086,938¥1,759,237$19,101,377

Total liabilities

965,100

928,211

1,540,617

16,727,655

Total net assets

193,824

158,727

218,620

2,373,721¥14,212.68¥11,439.86¥15,527.21$168.59

Basic

2,825.95(4,203.55)

4,092.17

44.43

Diluted

2,813.32—

4,077.62

44.27

Dividend

100.00100.00100.001.09

Assets and Liabilities

Per Share (in yen and U.S. dollars)

Total net assets
Net income (loss)

Notes:	*1 U.S. dollar figures have been translated from yen, for convenience only, at the rate of ¥92.10 to US$1, the approximate rate of exchange at December 31, 2009.
		*2 The fiscal 2007 operating income included a one-time expense of ¥24.5 billion due to additional provisions for allowances relating to interest repayment claims at
Rakuten KC Co., Ltd.
		*3 The fiscal 2007 net income included gain on sales of affiliate securities of ¥53,873 million.
		*4 The fiscal 2008 net loss included loss on valuation of investment securities of ¥67,177 million.

06

Our
Group

Operating Income

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

(%)

300

60

250

50

200

40

150

30

100

20

50

10

Our
Strategies

Net Sales

2020

1515

Our
Activities

1010

55

0

FY ’06

’07

’08

’09

0

FY ’06

’07

’08

’09

00

FY ’06

’08

’09

’07

’08

’09

Our
Year

’07

ROE

Total Assets

Net Assets(%)(Billions of yen)(Billions of yen)

4040

2,000
2000000

2020

1,500
1500000

00

1,000
1000000-20-20500
500000

250
200
150
100

-40-40

FY ’06

’07

’08

’09

00

50

FY ’06

’07

’08

’09

0

FY ’0607

To Our Shareholders

Rakuten— Boldly Taking on New Challenges in an Expanding Arena
The Rakuten Group continues to see rapid growth led by its E-Commerce and Travel
Businesses. We accredit this success to our strengthening of the Rakuten Eco-System as thefoundation for integrated Internet-based services.
Our theme for 2010 will be global expansion. This year, we will begin our evolution into astrong global company. This is our vision for the future, and we will achieve it by accelerating ourinternational expansion and shifting focus to overseas markets, while also contributing to theJapanese economy.
Furthermore, to remain a model of success in today’s rapidly changing Internet sector, we will
prepare for future growth through a range of initiatives, including improving service quality andutilizing our settlement services to maximize customers’ satisfaction.

Q.1

How would you assess the results
for fiscal 2009?

Sales and income, especially fromour online services in Japan, grew strongly.
The income result was our highest ever.
Net sales increased by 19.4% year on year to ¥298,252 million. Operating
income also rose substantially, setting a new record for the second consecutive
year with a 20.1% rise to ¥56,649 million. On our Internet shopping mall Rakuten
Ichiba, which is our core business, growth in gross merchandise sales surpassed
the market growth rate, exceeding the previous year’s total by 20.6%. The grossbooking transaction volume on our online travel reservation site, Rakuten Travel,also continued to grow strongly, rising by 17.2% year on year.
We see the fiscal 2009 results as evidence of the strong operating capacityand potential of the Rakuten Group companies, including eBANK Corporation(renamed Rakuten Bank in May 2010), which made a successful business
transition after joining the consolidation in the first quarter of fiscal 2009. We areconfident that we have demonstrated to shareholders the ability of the Rakuten
Group to generate income reliably.

08

Our
Group
Our
Strategies
Our
Activities

Hiroshi Mikitani
Chairman and CEO

Our
Year

Q.2

What factors have helped you achievethese strong performance results?

Besides growing use of e-commerce in general,
improvements in the user-friendliness of our sites andstrategic marketing are key factors.
A big reason for our continuing success has been the rapidly growing popularity
of online services. Thanks to various initiatives, especially campaigns basedon our reward points program strategy, and the continuing expansion of ourmerchandise line-up with the establishment of large-scale and regionallyfocused stores, Rakuten has grown rapidly ever since we first launched online
services. Our efforts to enhance the satisfaction of business partners, such as
improving support services for merchants and accommodation facilities, havealso contributed significantly.
We a im to ac hi eve s u s t a in e d g row th by a d a ptin g qui c k l y to n ew
developments in our rapidly changing business environment, including
increased use of smartphones and other mobile access devices, and byenhancing the competitiveness of our online services in Japan. The latter entails
continuously adding attractive new features, such as social media marketing andpersonalization, to our e-commerce systems and other services.
We will also strengthen the Rakuten Eco-System model in Japan by further
enhancing usability so as to encourage members to use multiple services.

09

To Our Shareholders

Q.3

What steps have you taken to strengthen
your finance-related businesses?

We are strengthening our settlement services,
including online banking, credit card and e-money services.
The Rakuten Group quickly connected e-commerce and payment collection
services. We have expanded our settlement business through various strategies,
such as developing our Credit Card Business. By maintaining our own
operations in the credit and payment area, where switching costs are high, we
can strengthen cross-use of services.
Since introducing our card service in 2005, we have seen that Rakuten Card
holders spend more on average on Rakuten Ichiba than non-Rakuten Card holders.
Also, the introduction of the Rakuten Card has accelerated growth in the service
cross-use ratio. By keeping the settlement infrastructure within the Rakuten Group,
we activate money flows within the Rakuten Eco-System and strengthen customer
loyalty.
In January 2009, we moved into online banking by acquiring eBANK, Japan’s
leading online bank in terms of account numbers, as a subsidiary. In November
2009, we announced a full-scale entry into the electronic money (e-money)
business with the acquisition of bitWallet, Inc., which plans and operates the Edy
prepaid e-money system and has been a pioneer in the field since 2001. Japan’s
e-money market, including the Edy system, continues to expand steadily in stepwith a general trend toward cashless processing of micro-payments. The Rakuten
Group is moving along with this trend, including linking settlement services with
our points program. With this approach, we expect to increasingly influence
consumer behavior, in terms of both settlement services and real-world consumer
spending.

Q.4

The logo of the pioneering Edy
e-money system operated by
bitWallet Inc.

Please tell us about Rakuten’s ambitions
to expand overseas.

We aspire to be a strong global company,
and are shifting our focus beyond Japan’s borders.
Through our international expansion, we want to empower business owners andconsumers in other countries, as we have in Japan. We will implement prioritizedstrategies that will enable the Rakuten Group to contribute, through continuous
growth, to medium- to long-term global economic development.
We began as an entrepreneur business in Japan, and have now reached a newstage as we evolve into one of Asia’s leading enterprises. Ultimately, we intend to
become a borderless shopping mall operator. In fiscal 2008, we opened our first10

The homepage of Rakuten Ichiba
Taiwan, our first overseas shopping
mall.

Our
Group

overseas Internet shopping mall in Taiwan, which is now firmly established and on
track for future growth.
Our
Strategies

Rakuten joining forces withTARAD.com in Thailand.

Our
Activities

Thailand: In September 2009, Rakuten entered into a capital and business alliancewith TARAD Dot Com Co., Ltd., which operates Thailand’s leading e-commerce
website, TARAD.com. We chose Thailand because it offers the greatest potential for
e-commerce market growth in Southeast Asia. Approximately 160,000 merchants are
already trading on TARAD.com, and around 1.4 million products, including fashion
items and electronic appliances, are on sale. Membership has reached 2 million.
We have introduced Rakuten business expertise and the Rakuten style ofmanagement to TARAD.com. Early in 2010, we started to enhance and expand thecompany’s services by applying functions and services from Rakuten Ichiba.

■ Internet shopping mall business

Our
Year

China: We are also building a presence in China. In January 2010, Rakuten reachedagreement with Baidu, Inc. to establish a joint venture for the operation of an Internet
shopping mall in China. Baidu’s activities include the operation of Baidu.com,
China’s leading search engine and the third-ranked search service in the world interms of global market share.
China’s business-to-consumer (B2C) e-commerce market is expected to expand
rapidly in the future. The new joint venture, which plans to launch its services in thesecond half of 2010, aims to become the number one B2C Internet shopping mallin that market by combining Baidu.com’s capacity to attract users with Rakuten
Ichiba’s e-commerce platform technology and operating expertise.
We also anticipate continuing growth in the overseas activities of Rakuten
Travel. This business currently has eight overseas offices, mainly in the
Asia-Pacific region.

Europe[Taiwan] Taipei[Thailand] Bangkok

America■ Travel business[Taiwan] Taipei[Thailand] Bangkok[US] Hawaii, Guam
[China] Hong Kong
[Korea] Seoul[China] Shanghai, Beijing

Head office

Asia■ Marketing business[US] New York, Tampa,
Chicago, San Francisco,
Boston[UK] London

11

To Our Shareholders

Q.5

What are your financial projections
for fiscal 2010?

While the economic outlook remains uncertain, the Rakuten Grouphas key advantages and is active in markets that are expected to
grow continuously.
In fiscal 2010, the year ending December 31, 2010, we expect to maintain high growth
fueled by continuing expansion in the use of our services, especially in the E-Commerce
and Travel Businesses. The market environment for our finance-related businesses
is less predictable because of the impact of regulatory changes and volatile market
conditions. We are determined to surpass the fiscal 2009 results by adapting to thisenvironment by continually enhancing our existing services, and by actively launching
new ones.

Q.6

What is your policy onshareholder returns?

Our basic policy is to maintain stable dividends while
investing in future growth.
Healthy growth in income is a core management priority for the Rakuten Group, andwe continually strive to maximize business performance and strengthen our financial
fundamentals. Our basic policy on shareholder returns is to maintain stable shareholder
dividends while retaining sufficient income to build the reserves needed to develop ouroperations and maintain a sound financial structure. Accordingly, we paid a dividendof ¥100 per share for fiscal 2009. We will use retained earnings to prepare for the future
development and expansion of our business by further strengthening our financial andmanagement structures.

Dividend per Share(Adjusted for Stock Splits)(Yen)

00,100

80

60

40

20

0
FY ’03 ’04 ’05 ’06 ’07 ’08 ’09

Hiroshi Mikitani
Chairman and CEO

12

Corporate History
1997

1998

1999

2000

2001

2002

2001

Internet Shopping Mall

Online Book Store

2004

2007

2008

2009

2005

2006

2005

2006

2008

Performance Marketing

AuctionInternet Shopping Mall in Taiwan

Our
Group

1997

2003

E-Commerce
Business
2005

Credit Card
Business
Credit Card

Banking
Business
Internet Banking

Personal Loan
2000

2001

2005

2008

2009

Portal Site

Blog

Internet Research

Marriage Consultant

Pay-per-view Video Service

Our
Strategies

2009

2004

Portal and MediaBusiness
2001

Our
Activities

TravelBusiness
Online Hotel Reservation
2003

Securities
Business
Online Securities Brokerage
2004

Our
Year

Professional Sports
Business
Professional Baseball2007

Telecommunications
Business
IP Telephony

1998

Rakuten Ichiba, the Internet shopping
mall, commences operation.

2000

Rakuten, Inc. goes public throughan IPO on the JASDAQ market.
Rakuten Books is founded as a
joint venture with Nippon Shuppan
Hanbai Inc.
Infoseek Japan K.K. is acquired by
Rakuten, Inc. to create a portal
service.

2004

Rakuten, Inc. acquires 96.5% ofshares in Aozora Card; thecompany is later renamed Rakuten
Credit, Inc.

2008

Rakuten, Inc. and President ChainStore establish a joint ventureagreement to start a Taiwan-based
internet shopping mall business:
Rakuten Ichiba Taiwan.

 akuten Baseball, Inc. is founded toRstart a professional sports business.

2005

Rakuten, Inc. acquires 100% of
shares in LinkShare Corporation to
spearhead overseas push.
Rakuten Auction, Inc. is founded as a
joint venture with NTT Docomo, Inc.

2001

Rakuten Travel starts online hotel
reservation services.

2003

MyTrip.net is acquired by Rakuten,
Inc. to spearhead the travelbusiness; later merged with
Rakuten Travel, Inc. in 2004.

2006

Rakuten, Inc. acquires 96.7% ofshares in DLJdirect SFG Securities
to create the current Rakuten
Securities, Inc.

Rakuten KC transfers its auto loanbusiness to Orient Corporation to
streamline its business.

2007

Rakuten, Inc. acquires 73.5% of
the shares in Fusion Communications to commence IP telephonybusiness.

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

Rakuten Logistics is founded tocommence new logistics business.

Rakuten, Inc. signs an agreementwith eBANK Corporation (nowRakuten Bank) regarding astrategic and capital alliance.

2009

Japanese pay-per-view video
service provider SHOWTIME, Inc.
is made a wholly owned subsidiaryby stock acquisition.
TARAD Dot Com Co., Ltd., an
Internet shopping mall operator in
Thailand, becomes a subsidiarythrough Rakuten (Thailand) Co., Ltd.
A capital alliance agreement issigned with bitWallet, Inc.

Rakuten Books is integrated into
Rakuten Ichiba to improvebusiness efficiency.

13

At a Glance

E-Commerce
Business

Credit Card
Business

38.6%

Share ofNet Sales

Banking
Business

19.3%

Share ofNet Sales

10.2%

Share ofNet Sales

5.9%

Share ofNet Sales

In fiscal 2009, Rakuten Ichiba user
numbers grew strongly, due totargeted promotions and initiatives
to expand the product line-up
and acquire new merchants fromdiversified genres and regions.
Gross transaction volume rose
20.6% year on year, and net salesrose 26.3% to ¥115,003 million.
Increased net sales from Rakuten
Ichiba and extensive cost-cutting
in other areas led to a sharp 39.0%
year-on-year rise in operating
income to ¥36,222 million.

The new Credit Card Business*
produced net sales of ¥57,699 million
in fiscal 2009, reflecting growth incardholder numbers and a sustained
increase in revenues from credit
card shopping. Operating income
reached ¥3,313 million, despite
worsening economic conditions
and cost increases, including higher
marketing expenditure to attract new
cardholders.

The Banking Business, establishedin the first quarter of fiscal 2009
with the addition of eBANK
Corporation (now Rakuten Bank) to
the consolidation, saw solid positive
trends. Net sales reached ¥30,301
million and operating income ¥2,418
million. Contributing factors included
sustained growth in fees andcommissions due to the expansionof settlement services by eBANK
Corporation. Income from financial
assets, specifically loans andinvestment assets, also increased.

Net sales for this segment grew
82.0% to ¥17,622 million in fiscal
2009, leading to operating incomeof ¥1,164 million, a steep recovery
from the previous year’s ¥205
million operating loss. Major boosts
came from newly consolidated
subsidiaries, such as the marriage
consulting service O-net, Inc. andpay-per-view video service provider
SHOW TIME, Inc. Adver tising
revenue from existing businesses
also grew steadily.

Rakuten Ichiba (Internet Shopping Mall),Auction, Package Media, Golf, Auto,
Delivery, Dining, Tickets, Business Service,
Performance Marketing, Media Rental,
Off-track Betting, Logistics Service,
Global Ichiba, Net Super Market,
Check OutKC

Banking, Personal Finance

Infoseek, Advertising, AD Solution,
Research, Blog,
Marriage Consultant (O-net),
Rakuten Photo,College Students’ Portal Community,
Content, Wedding, Tool Bar

Net
Sales

*Previously Credit and Payment Business

Net
Sales

Net
Sales

Net
Sales

(Millions of yen)

(Millions of yen)

(Millions of yen)

(Millions of yen)

120,000

60,00035,00020,000100,000

50,00030,00080,00040,00060,00030,00040,00020,00020,00010,0000+26.3%

FY ’07

Operating
Income’08’09+39.0%(Millions of yen)

40,0000

20,00010,000

FY ’07’08’09

FY ’07’08’09

FY ’07

’08

’09

0

FY ’07

Operating
IncomeOperating
Income(Millions of yen)

(Millions of yen)

(Millions of yen)

2,500
2,000

2,000

1,500

1,500

1,000
500

500
0

0

Operating
Income1,000

10,000

5,000

5,000

2,500

20,00010,00015,0003,500

30,000+82.0%

15,00025,0003,000

14Portal and MediaBusiness0

FY ’07

’08

’09

0

FY ’07’08’09

01,200
1,000
800
600
400
200
0
-200
-400

FY ’07

’08

’09

’08

’09

E-Commerce
Business

Credit Card
Business

Portal and MediaBusiness

Banking
Business

Securities
Business

Securities
Business

6.5%

Share ofNet Sales

Professional Sports
Business

7.9%

Share ofNet Sales

2.8%

Share ofNet Sales

Telecommunications
Business

8.9%

Share ofNet Sales

Fis c a l 20 0 9 s aw the Tohoku
Rakuten Golden Eagles advanceto the Climax Series for the firsttime, attracting increased media
attention. This helped to boost
both ticket revenues and sales ofgoods for the Professional Sports
Business. Net sales rose by 5.0%
year on year to ¥8,361 million, andthe operating loss was reduced
from ¥812 million in the previous
year to ¥617 million.

In fiscal 2009, we continued therebuilding of our operations in the
Telecommunications Businessthrough various initiatives, including
th e re d u c ti o n of ove r h e a d s .
However, the market environment
for the IP telephony businessremained harsh, and net sales
were 22.9% lower year on year at¥26,396 million. Operating income
declined by 16.5% to ¥363 million.

TravelSecurities, Investment, Insurance

Professional Sports

IP Telephony

Our
Year

The Securities Business recorded
strong growth in the Rakuten FX(foreign currency margin transaction)
service in fiscal 2009, but thesluggish Japanese stock market
resulted in lower commission
revenues. These and other factors
caused net sales to decline by 5.1%
year on year to ¥23,549 million.
However, operating income was
15.7% higher at ¥4,464 million,
partly due to cost-cutting measures.

Our
Activities

In fiscal 2009, the Travel Businessworked to boost sales throughinitiatives aimed at enhancing
convenience for leisure travelers.
We also enhanced the support
for contracted accommodation
facilities. As a result, gross booking
transaction volume rose 17.2%
year on year. Net sales increasedby 19.3% year on year to ¥19,321
million, and operating income by
17.9% to ¥8,802 million.

Our
Strategies

TravelBusiness

Professional Sports
Business

Our
Group

TravelBusiness

Telecommunications
Business

Net
Sales

+19.3%

Net
Sales

-5.1%

Net
Sales

+5.0%

Net
Sales

-22.9%(Millions of yen)

(Millions of yen)

(Millions of yen)

(Millions of yen)

20,00035,00010,00035,00030,00015,00025,00010,0006,000

20,00015,0004,000

15,000

FY ’07

Operating
Income’08’09+17.9%(Millions of yen)0

FY ’07

Operating
Income’08’09+15.7%(Millions of yen)

10,000

6,000

8,000

5,000

’09

(Millions of yen)

-800

0

0

-1,000’08’09

FY ’07(Millions of yen)-600

FY ’070

Operating
Income

1,000
’09

’08

-200

2,000

’08

FY ’07

Operating
Income2,000
FY ’07

5,000

-400

3,000

4,000

0

0

4,000

6,000

10,000

2,000

5,000
0

25,00020,00010,0005,000

30,0008,000

FY ’07

’08

’09

500
400
300
200
100
0
-100
-200
-300
-400

’08

’09

-16.5%

FY ’07

’08

’09

15

Review of Operations

E-Commerce BusinessJapanese E-CommerceMarket Expanding

Strong Trend in
Gross Merchandise Sales

Japan’s business-to-consumer retail e-commerce

Our core business in this segment is Rakuten Ichiba. The growthmarket continues to expand. In 2008, theof Rakuten Ichiba has been driven not only by the increasing

market grew by 14.8% year on year to a size of

use of e-commerce services by Internet users, but also by ourapproximately ¥2.9 trillion (excl. service travel

dynamic efforts to expand our product line-up and encourage thebookings). Currently, e-commerce makes up

establishment of new merchants in categories and regions that weonly 1.7% of the total Japanese retail market,

have not previously explored. We have also implemented highly

compared with 3.5% in the United States, which

successful sales promotions based on our Rakuten Super Points

is a world leader in Internet use. This means there

Program and strategic marketing campaigns linked to sophisticatedis considerable scope for further growth in theanalyses of consumer behavior. These factors have allowed us toJapanese e-commerce market*.

maintain a steep upward trend in gross merchandise sales, which

This is a time of dramatic change, both in theworld economy and also in the Internet sector.

increased by 20.6% year on year (20.9% after adjustment for theleap year in 2008) in fiscal 2009.

In this environment, the Rakuten Group’s toppriority is to build a business structure capable ofgrowing globally over the medium- to long-term
future.

GMS (Rakuten Ichiba and Rakuten Books)*(Billions of yen)00250

* Research in IT Utilization in Japan 2008 (METI)
200

Growth of Domestic E-Commerce Market

150(Billions of yen)

100

3,000
2,400

50

1,800
1,200

0

600
0

FY

Q1

Q2

Q3

’07
’04

’05

’06

’07

’08

Q4

Q1

Q2

Q3

Q4

’08

Q2

Q3

* GMS: Mall (Fixed-price, Group Buy), Mobile (Fixed-price, Group Buy) and Rakuten Books

Enhancing User Functionality
We are continually enhancing user functionality on Rakuten Ichiba. Enhancements

Retargetingin fiscal 2009 include expanding the review system, which allows shoppers to
submit comments, and reinforcing the personalization platform, which is basedon our exclusive cloud computing technology, ROMA (see page 22). By providing

Page
personalization

retargeting, personalization and recommendation functions, we were able toincrease the percentage of visits that resulted in actual sales.

16

Q1

’09

Recommendation

Q4

Our
Group

Travel Business
Ongoing Initiatives

We continued aggressive marketing campaigns targeting leisure travelers in

Strategy,” Rakuten Travel is focused on

fiscal 2009. Also, we enhanced user convenience by improving the functions

expanding its businesses in three areas:of the Rakuten Travel site and upgrading systems to support access via

Category, geographic area and service.

Under the “Three-Dimensional Growth

Our
Strategies

Number One among
Japanese Hotel Reservation Sites

smartphones and other mobile equipment. At the same time, we expanded
support for contracted accommodation facilities. These measures led themaintain our top ranking* among the Japanese hotel reservation sites.
* Source: Company research

Rakuten Travel Gross Booking Transaction Volume (GTV)*(Billions of yen)(Thousands)

10,000

80

8,000

60

6,000

40

4,000

20

2,000

0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

’05

’06

GTV (Left scale)Nights booked (Right scale)

’07

’08

0

’09

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

Our
Year

100

 eographic area: The business field will beGextended to the rest of Asia and globally. In
the mid- to long term, we will dedicate moreresources to Asia with the goal of becoming“the No. 1 online travel agency in Asia.”

Our
Activities

number of nights booked to grow substantially to 305 million, allowing us toCategory: Booking arrangement services will
be expanded from business use to leisure
use and to group travel, thereby extending
services beyond today’s main booking
purposes.

Service: To meet a wider range of customer
needs, the service line-up will be extended
from hotel bookings to air ticket reservations,rental car arrangements and optional
services including additional flexible dynamic
packages.

Overseas Activities —Eight Overseas Offices EstablishedServiceLine-up

Our goal is to expand our overseas markets, especially in the Asia-Pacific.
Since 2002, when we first launched Rakuten Travel overseas, we have opened
offices in Shanghai and Beijing, China, as well as in South Korea, Guam,
Bangkok, Hawaii, Hong Kong and Taiwan. The offices in Hawaii, Hong Kong
and Taiwan were added in fiscal 2009, bringing the total number to eight.
We will continue to enhance services

Dynamic
Package Tours

Geographic
Area
Transportation

All overthe worldand capabilities with the aim of building
Rakuten Travel into Asia’s premier travelAsia

site. As one of Asia’s biggest online hotel

Categoryof Travel

Accommodation

Domestic

reservation sites, we now also accept
bookings in English, Mandarin, Cantonese

Businessand Korean.

LeisureGroup tours

Individual trips

The top page of Chinese website.

17

Review of Operations

Credit Card Business
Cardholder Base Expanding
In addition to the Rakuten Super Points Program, designed

Growth in Revolving Credit Balanceand Shopping Transaction Volume

to maximize synergy benefits within the Rakuten Group,

Rakuten KC saw a 40.0% year-on-year increase in credit

we are also attracting new cardholders through marketingcard shopping transaction volume. This dramatic increase,initiatives using the Rakuten Group’s membership base.

taking total transactions to ¥657.5 billion in a year, resulted

These strategies have brought substantial growth in thefrom growth in the number of Rakuten Card holders andnumber of cardholders and are helping to keep cardsynergies with the E-Commerce Business. Successful

utilization levels high. Rakuten Cards also help to strengthenmarketing also helped Rakuten KC to grow the revolving

links between different businesses within the Rakuten Eco-credit balance by 62.2% year on year. Despite challenging

System. For example, holders of Rakuten Cards tend to

economic conditions, this buoyant trend was reflected inmake increased use of other Rakuten services.

sustained revenue growth.

Number of Valid Card Holders

Credit Card Shopping Transaction Volume and Revolving Credit Balance(Thousands)(Billions of yen)

5,000

80

4,000

200

Revolving credit balance (Left scale)
Shopping transaction volume (Right scale)

60

150

40

100

20

50

3,000
2,000
1,000
0

FY

Q1

’07

Q2

Q3

Q4

Q1

Q2

Q3

’08

Q4

Q1

Q2

Q3

Q4

’09

0

FY

Q1

Q2

Q3

Q4

’07

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

0

’09

’08

Adapting to the Amended Money-Lending Business Control and Regulation Law
Japan has modified its consumer loans regulations. The

Interest Repayments Claimschanges, which will come into effect fully in June 2010, include(Billions of yen)

restrictions on the amount of credit provided and reduced upper

Amount of cash out
Amount of write-off

2.5

limits for interest rates. Rakuten KC will minimize the risk byretrenching its business activities in areas likely to be affected by2

these changes, such as cash advance services, and by focusing
instead on expanding business activities that are much lessvulnerable, such as Rakuten Card shopping services.
Interest repayment claims are declining. At the end of 2009, ourallowance for loss on interest repayment claims was sufficient for

1.5

1

0.5

3.0 years, as shown by the Q4 figures of fiscal 2009. Rakuten KCplans to take advantage of these conditions to strengthen its roleas an online credit card company.

18

0

FY Q4

Q1

’08

’09

Q2

Q3

Q4

Our
Group

Banking Business

The addition of eBANK Corporation (“eBANK”) to the Rakuten Group in

Review of Investment
Portfolio Dramatically
Improves Interest Margin
A p p r o p r i a te c o n t r o l o f i nve s t m e n t

to Rakuten-style management and administration systems. The early

assets and deposits brought a dramaticconsolidation of this new structure, combined with the establishment of

improvement in eBANK’s interest margin.

systems to ensure efficient investment of management resources, allowed

Integration with Rakuten Credit’s loaneBANK to achieve a positive income position after just one year.

business and a review of investment

There was a major improvement in eBANK’s basic balance, whichassets and deposits enabled eBANK toremained positive by a rapidly expanding margin from the first quarter

reduce its funding costs to an appropriate

onwards. Contributing factors include changes to ATM charges, thelevel and adopt a more sophisticatedretrenchment of unprofitable activities and the reinforcement of group

investment approach based on a propersynergies. An improvement in investment returns played a key role in abalance between risks and returns.

fundamental restructuring of eBANK’s income structure.

Investment assets were reduced primarily
Japanese Government Bonds (JGB).

eBANK Profit Improvement

Basic profit*
Banking segment operating profit(Millions of yen)

1,500

Our
Year

th r o u g h r e d e m p ti o n s a n d s a l e s of

Our
Activities

the first quarter of fiscal 2009, was followed by a period of adjustment

Our
Strategies

eBANK— Rakuten-Style Operation Brings
Solid Shift to Profitability

Investment Portfolio Trend

Consolidated from
’09/Q1(Billions of yen)

1,000

800
500

700

713.5

672.6

Real estate
derivatives
(CDO)

600
0

500

Lending, etc.

400

-500

Fund

300
-1,000

FY

Q2

Q3

Q4

’08

Q1

Q2

Q3

Q4

’09

* Basic profit = Income or loss deducted from income (loss) due to changes in market price or sales of investment products.
Income or loss from main business of eBANK excludes temporary evaluation gains (losses) such as investment.

200

JGB, etc.

100
0’08/Dec.

’09/Dec.

Synergy with Rakuten Brand Strengthened
through Name Change
In May 2010, eBANK’s trading name was changed to Rakuten Bank. The purpose of thischange was to maximize synergies with other Rakuten Group companies by clearly identifying
the bank as a Rakuten company. We will further strengthen group synergies and our ability
to offer user-friendly financial services by emphasizing the Rakuten brand and the Rakuten
Super Points Program.

The logo of Rakuten Bank.

19

Review of Operations

Securities Business
Strengthening Our Productand Service Line-Up

Continuing Strong Growth
in FX Business

Rakuten Securities handles over 600 mutual

Rakuten Securities also operates the Rakuten FX service. Therefunds and has consistently maintained its

has been sustained growth in both revenues and the number of

position as the leading name in the Internet-

accounts since the service was launched in 2008. There are now

based securities business. It was the first

more than 100 thousand accounts. Rakuten Securities has built

Internet-based securities firm to offer a

FX into a key source ofRakuten FX Growth Trendmutual fund installment investment service,earnings by releasing(Thousands)

known as the “Mini-Tsumitate” service, andMarket Speed Ver. 8.0

120

400

has continually worked to diverse its income

with FX trading functions,streams by expanding its involvement in foreign

and by implementing

90

300

stocks and overseas ETFs. Rakuten Securities

campaigns and other

60

200

continues to enhance its exclusive “Market

initiatives.

30

100

Speed” trading application to create a stressfree and user-friendly investing environment.

0(Millions of yen)Jan. Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan.

’09

0

’10

■ Number of FX accounts (Left scale)– Revenue growth (Right scale)Portal and Media Business
Growth in Rakuten Group’s
Advertising Sales

Rakuten Toolbar
Functions Enhanced

We do not simply sell advertising space; our basic strategy is to provide

The new Rakuten Toolbar provides

marketing solutions based on added-value advertising generated by the Rakuten

enhanced search functions forSuper Database, Japan’s biggest, which holds detailed purchasing profiles on

Rakuten Ichiba and Rakuten Travel.

Rakuten Group Members. This approach allows us to maximize the accuracy of

It also allows users to accumulate

advertising by carefully targeting

Rakuten Super Points based on the

products and services to members,

number of Internet searches. Users

leading to improved conversion

also enjoy free access to a range ofrates. Improved marketing toward

useful features, including weather

advertisers has also helped to drive

information, maps and train routea growth trend in our advertisingplanning. We will continue thesesales.

initiatives to provide a user-friendly
shopping environment.
The top page of Infoseek.

20

Our
Group

Professional Sports Business
Fan Club Membership
Exceeds 40,000
Membership of the Rakuten
Eagles Fan Club reached over

Our
Strategies

Rakuten Golden Eagles Make
their First Appearance in the Climax Series

40,000 in the 2009 season, an
increase of 38,200 comparedwith the number in 2005, when
expectations were extremely
high from the start of the 2009

their first appearance in the Climax Series (play-off). This was a major achievement

season, and the team’s entry

in what was just the fifth season since the formation of the team. They reached theinto the Climax Series createdsecond stage of the competition and ended the season in second place in the Pacifican intense wave of excitement,

League. Participation in the Climax Series helped boost spectator numbers, and theespecially in the Tohoku region

sales of both tickets and goods were excellent.

of Japan.

Our
Year

In 2009, the Tohoku Rakuten Golden Eagles, our professional baseball team, madeOur
Activities

the club was founded. Fan

Telecommunications Business
My-Line Sign-Up
Campaign for IP-Phone
Service Intensified

Rakuten Mobile for Business Service Launched

As competition intensifies in thetelephone charges to the same level as fixed-line charges. The service, whichcall for warding market, FUSION

is limited to corporate customers, is marketed by FUSION COMMUNICATIONSCOMMUNICATIONS has stepped up

and its agents.

In 2009, FUSION COMMUNICATIONS launched the Rakuten Mobile for
Business service. This new service is based on the concept of reducing mobile

its efforts to attract corporate MyLine customers, whose telephones
automatically connect to Fusion’s 0038
system. The number of customers
signed up was substantially above thetarget level, thanks to the expansion of
the sales network and the introductionof increased incentives in April 2007.

21

Technology
The Rakuten Group’s technology development is basedon a core concept, called “More Than Web.” Under thisconcept, we are implementing initiatives that use promisingtechnologies to both enrich the lives of Internet users andcreate possibilities for new services and businesses.
Alongside creating individual businesses, we alsoestablished the Rakuten Institute of Technology in 2005 to
pursue original research leading to new technologies. Basedon our vision of the Internet’s future direction, we establishedthree areas of research within the Rakuten Group: language
processing and data analysis, multimedia user interfaces, andlarge-scale distributed processing. Under these themes, weare researching a range of fundamental technologies aimed at
expanding Rakuten’s sphere of business.
Research carried out by the Rakuten Institute of Technology
has led to cutting-edge technologies that are being applied not
only in innovative services within Rakuten, but throughout theInternet as a whole.

Database Marketing Using
Large Data Volumes

ROMA —Technology for
Efficient Parallel Processing ofLarge Data Volumes

Rakuten’s Super Database holds data on products and

ROMA (Rakuten On-Memory Architecture) is distributed

services for the diverse businesses in the Rakuten Group andkey-value data storage software that was developed as

information about members’ demographic profiles based

e-commerce software. By virtually combining multiple servers

on browsing and purchasing histories. When combined with

into a single data storage system, it is capable of rapidly

our recommendation engines, this enables advanced dataprocessing the large and growing volumes of user information

analysis for rapid and accurate recommendations as well as

and product information used in the Group’s services. The

the creation of personalized content.

introduction of ROMA has led to improved operationalAlso, because the required formats and algorithms
for recommendations differ between services, we havec o n s t r u c t e d t h e TO H O s h a r e d p e r s o n a l i z a t i o n a n drecommendation platform, which can be customized to matchthe characteristics of each service within the Rakuten EcoSystem. This platform means that each service can use theSuper Database and data from other services to provide moreaccurate recommendations.

22

reliability, scalability and maintainability.

Philosophy
Our
Group
Our
Strategies

From the start, Rakuten has been dedicated to empowering people and society through the Internet. This
principle has driven the growth and development of our business, and is reflected in our efforts to invigorate
value and will remain a fundamental and unchanging aspect of our management philosophy.
All Rakuten Group employees, in Japan as well as overseas, adhere to this philosophy and work to realize

Our
Activities

Japan and the world through our activities. Our commitment to social contribution is our most importantthe ideal of a sustainable society by implementing it in all their activities.

Our management policies reflect
our determination to contributeto social change and maximize
added value for all stakeholders
through our core businesses.

Educating the Next
Generation
Rakuten has launched a range
of initiatives to build an enrichedsocial environment by educating
the next generation about thepotential of the Internet.

Environmental
Initiatives

Social and Community
Contribution Initiatives

We are working to ensure
effective use of limited
resources by steadily reducing
environmental loads.

Cultural Activities
As a Japanese company, Rakuten
supports activities that contributeto the preservation of Japaneseculture. We also work to informthe public about the importanceof preserving culture for future
generations.

Our
Year

Management
Initiatives

We are implementing a varietyof activities designed to bringpeople together and build
enriched communities.

Sporting Activities
Rakuten actively promotes
sports as activities that provide
excitement and enrich people
both physically and mentally.

Details of Rakuten’s CSR activities can be found on our website:

http://corp.rakuten.co.jp/csr/(Japanese only)

23

CSR Activities

The Rakuten Group’s social mission is to empower people and society through the Internet, and to transformand enrich society through its own success. Our management policies are designed to maximize added
value for all stakeholders, including shareholders.
We are actively implementing initiatives in three priority CSR categories—environmental initiatives,contribution to regional communities and education for future generations—and have also established a
special committee, reporting directly to the CEO, to explore ways of further enhancing our CSR activities.

Empowerment
throughBusiness

Environmental
Initiatives

Contributing
to Regional
Communities

The Rakuten Group aims to contribute to

T h e R a k u te n G r o u p s t r e s s e s t h e

We are implementing a variety of activities

social change and progress by turning

importance of individual employee efforts

designed to bring people together andits own growth into growth opportunities

to reduce environmental loads throughbuild enriched communities. Employee

for as many people as possible, andsustained initiatives. These include thevolunteers visit schools throughout Japanby harnessing that positive momentum

reduction of paper use, efficient use of

to teach children about the potential of

to develop services with high levels of

elevators, collection of PET bottles, andthe Internet, and about online safety.

satisfaction for both consumers andcleaning projects in local communities.

business partners.

on cooperation with Rakuten Ichiba

Through our business activities, we

stations inside the Kleenex Stadium inmerchants, including participation increate growth opportunities for merchants

Miyagi, the home ground of the Tohoku

collaborative industry-academia projects

and contracted facilities throughout

Rakuten Golden Eagles. Activities include

and workplace experience schemes. As

Japan. For example, we work with local

public education about the need topart of our efforts to consolidate regional

governments to support local businesses

separate waste into different categories.

support for the Rakuten Eagles, wethrough Machi-Raku, an e-commerce

There are also other initiatives acrossactively foster interaction with future fanssite established within Rakuten Ichiba to

our business operations, including theby arranging workplace visits and school

introduce regional products and culture.

introduction of eco-friendly packaging for

visits at all levels from kindergarten to

Rakuten Books. The entire Rakuten Groupjunior high school.

is working to protect the environment
through activities such as these.

24

We also engage in activities based

Employee volunteers work at five eco-Corporate Governance

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

1. Basic Structure of Corporate Organization

The Board of Directors consists of 16 directors, including four
outside directors. Resolutions to appoint directors must be
approved by a majority of voting rights at a General Meetingof Shareholders attended by shareholders holding at least
one-third of voting rights.
In addition to regular monthly meetings, the Board of
Directors holds extraordinary meetings as required. At thesemeetings, directors make decisions on important management
matters and supervise executive officers’ activities. To ensure
appropriate decision-making by the Board of Directors,
medium- and long-term management plans, basic policies
and other key strategies are first discussed at Executive
Strategic Meetings, which consists mainly of executives at
Senior Executive Officer level and above.
Board decisions are delegated to the Executive Officers’
Meeting, which consists of Executive Officers. Individual
Executive Officers carry out their respective duties in accordance with these decisions. To ensure appropriate and

Our
Year

2. Corporate Organization(1) Directors, Board of Directors, Executive Officers, etc.

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

Our
Activities

Rakuten, Inc. supervises management by using a Corporate
Auditor System. In March 2003, the Company adopted an
Executive Officer System to separate the supervisory andexecutive roles of management. Under that system, functions
previously performed by the Board of Directors were separated,with directors retaining responsibility for management
decision-making and supervision, while executive functions
were transferred to the executive officers.
A business unit system was introduced in 2006 with thedual aims of speeding up executive processes and strengthening the supervisory functions of the Board of Directors andCorporate Auditors. In addition, Rakuten Inc. created a groupwide risk management structure by establishing Functional
Teams to manage risk comprehensively across all Rakuten
Group businesses.

(2) Corporate Auditors and the Board of Auditors
Our
Strategies

Corporate Organization andInternal Control Systems

efficient conduct of business operations, activities in individual
segments are supervised by management councils convened
within each segment, as well as by Functional Teams responsible for human resources, financial management, accounting,organizational management and other management aspects
across the Rakuten Group.

Our
Group

1. Basic Approach to Corporate Governance

3. Internal Control Systems
Basic internal control policies for Rakuten, Inc. are determinedby the Board of Directors. The Company has declared its
intention to comply with all regulatory requirements, and to
apply high ethical standards to its business activities.
The performance of business operations by Directors andemployees is subject to regular operational audits by theInternal Audit Department, an independent unit reporting
directly to the CEO. The Compliance Committee also helps toensure that all operations are conducted appropriately byimplementing group-wide compliance initiatives.
Compliance training is provided for all directors andemployees to enable them to develop the knowledge andethical perceptions needed to perform their duties. In addition,
Rakuten, Inc. is committed to the appropriate management ofsystems based on the Whistleblower Protection Act.
Directors are closely supervised in the performance of
their duties by the outside directors and outside corporate
auditors. Attorneys have been appointed to help each of theoutside directors and outside auditors verify compliance with
the Articles of Incorporation and regulatory requirements froman objective perspective based on expert knowledge.
Rakuten, Inc. is also expanding the Rakuten Group25

Regulations as the basis for integrated group management,with the aim of strengthening corporate governance andpaving the way for further growth.

4. Internal Audits and Audits by Corporate Auditors
The nine-member Internal Audit Department is an independent
unit reporting directly to the CEO. It conducts internal control
and compliance audits in accordance with annual internal audit
plans to verify the legality, appropriateness and efficiency ofoperations in each organizational unit. It has also strengthened
cooperation with the internal audit units of subsidiaries, and iscontinually implementing group-level internal audits to ensurethat all operations are conducted appropriately.
Internal audit results are reported to the Board of
Directors, the CEO, the Compliance Committee and the
Executive Officers responsible for the area covered by each
audit. The Internal Audit Department also reports its findings
to the Board of Auditors and works in cooperation with the
Corporate Auditors.

5. Audits by Independent Auditors
Rakuten, Inc. has an auditing agreement with Ernst & Young
ShinNihon LLC, which conducts financial audits as required
under Japan’s Corporate Law and the Financial Instruments
and Exchange Law. Audits for fiscal 2009 were conducted by
the following chartered public accountants and assistants:
1. Chartered public accountants
Designated limited
liability partner

Executive partner

Kazunori
Watanabe

Designated limited
liability partner

Executive partner

Masaharu
Sugiyama

Designated limited
liability partner

Executive partner

Kenichi Ishida* The continuous number of years over which audits have been performed has been
omitted, as it is fewer than seven years.

2. Audit assistants
Certifiedaccountants

17

Assistantaccountants, etc.

36

6.	Relationships with Outside Directors andOutside Auditors
One of the outside directors, Mr. Koichi Kusano, is a representative partner in Nishimura & Asahi, a law firm with which
Rakuten, Inc. has a business relationship that includes theprovision of services, and one of the outside auditors, Mr.
Katsuyuki Yamaguchi, is a partner in the same firm.
Another outside director, Mr. Tatsumi Yoda, is the Representative Director and Chairman of GAGA CORPORATION
Inc., with which Rakuten, Inc. has a business relationship that26

includes the provision of services. Rakuten, Inc. has appointed
Mr. Ken Kutaragi, who is an outside director, as a fellow of the
Rakuten Institute of Technology under the provisions of aservice agreement. There are no other personal, capital or
business relationships or significant interests.
Rakuten, Inc. has signed an agreement with each of its
outside directors and outside auditors under the provisions ofArticle 427, Paragraph 1 of the Corporate Law. This agreement
is summarized below:
Provided that duties have been carried out in good faith andwithout gross negligence, the total liability in situations as definedin Article 423, Paragraph 1 of the Corporate Law will be limited tothe sum of the amounts stipulated in the following items:i. 	Two times the greater of the sum of fees, bonuses andother payments received or asset benefits received in theyear that includes the date on which the event that resulted
in the liability occurred, and in the preceding year, or thevalue of asset benefits to be received (excluding benefits
stipulated under Item ii below).
ii. 	Two times the smaller of the sum of retirement bonuses orasset benefits that are in the nature of retirement bonuses,or that amount divided by the number of years during
which the office of outside director was held.
iii.	The amounts stipulated below if stock options, as definedin Article 238, Paragraph 3 of the Corporate Law, were
exercised or transferred after the person was appointed
as an outside director.
1. If the options have been exercised		An amount calculated by subtracting the sum of theissue price of the stock options and the paid-in value
per share on the exercise date from the market priceper share on the exercise date and multiplying theresult by the number of shares granted through theexercise of the stock options.
2. If the options have been transferred		An amount calculated by subtracting the issue price ofthe options from the transfer price and multiplying theresult by the number of stock options.

Risk Management Systems
Under the Rakuten Group Regulations, the units responsible foreach business area also manage the associated risk factors.
Information management risk is rigorously controlled
through group-wide risk minimization measures, including
Information Security Management System (ISMS) certification,
under the leadership of the Risk Management Department. In
addition, emergency reporting systems have been enhanced
to ensure that risk information can be gathered promptly.
To ensure appropriate supervision of actions by directors

holders, as stipulated in Article 309, Paragraph 2 of the
Corporate Law, require resolutions supported by at least
two-thirds of voting rights at General Meetings of Shareholders attended by shareholders holding at least one-third of
voting rights. The purpose of this provision is to facilitate theadministration of General Meetings of Shareholders by easing
the quorum requirements for special resolutions.

Item

Fees paid to directors and corporate auditors
Number of recipients

Our
Strategies

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

Remuneration for Directors and Auditors

14¥690 million

5¥40 million

Companysubmitting
financialreports

—

—

149

4

Consolidated
subsidiaries

—

—

227

25

Total

—

—

376

30

Other Important Matters Pertaining to Fees

Our
Year

Notes
1. T
 he above amounts do not include salaries and bonuses paid to directors who arealso employees.
2. T he above amounts include directors’ bonuses pertaining to the year ended
December 31, 2009.
3. T he above amounts include ¥25 million in fees, etc., paid to three outside directors,and ¥37 million in fees, etc., paid to four outside auditors.
4. In addition to the above amounts, the total cost of new share subscription rights
granted as stock options in the year ended December 31, 2009 amounted to ¥72
million for directors (including ¥2 million for outside directors) and ¥2 million foroutside corporate auditors.
5. In addition to the above, outside auditors received fees of ¥400 thousand as
directors of subsidiaries of Rakuten, Inc. in the year ended December 31, 2009.
6. T he yearly fees for directors and auditors, as determined by resolutions passed
at the General Meeting of Shareholders on March 29, 2007, are ¥700 million peryear for directors and ¥120 million for corporate auditors. New share subscription
rights granted as stock options, as referred to in Note 4, were either approved as
separate allocations under resolutions passed at General Meetings of Shareholders, or were issued to directors and corporate auditors, etc., on favorable
terms under the provisions of the old Commercial Code before the enforcementof the Corporate Law.

Our
Activities

Directors

Fiscal year ended
December 31, 2009

Fees paid forFees paid forFees paid forFees paid for
audit
non-audit
audit
non-audit
certification
services
certification
services
services(millions of yen) services(millions of yen)(millions of yen)(millions of yen)Amount of fees, etc.

Corporate Auditors

Fiscal year ended
December 31, 2008

Our
Group

in relation to business risk, business investments above acertain amount are subject to approval by the Board of
Directors. In addition, management councils in each businesssegment gather risk information and enforce rigorous risk
management by requiring thorough reporting of risks that
could affect operations.
A group-level risk management structure has also been
established. The Group Risk Management Committee,
chaired by the CEO, provides integrated monitoring of risk
factors that could seriously affect the Rakuten Group.

Some consolidated subsidiaries of Rakuten, Inc. are auditedby Ernst & Young, which belongs to the same network as
Ernst & Young ShinNihon LLC, the company providing
certified public accountants and other audit personnel for
Rakuten, Inc. Fees paid to Ernst & Young in fiscal 2009amounted to ¥8 million.

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

Non-Audit Services Provided to the Company
Submitting Financial Reports by Certified Public
Accountants and Other Audit Personnel
The non-audit services for which Rakuten, Inc. pays fees tocertified public accountants and other audit personnel consist
primarily of advisory services relating to the preparation ofEnglish financial statements.

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

2.	Items Requiring Special Resolutions ofGeneral Meetings of Shareholders
The Articles of Incorporation of Rakuten, Inc. state thatmatters requiring resolutions of General Meetings of Share-

27

Risk Factors
Business Risk and Other Risk Factors
Described below are the main aspects of the businessactivities and finances of the Rakuten Group (the “Group”)
that are considered to be potential risk factors or that may
influence decisions by investors. Having identified theserisks, the policy of the Group is to take steps to prevent
occurrences or to take appropriate action in response tocontingencies. This policy notwithstanding, the Group’s
position is that decisions to invest in its securities should
be preceded by careful examination of relevant information,
including information provided elsewhere.
Unless otherwise stated, all forward-looking statements
herein are based on judgments by the Group as of the dateof filing of the Yuukashouken-Houkokusho on March 27,
2010 to the Finance Services Agency of the Japanese
government. They are subject to uncertainty and could
differ from actual results.

1. Risks Relating to Business Environment
1–1 Growth Potential of the Internet Industry
The Group is primarily active in the Internet sector. It
provides a variety of services under the Rakuten brand via
its membership service infrastructure.
Given the expansion of business-to-consumer (B2C)
e-commerce and other factors, we anticipate continuing
growth trends in both gross transaction value and thenumber of unique buyers* on the Group websites. However,the Group’s financial performance could be affected if thegrowth of the Internet sector as a whole decelerates
because of external factors, such as regulatory systems
that limit Internet use, growing awareness of information
security issues, especially in relation to personal information, or because of economic trends, competition fromother companies or other factors, or if gross transaction
value on the Group’s websites fails to expand as expected.
Revenues from Internet advertising and similar sources
make up a substantial share of the Group’s net sales. Since
the advertising market is highly likely to be affected byeconomic trends, the Group’s financial performance could
be affected if there is a downturn in business confidence.
In addition, to further raise its gross transaction value,
the Group is converting its various service brands to the
Rakuten brand. The Group is also integrating its
membership IDs by unifying membership databases anddeveloping a common points program. However, changes
to brand names and membership IDs could reduce theloyalty of existing members or cause them to withdraw
from services. Gross transaction value on the Groupwebsites and the financial performance of the Group could28

be affected if these measures fail to produce the anticipated benefits.
*N umber of unique buyers: The total number of buyers who purchase items evenonce on Rakuten Ichiba during a specified period.

1–2 Competition
As the number of internet users increases, many companies
are moving into Internet-related businesses across a wide
spectrum of product categories and service formats.
In addition to its Internet-related business operations,
the Group also faces competition from numerous
companies in its other areas of business.
The Group aims to expand its business activities bycontinuously enhancing its response to customer needs.
However, it is possible that these initiatives will fail to yield
the anticipated benefits, or that the revenues of the Groupwill fall because of changes in the competitive environment,such as the emergence of a competitor with revolutionary
services backed by powerful system development capabilities. There is also a possibility that the Group will be forced
to compete on prices or increase its advertising expenditure. Such situations could have a serious impact on thebusiness activities and performance of the Group.

1-3 Technological changes in the industry
The Rakuten Group is expanding its business in the Internet
field, where progress and changes in technology are particularly pronounced and new products and services are
introduced with high frequency. It is necessary for theGroup to respond swiftly to such changes. Should theGroup’s response be slow for some reason, there is a riskthat our services could be seen as obsolete and ourcompetitiveness deteriorate. Furthermore, even if we
respond appropriately, we may incur increased expenses
associated with upgrading existing systems and undertaking new development. These market trends and our
responses may therefore have an impact on the businessresults of the Rakuten Group. In addition, technology may
be developed that damages the operation of the Rakuten
Group. If this technology becomes widespread, it may also
have an impact on the business activities and performanceof the Group.

2.	Risks Relating toInternational Business Expansion
Global expansion is one of the Group’s key strategies, andwe are dynamically extending our existing business model
into other countries. For example, marketplace-type
Internet shopping malls similar to Rakuten Ichiba have

Our
Year

The Group amortizes goodwill over the period in whichsuch action is deemed effective. Companies that have aclose relevance to the activities of the Group, such as
Rakuten KC Co., Ltd., LinkShare Corporation and eBANK
Corporation, have been acquired on the basis of long-term
assessments of corporate value. Goodwill for thosecompanies is therefore amortized on the basis ofreasonable estimates over a period of 20 years, which is
the longest period stipulated in the accounting standards
for business combinations. Goodwill amortization is
included in selling, general and administrative expenses.
The balance of goodwill (consolidation adjustment
accounts) showing in the consolidated balance sheets as ofDecember 31, 2009 was ¥86,417 million.
Amortization expenses could increase if new goodwill isgenerated in the future. Furthermore, the business performance and financial position of the Group could be
adversely affected by an impairment of goodwill if a situationarises in which the goodwill from a company is likely to be
deteriorated over a shorter period than was estimated at thetime of acquisition, because of a worsening in thecompany’s business performance or other factors.

Our
Activities

The Group actively engages in merger and acquisition(M&A) activities and the establishment of joint ventures,
both in Japan and overseas. Our aim is to move into new
business areas and overseas markets, gain new users,
expand our existing activities and acquire related technologies. These activities are regarded as an importantmanagement priority.
When acquiring a company, the Group seeks to avoid
risk as much as possible by conducting detailed due
diligence concerning the financial position, contractual
relationships and other aspects of the potential acquisition.
However, it is not always possible to carry out due diligenceexhaustively because of the circumstances surrounding
individual acquisitions, and it is possible that contingent or
unrecognized liabilities will come to light after an acquisition. Furthermore, it is impossible to predict reliably how

3–2 Goodwill

Our
Strategies

3.	Risks Relating toBusiness Expansion and Development
3–1 M&A

the characteristics of a newly created business will affectthe business operations and performance of the Group. It
may also become impossible to develop the new businessas anticipated because of changes in the businessenvironment or other factors. In such cases, the businessperformance of the Group may be adversely affected, andit may be impossible to recover the investment.
It is also possible that the information systems andinternal control systems of an acquired company cannot be
integrated successfully, or that executives, employees andcustomers of an acquired company will be lost after theacquisition. In addition, because future investment andlending could be substantial compared with the current scaleof business operations, there is the possibility of increased
risk affecting the financial position and other factors acrossthe entire Group.
When the Group launches a new business in an area inwhich it has not previously been involved, it becomes
exposed to risk factors specific to that activity. It is possiblethat the Group will be affected by risk factors not listed inthis section as a result of acquisitions and other actions.

Our
Group

already been opened and operating successfully in Taiwan
and Thailand. In addition, a joint venture has been established in China, and we are now preparing for the start ofbusiness operations in that country. We are currently
studying a variety of initiatives relating to the establishmentof overseas business and R&D sites, including sites inemerging countries. The Group has also introduced crossborder services that allow users in Japan or overseas topurchase products from Japan or other countries.
However, an involvement in global business activities
entails a variety of potential risks, including differences inlanguages, geographical factors, legal and taxation systems,
economic and political instability, and differing commercial
practices. The business activities and performance of theGroup could be affected if these risks are not handledproperly.
In particular, the Group is likely to incur additionalcosts when setting up corporations and businesses inother countries, including recruitment costs and development costs relating to system localization. Profit will
temporarily come under pressure from these additionalcosts, and it will take time before new operations start togenerate stable sales. Delays in global business development resulting from changes in local conditions or otherfactors could have adverse effects on the business performance of the Group, including difficulties in the collectionof the capital invested. Overseas sales, costs, assets andliabilities will also be exposed to the effects of currency
exchange rate fluctuations.

29

3–3 Capital and business alliances andassociated collaboration
Capital alliance with bitWallet, Inc.
For the purpose of gaining full entry into the e-money
business and expanding our field of operations to provide
settlement services that integrate online and offline
businesses, Rakuten concluded a master agreement
concerning a capital alliance with bitWallet, Inc. on
November 11, 2009 and subscribed to a third-party allotmentof new shares issued by bitWallet on January 21, 2010.
Through this subscription, we acquired 576,037 shares in
bitWallet (acquisition cost: ¥3,000 million, voting rights:
52.8%) and made bitWallet a consolidated subsidiary.
We will leverage the Rakuten Group’s customer baseand marketing know-how with the intent of enhancing Edy
business operated by bitWallet, by acquiring users andpromoting its use on the Internet. We are proceeding withthis merger to enhance the synergy between bitWallet andthe Rakuten Group businesses. If the business merger with
bitWallet does not proceed smoothly or if problems arise inbusiness operations with bitWallet, the business performance and financial condition of the Rakuten Group may
be materially affected.

4. Business Risks
4–1 Marketplace Business
Marketplace services such as Rakuten Ichiba and Rakuten
Auction, and accommodation booking services such as
Rakuten Travel, basically provide venues for trading, and
the Group is not party to trading contracts. The rules forthese marketplaces stipulate that the Group will incur noliability in the event of disputes between sellers or service
providers and purchasers, and that disputes must be
settled between the parties. However, if users of ourmarketplace services engage in activities that defame otherparties or infringe their rights, including intellectual property
rights and privacy rights, or if they engage in illegal activities, such as fraud, the resulting liabilities could affect not
only the parties responsible for the actions that caused the
problems, but also the Group as venue provider. There
could also be damage to the brand image of the Group.
Furthermore, vendors and service providers participating in our marketplace business can easily move toalternatives, such as other marketplaces or their own sites.
It is possible that unless Rakuten continues to provide
highly convenient and reliable services, the Group’s
financial performance will be affected by a decline in thenumber of vendors and service providers.

30

4–2 Direct Selling Business
The Group has service categories that involve direct selling ofgoods and services to general consumers, such as Rakuten
Books and Rakuten Rental. In these categories, the Group isa party to sales contracts, etc., and is therefore liable for thequality and content of goods and services. When selling
goods or providing services, the Group takes all possible
steps to ensure compliance with relevant laws and regulations. However, if a defective product is sold or a defective
service is provided, the Group could become subject toactions by supervisory agencies. The Group could also incur
costs resulting from product recalls, liability for damages orother consequences. There could also be reputational
damage leading to a decline in sales. The financial performance of the Group could be affected in such situations.

4–3 Financial Businessa Regulatory Requirements
Rakuten KC Co., Ltd., eBANK Corporation, Rakuten
Securities, Inc. and other subsidiaries are involved in thefinance-related businesses. The activities of thesecompanies are subject to the provisions of the Law
Concerning the Regulation of Receiving of Capital
Subscription, Deposits and Interest on Deposits (hereinafterreferred to as the “Capital Subscription Law”), the Banking
Law, the Interest Rate Restriction Law, the Money-Lending
Control Law, the Installment Sales Law, the Financial Instruments and Exchange Law, the Trust Business Law andother laws and regulations and regulatory requirements
relating to financing activities, as well as the guidelines ofsupervisory agencies, and the rules imposed by autonomous regulatory bodies, such as stock exchanges andindustry organizations.
If any of the above subsidiaries becomes subject to asuspension of business, license revocation or other actions
for any reason, if new regulatory requirements, supervisoryagency policies, regulations or supervisory guidelines are
established, or if there are any changes that would
adversely affect their business activities, the business
operations and financial performance of the Group could beseriously affected.
Under the Money-Lending Control Law, which will comeinto effect fully in June 2010, lenders will be required to use
information about consumers’ annual incomes and datafrom credit agencies to limit the total amount of credit
provided to no more than one-third of the borrower’s
annual income. This will require changes to systems andoperating methods. It will also be necessary to restrict newlending. In addition, lenders will be obliged to tighten their

c Liquidity

eBANK Corporation operates an Internet banking business.
Since customers are able to make withdrawals fromordinary deposit accounts, close time deposits and transfer
or remit funds to other financial institutions via the Internet,
unforeseeable circumstances, such as the spread of rumorsthat impact on the reputation of this subsidiary or theGroup, could cause deposit outflows to occur more rapidly
than would be the case in a conventional bank. The
business could become unsustainable if the outflow significantly exceeds the anticipated level.

Our
Year

Rakuten KC Co., Ltd. deals mainly with individual
customers and procures operating funds primarily in theform of loans from financial institutions. The financial
performance of the Group could be affected if deteriorating
economic conditions cause a slump in consumer spending
and demand for credit, or if rising unemployment leads toan increase in personal bankruptcies or the number ofheavily-indebted creditors, or if there is deterioration in thestate of financial markets or the credit situation of theGroup. If serious problems arise, affecting the Group’s
ability to maintain and operate the credit control systems
used to reduce the risk of uncollectable receivables, or its
ability to recruit personnel with loan collection expertise,
the sustainability and future development of the businessmay be jeopardized.
Securities make up a substantial portion of theoperating assets used by eBANK Corporation and have asignificant effect on its operating revenue. Those operating
assets consist of various financial products, including
bonds, shares, funds, and securitization and liquidation
products. Returns on investments in financial products are
significantly affected by factors that include interest rates,
foreign exchange rates, market fluctuations and debtor
credit risk. There is no guarantee that this business will not
be affected by losses on these investments, and it ispossible that the financial performance of the Group will beaffected. Credit costs relating to loan receivables, including
allowances for doubtful receivables or guarantee charges,
could increase if economic conditions deteriorate or if there
are changes to accounting standards, changes in the credit

Our
Activities

b The Business Environment

Our
Strategies

situation of guarantee companies, or changes in guarantee
performance conditions. Such situations could affect thefinancial performance of the Group.
Rakuten Securities, Inc. implements various types oftransactions, including margin transactions, foreignexchange margin transactions, futures options transactions
and CFD transactions. Its main source of revenues isbrokerage commissions, which are affected by conditions
in securities markets and other aspects of the priceenvironment. The financial performance of the Group may
be affected under certain circumstances, such as if
securities markets stagnate under the impact of economic
conditions, trends in overseas markets, political developments, regulatory changes, or changes in investor
sentiment, or if money lent to clients for margin transactions cannot be recovered because of a decline in margin
balances resulting from sudden stock price fluctuations,interest rate increases or other factors.

Our
Group

credit management under the provisions of the amended
Installment Sales Law, which have not yet taken effect. Allof these factors could affect earnings.
Furthermore, Rakuten KC Co., Ltd. has loan contracts
dating before December 31, 2007 that stipulate interest rates
in excess of the maximum rates stipulated in the Interest Rate
Restriction Law. It has provided an allowance for losses oninterest repayments, the amount of which reflects estimatedfuture claims for interest refunds based on historical interest
repayment claims (loan transition ratio, average claim). It has
also provided an allowance for the estimated amount ofprincipal receivables that may be non-recoverable because ofinterest refund claims. If there is an increase in the factors
used to calculate these allowances, such as the averageamount of claims, the financial performance of the businessconcerned could be affected by the need to make an
additional provision.

4–4 Third-Party Outsourcing and Alliancesa Outsourcing and Alliances with Financial InstitutionseBANK Corporation does not have a current deposit accountwith the Bank of Japan, and it does not have its own ATM
network. For this reason, it commissions inter-bank settlements to the Nishi-Nippon Citybank, Ltd. and has
concluded ATM utilization agreements with Seven Bank, Ltd.,
Japan Post Bank Co., Ltd. and Aeon Bank, Ltd. The
business operations and performance of the eBANK Groupwould be seriously affected if its relationships with thesebanks deteriorate, or if it becomes unable to use these
services and systems.
b Alliances with Travel-Related Businesses

In the Travel Business, our policy is to improve the overall
quality of our travel-related services and develop thebusiness through cooperation with travel-related
businesses, such as airlines and railroad companies.

31

Business operations and financial performance in thissegment could be affected if relationships with thesepartners deteriorate, or if negotiations with prospective newpartners are unsuccessful.
c Interconnection Agreements with

Telecommunications Providers
To ensure the efficient provision of telecommunications
services, Fusion Communications Corporation has
concluded interconnection agreements providing for reciprocal connections between its telecommunications facilities
and those of other telecommunications providers. Telecommunications carriers that own telecommunications facilities
are, in principle, required to allow other providers toconnect to those facilities. The business operations,financial performance and financial position of the Group
could be affected if changes to this situation, such as theabolition or relaxation of this requirement, result inincreased usage charges for Fusion Communications, or if
the conditions are amended in ways disadvantageous for it.
d Supply of Goods, Content and Technology

The Group relies on outside suppliers or licensing arrangements for the supply of goods for its direct selling business,for certain types of content or technology used on its
websites, such as search engines, news and other services.
If the supply is interrupted and Rakuten becomes unable toaccess quality content and technology efficiently, if prices
increase, or if licenses are terminated because of deteriorating relationships with suppliers, bankruptcies, demand
growth, changing economic conditions, contract changes
or other factors, Rakuten’s ability to provide services could
be compromised, and the financial performance of theGroup could be affected.

5. Compliance Risk
5–1 Possibility of Imposition of Regulatory Restrictions
In addition to the items listed under Section 4–3 a(“Regulatory Requirements”), the Group is subject to theprovisions of various other laws and regulations, including the
Act Concerning the Prohibition of Unauthorized Computer
Access; the Act on the Limitation of Liability for Damages ofSpecified Telecommunications Service Providers and theRight to Demand Disclosure of Identification Information of
the Senders; the Act on Specified Commercial Transactions;
the Act on Regulation of Transmission of Specified Electronic
Mail; the Consumer Contract Act; the Act against Delay inPayment of Subcontract Proceeds, etc. to Subcontractors;
the Secondhand Articles Dealer Act; the Travel Agency Act;32

the Telecommunications Business Act; the Employment
Security Act; and the Act Concerning the Creation of Conditions, etc., for the Safe and Secure Use of the Internet byYoung People, as well as policies and guidelines establishedby regulatory agencies. The e-money and settlement services
provided by the Group could also be subject to new restrictions under the Act Concerning Financial Settlements, which
took effect in April 2010.
If the Group’s business activities become subject to
new restrictions due to the establishment and amendmentof laws and regulations, the cancellation of approvals andpermits by regulatory agencies, or the formulation of new
guidelines and voluntary rules, or for other reasons, there
could be implications for the Group’s financial performanceand financial position.
If the scale of the Group’s service provision andbusiness activities expands, it is possible that issues will beraised under the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade concerning measures
implemented by the Group to provide a healthy businessenvironment for merchants, service providers and otherpartners, or the content of agreements on which thosemeasures are based. If this happens, new restrictions could
be imposed on the Group’s business activities. This could
affect the Group’s business activities, financial performanceand financial position.

5–2 Possibility of Litigation
The Group could be exposed to litigation or other claims if
merchants, purchasers, participants or other users engage
in illegal activities or involved in disputes, if users violate
the rights of third parties through illegal actions or the distribution of harmful information, or if losses are incurred bymerchants, purchasers, participants or other users as aresult of system failures or other situations. Furthermore,
the Internet itself is still a relatively new phenomenon, andthere is the possibility of unforeseeable litigation or otheractions resulting from new contingencies or business risks
that have not yet become apparent.
If the Group’s rights are infringed or damaged in some
way by third parties, of if Rakuten is not protected from theinfringement of its rights by third parties, it is possible that
substantial costs will be incurred due to litigation or otheractions to protect those rights. Depending on the nature ofsuch litigation and other actions and the amounts sought,
such situations could impact on the business activities,
performance and financial performance of the Group.

9. Risks Relating to Deferred Tax Assets
Rakuten, Inc. and some of its consolidated subsidiaries are
currently treating future tax reduction factors as deferred
tax assets, in accordance with Japanese accounting
standards. The computation of deferred tax assets is basedon various projections and assumptions, including
estimates of future taxable income based on business
forecasts. It is possible that actual results will differ fromthese projections and assumptions. If estimates of futuretaxable income indicate that Rakuten, Inc. or its subsidiaries will be unable to recover part or all of their deferred
tax assets, the financial position and financial performanceof the Group would be affected by the consequent
reduction in the value of said deferred tax assets.

7. Market Risks

10. Risks Pertaining to Financial Reporting

The Group holds substantial amounts of financial products,
including marketable securities and money trusts, as
operating assets. The financial position and financial performance of the Group could be affected if interest rate
movements or fluctuations in markets for financial productscause impairment of or valuation losses on these assets.

Internal control reporting requirements under the Financial
Instruments and Exchange Act came into effect in thecurrent fiscal year. The Group accordingly strengthened its
internal control systems in relation to financial reporting.
However, the public reputation of the Group could bedamaged if serious errors are discovered.

8. Risks Relating to Financing

11. Human Resource Management Risks
11–1 Dependence on the Chairman and CEO

As noted above, the Group conducts its Credit Card businessand Securities business through subsidiaries. The main
methods used to raise funds for these activities are loans
from financial institutions and bonds. As of December 31,
2009, the balance of consolidated interest-bearing
borrowings from financial institutions outside of the Groupwas ¥355,869 million. This total consists of long-term andshort-term borrowings, corporate bonds, commercial paper,

Our
Year

The Group endeavors to protect intellectual property,
including patents, trademarks, copyrights and domainnames, and licenses granted to it. However, the businessactivities, performance and financial position of the Group
could be affected if it is unable to protect its intellectual
property from infringement by third parties, or if substantial
costs are incurred in order to protect intellectual property.
Costs or losses could also be incurred if it becomes
necessary to defend against or settle claims of intellectual
property infringements in relation to technology, content
and other items used by the Group. Such situations could
also result in the restriction of the Group’s ability to provide
specific content or services or use specific technologies.
The business activities, performance and financial positionof the Group could be affected in such cases.

Our
Activities

6–2 Intellectual Property

Our
Strategies

Since its establishment, the Group has worked to invest
substantial management resources in business development and advertising with the aim of building the
Rakuten brand. While the Group believes that it has
achieved a certain level of brand recognition among
consumers, there is no guarantee that future initiatives will
yield the anticipated benefits, and it is possible that these
efforts will not result in revenues for the Group. If there areproblems relating to business development, confidence in
the Rakuten brand could be eroded, with possible implications for the Group’s business performance, financial
position and share price.

borrowings on securities margin transactions, and lease debt.
Because of this debt, the business performance of the Groupis exposed to the effects of changes in financial markets, and
it is possible that this situation could have an adverse effecton the financial position of the Group and its ability to raise
funds. Loan contracts and commitment lines are in somecases subject to covenants and collateral clauses, and any
deterioration in the business performance, financial position
or credit rating of the Group could result in demands for full
repayment of existing debt or the provision of new collaterals
under these clauses, or increases in interest rates orcommission rates.
Since there is no guarantee that the Group will be able toraise funds on favorable terms in the future, this situation
could have a limiting effect on the development of theGroup’s business operations.

Our
Group

6. Risks Pertaining to Intangible Assets
6–1 Group Branding

Hiroshi Mikitani, the Chairman and CEO of Rakuten, Inc., isthe driving force behind the Group. Mr. Mikitani has been the
CEO and a major shareholder of Rakuten, Inc. since its establishment and continues to determine management policies
and strategies as well as playing a central role in business
operations, including marketing, technology and financial
management. Hiroshi Mikitani could therefore be considered33

to have a substantial influence over final decisions that affectthe business operations of the Group, including theappointment of officers.
The Group is making organizational changes with theaim of building a management structure that is not excessively dependent on Mr. Mikitani, including the adoption ofa business unit (BU) system, and the restructuring of humanresource management systems. However, the businessperformance and financial position of the Group could beseriously affected if Mr. Mikitani were to resign or become
incapable of performing his duties at the present time.

11–2 Human Resources
In addition to engineers capable of building and maintaining
computer systems, the business operations of the Groupalso require human resources with specialized skills relating
to individual business segments. As the Group expands its
activities and develops its business internationally, there is
likely to be a continuing need for the recruitment of
personnel. The Group is not aware of any serious obstacles
to recruitment at the present time.
However, the business activities, performance andfinancial position of the Group could be adversely affected
if it becomes difficult to secure skilled staff in the future
because of escalating competition for human resources in
specific fields or regions, or if there is an exodus ofexisting staff.

12. Information Security Risks
As an organization that handles personal information, theGroup is subject to the provisions of the Act on theProtection of Personal Information. Currently, users of
Rakuten Ichiba and the main services provided by theGroup are required to complete membership registration.
This process involves the collection of information that canbe used to identify users, including names, addresses,
telephone numbers and credit card numbers.
The Group takes all possible care to protect privacy andpersonal information through proper information
management. It complies with laws and regulations covering
each type of service business and follows guidelines established by government agencies, industry groups and otherorganizations. In April 2007, the Group gained certification
for its main business activities under ISO/IEC 27001, whichis the international standard for information security.
However, the possibility of further information leaks or abusein the future cannot be ruled out, and it is possible that such
incidents will result in legal disputes or damage to the34

Group’s reputation. Such situations could impact on thebusiness activities and performance of the Group.

13. Risks Pertaining to
Telecommunication Networks and Systems
The Group’s business activities rely heavily on the use of
telecommunications networks to link computer systems.
Some aspects of vital network-related operations,
including connection to the Internet and the managementof data servers, are outsourced. The servers of the Groupor providers could become inoperable, preventing normal
trading activities or causing systems breakdowns, if thetelecommunication networks of outside contractors areaffected by faults caused by natural disasters, accidents
or temporary overloads resulting from access increases,
or if defects or other problems affect the hardware orsoftware of the Group, merchants, purchasers, participants or other users.
There is also a possibility that pages belonging to theGroup or merchants will be altered, that pages will cease tofunction properly, or that important data will be lost or
obtained illegally as a result of criminal activities, such as
computer viruses or external access to computer resources
using illegal methods, or because of errors by employees
and executives.
If trading is suspended as a result of a server failure or
defects, the business activities and performance of theGroup could be affected by loss of income opportunities,
by a decline in confidence in the Group’s systems, bycompensation claims, or by actions by regulatory agencies.
Rakuten Securities, Inc. experienced system failures in
November 2008 and January 2009. On March 24, 2009, theFinancial Services Agency issued a temporary suspension
order preventing Rakuten Securities from undertaking any
new business expansion involving the development ofsystems (except with the specific approval of the Finance
Services Agency) and issued a directive requiring thecompany to improve its operations on the grounds that its
response to the faults had been inadequate. Rakuten
Securities has since improved and strengthened its
hardware and moved to develop structures to support
reliable operation of its system. However, if the company isaffected in the future by major or frequent system failures,the reputation of the company and the entire Group could
be adversely affected, leading to a loss of customers andother consequences. In such cases, the financial performance of Rakuten Securities and the entire Group could be
affected, and additional administrative actions could be
implemented by the Financial Services Agency.

Our
Strategies
Our
Activities

Natural disasters such as earthquakes, typhoons, floods
and tsunamis, fires, power outages, unknown computerviruses, infections caused by previously unknown diseases
such as new influenza strains, terrorist attacks, international
conflict and other contingencies could have a serious
impact on the business operations of the Group. Since thebusiness premises of the Group are concentrated in thegreater Tokyo area, a natural disaster or other event in thatarea could temporarily disrupt services. In addition todegrading the Group’s reliability and damaging its brandimage, such situations could also impact on businessperformance.
Within the Group, the Risk Management Department of
Rakuten, Inc. has worked to prepare emergency response
measures in advance, including the formulation of business
continuity plans. However, there is no guarantee that thesemeasures will be sufficient to mitigate all of the effects ofnatural disasters or other events, and the continuity ofbusiness operations may be jeopardized if there are serious
losses to physical and human resources.

Our
Group

14. Risks Pertaining to Natural Disasters,
Conflicts and Accidents

Our
Year

35

Our Year
Financial Section andCorporate Data

Contents
37
38
40
41
42
44
46

36

Results of Operations and Financial Condition
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Consolidated Subsidiaries and Affiliated Companies
Corporate Information

Results of Operations and Financial Condition
For the fiscal year ended December 31, 2009

Business Performance

Total liabilities rose by ¥612,407 million to ¥1,540,617 million
as of December 31, 2009. This resulted mainly from theinclusion of eBANK, and the addition of deposits and otherliabilities relating to the Banking Business to the Group’s
liabilities. Total short-term and long-term loans payable fell by¥163,332 million due to repayments, mostly made by Rakuten
Credit, Inc. in preparation for its merger with eBANK.

Net Assets
Total net assets amounted to ¥218,620 million as of December
31, 2009, up from ¥158,727 million at the end of fiscal 2008.
Shareholders’ equity increased by ¥52,403 million due to net
income reaching ¥53,564 million.

Cash Flows
There were substantial cash inflows, primarily due to the EC
Business’ strong performance.

Our
Year

Liabilities

Our
Activities

Total assets as of December 31, 2009 amounted to ¥1,759,237
million, up from ¥1,086,939 million at the end of fiscal 2008.
The growth resulted mainly from the inclusion of eBANK, an
increase in cash and deposits, and the addition of assets
including securities worth ¥524,379 million.

Our
Strategies

Assets and Liabilities
AssetsOur
Group

Despite recessionary conditions in Japan overall, Rakuten
continued to perform strongly in fiscal 2009, seeing growth in
the gross transaction volume of Rakuten Ichiba and Rakuten
Books, and in the gross booking transaction volume of
Rakuten Travel. Performance also benefited from the inclusionof eBANK Corporation (“eBANK”) into the consolidation in thefirst quarter. Net sales increased by 19.4% year on year to¥298,252 million.
Operating income increased by 20.1% year on year to arecord ¥56,649 million. Contributing factors included cost
structure improvements under a strengthened management
and administration system.
There was an income tax adjustment of ¥18,059 million,
mainly from deferred tax assets recorded in connection with avaluation loss on investment securities in the previous year,
following our request for buy-back of shareholdings in Tokyo
Broadcasting System, Inc. (now Tokyo Broadcasting System
Holdings, Inc.) on March 31, 2009. As a result, net income
reached ¥53,564 million, compared with a ¥54,978 million
operating loss in the previous year.

There were also inflows and outflows resulting from initiatives to reduce funding costs and improve investment
performance from a risk-return perspective in connection withintegrating the personal loan operations of Rakuten Credit,
Inc. into eBANK. On the funding side, this resulted in a decline
in deposits from customers, especially matured time deposits,
while on the investment side holdings of negotiable securities
were reduced through redemptions and sales, especially ofJapanese government bonds. These were the main reasonsfor the cash outflow from operating activities and the cash
inflow from investment activities. The principal cash outflow
from financing activities consisted of the full repayment of thedebt of Rakuten Credit, Inc. when its personal loan operations
were integrated into eBANK.
These fluctuations in the cash flow position of eBANK and
improvements in cash-use efficiency brought a ¥12,252
million reduction in cash and cash equivalents from operating,investment and financing activities in fiscal 2009.
However, the addition of eBANK and other new subsidiaries to the consolidation added ¥34,751 million to cash andcash equivalents. This and other factors caused cash andcash equivalents to increase by ¥22,335 million to ¥103,618
million as of December 31, 2009.

Operating Activities
Net cash used for operating activities amounted to ¥55,219
million, compared with a net outflow of ¥13,467 million in theprevious year. Cash inflows, including ¥52,529 million fromnet income before provision for income taxes and minority
interests, were offset by the aforementioned outflows fromfinance-related businesses, including a ¥73,047 million
reduction in deposits held by the Banking Business.

Investment Activities
A cash inflow of ¥723,626 million from sales and redemptionsof negotiable securities outweighed a cash outflow of¥526,820 million resulting from the acquisition of negotiablesecurities by eBANK. As a result, net cash provided byinvestment activities amounted to ¥217,160 million, comparedwith a net outflow of ¥40,977 million in the previous year.

Financing Activities
Net cash used for financing activities amounted to ¥174,157
million, compared with a net inflow of ¥62,397 million in theprevious year. This reflects the full repayment of the debt of
Rakuten Credit, Inc., and reduction of the debts of Rakuten,
Inc. and Rakuten KC Co., Ltd.

37

Consolidated Balance Sheets
Rakuten, Inc. and Consolidated Subsidiaries
December 31, 2009 and 2008

Thousands of
U.S. dollars

Millions of yen

2008

ASSETS2009

2009

Current assets:

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

¥
		
		
		
		
		
		
		
		
		
		
		
		
		
		

Noncurrent assets:

Property, plant and equipment
Intangible assets
Goodwill
OthersTotal intangible assets

		
		
		

InvestmentS and other assets:

Investment securities
Deferred tax assets
Other
Allowance for doubtful accounts
Investments assets and other assets
Total noncurrent assets
Total assets

		
		
		
		
		
		

88,588¥96,233$ 1,044,878
32,241 		
37,842 		
410,885
93,631 		
93,111 		 1,010,980
3,551 		2,834 		30,767
101,572 		
41,774 		
453,574
214,892 		
223,909 		 2,431,148
81,154 		
119,060 		 1,292,729
188,696 		
177,806 		 1,930,579
2,629 		18,014 		
195,597— 		524,379 		 5,693,588— 		92,877 		 1,008,434
12,829 		
13,680 		
148,536
66,557 		
114,682 		 1,245,195(36,073) 		
(42,078) 		 (456,877)
850,267 		 1,514,125
16,440,012
		
		
		
		
21,115
19,525211,994								
65,083 		
87,047 		
945,139
28,230 		
33,481 		
363,530
93,313 		
120,528 		 1,308,669
		
		
		
		
82,846 		
59,314 		
644,019
15,510 		
26,136 		
283,773
29,294 		
23,990 		
260,478(5,408) 		
(4,381) 		
(47,568)
122,243 		
105,059 		 1,140,703
236,671 		
245,112 		 2,661,365¥ 1,086,938¥ 1,759,237$19,101,377

The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been
made at ¥ 92.10 to $1, the rate of exchange prevailing at December 31, 2009.

38

LIABILITIES AND NET ASSETS

2008

2009

2009

156,150
134,156
20,210—3,551
10,697
142,60953,53988,7494,607
13,45275,135
702,855¥
83,090		
89,810		
28,232
		698,354
		
2,834
		
12,565
		
142,600
		
59,016
		
89,122		—		
12,318
		
149,106
		 1,367,044
				
158,067		
10,275
		
460
		
357
		
1,674
		
170,833
		
		
		
2,728
		
11
		
2,740
		 1,540,617
		
		
		

$ 902,171
		
975,132		
306,534
		 7,582,561
		
30,767
		
136,426
		 1,548,315
		
640,779		
967,666		—		133,741
		 1,618,952
		 14,843,043
				
1,716,253
		
111,564
		
4,998
		
3,875
		
18,177
		 1,854,866
						
29,624
		122
		
29,746
		 16,727,655
		
		
		

Our
Group

Thousands of
U.S. dollars

Millions of yen

Current liabilities:

Reserves under the special laws:

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

		
		
		
		
		
		
		
		
		
		
		
		
		
		

197,081
15,365
8,266
375
1,051
222,138

3,206
11
3,217
928,210

Capital stock-authorized, 39,418,000 shares;		
issued,13,096,980 shares in 2009 and 13,087,064 shares in 2008
Capital surplus
		Retained earnings		Treasury stock - at cost, 979.50 shares in 2009 and 979.50 shares in 2008 		
Total shareholders’ equity
				Valuation and translation adjustments:		Valuation difference on available-for-sale securities		
Deferred gains or losses on hedges
		Foreign currency translation adjustments
		
Total valuation and translation adjustments		

107,535 		

107,606 		 1,168,357

119,565 		
(76,409) 		
(11) 		150,681 						656 		
(336) 		(1,298) 		
(978) 		115,899 		 1,258,408(20,411) 		 (221,615)(11) 		
(120)203,083 		 2,205,030
				
1,842 		19,995(305) 		(3,316)(1,275) 		
(13,843)
261 		
2,836

Subscription rights to shares		243 		

609 		

6,610

Minority interests		

8,781 		14,666 		

159,245

Total net assets

		
158,727 		
218,620 		 2,373,721
						
¥ 1,086,938¥ 1,759,237$19,101,377

Total liabilities and net assets

Our
Year

Long-term debts
Provision for loss on interest repayments
Deferred tax liabilities
Other provision
Other
Total noncurrent liabilities

Our
Activities

Noncurrent liabilities:

¥
		
		
		
		
		
		
		
		
		
		
		
		
		
		

Our
Strategies

Short-term debts
Current portion of long-term debts
Notes and accounts payable - trade
Deposits for banking businessAccounts payable - credit guarantee
Income taxes payable
Deposits received for securities businessMargin transactions liabilities for securities business
Guarantee deposits received for securities business
Collateralized guarantee borrowings for securities business
Provision
Other
Total current liabilities

39

Consolidated Statements of Income
Rakuten, Inc. and Consolidated Subsidiaries
Years Ended December 31, 2009 and 2008
Thousands of
U.S. dollars

Millions of yen

Net sales
Cost of sales

Gross profit
Selling, general and administrative expenses

Operating income
Other Income (Expenses):

Interest income
Dividend income
Foreign exchange gain (loss)
Equity in earnings (losses) of affiliates
Interest expenses
Commission fee
Gain on receipt of investment securities
Gain on change in equity
Reversal of provision for loss on business liquidation
Reversal of reserve for financial instruments transaction liabilities
Loss on sales of noncurrent assets
Loss on retirement of noncurrent assets
Office transfer expenses
Provision for loss on business liquidation
Loss on valuation of investment securities
Restructuring loss
Impairment loss
Other - net
Other expenses - net
Income (loss) before income taxes and minority interests
Income taxes

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

¥
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
		
¥

2008

2009

249,883
55,347
194,537
147,385
47,151

298,252
70,039228,213
171,564
56,649

¥
		
		
		
		
		
171 		
867 		
(68) 		(116) 		(2,224) 		
(1,244) 		
267 		
31 		185 		
714 		
(145) 		(1,855) 		
(691) 		(4,481) 		
(67,177) 		
— 		(5,418) 		
(1,791) 		
(82,141) 		
(34,989) 		
		
15,695 		
4,911 		20,606 		(618) 		(54,978) ¥2009$ 3,241,518
		
761,214		 2,480,304
		 1,864,621
		615,683		
183 		
1,991
185 		
2,015
15 		
166
527 		
5,731
(2,216) 		
(24,080)(645) 		(7,012)— 		
—
4,034 		43,846352 		
3,823
478 		
5,197
— 		—(1,087) 		
(11,810)
— 		
—
— 		
—
(1,773) 		
(19,273)(696) 		(7,561)(2,125) 		
(23,098)(1,353) 		
(14,705)(4,119) 		
(44,771)
52,530 		
570,913
		
17,452 		
189,672(18,059) 		 (196,270)(607) 		(6,598)(428) 		(4,645)$ 582,155

The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been
made at ¥ 92.10 to $1, the rate of exchange prevailing at December 31, 2009.

40

Consolidated Statements of Changes in Net Assets
Rakuten, Inc. and Consolidated Subsidiaries
Years Ended December 31, 2009

As of Dec.31,
2009

Changes in fiscal 2009
Dividends
Issuance
Deficitfrom surplusof capitalother capital disposition
stock
surplus

Net changes
Changes
Disposal in items otherin theof treasury than those in
Net income
scope ofshareholders’
stock
consolidation
equityTotal ofchangesin fiscal
2009

¥ 71

—

—

—

—

—

—

71

¥107,606

119,56571¥(1,309)¥(2,428)

—

—

¥ 0

—

(3,666)

115,899

Retained earnings(76,409)

—

—

2,428

¥53,564¥ 5——

55,998(20,411)

(11)

—

—

—

—

—

0

—

0

(11)

150,681142(1,309)—53,5645

0—52,403203,083

Valuation difference on
available-for-sale securities

656

—

—

—

—

—

—

¥1,186

1,186

1,842

Deferred gains orlosses on hedges

(336)

—

—

—

—

—

—

30

30

(305)

Foreign currencytranslation adjustments(1,298)

—

—

—

—

—

—

23

23

(1,275)

Valuation andtranslation adjustments

(978)

—

—

—

—

—

—

1,239

1,239

261

Shareholders’ equity

Subscription rights to shares
Minority interests
Net assets

243

—

—

—

—

—

—

366

366

609

8,781

—

—

—

—

—

—

5,885

5,885

14,666¥158,727¥142¥(1,309)—¥53,564¥ 5¥ 0¥7,490¥59,892¥218,620— $581,586

$58

$0

$81,322 $650,298$2,373,721$1,723,424$1,540 $(14,209)

Our
Year

Net assets, Dec. 31, 2009
thousands of U.S. dollars¥

Our
Activities¥107,535

Our
Strategies

Capital stock
Capital surplus
Treasury stock

Our
Group

Millions of yen
As of Dec. 31,
2008

The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been
made at ¥ 92.10 to $1, the rate of exchange prevailing at December 31, 2009.

41

Consolidated Statements of Cash Flows
Rakuten, Inc. and Consolidated Subsidiaries
Years Ended December 31, 2009 and 2008
Thousands of
U.S. dollars

Millions of yen

2009

2008

2009

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES:

Income (loss) before income taxes and minority interests
Depreciation and amortization
Amortization of goodwill
Decrease in allowance for doubtful accounts
Decrease in provision for loss on interest repayments
Gain on change in equity
Interest expenses
Loss on valuation of securities for banking business
Gain on sales of securities for banking business
Loss on valuation of investment securities
Loss on retirement of noncurrent assets
Other loss
Increase in notes and accounts receivable - trade
Decrease (increase) in accounts receivable - installment
Decrease in beneficial interests in securitized assets
Increase in operating loans receivable
Increase in notes and accounts payable - trade
Decrease in deposits for banking business
Decrease in call loans for banking business
Decrease in loans for banking business(Increase) decrease in operating receivables for securities business
Decrease in cash segregated as deposits for securities business
Increase (decrease) in operating payable for securities business
Increase (decrease) in loans payable secured
by securities for securities business
Other, net
Subtotal
Payments for guarantee deposits for business operation
Proceeds from guarantee deposits for business operation
Income taxes paid
Income taxes refund
Net cash used in operating activities¥¥(34,989)
12,284
3,931(8,125)(4,710)
(31)
2,224
—
—
67,177
1,855
4,004(4,146)(22,892)
8,572(29,732)
3,545
—
—
—
128,326—(77,630)¥

52,53014,361
5,524(6,919)(5,090)(4,034)
2,216
2,478
(110)
1,773
1,104
615
(3,470)520
39,798(81,434)
7,138(73,047)
21,0004,669(45,687)
4,700
5,842

$

570,355
155,929
59,976(75,120)(55,264)(43,803)
24,057
26,910(1,197)
19,254
11,987
6,682(37,681)5,646
432,117(884,190)
77,508(793,125)
228,01350,693(496,053)
51,031
63,433(36,059)

5,505

59,769(4,768)
8,836
(23)
143
(23,453)
1,031(13,467)

12,789(37,228)(2,665)
41(16,420)1,054(55,219)

138,859(404,216)(28,940)
444(178,281)
11,440(599,553)¥$

The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been
made at ¥ 92.10 to $1, the rate of exchange prevailing at December 31, 2009.

42

2009

2008

2009

Our
Group

Thousands of
U.S. dollars

Millions of yen

NET CASH PROVIDED BY (USED IN) INVESTment ACTIVITIES:¥(9,296)
3,873
—
—
—
(404)

¥

(10,982)
8,386(526,820)
723,626
40,000(1,670)$(119,240)
91,051(5,720,085)
7,856,963
434,311(18,134)(35,751)(3,699)1,663(12,848)
(257)
1,350
(24,125)
2,183
1,120
(40,977)(2,886)201(10,030)(1,165)
1,406(1,006)694
700
217,160(31,332)
2,177(108,900)(12,653)
15,262(10,923)
7,536
7,596
2,357,877

6,905
7,700
146,547(101,509)
9,863(4,990)(810)—(2,310)(1,299)1,271
62,397(866)
7,088
73,861(77,600)
4,600
49,650(135,204)
1,234(6,010)(3,532)(4,116)(2,246)(1,309)376(174,157)(37)(12,253)
81,284(842,567)
49,946
539,088(1,468,018)
13,398(65,255)(38,347)(44,690)(24,384)(14,216)
4,086(1,890,959)(402)(133,036)
882,562342

34,751

377,320

(7)

(164)

(1,781)

103,618$ 1,125,064

Net cash (used in) provided by financing activities:

Net (decrease) increase in short-term loans payable
Increase in commercial papers
Proceeds from long-term loans payable
Repayment of long-term loans payable
Proceeds from issuance of bonds
Redemption of bonds
Repayments of lease obligations
Purchase of treasury stock of consolidated subsidiary
Interest expenses paid
Cash dividends paid
Other
Net cash (used in) provided by financing activities
Effect of exchange rate change on cash and cash equivalents
Net (Decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Increase in cash and cash equivalentsfrom newly consolidated subsidiary
Decrease in cash and cash equivalents resulting
from exclusion of subsidiaries from consolidation
Cash and cash equivalents at end of the year¥

81,284

¥

Our
Year

(3,293)

Our
Activities

(537)

Our
Strategies

Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of securities for banking business
Proceeds from sales and redemption of securities for banking business
Proceeds from a exercise of appraisal rights for investment securities
Purchase of investments in subsidiaries
Purchase of investments in subsidiaries resulting
in change in scope of consolidation
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Payments for lease and guarantee deposits
Proceeds from collection of lease and guarantee deposit
Other payments
Other proceeds
Interest and dividends income received
Net cash provided by (used in) investment activities

43

Consolidated Subsidiaries and Affiliated Companies(As of December 31, 2009)

Name

Location

Capital or investment(Millions of yen)Type of business

Voting rights orownership (%)

Note

Consolidated Subsidiaries

44

Rakuten Auction, Inc.

Shinagawa-ku, Tokyo

1,650

E-Commerce Business

60.0

Rakuten Enterprise Inc.

Shinagawa-ku, Tokyo

10

E-Commerce Business

100.0

Signature Japan Co., Ltd.

Shinagawa-ku, Tokyo

80

E-Commerce Business

100.0

Fine Wine Co., Ltd.

Shinagawa-ku, Tokyo

205

E-Commerce Business

100.0

E-Commerce Business

E-Commerce Business

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

LinkShare Corporation

U.S.A.

LinkShare International, LLC

U.S.A.

LinkShare Ltd.

U.K.

Rakuten USA, Inc.

U.S.A.

1
U.S. dollars
2,688 thousand
U.S. dollars
1,826 thousand
U.K. pounds
182
U.S. dollars

E-Commerce Business

100.0

CauseLoyalty, LLC

U.S.A.

—

E-Commerce Business

100.0(100.0)Keiba Mall, Inc.

Shinagawa-ku, Tokyo

E-Commerce Business

499

E-Commerce Business

100.0

454 million
NT dollars

E-Commerce Business

51.0
78.7

5
5
5

5

Taiwan Rakuten Ichiba Inc.

TaiwanNet’s Partners Co., Ltd.

Shibuya-ku, Tokyo

493

E-Commerce Business

TRAFFIC GATE, Ltd.

Minato-ku, Tokyo217

E-Commerce Business

100.0
5

FreeCause, Inc.

U.S.A.

15 U.S. dollars

E-Commerce Business

100.0(100.0)

Rakuten (Thailand) Co., Ltd.

Thailand

114 million baht

E-Commerce Business

100.0

2

E-Commerce Business

67.0(67.0)2, 6

TARAD Dot Com Co., Ltd.

ThailandRakuten KC Co., Ltd.

Fukuoka-shi, Fukuoka

Kajiyama Warehouse Co., Ltd.

Kitakyusyu-shi,
Fukuoka

Rakuten Credit, Inc.

Shinagawa-ku, Tokyo

Rakuten Mortgage Co., Ltd.
eBANK Corporation

10 million baht
3,055

Credit Card Business

97.3

14

240

Credit Card Business

100.0(100.0)74,450Banking Business

100.0

Shinagawa-ku, Tokyo

607

Banking Business

100.0

8

Shinagawa-ku, Tokyo

23,485

Banking Business

73.7

2, 12, 132, 8eBANK Systems Corporation

Minato-ku, Tokyo

400

Banking Business

eBANK Capital Management (Cayman) Ltd.

Cayman Islands

50

Banking Business

58.3(58.3)
100.0(100.0)Target, Inc.

Shinagawa-ku, Tokyo

480

Portal and Media Business

100.0

Rakuten Research, Inc.

Shinagawa-ku, Tokyo

246

Portal and Media Business

100.0

Rakuten Shashinkan, Inc.

Shinagawa-ku, Tokyo

279

Portal and Media Business

66.7

O-net, Inc.

Shinagawa-ku, Tokyo

98

Portal and Media Business

100.0

SHOWTIME, Inc.

Minato-ku, Tokyo

480

Portal and Media Business

100.0

Rakuten Travel, Inc.

Shinagawa-ku, Tokyo

RAKUTEN TRAVEL KOREA CO., LTD.

Republic of Korea

TABIMADO CO., LTD SHANGHAI

People’s Republicof China

Rakuten Bus Services Inc.

Shinagawa-ku, Tokyo

212

Travel Business

100.0

350 million
won
1,000 thousand
RMB

Travel BusinessTravel Business40

Travel Business

200 thousand
U.S. dollars

Travel Business

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

Rakuten Travel Guam Inc.

U.S.A.

Rakuten Securities, Inc.

Shinagawa-ku, Tokyo

7,477

Securities Business

100.0

Rakuten Realty Management Co., Ltd.

Shinagawa-ku, Tokyo

200

Securities Business

100.0

Rakuten Investment Management, Inc.

Shinagawa-ku, Tokyo

150

Securities Business

100.0(100.0)

2, 8

9

9
9

Location

Capital or investment(Millions of yen)Type of business

Voting rights orownership (%)

Dot Commodity, Inc.

Shibuya-ku, Tokyo

1,899

Securities Business

56.7

Note

Shinagawa-ku, Tokyo

16

Securities Business

100.0

Shinagawa-ku, Tokyo

2,340

Securities Business—

Rakuten Baseball, Inc.

Sendai-shi, Miyagi

400

Professional Sports Business

100.0

Rakuten Sports Properties, Inc.

Sendai-shi, Miyagi

150

Professional Sports Business

100.0(100.0)10

FUSION COMMUNICATIONSCORPORATION

Chiyoda-ku, Tokyo

10,955

Telecommunication Business

74.5

13

Rakuten Sociobusiness, Inc

Sendai-shi, Miyagi

10

LinkShare Japan K.K.

Chiyoda-ku, Tokyo

10

E-Commerce Business

50.0(50.0)

11

OKWaveShibuya-ku, Tokyo

965

E-Commerce Business

18.6

12

Drecom Co., Ltd

Shinjuku-ku, Tokyo

1,042

Portal and Media Business

19.9

12

WORLD TRAVEL SYSTEMS INC.

Shinjuku-ku, Tokyo

110

Travel Business

20.0

Rakuten ANA Travel Online Co., Ltd.

Shinagawa-ku, Tokyo

90

Travel Business

50.0

TECHMATRIX CORPORATION

Minato-ku, Tokyo

1,298

31.8

12

NEXT Co., Ltd.

Chuo-ku, Tokyo

1,990

16.8

12

100.0

Equity-method Affiliates

Our
Activities

1. Business segments are used to indicate the type of business.
2. The company became a group member during the fiscal year ended December 31, 2009.
3. Indirectly held voting rights are shown in parentheses.
4. Voting rights held by parties close to Rakuten or that support Rakuten’s policies, but not included in the voting rights percentage, are shown in square brackets.
5. L inkShare Corporation, CauseLoyalty, LLC and FreeCauce, Inc. are subsidiaries of Rakuten USA, Inc. In addition, LinkShare International, LLC is a subsidiary of
LinkShare Corporation, and LinkShare Ltd. is a subsidiary of LinkShare International, LLC.
6. TARAD Dot Com Co., Ltd is a subsidiary of Rakuten (Thailand) Co., Ltd.
7. Kajiyama Warehouse Co., Ltd., is a subsidiary of Rakuten KC Co., Ltd.
8. Rakuten Mortgage Co., Ltd., eBANK Systems Corporation and eBANK Capital Management (Cayman) Ltd. are subsidiaries of eBANK CORPORATION.
9. RAKUTEN TRAVEL KOREA CO., LTD., Rakuten Bus Services Inc. and Rakuten Travel Guam, Inc. are subsidiaries of Rakuten Travel, Inc.
10. Rakuten Sports Properties, Inc. is a subsidiary of Rakuten Baseball, Inc.
11. LinkShare Japan K.K. is an equity-method affiliate of LinkShare International, LLC.
12. Denotes companies required to submit financial reports and securities registration statements according to Japanese securities and exchange legislation.
13. This is a special-purpose company.
14. Net sales of Rakuten KC Co., Ltd. (excluding internal sales between consolidated subsidiaries) account for over 10% of consolidated net sales.

Our
Year

Notes:

Our
Strategies

RS Empowerment, Inc.
Rakuten Financial Frontier Investment
Limited Partnership

Our
Group

Name

45

Corporate Information
Company Overview
Name

Rakuten, Inc.

FoundedFebruary 7, 1997

Service Launched

May 1, 1997

IPO

April 19, 2000

Capital107,605 million yen (As of December 31, 2009)

Employees

5,810 (Consolidated)
2,625 (Non-consolidated) (As of December 31, 2009)

Headquarters

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

Board of Directors and Corporate Auditors (As of March 30, 2009)
Position

Name

Responsibilities

Chairman and CEO

Hiroshi Mikitani

E-Commerce Business Unit (BU), Banking BU,
Travel BU, E-Money BU

Deputy President and Director

Atsushi Kunishige
Masatada Kobayashi

Senior Executive Officer and Director

Toru Shimada
Akio Sugihara
Hisashi Suzuki

Director

Corporate Auditor

Ken Takayama
Kazunori Takeda
Takao Toshishige
Takeshi Hanai
Hiroaki Yasutake
Yoshiaki Ohnishi
Kouichi Kusano
Ken Kutaragi
Hiroshi Fukino
Tatsumi Yoda
Tanekiyo Kunitake
Kouji Hata
Takeo Hirata
Katsuyuki Yamaguchi

Sharesowned(Thousand)

2,171
0

Sub-head of E-Commerce BU
Professional Sports BU, Group Marketing Department,
Advertising BU, Telephony BU
Development Department
Content BU, Community BU, Creative & Web Design
Department
CFO, Finance Department

41
3
89
3
50

Business Directorate Department

3

Content Business0

Securities and Investment BU, Credit and Payment BU—

Sub-head of Development Department

4

Corporate Planning Department

0
12
0
1
1
0
2
—
—

Note: Mr. Kusano, Mr. Kutaragi, Mr. Fukino and Mr. Yoda are outside corporate directors as stipulated in Paragraph 15, Article 2 of the Corporation Law of Japan.
Mr. Kunitake, Mr. Hata, Mr. Hirata and Mr. Yamaguchi are outside corporate auditors as stipulated in Paragraph 16, Article 2 of the Corporation Law of Japan.

Stock Information

46

Stock Code4755 (JASDAQ)

Fiscal Year

January 1 to December 31

Month of Annual General Shareholders’ Meeting

March

Shareholder Record Date

December 31

Transfer Agent

The Sumitomo Trust & Banking Co., Ltd.

Contact

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

Contents
Number of Shares and Shareholders (As of December 31, 2009)

A brief introduction to the characteristics, strengths and market
position of the Rakuten Group.

Number of shares authorized

39,418,000 (common stock)Total number of shares issued

13,096,980 (common stock)

02 This is Rakuten
04 Rakuten in Numbers
06 Financial Highlights

Number of shareholders

Our Strategies

Main Shareholders (As of December 31, 2009)

Our
Group

Our Group

96,331

2,264,190

17.29

08 To Our Shareholders
13 Corporate History

Hiroshi Mikitani

2,171,722

16.58

Haruko Mikitani

1,458,750

11.14

Our Activities

The Master Trust Bank of Japan, Ltd. (Trust Account)549,262

4.19

Japan Trustee Services Bank, Ltd. (Trust Account)

456,250

3.48

An overview of our business operations and other activities, fromsegment performance to corporate governance.

Masuda and Partners Inc.

443,410

3.39

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

314,180

2.40

14 At a Glance
16 Review of Operations
16		 E-Commerce Business17		 Travel Business18		 Credit Card Business19		 Banking Business20		 Securities Business20		 Portal and Media Business21		 Professional Sports Business21		 Telecommunications Business
22 Technology
23 Philosophy
24 CSR Activities
25 Corporate Governance
28 Risk Factors

The Chase Manhattan Bank,
N.A. London SECS Lending Omnibus Account238,486

1.82

Other domestic corporations

The Chase Manhattan Bank 38503G

189,246

1.44

Domestic financial institutions

Mellon Bank N.A. as Agentfor its Client Mellon Omnibus US Pension

176,592

1.35

Individuals
Foreign financial institutions and individuals
Securities firms
Others40.82%
21.03%
24.77%
13.04%
0.32%
0.02%

Our
Year

Crimson Group, Inc.

Our
Activities

Number ofsharesOur
Strategies

Name

How we will build on our successes to date and continue to deliver
value to shareholders.

Percentage
heldClassification by Typeof Shareholder (As of December 31, 2009)

Monthly Stock Price Range (Tokyo Stock Exchange)(Yen)
140,000
105,000
70,00035,000Our Year0(Thousands of shares)
9,000

Full disclosure about how well we performed over the fiscal year
ended December 31, 2009.

6,000

36 	Financial Section and Corporate Data

3,000

0

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

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

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
’05
’06
’07
’08
’09
’10

Inquiry
Investor Relations, Rakuten, Inc.
Tel +81-3-6387-0555
URL http://corp.rakuten.co.jp/en/ir/

47

Rakuten, Inc.
Annual Report 2009

Annual Report
Rakuten, Inc.

Fiscal Year Ended December 31,2009

TEL: +81-3-6387-1111

URL: http://corp.rakuten.co.jp/en/ir

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

Rakuten, Inc.
Annual Report
Fiscal Year Ended December 31, 2009