Rakuten Reports Consolidated Financial Results for the Fiscal Year Ended December 31, 2012

  Rakuten Reports Consolidated Financial Results for the Fiscal Year Ended
  December 31, 2012

Business Wire

TOKYO -- February 14, 2013

Rakuten, Inc. (JASDAQ:4755) today announced consolidated financial reports for
the fiscal year ended December 31, 2012. The Rakuten Group, for the fiscal
year ended December 31, 2012 achieved solid growth with consolidated net sales
of ¥443,474 million (up 16.7% year on year), operating profit of ¥72,259
million (up 2.1% year on year), and ordinary profit of ¥71,514 million (up
4.8% year on year). All three results are record highs. On the other hand,
there was an extraordinary loss recorded of ¥28,571 million, including the
loss from the restructuring of overseas businesses and impairment of goodwill.
This was mainly attributable to a loss from business restructuring in Play.com
(U.K.) due to the organizational restructuring carried out against changes in
local regulations, and the recording of an impairment of goodwill in Buy.com
(U.S.) due to income plan falling below initial forecasts, as a result of
prioritizing a switch in the business model so as to raise mid-term
competitiveness. As a result of these factors, current net income amounted to
¥19,413 million (compared with a net loss of ¥2,287 million in the previous
fiscal year).

Qualitative Information Concerning Consolidated Business Results

(1) Business Results for the Fiscal Year Ended December 31, 2012

In the world economy during the fiscal year ended December 31, 2012, the
prolonged European debt crisis and slowdown in growth in newly developing
regions led to heightening uncertainty for the world outlook. In the Japanese
economy, although personal consumption generally remained strong, the
deterioration in the overseas economy and other factors saw it weaken from the
middle of the year. Despite recent signs of a prevailing recovery in the
domestic and overseas economy, there continues to be aspects of these trends
that require close watch.

Meanwhile, the worldwide spread of the Internet and the developing shift in
social foundations across the world means that the Internet continues to be a
major engine for worldwide economic growth, as documented in a recent White
Paper on Information and Communications (*1). The Internet shopping market,
with the rapid spread of smartphone and tablet devices, coupled with the
accompanying changes in consumer lifestyles, is likely to see continuous
growth.

Under such environment, Rakuten seeks to vigorously drive forward its growth
strategy even further, by actively taking Rakuten Ichiba's B2B2C marketplace
model to the world while also enhancing services for smartphone and tablet
devices. In addition, we also aim to improve delivery quality, from measures
such as reinforcing our logistics infrastructure. In the Internet Finance
business segment, we are aggressively promoting the business centering on
Rakuten Card, which has notable synergies with Internet Services.

(2) Segment Information

Business results for each segment are as follows.

< Internet Services >

In the Internet Services segment for the fiscal year ended December 31, 2012,
Rakuten worked on enhancing its product lineup, strengthening services for
smartphone and tablet devices, improving next-day delivery services, and
running large-scale sales events called 'Rakuten Super Sale', among other
initiatives in its core 'Rakuten Ichiba' service. In addition to the success
of these initiatives, the expanding use of e-commerce in daily consumption saw
the number of unique buyers and order numbers perform strongly, with the
domestic e-commerce gross merchandise sales rising by 15.3% over the previous
fiscal year, as the segment continues to maintain a high level of growth.

In Travel services, we added a 12.9% year on year increase to gross
transaction value. Dynamic Packages had solid sales and upgraded its single
payment service for corporate hotel reservations in pursuit of a more
diversified earnings base.

In its overseas ventures, despite posting an extraordinary loss, Rakuten is
promoting the expansion of its business model overseas by focusing on
marketplace-model services while also actively implementing initiatives
including points programs that have proven successful in Japan. During the
first quarter, Rakuten made the Canadian-based Kobo Inc., a worldwide operator
of e-books where the market in enjoying continuous high sales growth, into a
consolidated subsidiary.

As a result, net sales for the segment rose to ¥285,814 million, a 25.0%
year-on-year increase, while segment operating income was down 10.6% year on
year to ¥58,639 million due to our continued advance investments, mainly in
overseas businesses.

< Internet Finance >

For the Internet Finance segment for the fiscal year ended December 31, 2012,
in credit card and related services, the shopping transaction value
accompanying an increase in credit card membership rose 36.0% over the
previous fiscal year. Also, a solid rise in the revolving shopping balance
resulted in a rise in commission income and subsequent notable growth in
profit.

Banking services benefited from its effective marketing programs to Rakuten
members and solid growth in loan balances to achieve increased interest income
from loans. In securities services, activation of the domestic market from the
fourth quarter has been generating a huge increase in current domestic stock
transaction payments. In its aim to further enhance financial services, from
the fourth quarter, Rakuten has made AIRIO Life Insurance Co., Ltd. (*2) a
consolidated subsidiary.

As a result of the above, the Internet Finance segment recorded ¥156,430
million in net sales (10.8% increase over the previous fiscal year). Segment
operating profit was ¥23,714 million (compared to a segment operating profit
of ¥12,970 million in the previous fiscal year) which was an 82.8% growth in
income over the previous fiscal year, due to a ¥4,264 million allowance in the
previous fiscal year, for loss on interest repayment taken in advance of the
re-organization of the credit card business.

< Others >

During the fiscal year ended December 31, 2012, operating profit in the Others
segment firmed up, despite lower telecommunications sales stemming from the
shift to a new business model emphasizing new, high-growth ventures such as
cloud services, while moving away from a traditional landline operator
providing bypass services. The professional sports division lifted net sales
through year-on-year revenue increases in both advertising and tickets.

As a result of the above, net sales for the segment were ¥33,269 million, a
2.6% year-on-year decrease, while segment operating profit grew 38.8% year on
year to ¥1,585 million.

    
      Heisei 24 Nen Joho Tsushin ni Kansuru Genjo Hokoku [Fiscal 2012
*1:   Information and Communications Status Report] (published by the Ministry
      of Internal Affairs and Communications, July 17, 2012)
      Assuming approval from the relevant authorities, as of April 1, 2013,
*2:   AIRIO Life Insurance Co., Ltd. will change its trade name to Rakuten
      Life Insurance Co., Ltd.
      

(3) Outlook for the Coming Year

In the year ending December 31, 2013, we anticipate further expansion in the
use of our services in Japan including e-commerce and travel, resulting in
continued high growth. In financial services, although there will be a certain
degree of impact from financial conditions, we anticipate a continuous growth
in earnings created from synergies within the Rakuten Group. Aiming for an
early return in income, Rakuten will continue to make strategic allocations of
corporate resources and active investments in high-growth areas such as
e-books, in order to generate more mid-to-long-term income opportunities.

While making these forward-looking investments, Rakuten intends to surpass its
current financial results in the fiscal year ending December 31, 2013.

Rakuten, Inc. and its group companies are also involved in the securities
business and other finance-related business activities, with the result that
their business performance is affected by financial market trends and other
factors. For these reasons, it is impossible to predict financial results, and
no forecasts are included in this report.

(4) Changes in Accounting Policy

(a) Changes in Recognition Timing of the Reserve for Points

The former accounting procedure for the Rakuten Super Points program treated
regular points by recognizing a reserve for points at an amount corresponding
to the balance of points available for customer use at the end of the period
and treated limited-time points as an expense in the period used. Under the
new policy, the projected value of points granted for both regular and
limited-time points will be recognized in the reserve for points at the time
of transaction.

Points granted and used have both grown recently as point programs play an
increasingly important role each year as marketing tools. In response to these
conditions, the Rakuten Group has constructed a point campaign management
system and developed an internal management structure in order to gain timely
understanding of campaign effects. In the first quarter accounting period, we
have been able to promptly calculate the estimated value of granted points
from campaigns at the time of generation for both regular and limited-time
points. We are thus able to gauge and to manage the point balances in the
important Rakuten Super Points marketing tool. At the same time, we have
adopted a uniform accounting procedure for the Rakuten Super Points program.
This method accounts for points in the reserve for points by using the
projected value of point grants, and recognition timing will be based on the
transaction that caused the points to be generated.

The change in accounting policy is applied retroactively, and quarterly and
annual financial statements for the previous year are presented after
retrospective application.

As a result, the amounts for operating profit and ordinary profit for the
previous fiscal year are each ¥554 million lower and loss before income taxes
and minority interests for it is ¥554 million larger than before retrospective
application, and the reserve for points at the end of the previous fiscal year
is ¥5,290 million higher. In addition, reflecting the cumulative effect in net
assets at the beginning of the previous fiscal year reduces retained earnings
at that time by ¥2,812 million.

(b) Application of the Accounting Standard for Net Income per Share

Starting in the first quarter of the current fiscal year, we are applying the
Accounting Standard for Earnings per Share (Accounting Standards Board of
Japan [ASBJ], Statement No. 2, revised June 30, 2010) and the Guidance on
Accounting Standard for Earnings per Share (ASBJ Guidance No. 4, revised June
30, 2010).

According to this change, the calculation of diluted net income per share for
stock options whose right to exercise is established after a fixed period of
work service sets the value of receipts on the assumption that funds are paid
in when rights are exercised and has changed to a method that includes the
future service-related portion furnished by the company.

For the stock split conducted during the fiscal year ended December 31, 2012,
net income per share and net income per diluted share were calculated under
the assumption that the stock split took effect at the start of the previous
fiscal year.

(c) Application of the Accounting Standards for Accounting Changes and Error
Corrections

As a result of accounting changes and corrections to prior period errors after
the beginning of the first quarter financial reporting period, we have applied
the Accounting Standards for Accounting Changes and Error Corrections (ASBJ
Statement No. 24, December 4, 2009) and the Guidance on Accounting Standards
for Accounting Changes and Error Corrections (ASBJ Guidance No. 24, December
4, 2009).

(5) Other

(1) Significant changes in the scope of consolidation: Yes
Increase: Kobo Inc.
(2) Changes in accounting policies and presentation of the financial
statements
Changes due to amendment of accounting standards: Yes
Other changes: Yes
Changes in the accounting estimate: No
Modified re-disclosure: No
(3) Number of shares issued (Common stock)
1.Common stock (including treasury stock)
1,320,626,600 shares (As of December 31, 2012)
1,319,457,800 shares (As of December 31, 2011)
2.Treasury stock
6,007,996 shares (As of December 31, 2012)
6,007,900 shares (As of December 31, 2011)
3.Average number of shares issued for the fiscal year ended December 31
1,313,987,266 shares (January 1 – December 31, 2012)
1,312,810,029 shares (January 1 – December 31, 2011)

         Rakuten, Inc. made a 100-for-1 stock split regarding shares of its
         common stock on July 1, 2012. Common stock and treasury stock as of
(Note)  December 31, 2011 and December 31, 2012, and average numbers of
         shares during the fiscal years ended December 31, 2011 and 2012 are
         calculated under the assumption that the stock split took effect at
         the start of the previous fiscal year.
         

The above information was originally prepared and published by the Company in
Japanese as it contains timely disclosure materials to be submitted to the
Osaka Securities Exchange. This English summary translation is for your
convenience only. To the extent there is any discrepancy between this English
translation and the original Japanese version, please refer to the Japanese
version. The following financial information was prepared in accordance with
generally accepted accounting principles in Japan.

*The full report is available at:
http://global.rakuten.com/corp/investors/documents/pdf/12Q4tanshin_e.pdf

About Rakuten

Rakuten, Inc. (JASDAQ:4755), is one of the world's leading Internet service
companies, providing a variety of consumer- and business-focused services
including e-commerce, eBooks & eReading, travel, banking, securities, credit
card, insurance, e-money, portal and media, online marketing and professional
sports. Selected by Forbes as 7th among the World's Most Innovative Companies
of 2012, Rakuten is expanding globally and currently has operations throughout
the Americas, Europe, Asia and Oceania. Founded in 1997, Rakuten is
headquartered in Tokyo, with over 10,000 employees and partner staff
worldwide. For more information, visit http://global.rakuten.com/corp/.

Contact:

Rakuten Investor Relations
investor-relations@mail.rakuten.com
http://corp.rakuten.co.jp/en/ir/
or
Rakuten Public Relations
Email: pr@mail.rakuten.com
Tel: +81-50-5817-1104