Overview of 2007/Q3
November 15, 2007 Rakuten, Inc
This presentation includes forward-looking statements relating to our future plans, targets, objectives, expectations and intentions. The forward-looking statements reflect management’s current assumptions and expectations of future events, and accordingly, they are inherently susceptible to uncertainties and changes in circumstances and are not guarantees of future performance. Actual results may differ materially, for a wide range of possible reasons, including general industry and market conditions and general international economic conditions. In light of the many risks and uncertainties, you are advised not to put undue reliance on these statements. The management targets included in this presentation are not projections, and do not represent management’s current estimates of future performance. Rather, they represent targets that management strive to achieve through the successful implementation of the Company’s business strategies. The Company may be unsuccessful in implementing its business strategies, and management may fail to achieve its targets. The Company is under no obligation – and expressly disclaims any such obligation – to update or alter its forward- looking statements. 0 Agenda
1 2007 Third Quarter: Consolidated Operating Results , Key Business Units (YoY)
2 Operating Results by Key Business Units 1. Rakuten Ichiba Business Unit 2. Travel Business Unit 3. Infoseek and Advertising Business Unit 4. Performance Marketing Business Unit 5. KC Business Unit 6. Personal Finance Business Unit 7. Securities Business Unit 8. Professional Sports Business Unit 9. Telephone Business Unit
3 Segment Information (YoY, QoQ) , Key Business Units (QoQ)
4 Balance Sheets
Appendix
1 1 2007 Third Quarter: Consolidated Operating Results, Key Business Units (YoY)
2 2007/Q3 Highlights (1)
Healthy growth both in Especially in Jul- Sep, great Consolidated EBITDA improvement of financial-related ` businesses since last year +30.1%(9months total, YoY)
High-performing Strengthened marketing strategies Rakuten Ichiba business ` for realizing “Everything Rakuten” Dominant position in domestic online accommodation site Continuing high growth Breakthrough of DP and oversea in Rakuten Travel ` sales Collectively reservation for car rental
Dramatic decline in expenses associated with doubtful accounts Maintaining profitability and general expenses for Rakuten KC ` Steady card-shopping transaction growth
3 2007/Q3 Highlights (2)
Healthy sales of foreign stocks and Diversify revenue Nikkei mini 225 offset weakness in Japanese stock sources at Securities Continually substantial recovery in spite Business ` of exclusion of one-time provision to allowance for doubtful accounts “Rakuten Bank＠TTB” in Jul “Rakuten Rental” (Online DVD Rental) in Started new services Oct ` “Rakuten Secured Shopping Service” at Ichiba in Oct
Established JV with FAST for mobile Strengthen mobile search development search ` Renewed Infoseek mobile search in Nov
Newly established Consolidated Fusion Communications telecommunication B/S segment ` 4 2007/Q3 Consolidated Financial Overview [After adjustment of tax and dues]
(Unit：Billion) 06/Q1-Q3 07/Q1-Q3 (accumulative) (accumulative) YoY (06/Jan-Sep) (07/Jan-Sep) Net Sales 153.11 151.01 -1.4% Operating Profit 17.65 19.96 +13.1% Ordinary Profit 18.67 21.36 +14.4% EBITDA 25.79 33.79 +31.0% Net income (loss) -8.72 43.57 -
Total Assets 1,489.75 1,193.11 -19.9% Nine months Interest-bearing debt 639.34 441.43 -31.0% Net Assets 162.44 226.97 +39.7% 53.87 billion yen profit (Unit：Billion) from sales of 06/Q3 07/Q3 Ctrip.com shares YoY included in (06/Jul-Sep) (07/Jul-Sep) extraordinary profit in 07/Jul-Sep Net Sales 47.79 52.08 +9.0% Operating Profit -1.63 6.49 -
Ordinary Profit (loss) -2.19 6.37 -
EBITDA 2.50 10.88 +334.4% Three months Net income (loss) -15.82 37.76 -
*0.23 billion yen of tax and dues regarding sales of Ctrip.com shares deducted from operating expense in 2007 *EBITDA=Ordinary profit + Interest expense + Depreciation and Amortization + Amortization of goodwill- Effect of securitizing loan receivables •Interest-bearing debt ＝SB+CP＋short-term borrowings＋long-term borrowings 5 Quarterly Consolidated Net sales and EBITDA
Net sales +9.0% (YoY), EBITDA Significant Growth 4x 60
52.1 53.1 52.0 50.1 50.4
) 50 47.7 48.4
40 billion yen ：
% es +9.0 30 Net sal
20 16.6
12.1 12.1 * 2 11.3 10.8 10.8 Net sales & EBITDA (Unit10 34.4% 2.6 EBITDA *1 +3 0 06/Q1 06/Q2 06/Q3 06/Q4 07/Q1 07/Q2 07/Q3
Net sales EBITDA
*1 EBITDA=Ordinary profit + Interest expense + Depreciation and Amortization + Amortization of goodwill- Effect of securitizing loan receivables * 2 0.23 billion yen of tax and dues regarding sales of Ctrip.com shares deducted from operating expense in 07/Q3 6 2007/Q3 Financial Overview by Business Units (YoY) [Excluding Securitization Effect] (Billion Yen)
06/Q3 07/Q3 Operating Operating Segment BU/Company Sales Sales YoY YoY OP Margin Profit Profit E-Commerce Rakuten Ichiba Business 9.85 3.98 12.41 +26.0% 5.09 +27.6% 41.0%
E-Commerce Rakuten Books*1 2.17 0.02 3.50 +61.3% -0.31 - -9.0%
E-Commerce Rakuten Auction*1 0.21 -0.09 0.35 +63.8% -0.45 - -128.7%
E-Commerce LinkShare*1,3 1.34 0.37 1.70 +26.7% 0.44 +17.4% 25.8%
Credit and Payment Rakuten KC*1 18.26 -6.82 16.62 -8.9% 1.36 -8.2%
Credit and Payment Rakuten Credit*1 2.01 0.33 2.59 +29.1% 0.41 +25.0% 16.1%
Credit and Payment Banking (Rakuten Financial Solution)*1 -- 0.02- -0.54 --
Travel Rakuten Travel*1 2.93 1.33 3.64 +23.8% 1.82 +36.3% 50.0%
Securities Rakuten Securities*1 7.69 2.21 8.04 +4.5% 1.84 -16.7% 22.9%
Professional Sports Rakuten Baseball*1 2.43 0.16 2.74 +12.9% 0.37 +133.1% 13.7%
Portal and Media Infoseek, Advertising Business 1.62 -0.01 1.46 -9.7% -0.05 - -3.7% Other Business Units 2.95 -0.27 2.84 -3.8% -0.66 --23.3%
Amortization of Goodwill - -0.72 - - -0.88 --
Corporate and Internal elimination*2 -1.91 -0.33 -2.54 - -0.93 -- Securitazation Effect -1.81 -1.81 -1.34 - -1.23 -- Consolidated 47.79 -1.63 52.08 +9.0% 6.26 - 12.0% *1 Entity basis, except Rakuten HD (Consolidated) *2 Segment in consolidated financial statement *3 Pro forma basis US$=￥117.90(06/Q3), US$=115.43(07/Q3) 7 2007/Q3 Financial Overview by Business Units (YoY) (Billion Yen)
06/Q3 07/Q3 Operating Operating Segment Business Unit / Company Sales Sales YoY YoY OP Margin Profit Profit E-Commerce Rakuten Ichiba Business 9.85 3.98 12.41 +26.0% 5.09 +27.6% 41.0%
E-Commerce Rakuten Books*1 2.17 0.02 3.50 +61.3% -0.31 - -9.0%
E-Commerce Rakuten Auction*1 0.21 -0.09 0.35 +63.8% -0.45 - -128.7%
E-Commerce LinkShare*1,3 1.34 0.37 1.70 +26.7% 0.44 +17.4% 25.8%
Credit and Payment Rakuten KC*1 16.44 -8.64 15.47 -5.9% 0.21 -1.4%
Credit and Payment Rakuten Credit*1 2.01 0.33 2.39 +19.3% 0.33 -1.4% 13.8% Banking Credit and Payment -- 0.02 - -0.54 -- (Rakuten Financial Solution)*1
Travel Rakuten Travel*1 2.93 1.33 3.64 +23.8% 1.82 +36.3% 50.0%
Securities Rakuten Securities*1 7.69 2.21 8.04 +4.5% 1.84 -16.7% 22.9%
Professional Sports Rakuten Baseball*1 2.43 0.16 2.74 +12.9% 0.37 +133.1% 13.7%
Portal and Media Infoseek, Advertising Business 1.62 -0.01 1.46 -9.7% -0.05 - -3.7% Other Business Units 2.95 -0.27 2.84 -3.8% -0.66 --23.3%
Amortization of Goodwill --0.72-- -0.88 -- Corporate and Internal -1.91 -0.33 -2.54 - -0.93 -- elimination*2 Consolidated 47.79 -1.63 52.08 +9.0% 6.26 - 12.0% *1 Entity basis, except Rakuten HD (Consolidated) *2 Segment in consolidated financial statement *3 Pro forma basis US$=￥117.90(06/Q3), US$=115.43(07/Q3) 8 2 Operating Results by Key Business Units
1. Rakuten Ichiba Business Unit 2. Travel Business Unit 3. Infoseek and Advertising Business Unit 4. Performance Marketing Business Unit 5. KC Business Unit 6. Personal Finance Business Unit 7. Securities Business Unit 8. Professional Sports Business Unit 9. Telephone Business Unit
9 Business Units and Financial Segments*1
E-Commerce Business Credit and Payment Travel Business Rakuten Ichiba*2 Business Travel
Greeting Service *2 Personal Finance Business Service *2 KC Securities Business *2 Stuffed Animal Greeting Cards Banking (Alliance with TTB) Securities Golf *2 Capital Investments Auto *2 Asset Management Delivery *2 Portal and Media Business Property Management Books & Media Infoseek Media Rental Advertising Professional Sports Auction Blog Business Fine Wine Research Professional Sports Dining Career Service Downloads Target Telecommunication Tickets CS Television Business*3 Performance Marketing (LinkShare) Internet Television Telephone*3 Horse Racing Mall Cross Media * 4 (Fusion Communications) (Messenger) *1 Excludes Incubation Businesses *2 E-Commerce businesses operated by Rakuten, Inc in 2007/Q3 *3 Established in 2007/Q3 *4 Discontinued in Nov. 2007 10 2 -1 Rakuten Ichiba Business Unit
11 Rakuten Ichiba Business 2007/Q3 Highlights
Maintain Substantial Sales up 26.2%(YoY) GMS of Rakuten Ichiba and Rakuten Growth ` Books +25.5%(YoY)
Strongly Promote Totaled 21,333 merchants as of 30th Merchants Support and Sep “Everything Rakuten” ` Healthy growth in sales of Ads and started search word Ads
Provide Users Merit ` “Secured Service” started
12 Rakuten Ichiba Sales and Operating Profit
Boosted Profit Margin while Maintaining a High Growth Rate, Sales +26.0% (YoY), Operating Profit +27.6%(YoY) Increase in Sales from Margin and Fixed Merchant Fee in Q2 due to Seasonality 12,322 12,372 12,414 12,000 11,508
9,714 9,855 10,000 9,097 8,397 26.0% ales + 8,000 S 6,734 6,072 6,348 5,551 6,000 5,254 5,508 4,888 5,090 4,233 3,929 3,988 4,000 2,480 2,635 2,702 27.6% rofit + ting P 2,000 Opera
Sales & Operating Profityen) (Million 0 05/Q1 05/Q2 05/Q3 05/Q4 06/Q1 06/Q2 06/Q3 06/Q4 07/Q1 07/Q2 07/Q3 Sales Operating Profit *1 Charge on below 1 million sales per month to Standard merchants started from January 2006 *2 Retroactive adjustment of 07/Q2 13 Growth in Number of Rakuten Members
Rakuten Group Members Increasing Continuously, Surpassed 40 million (Million) 45 40.2 38.7 40 # of Rakuten Group 37.336.9 members 33.433.8 35 32.5 32.5 31.3 31.8 30.8 30.0 28.328.829.2 30 28.1 27.3 25.9 25.6 23.8 23.9 25 22.0 22.4 20.4 19.1 18.8 20 17.3 15.9 16.2 14.0 14.6 15 12.8 # of Rakuten 7.8 members 10 6.8 5.5 5.1 5.8 4.0 4.6 2.6 3.0 3.5 5 1.7 2.0 2.3
0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2002 2003 2004 2005 2006 2007
* Rakuten Members : Members who have integrated IDs (e.g Rakuten Ichiba, Rakuten Travel, Infoseek, Rakuten greeting, etc) * Rakuten Group members：Rakuten members and members who have either un-integrated IDs with Rakuten securities, Rakuten KC, Rakuten Credit and etc, or un-integrated IDs for former-My trip.net service members etc. 14 GMS (Rakuten Ichiba and Rakuten Books)
Gross Merchandise Sales of Rakuten Ichiba and Rakuten Books +25.5%(YoY)
17.08 16.87 18 15.79 140 15.43 *2 127.41 16 129.40 120 Number of orders 120.15 12.51 12.53 130.52 14 # oforders(Million) 100 10.90 10.49 12 99.88 101.54 ※１ % GMS 4.6 +3 10 80 8.26 91.51 rs 8.23 95.66 rde f o 7.03 # o 8 60 6.66 71.14 70.54 4.99 6 63.63
GMS (Billion Yen) GMS (Billion 40 63.10 5% 25. 4 S+ 45.68 GM 20 2
0 0 04/Q3 04/Q4 05/Q1 05/Q2 05/Q3 05/Q4 06/Q1 06/Q2 06/Q3 06/Q4 07/Q1 07/Q2 07/Q3 GMS orders
*1 GMS ＝Mall（Fixed-price, Group Buy), Mobile （Fixed-price, Group Buy）and Rakuten Books *2 Decrease in GMS at 07/Q2 to 2007/Q3 includes1.3 billion yen of cut-down GMS at diet, health genre due to popular diet-program DVD in Q2 , 15 Rakuten Ichiba Buyer Metrics (including mobile commerce, based on e-mail address)
Maintain growth in Number of Unique Buyers (+27.2% YoY) and Transactions (+35.6% YoY)
2006/Q1 2006/Q2 2006/Q3 2006/Q4 2007/Q1 2007/Q2 2007/Q3
Unique Buyers 3,680 3,970 4,070 4,710 4,730 5,140 5,180 (‘000)
# of Transactions 10,260 11,790 11,650 14, 680 14,410 16,140 15,800 (‘000)
Average # of Transactions 2.79 2.97 2.86 3.11 3.05 3.14 3.05 per Buyer
Quarterly GMS ¥24,479 ¥24,650 ¥24,249 ¥26,942 ¥ 24,649 ¥ 24,527 ¥23,827 Per Buyer
* Based on E-mail address * Fixed-Price and Group Buy made at Rakuten Ichiba and mobile * Quarterly GMS Per Buyer = GMS (Rakuten Ichiba) / Unique Buyers
16 Number of the Merchants
Total Number of the Merchants Maintain Healthy Growth
25,000
21,333 20,574 19,539 20,000 18,637 17,910 16,472 15,781 15,157 15,000 13,833 12,409 11,312 10,587 9,665 10,000 Total # of merchants # of Total
5,000
0 04/Q3 04/Q4 05/Q1 05/Q2 05/Q3 05/Q4 06/Q1 06/Q2 06/Q3 06/Q4 07/Q1 07/Q2 07/Q3
17 Non-Consolidated Sales Breakdown (Excluding Portal and Media Business Results)
Healthy Increase in Merchant Fixed Fee and Margin Sales at Rakuten Ichiba
100% 12.3% 12.4% 13.8% 13.6% 15.0% 14.6% 15.5% 7.6% 7.5% 7.7% 7.4% 8.5% 9.3% Others 1,163 1,259 1,431 1,752 1,817 1,913 2,033
80% 31.3% 34.3% 33.4% 35.8% 33.6% 37.6% 32.6% 32.5% 31.0% 33.7% Advertising 35.2% 32.4% 32.4% 3,083 3,311 3,228 4,552 3,932 4,427 4,262 60%
29.3% 30.7% 29.6% 29.3% 29.8% 33.4% Margin 40% 29.4% 31.8% 32.8% 32.8% 33.8% 33.9% 33.1% 3,003 3,345 3,416 4,283 4,045 4,439 4,458
20% 31.8% 27.5% 29.3% 27.0% 28.6% 23.7% 23.3% 22.4% 22.4% 19.2% 17.9% 18.2% Merchant 18.1% Fixed Fee 2,198 2,280 2,333 2,338 2,331 2,355 2,397 0% 04/Q3 04/Q4 05/Q1 05/Q2 05/Q3 05/Q4 06/Q1 06/Q2 06/Q3 06/Q4 07/Q1 07/Q2 07/3Q
* Others includes internal sales. = Million Yen 18 Secured Shopping Service
Ever-Improvement of Services and Securing
Declaration of Rakuten Secured Shopping
Started from 29th Oct, 2007 100% compensation for undelivered items Compensation system without membership fees ・Rakuten Secured Shopping Service *Amount of compensation is up to 0.5 million Yen, once a year
Escrow Auction service ・Rakuten Secured transaction for C to C Auction
Rakuten card leads to undelivered items and the early detection of unfair use of credit card ・Credit card usage confirmation by E-mail ・Secured system for undelivered items 19 2 - 2 Travel Business Unit
20 Travel Segment Sales & Operating Profit
Sales +25.1% (YoY), Operating Profit +41.1% (YoY), Maintained High Growth
4,000 3,786
3,500 3,116 3,027 3,000 2,905 2,885
2,468 2,500 2,262 2,325 25.1% 2,015 les + 2,000 Sa 1,879 1,609 1,478 (Million Yen) (Million 1,423 1,500 1,332 1,323 1,291 1,014 989 1,000 887 892 .1% 600 603 +41 rofit 500 g P ratin Ope 0 05/Q1 05/Q2 05/Q3 05/Q4 06/Q1 06/Q2 06/Q3 06/Q4 07/Q1 07/Q2 07/Q3
Sales Operating Profit 21 Travel Business Reservations
New Contracts Promoted Gross Booking value, +19.1% (YoY) High Steady Position in Travel Booking Site
6,332 60 7,000 5,952 5,631 5,705 6,000 50 5,455 59.65 5,179 50.07 53.71 4,935 48.99 4,753 4,644 46.83 5,000 40 4,396 43.48 4,191 39.34 39.08 3,826 37.35 4,000 34.82 30 31.45 .1% 28.58 +19 3,000
GTV (Billion Yen) 20 2,000 Reservations (Nights in '000s) in (Nights Reservations 10 1,000
0 0 04/Q4 05/Q1 05/Q2 05/Q3 05/Q4 06/Q1 06/Q2 06/Q3 06/Q4 07/Q1 07/Q2 07/Q3 GTV* Room Nights Booked
* Gross Transaction Value at time of reservation (before cancellation, tax calculated) * Travel Business: MyTrip.net and Rakuten Travel combined * From 05/Q1, Overseas hotels gross bookings, overseas air travel gross bookings, and overseas hotel reservations included * From 05/Q4, Rakuten Bus Services Inc. included * From 06/Q1, international dynamic packaging included * From 06/Q4, domestic dynamic packaging included 22 Changes in Ratio of Mobile Users
Share of Mobile Domestic GTV Rises to 11.7% Essential for Growth GTV （％） 12.0% 11.7%
11.0% 11.0% 10.5% 10.4%
10.0% 9.5% 9.0% 9.0% pt 8.5% .2 8.3% + 2 8.0% 7.4%
7.0% 05/Q3 05/Q4 06/Q1 06/Q2 06/Q3 06/Q4 07/Q1 07/Q2 07/Q3 Mobile share in Domestic Booking Transaction Value Value Transaction Booking Domestic in share Mobile
23 2 -3 Infoseek Business
24 Infoseek Business Unit, Advertising Business Unit: Sales and Operating Profit
(Million Yen) 1,800 1,626 1,634 1,625 1,631 1,559 1,600 1,498 1,447 1,468 1,400 1,330 1,196 1,200 Decline in sales of Advertising BU 992 1,000 due to changes in method of in- house advertisement transaction 800
600
400 354 262 220 194 187 170 200 90 6 0 -13 -60 -53 -200 05/Q1 05/Q2 05/Q3 05/Q4 06/Q1 06/Q2 06/Q3 06/Q4 07/Q1 07/Q2 07/Q3
Sales Operating Profit
*Difference with Portal & Media Business in segment information to consolidated financial statements is accounted for by Target, Inc., College Students’ Portal Community, Inc., Rakuten Research, Inc. and the blog business. Internet TV and publishing businesses of Rakuten, Inc. 25
Established Mobile Search JV with Fast
Alliance with Fast Search & Transfer ASA , the leading global provider of enterprise search technologies in Norway Jointly providing mobile search service
Strengths of Rakuten ：attracting customers, service know-how • Attracting 40 million group members • Japanese Internet service development know-how Ｘ Strengths of Fast ：technology capability • Extensibility for increase in data, customizing multiple and complex requirements, search capability for multiple and simultaneous accesses in real time, high flexibility • Oversea achievements in mobile search solution （US: InfoSpace）
Outline of JV 1.Company name: Rakuten FAST Mobile Search, Inc. 2.Investment ratio ： Fast Search & Transfer ASA. (50%), Rakuten, Inc.(50%) 3.Businesses： Mobile search services for Japan, Mobile listing
advertising services, etc
4.Capital and capital surplus: 0.8 billion yen 5.Date of establishment： September 2007 6.Date of launching service: November 2007 26 2 -4 Performance Marketing Business Unit
27 LinkShare: Expansion of Operating Base
Expand service lineup at LinkShare – Affiliate （Core business ） – Lead-Generation（Lead-Gen） – Search – Adnetwork
Acquisition new businesses by LinkShare – Company name：TrafficStrategies.com, LLC （U.S） – Date of Acquisition：June, 2007 – Businesses：Lead- Generation, Listing advertising management, Search words-analysis, SEO
LinkShare Europe – In addition to UK, further business expansion in Europe under study
28 2 -5 KC Business
29 KC Business 2007/Q3 Highlights
Newly-issued Rakuten Premium Card
Annual Membership fee:¥10,000 Expanded Rakuten Card Synergy ` Issued Rakuten Card Academy （for students） Expanded Rakuten card applicants through Rakuten group
Prominent progress in remaining cost associated with transfer of credit business structure Reduced Costs – Reduction in expenses with doubtful accounts due to stabilization of stronger collection and screening loan （continuation） ` balances – Further reductions in general and administration expenses and personnel expense Preparation for Under study at in-house project Compliance with – Cash advances of Rakuten card are fully compliant with new Money-lending ` under 18% interest – Scheduled for other cards (from new applications) Law 30 Rakuten KC: Overview of Profit & Loss
Income Statement Overview
(Billion Yen) Sales 2006 2007 2007 Sales from shopping ¥2.4 billion(+4.4% (Jul-Sep) (Apr-Jun) (Jul-Sep) QoQ), Cash advances ¥10.9 billion(-0.7% Sales 16.4 15.2 15.4 QoQ) Operating Expense 25.0 15.1 15.2 Operating expense SG & A 22.9 13.6 13.7 Serious reduction in expenses related to Interest Expense 2.1 1.4 1.4 doubtful account Operating Profit (Loss) -8.6 0.04 0.2 Non-Operating Profit 0.0 0.04 0.0 Slightly increase of expense associated with interest repayments Ordinary Profit (Loss) -8.6 0.09 0.2 Extraordinary Loss -29.1 0.05 0.1 Operating profit Earnings (Losses) Before Tax -37.7 0.1 0.3 Maintain profit Provision for income taxes -5.0 -0.3 0.1 3.81 million yen in first-half (07/Apr-Sep) Net Income (Loss) -32.7 0.4 0.2 Securitizing loan receivables Ordinary Profit (before -6.8 1.3 1.4 The existing write-off portion (¥1.1 billion) securitizing effect) will negatively impact on OP performance
31 Rakuten KC: Ordinary Profit (Pro Forma)
Excluding securitization, actual ordinary profit of ¥1.4 billion. Maintaining profitability on an accounting basis
Ordinary Profit (Excluding Securitizing effect)
(Billion Yen) Excluding securitization effects
4 1.7 2 0.3 0.0 0.6 1.3 1.4 0 0.2 -2 0.09 -0.4 -4.0 -0.5 -0.6 -4 -1.9 -6 -8 -8.6 -10 Accounting basis 06/Q1 06/Q2 06/Q3 06/Q4 07/Q1 07/Q2 07/Q3 (Jan-Mar) (Apr-Jun) (Jul-Sep) (Oct-Dec) (Jan-Mar) (Apr-Jun) (Jul-Sep)
Accounting basis Excluding securitization effects
32 Allowance for Interest Repayments and Allowance for Doubtful Accounts
Allowance for loss on interest repayments (Cash-Out and Write-off) is totaled 12.2billion Yen(+37.1% YoY) Allowance for write-off was posted at “Allowance for doubtful accounts” on B/S
(Billion Yen) Jun. 30, Sep. 30, Item Comment Changes 2007 2007 Allowance for loss on ‘Cash-Out’ amount associated 5.4 7.1 interest repayments with interest repayments claims +3.3 Write-offs of excess interest 3.5 5.1 portion of principal Allowance for doubtful Other allowances for doubtful accounts 28.6 28.0 -0.6 accounts 32.1 33.1 +1.0
Doubtful account allowance ratio¹ 8.94% 9.38% Doubtful account write-off ratio² 0.69% 0.70%
1.Doubtful account allowance ratio = Allowance for doubtful account/Operating receivables 2.Doubtful account write-off ratio = Doubtful account written off for the quarter/Operating receivables
33 Expenses related to doubtful account / Interest repayment expenses
Decrease of general expenses and expenses associated with doubtful accounts due to progress in collection offset an increase expenses associated with interest repayment
（Million Yen） 07/Q2 07/Q3 QoQ 07/Apr-Jun 07/Jul-Sep Actual Cash-Out amount 660 765 15.9% Provision to allowance 1,230 1,728 40.5% Expenses associated with interest repayments 1,890 2,493 31.9% Write-offs of excess interest portion 576 734 27.4% Provision to allowance -6 1,545 - Expenses associated with write-off of excess interest portion of principal 570 2,279 299.8%
Expenses associated with doubtful accounts(Excluding write-off of principal) 5,159 3,428 -33.6% Expenses associated with doubtful accounts 5,729 5,707 - 0.4%
34 Rakuten KC: Progress in Collection (1)
Amount of uncollectible loans carried over has stabilized due to continued measures to manage and collect receivables
Ratio of uncollectible loan carried over more than Ratio of uncollectible loan carried over more than one month to uncollected less than one month two months to uncollected less than two months
56.00% 12.0% 55.2%
54.00% 11.0% 11.0% 53.5%
10.3% 52.00% 10.0% 9.9% 50.9% 50.5% 50.4%50.5% 50.00% 9.2% 9.0%
8.3% 48.00% 47.9% 48.0% 8.0% 7.8% 7.8% 7.5% 46.5% 46.00% 46.1% 7.0% 7.0% 6.9%
44.00% 6.0%
42.00% 5.0%
40.00% 4.0% 07/1 07/2 07/3 07/4 07/5 07/6 07/7 07/8 07/9 07/10 07/107/Jan07/2 Feb07/3 Mar 07/4 Apr 07/5 May07/6 Jun07/7 Jul07/8 Aug07/9 07/10Sep 07/Jan Feb Mar Apr May Jun Jul Aug Sep Notes: 1. Ratio of uncollectible payments carried forward: Balances carried forward to next billing period/Initial balance 2. Ratio of carried over: [amount of carried over uncollected loan in the end of month] divide [the uncollectible loan at beginning of the month] 35 Rakuten KC: Progress in Collection (2)
Dramatically decreased amount carried uncollectible loans (from less than one month to more than one month) due to enhanced screening in March, 2007 and progress in collection Decreased amount carried uncollectible loans (from less than four months to more than four months) due to dramatically decreased amount carried uncollectible loans (from less than one month to more than one month)
Amount Carried Uncollectible Loans (Millions Yen)
The length of uncollected Mar. Apr. May Jun. Jul. Aug. Sep. Oct. From less than one month to more than one month 7,164 4,865 5,653 4,765 5,304 5,108 5,488 4,952 From less than two months to more than two months 5,148 4,497 3,867 3,882 3,557 3,704 3,429 3,455 From less than three months to more than three months 4,400 4,252 3,959 3,468 3,370 3,259 3,304 3,067 From less than four months to more than four months 3,541 3,404 3,567 3,347 2,925 2,934 2,795 2,819
*Carryover rate = Balance carried over for the coming month/initial balance *Current month’s receivables: Balance of contracts for which requested payment from accounts could not be withdrawn. If unchanged after one month, this balance becomes Receivables 1. 36 Rakuten KC: Cost Reductions
Further reduction of general expenses will be expected onward
(Billion Yen) 14
11.6 - 12 11.3 38. 11.1 9% (Y oY) 9.6 10 3.3 3.0 3.3 8.0 2.3 7.4 8 6.9 1.9 1.3 6 1.3 Personnel 6 5.7 6.2 Expense 5.6 4 4.7 4.7 General 4.2 Expense
2 Interest Expense 2.3 2.1 2.1 1.7 1.4 1.4 1.4 0 06/Q1 06/Q2 06/Q3 06/Q4 07/Q1 07/Q2 07/Q3
37 Rakuten KC Personnel Variable Factors
(Number of Employees) (Personnel Expenses) (Unit: Millions Yen) Business demerger 3,000 3,380 嘱託社員/パートTemporary staff 3,500 3,069 正社員Permanent staff Merger of branch 人件費Personnel 3,000 2,500 expense 2,251 offices 2,379 2,500 1,975 2,000 Personnel 837 1,900 reduction 2,000 776 1,500 1,359 1,348 1,233 1,354 1,500 526 1,000 453 969 837 258 1,000 1,414 179 1,199 500 833 500 780 711 658
0 0 06/Q206/2Q 06/Q3 06/3Q 06/Q4 06/4Q 07/Q1 07/1Q 07/Q2 07/2Q 07/Q3 07/3Q
38 Credit Card Shopping Transaction Volume
Rakuten Card transaction volume is an engine for total credit card transaction volume
(Billion Yen) 100 89.3 90 84.9 75.5 78.6 80
70 63.6
60 52.9
50 ) (YoY .4％ 40 +40
30
20
10
0 06/Q2 06/Q3 06/Q4 07/Q1 07/Q2 07/Q3
39 2 -6 Personal Finance Business Unit (Rakuten Credit)
40 Rakuten Credit 2007/Q3 Highlights
Healthy growth in Actual basis (excl. securitization effect) spite of securitization Sales +29.1%, effect ` Operating Profit +25.0％(YoY)
Strong growth in Loan balance achieved 100billion yen, 4x more than acquisition (Sep, 2004) members and loan Number of members surpassed 0.1 million balance ` in Oct
Interest rate 6.9% to 18.0% High income Average income 6 to 7 million yen customers, low- Salaried male workers in their mid-40’s interest rate strategy ` Depreciable rate 0.99%, Average uncollectible loan rate 1.76%
41 Rakuten Credit: Sales and Operating Profit
Net sales growth +19.3% (YoY) despite of negative accounting effect of securitization 4,000
3,500 3,339 ） 3,000 2,687 2,500 2,399 million yen million 2,159 （ 2,011 2,000 ％ 1,740 19.3 les + 1,474 et Sa 1,500 1,361 N 1,184 1,146 1,007 1,000 831 537 500 335 330325 7463 5047 0 △ 71 △ 219
-500 05/Q1 05/Q2 05/Q3 05/Q4 06/Q1 06/Q2 06/Q3 06/Q4 07/Q1 07/Q2 07/Q3 Sales & OperatingSales profit loss and Sales（accounting） Operating profit（accounting）
42 Rakuten Credit: Sales and Operating Profit (pro forma)
Maintain Strong Growth Net sales +29.1％, Operating profit +25.0% （Eliminating securitization effects） 4,000
3,339 3,500 Net sales（account）
3,000 2,687 2,596 2,494 2,281 2,500 2,159 2,011 2,399 1,740 2,000 Net sales （eliminating 1,474 1,361 securitization effects） 1,500 1,184 1,146 1,007 Operating profit 831 1,000 （account） 537 418 335 353 500 219 63 74 47 50 -71 325 330 0 -219 Operating profit Net sales & Operating profit and loss (million yen) （eliminating securitization effects） -500 05/Q1 05/Q2 05/Q3 05/Q4 06/Q1 06/Q2 06/Q3 06/Q4 07/Q1 07/Q2 07/Q3 Net sales(account) Net sales(Eliminating securitization effects) Operating profit and loss(account) Operating profit and loss(Eliminating securitization effec * Retroactive adjustment of 07/Q2 43 Rakuten Credit : Loan Receivable Balance
Loans Receivable Balance Growth +31.5% (YoY), Maintaining Rapid Growth (including in 25.0 billion of securitizing Loan Receivables in Jan- Jun/07) Achieved ¥100 billion of Loan Balance during 2007/Q3 99,551 120 94,535 100,000 87,822 90,000 81,312 100 75,437 80,000 68,861 70,000 80 60,810 ) 53,300 Y 60,000 （Yo 46,434 % 60 1.5 50,000 41,341 +3
102.5 Members 35,351 97.1 91.1 40,000 30,569 84.2 40 27,524 77.9 Loan BalanceLoan (Billion Yen) 24,441 30,000 21,685 69.2 59.0 51.3 45.6 20,000 20 39.7 32.9 25.6 28.2 19.8 22.2 10,000
0 0 04/Mar04/Jun04/Sep04/Dec05/Mar05/Jun05/Sep05/Dec06/Mar06/Jun06/Sep06/Dec07/Mar07/Jun07/Sep
Loan Balance Members 44 Rakuten Credit: Ratios Related to Doubtful Accounts
Provide allowances for loans which are intervened by lawyers for the purpose of bankruptcy rehabilitation, bankruptcy, adjustment of debts Loss ratio is fairly constant compared to contrary to allowance increase (by +0.45% points) Allowance balance rate 2.50% Allowance balance／Loan balance at end of the period
2.11% 2.00% 1.66% 1.66%
1.50% Loss ratio Total periodic loss ／Loan balance at end of the period
0.99% 1.00% 0.90% 0.81%
0.50% 05/Dec 06/Dec 07/Sep Loss ratio Allowance balance rate 45 2 -7 Securities Business
46 Rakuten Securities Holdings: Sales ＆ Ordinary Profit
Sales +11.1%(QoQ) and +4.5(YoY) due to revision of commission rate from June 2006 and profit from sales of private equity and other securities. Ordinary profit generally continued in flat on YoY (-0.2% ) due to increase of operating profit in spite of exclusion of large provision to allowance for doubtful accounts
1,200 1,153.6
988.4 1,021.5 1,000 831.8 776.1 804.6 billion Yen) 769.9 ： 800 716.0 724.3
Unit 629.6 （ 557.5 563.0 600 474.8 473.7 +11.1% Sales 374.8 400 336.2 280.8 225.9 215.4 209.7 197.5 197.1 200 Sales & Ordinary Profit
0 05/Jan- 05/Arp- 05/Jul- 05/Oct- 06/Jan- 06/Apr- 06/Jul- 06/Oct- 07/Jan- 07/Arp- 07/Jul- Ma r Jun Sep Dec Ma r Jun Sep Dec Mar Jun Sep Sales Ordinary Profit
47 Rakuten Securities Holdings: Industry Comparisons
Financial Overview for Jul-Sep 2007 (QoQ) (Million Yen) Rakuten E*Trade Matsui kabu.com MBH Securities
Sales 8,046 +4.5% 17,138 +33.0% 10,860 +10.8% 5,564 +11.8% 7,716 +2.9%
(Net Interest) 1,967 +29.7% 4,594 +45.9% 3,394 +8.8% 1,596 +45.1% 1,291 +0.5%
Net Sales 7,207 +0.9% 15,133 +27.1% 9,893 +9.5% 5,165 +10.0% 7,059 -1.0%
SG&A 5,363 +8.8% 8,589 +25.2% 3,628 -18.0% 2,587 +24.4% 3,558 +2.2%
Ordinary 1,971 -12.7% 6,426 +26.6% 6,264 +33.3% 2,572 -0.6% 3,433 -5.5% Profit
(Before exclusion of large portion to allowance for (2,704) (+19.7%) (6,836) (+33.2%) (6,095) (+29.7%) (2,826) (+9.2%) (3,434) (-5.9%) doubtful accounts)
Net Profit 641 -30.6% 4,113 +47.5% 3,574 (28.7%) 1,605 (+8.7%) 1,953 (-4.9%)
* Source: Company financial reports on a consolidated basis (excluding kabu.com) 48 Rakuten Securities Holdings: Industry Comparisons Financial Overview for Jul-Sep 2007 (YoY) (Million Yen) Rakuten E*Trade Matsui kabu.com MBH Securities
Sales 8,046 +11.1% 17,138 +11.0% 10,860 -3.3% 5,564 +5.5% 7,716 -3.9%
(Net Interest) 1,967 -3.0% 4,594 +12.7% 3,394 -8.0% 1,596 +9.9% 1,291 -2.3%
Net Sales 7,207 +10.5% 15,133 +7.2% 9,893 -4.1% 5,165 +5.2% 7,059 +2.7%
SG&A 5,363 +7.3% 8,589 +7.3% 3,628 -27.9% 2,587 +13.3% 3,558 +0.1%
Ordinary 1,971 -0.2% 6,426 +5.1% 6,264 +16.9% 2,572 -4.2% 3,433 +2.4% Profit
(Before exclusion of large portion to allowance for (2,704) (+10.3%) (6,836) (+8.1%) (6,095) (-1.9%) (2,826) (+5.1%) (3,434) (+2.4%) doubtful accounts)
Net Profit 641 +110.9% 4,113 +27.7% 3,574 -3.5% 1,605 +4.8% 1,953 +2.7%
* Source: Company financial reports on a consolidated basis (excluding kabu.com) 49 Rakuten Securities HD (Consolidated) Ordinary profit
(Million Yen) 4,000 Ordinary profit margin after 3,748 exclusion of large provision to allowance for doubtful accounts* 3,500 Ordinary profit
3,000 2,808 2,619 2,475 2,500
1,975 1,971 2,000
1,500
.8% 1,000 Profit +5 Ordinary 500
0 2006/Oct-Dec 2007/Jan-Mar 2007/Apr-Jun 2007/Jul-Sep *Provision to allowance for doubtful accounts for advances to clients involved in credit transactions of OHT Inc. 50 Rakuten Securities: Number of General Accounts
1,450,764 1,600,000 General Accounts as of Jun 07 4.0% 1,498,757 General Accounts as of Sep 07 +3.4% 1,400,000 Growth rate 3.5%
+3.3% 1,200,000 +2.9% +2.9% 3.0% Growth Rate No.1 1,000,000 +2.2% 2.5% 796,666 800,000 728,183 774,028 2.0% 704,508 684,243699,161 597,898
580,781 trate Growth 600,000 1.5%
400,000 General 1.0% Accounts
Number of General Accounts No.3 200,000 0.5%
0 0.0% E*Trade Rakuten Kabu.com Matsui Monex Securities * Source: based on information on companies’ websites 51 Rakuten Securities: Number of Margin Accounts
Growth rate No.1 Number of margin account as of Jul 07 180,000 5.0%
158,265 +3.9% Number of margin account as of Sep 07 160,000 153,228 4.0% Growth rate 140,000 +3.3% 3.0% +2.6% 120,000 +2.4% 2.0%
96,824 100,000 94,387 1.0% 79,56582,681 80,000 0.0% Growth rate Growth 60,000 54,88856,200 -1.0%
37,293 40,000 Number of 36,164 -2.0% Number of margin accounts margin accounts 20,000 NO.3 -3.0% -3.0% 0 -4.0% E*Trade Rakuten Kabu.com Matsui Monex Securities
* Source: based on information on companies’ websites 52 Rakuten Securities: Trading Value
25.0 23.4 2007(Apr-Jun) 22.7 2007(Jul-Sep) 20.0
15.0
Trading Volume No.2 10.0 9.3 8.3
5.4 4.9 5.0 4.1 3.7 3.9 4.1
0.0 Trading Volume-Daily Average (Trillion Yen) E*Trade Rakuten Kabu.com Matsui Monex Securities
* Source: based on information on companies’ websites 53 Nikkei 225 Mini-Report
Achieved No.1 Online Brokerage in Trading Volume of Nikkei225 mini in Oct
Daily-average Trading Volume Market Share (%) 60,000 20.0% 18.0% 50,000 16.0% 40,000 14.0% 12.0% 30,000 10.0% 8.0% 20,000 6.0% 10,000 4.0% 2.0% 0 0.0% May Jun Jul Aug Sep Oct Nov ※ Rakuten Securities E*Trade Mats ui Rakuten Market Share
th * Average volume by 12 Nov 54 2 -8 Professional Sports Business
55 2007/Q3 Professional Sports Business
Number of spectators +17.4(YoY) with well team performance (No.1 growth rate in the league) Total number (Rakuten-sponsored Total Number of Spectators included local area) Per game Total accumulated 1.117 spectators (Rakuten- sponsored) (+17.4% YoY) 1 million 0.952 Total spectators (Rakuten-sponsored （per game on average ） 15,519 15,000 people 13,996
2006 2007 Season End League Ranking Sixth Fourth 56 2007/Q3 Results (cumulative total ) of Professional Sports Business
Bumper sales of goods, fueled by growth in specters Expected greater improvement of operating profit than last year
（Million Yen） Non-consolidated 06/ Q3 07/ Q3 YoY Change (Rakuten Baseball, Inc.) (cumulative total ) (cumulative total ) (%) Sales 5,594 6,249 +12% Operating expenses 6,239 6,561 +5% Operating loss -644 -312 -
Consolidated 06/ Q3 06/ Q3 YoY Change (Including Rakuten Sports Properties, Inc.) (cumulative total ) (cumulative total ) (%) Sales 6,334 7,098 +12% Operating expenses 6,999 7,283 +4% Operating loss -665 -186 -
57 2 -9 Telephone Business Unit
58 Fusion Communications
Fusion Communications, IP telephony company became consolidated subsidiary, thus established new segment
Changes of organization control Toru Shimada appointed as Representative Director as of 1st Nov,2007 and Board members were dispatched from Rakuten, Inc Working on restructuring of business Drastic cost restructuring under review Weekly management meetings, Weekly morning meetings undergo Creating synergy in Rakuten group Joint team set up by Rakuten and Fusion Under review by Rakuten Produced Development Headquaters
*Consolidated B/S from 30th Sep, 2007 Ratio of voting rights：65.94%（substantial as of 30th Sep, 2007 ）(Increased to 73% as of 31st Oct, 2007) Acquisition Cost ：985 million yen (As of 30th Sep, 2007) Goodwill：-199 million yen (As of 30th Sep, 2007)
59 3 Segment Information (YoY, QoQ) , Key Business Units (QoQ)
60 2007/Q3 Financial Overview by Segment (YoY)
(Billion Yen)
2006/Q3 2007/Q3
OP EBITDA Sales OP EBITDA Sales YoY OP YoY EBITDA YoY margin Margin
E-Commerce 14.19 3.45 4.86 18.19 +28.2% 3.75 +8.5% 20.6% 4.83 -0.6% 26.5%
- Credit and Payment 18.41 -8.42 -6.05 17.89 -2.8% -0.21 - -1.2% 1.66 9.3%
- Portal and Media 3.15 -0.06 0.09 3.39 +7.6% -0.30 - -9.1% -0.09 -2.7%
Travel 3.02 1.33 1.63 3.78 +25.1% 1.87 +41.1% 49.6% 2.36 +44.5% 62.5%
Securities 8.26 2.23 2.51 8.34 +1.0% 1.76 -20.9% 21.2% 2.14 -14.6% 25.7%
Professional Sports 2.64 0.15 0.36 3.01 +13.8% 0.44 +186.7% 14.8% 0.64 +77.6% 21.5%
Telecommunication - - - 0.00 - -0.11 - - -0.11 - -
Corporate and -1.91 -0.33 -0.91 -2.54 - -0.93 - - -0.79 - - Internal elimination
Consolidated 47.79 -1.63 2.50 52.08 +9.0% 6.26 - 12.0% 10.65 +325.2 % 20.5%
* EBITDA=Ordinary profit + Interest expense + Depreciation and Amortization + Amortization of goodwill -Effect of securitizing loan receivables 61 2007/Q3 Financial Overview by Segment (QoQ)
(Billion Yen) 2007/Q2 2007/Q3
OP EBITDA Sales OP EBITDA Sales QoQ OP QoQ EBITDA QoQ margin Margin
E-Commerce 18.32 5.30 7.06 18.19 -0.7% 3.75 -29.3% 20.6% 4.83 -31.6% 26.5%
Credit and Payment 17.94 0.01 1.90 17.89 -0.3% -0.21 - -1.2% 1.66 -12.4% 9.3%
- Portal and Media 3.60 -0.03 0.13 3.39 -5.7% -0.30 - -9.1% -0.09 -2.7%
Travel 3.11 1.42 1.77 3.78 +21.5% 1.87 +32.0% 49.6% 2.36 +33.3% 62.5%
Securities 7.35 1.53 1.85 8.34 +13.5% 1.76 +15.2% 21.2% 2.14 +15.9% 25.7% Professional 2.88 0.27 0.51 3.01 +4.6% 0.44 +60.4% 14.8% 0.64 +26.1% 21.5% Sports Telecommunication - - - 0.00 - -0.11 - - -0.11 - - Corporate and -2.72 -1.22 -1.07 -2.54 - -0.93 - - △ 0.79 - - Internal elimination
Consolidated 50.49 7.29 12.17 52.08 +3.1% 6.26 -14.1% 12.0% 10.65 -12.5% 20.5%
* EBITDA=Ordinary profit + Interest expense + Depreciation and Amortization + Amortization of goodwill -Effect of securitizing loan receivables 62 (Adjustment of Common Costs Allocation) 2007/Q3 Consolidated Financial Overview by Segment (QoQ)
（Billion Yen） 2007/Q2 (After Adjustment of Common 2007/Q3 Costs Allocation)
OP EBITDA Sales OP EBITDA Sales QoQ OP QoQ EBITDA QoQ margin Margin
E-Commerce 18.32 5.02 6.78 18.19 -0.7% 3.75 -25.4% 20.6% 4.83 -28.8% 26.5%
Credit and Payment 17.94 -0.01 1.87 17.89 -0.3% -0.21 - -1.2% 1.66 -11.0% 9.3%
- Portal and Media 3.60 -0.10 0.07 3.39 -5.7% -0.30 - -9.1% - 0.09 -2.7%
Travel 3.11 1.38 1.73 3.78 +21.5% 1.87 +36.1% 49.6% 2.36 +36.6% 62.5%
Securities 7.35 1.50 1.82 8.34 +13.5% 1.76 +17.6% 21.2% 2.14 +18.0% 25.7%
Professional Sports 2.88 0.27 0.51 3.01 +4.6% 0.44 +62.0% 14.8% 0.64 +26.8% 21.5%
Telecommunication - - - 0.00 - -0.11 - - - 0.11 - - Corporate and -2.72 -0.77 -0.62 -2.54 - -0.93 - - - 0.79 - - Internal elimination
Consolidated 50.49 7.29 12.17 52.08 +3.1% 6.26 -14.1% 12.0% 10.65 -12.5% 20.5%
* EBITDA=Ordinary profit + Interest expense + Depreciation and Amortization + Amortization of goodwill -Effect of securitizing loan receivables 63 2007/Q3 Financial Overview by Business Unit (QoQ)
(Billion Yen)
07/Q2 07/Q3 Operating Operating Segment BU/Company Sales Sales YoY YoY OP Margin Profit Profit E-Commerce Rakuten Ichiba Business 12.37 5.55 12.41 +0.3% 5.09 -8.3% 41.0%
E-Commerce Rakuten Books*1 3.19 -0.07 3.50 +9.8% -0.31 --9.0%
E-Commerce Rakuten Auction*1 3.00 -0.47 0.35 +15.7% -0.45 --128.7%
E-Commerce LinkShare*1,3 1.69 0.54 1.70 +0.4% 0.44 -18.8% 25.8%
Credit and Payment Rakuten KC*1 15.21 0.04 15.47 +1.7% 0.21 +368.6% 1.4%
Credit and Payment Rakuten Credit*1 2.68 0.32 2.39 -10.7% 0.33 +1.8% 13.8%
Credit and Payment Banking (Rakuten Financial Solution)*1 0.10 -0.17 0.02 +35.4% -0.54 --
Travel Rakuten Travel*1 3.03 1.35 3.64 +20.1% 1.82 +34.5% 50.0%
Securities Rakuten Securities*1 7.24 1.52 8.04 +11.1% 1.84 +21.2% 22.9%
Professional Sports Rakuten Baseball*1 2.61 0.20 2.74 +5.0% 0.37 +84.4% 13.7%
Portal and Media Infoseek, Advertising Business 1.63 0.00 1.46 -10.0% -0.05 --3.7% Other Business Units 3.19 -0.37 2.84 -11.0% -0.66 --23.3%
Amortization of Goodwill --0.86-- -0.88 --
Corporate and Internal elimination*2 -2.72 -0.29 -2.54 - -0.93 -- Securitazation Effect 50.49 7.29 52.08 +3.1% 6.26 -14.1% 12.0%
*1 Entity basis, except Rakuten HD (Consolidated) *2 Segment in consolidated financial statement *3 Pro forma basis US$=￥123.26(07/Q2), US$=115.43(07/Q3) 64 4 Balance Sheets
65 Rakuten Group: Outlook of Balance Sheet (30th Sep, 2007) Rakuten (Consolidated) （Unit：Billion Yen）
Interest-bearing debt 441.4
Total Assets Rakuten 1,193.1 Securities HD Other Rakuten Liabilities (Non-Consolidated) 48.7 524.7
58.7 Rakuten KC 54.2 480.2 399.7 251.4 Total Net 391.4 324.9 Rakuten Credit Assets 278.5 81.5 226.9 56.0 90.5 31.7
*Rakuten Securities HD, Rakuten KC and Rakuten Credit includes Internal elimination 17.5 1.5 * Interest-bearing debt: SB + CP + Short-term borrowings +Long-term borrowings 7.4 66 Consolidated Balance Sheet
Consolidated Balance Sheet (Sep 30, 2007)
(Billion Yen; Amounts Less Than 0.1 Billion Omitted) CURRENT ASSETS 912.6 CURRENT LIABILITIES 755.5 Cash and cash equivalents 97.7 Accounts payable 12.8 Accouts receivable 24.5 Accouts payable, guarantee contracts 4.6 Installment accounts receivable 61.9 Short-term borrowings 237.5 Installment accounts receivable, guarantee contracts 4.6 Other accounts payable 21.6 Beneficial interests in securitized assets 99.4 Income taxes payable 25.6 Deposits for security brokerage business 223.5 Advances received 4.1 Margin transactions assets for security brokerage business 194.9 Deposits received for security brokerage business 138.5 Short-term guarantee deposits for security brokerage business 8.1 Margin transactions liabilities for security brokerageiness bus 99.1 Other current assets 230.4 Guarantee deposits received for security brokerage business 106.3 Allowance for doutful accounts - 32.8 Other current liabilities 103.4 LONG-TERM LIABILITIES 206.8 Other 3.7 TOTAL LIABILITIES 966.1 FIXED ASSETS SHAREHOLDERS' EQUITY 213.4 Property, plant and equipment 280.4 Common stock 107.4 Intangible fixed assets 24.7 Capital surplus 119.4 Investment and other assets 90.6 Retained earnings - 13.4 165.0 Treasury stock 0.0 VALUATION, TRANSLATION ADJUSTMENTS AND OTHERS 5.2 MINORITY INTERESTS 8.1 TOTAL NET ASSETS 226.9 TOTAL LIABILITIES TOTAL ASSETS 1,193.1 AND NET ASSETS 1,193.1
67 Rakuten Securities HD: Balance Sheet
Consolidated Balance Sheet (Sep 30, 2007)
(Billion Yen; Amounts Less Than 0.1 Billion Omitted) CURRENT ASSETS 454.2 CURRENT LIABILITIES 434.4 Cash and cash equivalents 16.3 Short-term borrowings 25.8 Deposits 223.5 Margin transactions liabilities 99.1 Magin transactions assets 194.9 Deposits 138.5 Other current assets 19.3 Guarantee deposits received 106.3 Allowance for doutful accounts - 0.1 Other current liabilities 64.4 LONG-TERM LIABILITIES 10.3 Long-term borrowings 9.5 Deffered tax liabilities 0.8 STATUTORY RESERVE FOR 3.7 SECURITY BROKERAGE BUSINESS TOTAL LIABILITIES 448.5 FIXED ASSETS 26.0 SHAREHOLDERS' EQUITY 28.1 Property, plant and equipment 0.2 Common stock 1.0 Intangible fixed assets 1.5 Capital surplus 10.6 Investment and other assets 24.2 Retained earnings 16.4 （Allowance for doutful accounts） - 1.4 VALUATION, TRANSLATION 3.5 ADJUSTMENTS AND OTHERS Unrealized holding gain on 3.5 investment securities TOTAL NET ASSETS 31.7 TOTAL LIABILITIES TOTAL ASSETS 480.2 AND NET ASSETS 480.2 68 Rakuten KC: Balance Sheet
Balance Sheet (Sep 30, 2007)
(Billion Yen; Amounts Less Than \0.1 Billion Omitted) CURRENT ASSETS 286.1 CURRENT LIABILITIES 200.1 Cash and cash equivalents 31.7 Accounts payable; guarantee Installment accounts receivable 150.0 contracts 4.6 Accounts receivable, Short-term borrowings 151.7 guarantee contracts 4.6 Other current liabilities 43.6 Beneficial interest in securitized assets 92.7 LONG-TERM LIABILITIES 107.3 Other current assets 38.4 Long-term borrowing 99.6 Allowance for doutful accounts -31.4 Allowance for interest repayment 7.1 Other current fixed liabilities 0.5 TOTAL LIABILITIES 307.4 FIXED ASSETS 38.8 SHAREHOLDERS' EQUITY 17.9 Property, plant and equipment 15.3 Common stock 3.0 Land and buildings 14.3 Capital surplus 51.0 Other tangible fixed assets 0.9 Retained earnings -20.0 Intangible fixed assets 2.8 Accumulated deficit -16.0 Investment and other assets 22.3 VALUATION, TRANSLATION Allowance for doutful accounts -1.6 ADJUSTMENTS AND OTHER S -0.4 TOTAL NET ASSETS 17.5 TOTAL LIABILITIES AND NET TOTAL ASSETS 324.9 ASSETS 324.9
*Total securitized loan receivables: 170.0 billion yen 69 Rakuten Credit: Balance Sheet
Balance Sheet (Sep 30, 2007)
(Billion Yen; Amounts Less Than 0.1 Billion Yen Omitted) CURRENT ASSETS 85.8 CURRENT LIABILITIES 38.9 Cash and cash equivalents 2.8 Short-term borrowings 37.3 Loan receivables 75.6 Other current liabilities 1.5 Beneficial interest in securitized assets 6.7 Other current assets 1.2 LONG-TERM LIABILITIES 44.2 Allowance for doutful accounts -0.7 Long-term borrowing 44.2 Other current fixed liabilities 0.0
TOTAL LIABILITIES 83.1 FIXED ASSETS 4.7 SHAREHOLDERS' EQUITY 7.4 Property, plant and equipment 0.0 Capital stock 4.4 Intangible fixed assets 0.6 Capital surplus 3.4 Investment and other assets 4.0 Accumulated deficit -0.5 Treasury stock 0.0 VALUATION, TRANSLATION 0.0 ADJUSTMENTS AND OTHERS TOTAL NET ASSETS 7.4 TOTAL LIABILITIES AND NET TOTAL ASSETS 90.5 ASSETS 90.5
*Total securitized loan receivables: 25.00 billion yen 70 Rakuten, Inc. : B/S, PL
Non-consolidated Balance Sheet （Million Yen） Non-consolidated Income Statement （Million Yen）
Account Title 2007/Q3 2007/Q3 2006/Q3 (As of Sep 30, 2007) Account Title (3 Months Ended Sep 30, 2007) (3 Months Ended Sep 30, 2006) composition Amount composition composition ratio Amount Amount ratio ratio （ASSETS） Ⅰ Net sales 14,279 100.0% 11,940 100.0% Ⅰ Current Asset 76,045 19.4% Ⅱ Cost of sales 405 2.8% 325 2.7% 1. Cash and cash equivalents 39,405 Gross profit 13,874 97.2% 11,615 97.3% 2. Accounts receivable 12,134 Ⅲ Selling, general and administrative 3. Other current assets 24,612 10,120 70.9% 8,190 68.6% expenses Allowance for doutful accounts -107 Ⅱ Fixed Asset 315,410 80.6% 1. Personnel 2,928 20.5% 2,308 19.3% 1. Tangible assets 6,906 2. Advertising and sales promotion 2,118 14.8% 1,988 16.7% 2. Intangible assets 8,793 3. Depreciation and amortization 1,110 7.8% 716 6.0% 3. Investments and other assets 299,711 4. Communication and maintanance 557 3.9% 365 3.1% （Allowance for doutful accounts） -280 5. Outsourcing 2,694 18.9% 1,911 16.0% (Allowance for possible investment losses) -2,324 6. Others 711 5.0% 900 7.5% Total Assets 391,456 100.0% Operating Income 3,753 26.3% 3,424 28.7% （LIABILITIES） Ⅳ Non-operating income 385 2.7% 306 2.6% Ⅰ Current Liabilities 63,641 16.3% Ⅴ Non-operating expenses 710 5.0% 857 7.2% 1. Accounts payable 96 Ordinary income 3,429 24.0% 2,872 24.1% 2. Short-term borrowings 13,900 Ⅵ Special Gains 45,513 318.7% 7,638 64.0% 3. Other accounts payable 5,178 Ⅵ Special losses 323 2.3% 10,058 84.2% Net income before income taxes and 4. Income taxes payable 22,596 48,619 340.5% 453 3.8% 5. Advenced received 3,120 minority interests Corporate, inhabitants' and enterprise 6. Reserve for points 4,498 19,550 136.9% -89 -0.7% taxes 7. Other current liabilities 14,250 NET INCOME 29,069 203.6% 542 4.5% Ⅱ Fixed Liabilities 49,310 12.6% Total Liabilities 112,952 28.9% (NET ASSETS) Ⅰ Shareholders' equity 277,851 71.0% 1. Common stock 107,443 27.4% 2. Capital surplus 116,774 29.8% 3. Retained earnings 53,644 13.7% 4. Tresuary stock -10 0.0% Ⅱ Valuation, translation adjustments and others 553 0.1%
Unrealized holding gain on investment securities 553 0.1%
Ⅲ Stock acquistion rights 99 0.0% Total Net Assets 278,504 71.1% Total Liabilities and Net Assets 391,456 100.0% 71 Appendix
72 Breakdown of Amortization of Goodwill
（Million Yen）
06/Q1 06/Q2 06/Q3 06/Q4 07/Q1 07/Q2 07/Q3 Companies
E-Commerce Linkshare Business 528 527 527 527 527 527 542 Credit and Payment Rakuten KC Group Business 168 168 168 234 234 234 234
Portal and Media Rakuten Research Business 16 16 17 17 17 17 17
Travel Business 7 7 7 10 10 10 10 Rakuten Bus Service
Rakuten Securities Holdings Rakuten Realty Securities Business 1 1 1 56 56 76 76 Management Rakuten Strategic Partners Professional Sports Business ------
Consolidated 722 721 721 845 845 865 880 73 Capital Expenditures
(Billion Yen) 2006 2007
Q1 Q2 Q3 Q4 Q1 Q2 Q3
Hardware 0.22 0.59 1.01 1.41 0.20 0.56 1.68
Software 0.40 0.54 0.58 2.34 0.56 1.04 0.79
Total 0.62 1.13 1.60 3.75 0.77 1.60 2.47 Non-consolidated
Hardware 0.97 0.69 1.51 1.95 0.63 0.91 2.05
Software 0.94 1.08 0.93 3.32 1.98 2.03 4.25
Consolidated Total 1.92 1.78 2.45 5.28 2.61 2.94 6.30
*Operating Base *Excluding Professional Sports and Funds 74 Rental-Car Reservation Service
Timely rental car reservation service commenced from Oct, 2007 First in the country, market style timely rental-car reservation service on nationwide
Service Outline
Service commenced from Oct, 2007 Participated Companies （Services） ¾ Toyota Mortar Corporation （TOYOTA Rent-a-car） ¾ MAZDA Car Rental Corporation. （MAZDA Car Rental ） ¾ ORIX Auto Corporation. （ORIX Rent-a-car , Rent-a-car JAPAREN） ¾ Nippon Rent-A-Car Service,Inc.（Scheduled） （Nippon Rent-A-Car ） Other than those above companies participate in the planning, Reservation services first in the country ¾ Able to search and reserve cross- company stock on nationwide
75 Rakuten KC: Transaction Volume and Sales
Composition of Transaction Volume (Million Yen) 07/Ｑ3 06/Ｑ306/Ｑ4 07/Ｑ1 07/Ｑ2 Results % of total YoY change General services 67,406 79,731 80,940 87,058 91,447 73.2% 35.7% Card shopping 63,632 75,546 78,698 84,907 89,340 71.6% 40.4% Other 3,774 4,185 2,243 2,152 2,106 1.7% - 44.2% Financing 52,357 44,586 33,986 30,409 28,956 23.2% - 44.7% Card cash advances 28,913 26,318 20,990 19,337 18,860 15.1% - 34.8% Loan card 23,444 18,268 12,996 11,071 10,095 8.1% - 56.9% Installment 25,882 5,618 11 23 14 0.0% - 99.9% Credit guarantee 19,297 8,074 2,858 2,528 2,660 2.1% - 86.2% Other 2,686 1,876 1,820 1,959 1,766 1.4% - 34.3% Total transaction volume 167,628 139,885 119,616 121,978 124,844 100.0% - 25.5%
Composition of Revenues (Million Yen) 07/Ｑ3 06/Ｑ3 06/Ｑ4007/Ｑ1 7/Ｑ2 Results % of total YoY change General services 2,051 2,349 2,390 2,487 2,590 15.6% 26.3% Card shopping 1,886 2,179 2,253 2,357 2,460 14.8% 30.4% Other 164 170 137 130 130 0.8% - 20.7% Financing 12,948 12,987 12,415 12,396 12,172 73.2% - 6.0% (11,158) (11,398) (11,210) (11,103) (11,023) - 1.2% Card cash advance 7,995 8,032 7,603 7,632 7,473 44.9% - 6.5% (6,648) (6,835) (6,538) (6,686) (6,634) 39.9% - 0.2% Loan card 4,896 4,902 4,751 4,708 4,638 27.9% - 5.3% (4,453) (4,509) (4,610) (4,360) (4,329) 26.0% - 2.8% Other financing 57 53 61 57 59 0.4% 3.5% Installment 1,4934801120.0%- 99.9% (1,467) (472) (1) (1) (2) 0.0% - 99.9% Credit guarantee 662 420 281 286 319 1.9% - 51.8% Other 842 846 726 1,173 1,484 8.9% 76.2% Financing revenues 264 173 101 167 58 0.3% - 78.0% Total revenues 18,260 17,256 15,913 16,509 16,626 100.0% - 8.9% (16,444) (15,658) (14,708) (15,217) (15,478) 93.1% - 5.9% Note: Amount of revenues in brackets include effects of securitization and as per income statement
76 Rakuten KC: Expenses, Loan Receivables & Membership
Operating Expenses (Million Yen) 07/Ｑ3 06/Ｑ3 06/Ｑ4 07/Ｑ1 07/Ｑ2 Results % of total YoY change Personnel cost 3,069 2,379 1,900 1,348 1,354 8.9% - 55.9% General expenses 6,216 5,657 4,777 4,717 4,224 27.7% - 32.0% Interest expenses 2,148 1,797 1,494 1,485 1,482 9.7% - 31.0% Expenses related to doubtful account 12,962 3,887 6,052 5,729 5,707 37.4% - 56.0% Interest repayment expenses 689 144 1,090 1,890 2,492 16.3% 261.7% Total operating expenses 25,084 13,864 15,313 15,170 15,260 100.0% - 39.2%
Balance of Loan Receivables 07/Ｑ2 06/Ｑ3 06/Ｑ4 07/Ｑ1 07/Ｑ2 Results % of total YoY change General services 55,733 62,198 60,825 64,137 62,976 16.3% 13.0% Card shopping 49,087 55,376 54,927 58,635 57,937 15.0% 18.0% Other 6,646 6,822 5,898 5,503 5,039 1.3% - 24.2% Financing 271,703 273,830 269,673 263,512 258,097 66.7% - 5.0% Card cash advances 129,015 128,451 126,117 122,668 120,413 31.1% - 6.7% (securitized) (95,646) (90,589) (92,437) (94,524) (91,908) 23.7% - 3.9% Loan card 108,487 110,941 109,482 106,494 103,722 26.8% - 4.4% (securitized) (81,964) (79,371) (85,186) (82,421) (78,101) 20.2% - 4.7% Other financing 34,201 34,438 34,074 34,350 33,961 8.8% - 0.7% Installment 121,471 1,158 1,166 1,108 1,174 0.3% - 99.0% (securitized) (8,787) ------Credit guarantee 356,445 51,197 50,013 48,248 47,117 12.2% - 86.8% (off-balance guarantees) (196,450) (46,144) (45,100) (43,483) (42,467) 11.0% - 78.4% Other 31,134 27,530 24,052 20,817 17,863 4.6% - 42.6% Total operating receivables 836,486 415,913 405,729 397,823 387,229 100.0% - 53.7% (as presented on balance sheet) 422,505 172,279 158,954 156,578 156,889 40.5% - 62.9%
Number of Current Cardholders 07/Ｑ3 06/Ｑ3 06/Ｑ4 07/Ｑ1 07/Ｑ2 Results YoY change Credit Card 2.58 2.67 2.79 2.86 2.92 13.2% (Rakuten Card) 0.39 0.48 0.57 0.67 0.77 97.4% Loan Card 0.50 0.47 0.47 0.46 0.45 -10.0%
77 Group Membership
COOL 0.44M Signature Japan*2 0.26M
Credit Card, Rakuten KC 2.92M MyTrip.net *3 2.77M
Money Card, Rakuten KC 0.44M
Rakuten Credit 0.09 M
Rakuten Securities 0.72M As of Sep 30, 2007 Total:40.26M※1
*1 Figures include duplication among services Rakuten Members *2 Includes automatic registration to contracted service 32.58M *3 MyTrip.net excludes members converted to Rakuten ID *4 Ynot members converted to Rakuten ID by 2007/Jul *5 Financial related business added from 2006/Q4
78 Group Employees
Rakuten Group: 3,358 Rakuten, Inc.: 1,485 (Non-consolidated)
Corporate, Corporate, 249 Developm 264 Ichiba, 568 ent, 457 Ichiba, 542 Profession al Sports, EC, 328 130 Finance, Personal 47 Finance, 80 Securities, Developme EC, 83 216 nt, 457 Travel, 198 Infoseek, KC, 825 Portal and Advertisin Infoseek, Portal and Advertising Media, 139 g, 67 39 38 Media, 49 , 67
* As of Sep 30, 2007 * Excluding directors, auditors and part-time workers
79 80