Annual Securities Report ConsolidatedConsolidated Financial(“Yukashoken-Hokokusho”) Financial Statements Statements Fiscal YearsFiscal Ended Years December Ended December 31, 2014 and31, 20142015 and 2015 Rakuten, Rakuten,Inc. and its Inc. Consolidated and its Consolidated Subsidiaries Subsidiaries This document Thishas beendocument translated has beenfrom translatedthe Japanese from original the Japa reportnese (Yukashoken-Hokokusho)original report (Yukashoken-Hokokusho) issued on Marchissued 30, 2016 on March for reference 30, 2016 purposes for reference only. Inpurposes the event only. of anIn ythe discrepancy event of an betweeny discrepancy between this translated documentthis translated and the document Japanese and or theiginal, Japanese the original original, shall the prevail. original shall prevail. 19 Table of Contents 10. Loans for Banking Business ..................................................................................................... 232 11. Investment Securities for Insurance Business .......................................................................... 232 12. Derivative Assets and Derivative Liabilities .............................................................................. 233 Cover 13. Investment Securities ............................................................................................................... 234 Part I Information on the Company ........................................................................................................ 23 14. Other Financial Assets .............................................................................................................. 234 I. Overview of the Company ................................................................................................................ 23 15. Allowance for Doubtful Accounts .............................................................................................. 235 1. Key Financial Data and Trends .......................................................................................................... 23 16. Investments in Associates and Joint Ventures ......................................................................... 236 2. Corporate History ............................................................................................................................... 26 17. Property, Plant and Equipment ................................................................................................. 237 3. Description of Business ..................................................................................................................... 28 18. Intangible Assets ...................................................................................................................... 239 4. Information on Subsidiaries and Associates ...................................................................................... 31 19. Deposits for Banking Business ................................................................................................. 243 5. Employees ......................................................................................................................................... 33 20. Financial Liabilities for Securities Business .............................................................................. 244 21. Bonds and Borrowings ............................................................................................................. II. Business Overview .......................................................................................................................... 34 244 22. Other Financial Liabilities ......................................................................................................... 1. Summary of Results........................................................................................................................... 34 246 23. Provisions ................................................................................................................................. 2. Production, Order and Sales Status .................................................................................................. 39 246 24. Policy Reserves and Others for Insurance Business ............................................................... 247 3. Challenges ......................................................................................................................................... 40 25. Income Tax Expense ................................................................................................................ 249 4. Business Risk and Other Risk Factors .............................................................................................. 42 26. Common Stock, Capital Surplus, Retained Earnings and Treasury Stock .............................. 253 5. Material Business Agreements, etc. .................................................................................................. 54 27. Revenue ................................................................................................................................... 254 6. Research and Development Activities ............................................................................................... 54 28. Operating Expenses ................................................................................................................. 262 7. Analysis of Consolidated Business Results, Financial Position and Cash Flows ............................ 55 29. Other Income and Other Expenses .......................................................................................... 263 III. Equipment and Facilities ............................................................................................................... 63 30. Financial Income and Financial Expenses ............................................................................... 263 1. Status of Capital Expenditures, etc. ................................................................................................... 63 31. Earnings per Share ................................................................................................................... 264 2. Situation of Major Equipment ............................................................................................................. 63 32. Assets Pledged as Collateral and Assets Received as Collateral ............................................ 265 3. Plans for Introduction, Disposals, etc. of Facilities ............................................................................ 63 33. Hedge Accounting .................................................................................................................... 266 IV. Information on the Company Submitting Financial Reports ..................................................... 64 34. Contingent Liabilities and Commitments .................................................................................. 267 1. Information on the Company’s Shares .............................................................................................. 64 35. Share-based Payments ............................................................................................................ 268 2. Status of Acquisition of Treasury Stock, etc. ..................................................................................... 178 36. Dividends .................................................................................................................................. 279 3. Basic Policy on Dividends .................................................................................................................. 179 37. Classification of Financial Instruments ..................................................................................... 280 4. Changes in Share Prices ................................................................................................................... 180 38. Gains and Losses Generated from Financial Instruments ....................................................... 283 5. Directors ............................................................................................................................................. 181 39. Fair Value of Financial Instruments .......................................................................................... 288 6. Corporate Governance ...................................................................................................................... 187 40. Offsetting of Financial Assets and Financial Liabilities ............................................................. 294 V. Financial Information ...................................................................................................................... 197 41. Financial Risk Management ..................................................................................................... 298 1. Consolidated Financial Statements ................................................................................................... 198 42. Capital Management ................................................................................................................ 310 (1) Consolidated Financial Statements ................................................................................................ 198 43. Related Parties ......................................................................................................................... 311 1) Consolidated Statements of