This document is a partial translation of the original “Kessan Tanshin” in Japanese. Digital Arts Inc. provides this translation for your reference and convenience only
and without any warranty as to its accuracy or otherwise. In the event of any discrepancy, the original “Kessan Tanshin” in Japanese shall prevail.

FY2015 Consolidated Financial Results
For Fiscal Year Ended March 31, 2016 (Japan GAAP)May 11, 2016
Company name: Digital Arts Inc.
<Tokyo Stock Exchange, First Section>
Code no.:2326
URL http://www.daj.jp
Representative:
Toshio Dogu, President and Chief Executive Officer
Contact Person:
Hidenobu Akazawa, Director, Administration Department
Tel. (03) 5220-6045
Scheduled date of annual general meeting of shareholders: June 24, 2016
Scheduled date of payment of cash dividends: June 27, 2016
Scheduled date of submission of financial reports:
June 27, 2016
Additional materials of the Financial Results for FY2015: Yes
Briefing session of the Financial Results for FY2015:
Yes (for institutional investors and analysts)(Amounts less than one million yen are rounded)

1. Consolidated Financial Results for FY2015 (April 1, 2015 through March 31, 2016)<1> Consolidated operating results(Percent indications show percentage of changes from corresponding figures for the previous period)

Net sales

Operating income

Net income attributable toowners of parent

Ordinary income

Millions of yen%

Millions of yen%

Millions of yen%

Millions of yen

%

4,000
3,402

17.6
12.4

1,006
865

16.4
32.5

994
910

9.2
38.0

545
531

2.8
33.0

FY2015FY2014(Note): Comprehensive income: 536 million yen for FY2015, -0.9% : 541 million yen for FY2014, 35.6%

Net income
per share-basic
FY2015FY2014

Net income
per share-diluted

Ordinary income tototal assets

Return on equity

Operating margin

Yen

Yen

%

%

%

39.26
38.27

39.14
38.19

12.4
13.3

16.7
17.1

25.2
25.4

(Reference): Equity in earnings (losses) of affiliates: 0 million yen for FY2015 and 0 million yen for FY2014<2> Consolidated financial position
Total assets

Net assets

Equity ratio

Net assets per share

Millions of yen

Millions of yen

%

yen

6,133
5,749

4,642
4,297

74.7
73.3

329.03303.40FY2015FY2014(Reference): Total equity: 4,583 million yen as of March 31, 2016, 4,213 million yen as of March 31, 2015.

<3> Consolidated cash flows
Cash flows from operating
activities

Cash flows from investing
activities

Cash flows from financing
activities

Cash and cash equivalents
at the end of period

Millions of yen

Millions of yen

Millions of yen

Millions of yen

1,027
1,355

(441)
(848)

(187)
(119)

2,443
2,074

FY2015FY2014
2. Dividends

Total cash
dividends(Annual)Annual cash dividends per share

FY2014FY2015FY2016 (forecast)

Total

Payout ratio(Consolidated)

Dividend on
equity(Consolidated)

at 1Q end

at 2Q end

at 2Q end

at year-end

yen

yen

yen

yen

yen

Millions of yen

%

%

―
―
―

5.00
7.00
10.00

―
―
―

9.00
8.00
10.00

14.00
15.00
20.00

194
208

36.6
38.2
32.0

5.3
4.7

(Note): Breakdown of year-end dividend for the fiscal year ended March 31, 2015: ordinary dividend of 5 yen, commemorative dividend of 4 yen (celebrating 20th company
anniversary)

3. Forecast of consolidated operating results for FY2016 (April 1, 2016 through March 31, 2016)(Percent indications show percentage of changes from corresponding figures for the previous period)

Net sales

At 2Q end (cumulative)
At FY end

Operating income

Net income
attributable to ownersof parent

Ordinary income

Net income pershare

Millions of yen%

Millions of yen%

Millions of yen%

Millions of yen

%

yen

2,222
4,600

14.8
15.0

608
1,400

22.5
39.1

608
1,400

21.9
40.8

363
870

15.5
59.5

26.08
62.49

－

1 －

※Notes<1> Significant changes in scope of consolidation: None
In : － (Company Name:)

Out : － (Company Name:)<2> Changes in accounting policies, accounting estimation change and restatement<2>-1 Changes in accounting policies due to the revision of the accounting standards: Yes<2>-2 Changes in accounting policies except for those in <2>-1:
No<2>-3 Changes due to accounting estimation change:No<2>-4 Restatement:
None
Note: See attached pages 18 “5. CONSOLIDATED FINANCIAL STATEMENTS (5) Notes to Consolidated Financial Statements (Changes in Accounting Policies)”<3> Number of shares issued<3>-1 Number of shares issued at the fiscal year end (including treasury stocks)<3>-2 Number of treasury shares at the fiscal year end<3>-3 Average number of shares issued during the fiscal year

FY2015

14,133,000 shares

FY2014FY2015201,800 shares

FY2014

14,133,000 shares
245,600 shares

FY2015

13,905,940 shares

FY2014

13,883,652 shares(Reference) Non-Consolidated Financial Results
1. Non-Consolidated Financial Results for FY2015 (April 1, 2016 through March 31, 2016)<1> Non-consolidated operating results(Percent indications show percentage of changes from corresponding figures for the previous period)

Net sales
FY2015FY2014

Operating income

Net income%

Millions of yen%

Millions of yen%

Millions of yen

%

4,018
3,395

18.3
14.7

1,335
913

46.1
44.4

1,328
926

43.5
44.9

840
573

46.4
47.7

Net income
per share-basic
FY2015FY2014

Ordinary income

Millions of yen

Net income
per share-diluted

Yen

Yen

60.45
41.34

60.25
41.26

<2> Consolidated financial position
Total assets

Net assets

Equity ratio

Net assets per share

Millions of yen

Millions of yen

%

yen

6,633
5,903

5,063
4,415

75.5
73.4

359.28311.86FY2015FY2014(Reference): Total equity: 5,005 million yen as of March 31, 2016, 4,330 million yen as of March 31, 2015.

2. Forecast of non-consolidated operating results for FY2016 (April 1, 2016 through March 31, 2016)(Percent indications show percentage of changes from corresponding figures for the previous period)

Net sales
At 2Q end (cumulative)
At FY end

Operating income

Ordinary income

Net income per share

Millions of yen%

Millions of yen%

Millions of yen

%

yen

2,264
4,598

17.1
14.4

792
1,712

20.2
28.9

546
1,182

24.8
40.7

39.23
84.88

※Presentation of Present Status of Audit ProceduresThis "Consolidated Financial Results" is exempt from audit procedures under the Financial Instruments and Exchange Act. Audit procedures for the financial statements arebeing performed when the Consolidated Financial Results are announced.

※Explanation of Appropriate Use of Performance Projections and Other Special Items
Business forecasts contained in this report are based on information available to the Company and on a certain assumption the Company considers reasonable on the date ofthis report’s announcement, and it does not constitute the Company’s intention to promise the accomplishment of the forecasts. Due to unforeseen circumstances, actual
results may differ significantly from such forecasts due to various risks and uncertainties which include, but are not limited to, global economic environment, intensified
sales competition, fluctuations in exchange rate and interest rate. Refer to “1. ANALYSIS of BUSINESS PERFORMANCE and FINANCIAL POSITION (1) Business
Performance Analysis on page 2 of the attached material for more information on performance projection.

－

2 －１．ANALYSIS OF BUSINESS PERFORMANCE AND FINANCIAL POSITION
Analysis of Business Performance
In the current consolidated accounting period (April 1, 2015 through March 31, 2016), the Japanese economy recovered
moderately, mainly as a result of improved corporate earnings due to aggressive economic and financial polices by the Japanese
government and BOJ, and a pickup in consumer spending as employment and income environments improved. On the other hand,the prospects of the world economy remains unclear as a result of stagnant resource prices, economic slowdown of China and otheremergent countries, and geopolitical risks seen in certain areas of the world.
In the security industry, where the Digital Arts Group (the “Group”) engages its primary business, FY2015 saw a trend where
information security was increasingly recognized as an important measure, mainly due to the growing number of diverse andadvanced threats involving businesses and other organizations, such as viruses, unauthorized server access, and data disclosure bymembers of the organization, as well as the expanded use of mobile and cloud, and a growing demand to respond to changes inrelative laws and regulations.
Notably in Japan, expectations centered on preventing data disclosure from within in aims to protect sensitive and confidential
information, in addition to the conventional security measures against targeted attacks from outside the organization.
In such circumstances, the Group continued to drive sales with its flagship product i-FILTER and m-FILTER, and its strategic
product FinalCode. Sales grew considerably for security software i-FILTER as the effectiveness of proxy against targeted attacks
and the traditional web filtering were rediscovered by society in general, and the Group’s ability to meet sophisticated demands bylarger organizations was achieved by alliancing with external products and solutions. i-FILTER Browser & Cloud for mobile
devices was preferred by financial institutions as well as forward-thinking schools and education boards seeking a secure operation
for smart devices, as opportunities to use smartphones and tablets in business and educational scenes increased.
Email security software m-FILTER continued to show steady performance from the prior period. Email mis-delivery incidents
occur every day, and against this backdrop, the Group successfully captured client needs with its wide range of robust measures toprevent message mis-delivery and the scalability of the product through a range of options and alliances with external solutions.
With FinalCode, a file encryption and tracking solution, FinalCode (cloud edition), a SaaS version for quick and easy installation,
maintained strong sales by meeting the pressing needs by businesses seeking effective file security measures in light of incidents
pertaining to data loss caused by targeted attacks and intentional disclosure from within. Some of the pipelines who have been
considering large-scale deployment of FinalCode have started to materialize into actual orders, which resulted in the overall
increase in sales.
In the overseas market, the Group focused on branding activities initiated by FinalCode, Inc., a US subsidiary, and establishedsales and support structures in Asia Pacific and in Europe in order to meet the needs of global enterprises with offices in theselocations.
Net sales in the consolidated fiscal year 2016 was ¥4,000,620 thousand (117.6% year-on-year). While there was an increase in
expense, such as those associated with the full-scale operation of FinalCode, Inc., advance investment to launch overseas regional
offices, and events celebrating the 20th company anniversary, operating income recorded ¥1,006,925 thousand (116.4% year-onyear), ordinary income totaled ¥994,311 thousand (109.2% year-on-year) and net income attributable to owners of parent increased
to ¥545,983 thousand (102.8% year-on-year).
Business performance by segment is as follows.
Business/Enterprise Segment
Net sales for the Business/Enterprise segment recorded ¥2,240,089 thousand (117.9% year-on-year). In this segment, the Group’s
flagship products i-FILTER, m-FILTER together with FinalCode demonstrated robust performance. As corporate earnings recovered
and big enterprises started to invest aggressively on measures for information security, i-FILTER and m-FILTER, partnering withexternal solutions, expanded the possibilities to tackle diverse and sophisticated risks, capturing the needs of large corporations.
This led to increased order reception in this sector. In addition, i-FILTER Browser & Cloud (for mobile devices) was widely
introduced mainly by financial institutions with a high level of awareness on secure browsers, which increased sales significantly. In
terms of FinalCode, the cloud edition saw a sharp rise as it was deployed largely by businesses rushing to install security measuresin light of frequent data leakage incidents of material information. Clients already running FinalCode prior to the preceding
consolidated fiscal year have highly acclaimed this product for its effectiveness and usability, which led to a noticeable trend ofadditional licenses sales. Potential leads for large orders have started to materialize into receiving actual orders.
Government & Education Segment
Net sales for the Government & Education segment totaled ¥1,418,060 thousand (124.4% year-on-year). As with theBusiness/Enterprise segment, the Government & Education segment performed strongly mainly with i-FILTER and FinalCode. The
alliance of the Group’s flagship product i-FILTER with other solutions resulted in acquiring large orders by major institutions
seeking to enhance information security. There was also a drive for ICT education, the use of tablet devices in the classrooms,－ 3 －predominately by forward-thinking schools and education boards for directing students to acquire ICT literacy from an early age.
Many of these schools and education boards deployed i-FILTER Browser & Cloud (for mobile devices) to ensure a secure operationof smart devices in their environment. Furthermore, under the pressing need to tackle targeted attacks and data disclosure fromwithin, i-FILTER Browser & Cloud was deployed by numerous local municipalities around the country, which contributed to push
up sales significantly.
Consumer Segment
Net sales for the Consumer segment totaled ¥342,470 thousand (94.4% year-on-year). The Group strived to increase sales for iFILTER for mobile device by exploiting and expanding partnerships with mobile carriers and other alliances.
While the significant drop of domestic PC sales and the termination of alliances with several ISPs were factors for decrease inrevenues, the Group’s sales in this segment held relatively steady due to the success of i-FILTER® for Multi-Device, a software thatallows users to filter up to three devices (Windows, iOS, Android™) with one serial number, which proved to be an effective
solution to reduce the stress in managing filter settings across multiple devices. Moreover, successful sales targeting the New
Nintendo 3DS™, a handheld game device launched by Nintendo in the preceding consolidated fiscal year, also contributed tomaintaining steady performance.
[Fiscal Year 2016 (April 1, 2016 through March 31, 2016) Financial Forecast]
For fiscal year 2016, the Group seeks to continue expanding the Busines/Enterprise and Government & Education segment bypromoting its flagship products to large-scale businesses and organizations and win them as new clients. In order to better reachthese major institutions, the Group will enhance its CONSULTING service. The Group believes that its products must be coupledwith effective consultation in order to have corporate giants consider and successfully deploy the Group’s products as a global tool.
In order to meet these needs, Digital Arts have established a subsidiary dedicated to the consulting business. It expects to accelerate
its sales with large businesses by offering value-added proposals tailored to each client. In the Government & Education segment,
the Group expects the local municipalities to gain even more momentum to incorporate enhanced security measures, following theissuance of Guideline to Enhance Security in Local Municipalities by The Ministry of Internal Affairs and Communications. By
partnering with other solutions in the market, the Group will continue to appeal the importance and necessity of sound information
security measures in the local government. In the Consumer segment, the Group will drive further sales and alliance with various
partners, including mobile carriers, for i-FILTER for mobile device.
In overseas development, its US subsidiary, FinalCode, Inc. has begun full scale operations in March, 2016. There is a heightenedinterest for sound file security on a global scale, and the Group sees an increase in leads and pipelines. In line of thesecircumstances, the Group established two new regional offices; FinalCode Asia Pacific Pte. Ltd. and FinalCode Europe Limited.
Although there was an up-front expenditure to launch these two subsidiaries, it plans to recoup the initial investment at an earlystage.
Based on these efforts, the Group anticipates net sales of ¥4,600 million, ordinary income of ¥1,400 million and ¥870 million for net
sales attributable to owners of parents for the consolidated fiscal year 2016. Expenditures include ¥450 million in advanceinvestment for overseas business that is expected to shift into full swing.
Business forecasts contained in this report are based on information available to the Group as of the date of this report, and actual
results may differ from such forecasts due to various risks and uncertainties. Updates on critical information, if applicable, will be
disclosed in a timely manner.
Fiscal Year 2016 Forecast (Consolidated)
Net Sales

Net Income Attributable to
Owners of Parent

Ordinary Income

Millions of yen

Millions of yen

Millions of yen

FY2016 (forecast)

4,600

1,400

870

FY2015 (actual)

4,000

994

545

Fiscal Year 2016 Forecast (Non-consolidated)
Net Sales

Ordinary Income

Millions of yen

Net Income

Millions of yen

Millions of yen

FY2016 (forecast)

4,598

1,712

1,182

FY2015 (actual)

4,018

1,328

840

(Amounts less than one million yen are rounded)
Note: Business forecasts contained in this report are based on information available to Digital Arts as of the date of this report, and actual results may differ fromsuch forecasts due to various risks and uncertainties.

－

4 －2. CONSOLIDATED FINANCIAL STATEMENTS(1) Consolidated Balance Sheets(Thousands of yen)Preceding FY(As of March 31, 2015)
AssetsCurrent assets
Cash and deposits
Accounts receivable – trade
Securities
Finished goods
Deferred tax assets
Other
Total current assets
Non-current assets
Property, plant and equipment
Buildings
Accumulated depreciation
Buildings (net)
VehiclesAccumulated depreciation
Vehicles（net）
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures (net)
Construction in progress
Total Property, plant and equipment
Intangible assets
Software
Other
Total intangible assets
Investments and other assets
Investment securities
Deferred tax assets
Shares of subsidiaries and affiliates
Other
Total investments and other assets
Total non-current assets
Total assets－

5 －Current FY(As of March 31, 2016)

2,673,533
932,503
300,872928
67,182102,958
4,077,9782,942,965
1,081,626
100,909413
73,81362,8844,262,613

123,803(66,559)
57,243
5,961(5,961)
0274,786(201,038)
73,74814,125
145,117

124,367(80,277)
44,09015,977(5,362)
10,614294,391(221,838)
72,552－
127,257

810,653
125,021935,674

821,395
174,131995,526

299,559
62,56557,905
170,428
590,459
1,671,251
5,749,229

404,099
48,35656,769239,237
748,462
1,871,246
6,133,859

(Thousands of yen)Preceding FY(As of March 31, 2015)
Liabilities
Current liabilities
Accounts payable – trade
Income taxes payable
Provision for bonuses
Advances received
Asset retirement obligations
Deferred tax liabilities
Other
Total current liabilities
Non-current liabilities
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income
Foreign currency translation adjustments
Total accumulated other comprehensive income
Subscription rights to shares
Total net assets
Total liabilities and net assets－

6 －Current FY(As of March 31, 2016)

3,720
266,542
96,743675,395
261
2,263
363,797
1,408,722

5,844
283,949
109,975
721,033－－
327,288
1,448,091

42,132455
42,587
1,451,309

43,089645
43,734
1,491,826

713,590735,847
2,896,517(143,017)
4,202,938

713,590766,234
3,220,233(117,511)
4,582,547

10,504
10,50484,477
4,297,919
5,749,229

1,208
1,208
58,2784,642,033
6,133,859

(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income(Consolidated Statements of Income)(Thousands of yen)Preceding FY
Current FY(April 1, 2014 through March 31, (April 1, 2015 through March 31,
2015)
2016)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Commission fees
Foreign exchange gains
Gain on forfeiture of unclaimed dividends
Insurance premiums refunded cancellation
Miscellaneous income
Total non-operating income
Non-operating expenses
Interest expenses
Foreign exchange losses
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on reversal of subscription rights to shares
Gain on sales of noncurrent assets
Total extraordinary income
Extraordinary losses
Loss on retirement of noncurrent assets
Loss on liquidation of subsidiaries
Total extraordinary losses
Income before income taxes
Income taxes – current
Income taxes – deferred
Total income taxes
Net income
Net income attributable to owners of parent－

7 －3,402,691
974,6442,428,046
1,562,962
865,084

4,000,620
926,094
3,074,526
2,067,600
1,006,925

2,459
273
41,3591,058－
163
45,315

1,366
170
－
3,367
1,836
1,084
7,826

131
－
131
910,268

8
20,432
20,440994,311

153
－
153

3,701
2,638
6,340

43
1,898
1,941
908,479
379,076(1,889)377,186
531,292
531,292

1,960
－
1,960
998,691
447,392
5,314
452,707545,983
545,983

(Consolidated Statements of Comprehensive Income)(Thousands of yen)Preceding FY
Current FY(April 1, 2014 through March 31, (April 1, 2015 through March 31,
2015)
2016)
Net income
Other comprehensive income
Foreign currency translation adjustments
Total other comprehensive income
Comprehensive income（Details）
Comprehensive income attributable to owners ofparent－8 －531,292545,983

10,504
10,504
541,796(9,295)(9,295)
536,688541,796536,688

(3) Consolidated Statement of Changes in Net Assets
Preceding FY (April 1, 2014 through March 31, 2015)(Thousands of yen)
Accumulated othercomprehensive income

Shareholders’ equity

Capital stock Capital surplus Retained earnings

Balance at beginning of current
periodChanges of items during theperiod713,590732,237

Cash dividends paid
Net income attributable toowners of parent
Disposal of treasury stock

2,490,168

Treasurystock(146,860)

Total shareholders’equity3,789,135

Foreign

Total accumulated

currency

othertranslation

comprehensive

adjustments

income－－Sharesubscription
rightsTotal net
assets87,362 3,876,498(124,944)(124,944)(124,944)

531,292

531,292

531,292

7,453

7,453

3,610

3,843

Net changes of items other thanthose in shareholders’ equity

10,504

10,504(2,885)

7,619
421,421

Total changes of items during theperiod－3,610

406,348

3,843

413,80210,504

10,504(2,885)

Balance at end of current period

713,590735,847

2,896,517(143,017)

4,202,938

10,504

10,50484,477 4,297,919

Current FY (April 1, 2015 through March 31, 2016)(Thousands of yen)
Accumulated othercomprehensive income

Shareholders’ equity

Foreign

Capital stock Capital surplus Retained earnings

Treasurystock

Total shareholders’equitycurrencytranslation
adjustments

Balance at beginning of current
periodChanges of items during theperiod713,590735,847

Cash dividends paid
Net income attributable toowners of parent
Disposal of treasury stock

2,896,517(143,017)

4,202,938

10,504

Total
accumulated
other

Share
subscription
rightsTotal net assets

84,477

4,297,919

comprehensive
income10,504(222,267)△222,267(222,267)

545,983

545,983

545,983

55,89255,89230,38725,505

Net changes of items other thanthose in shareholders’ equity(9,295)(9,295)(26,199)△35,495

Total changes of items during theperiod－30,387323,716

25,505

379,608(9,295)(9,295)(26,199)

344,113

Balance at end of current period

713,590766,234

3,220,233△117,511

4,582,547

1,208

1,208

58,2784,642,033－

9 －