Investors’ Guide FY2019
Year ended March 31, 2020

Japanese GAAP

Leadership in Total Motion Control

November 11, 2020

Primary Objectives
HDSI focuses our expertise and management resources on “Total Motion Control”,
developing and producing Precision Control Equipment and Components for a broad range of applications.
HDSI aims to become a world industry leader, as a highly skilled precision engineering expert with pioneering spirit.
HDSI will strengthen our management processes and our flexibility to become a winner in the dynamic business environment.

Schematic Concept of Total Motion Control

Speed
Reducers

Sensors

Controllers

MotorsOthersDrivers1

Management Philosophy
HDSＩ conducts management based on the following management philosophy.
1.Respect for the Individual
HDSＩ aspires to be a company where the rights of every individual employee are respected, and where individuals can pursue a meaningful,cultural, and worthwhile life.
We will make HDSＩ a company that believes in each employee’s aspirations, supports independent activities, creates an environment where
employees can maximize their abilities through work, and where abilities and performance are rewarded.
2.A Meaningful Company
HDSＩ wants to be recognized as a meaningful, superior company which manifests creativity, has personality and distinctive characteristics,
and whose management foundation is based on ceaseless research and development activities and a constant emphasis on quality—acompany where the entire organization finds meaning in making utmost efforts.
3.Coexistence and Co-prosperity
HDSＩ is supported by many different parties including our employees, customers, shareholders, materials and parts suppliers, affiliatedcompanies and trading partners.
We make our best efforts to create attractive products, services, compensation, working environments, and trading relations to satisfy allthese concerned parties.
4.Contribution to Society
HDSＩ broadly contributes to society and industry through our corporate activities as a good corporate citizen. The products and services weprovide directly and indirectly contribute to the betterment of society.
We aspire to be a company that helps to improve the environment and the quality of the communities where we are located.

2

History of Sales（Million ¥）50,000

History of Sales（Non-consolidated basis）

45,00040,00035,000Flat Panel Display
Manufacturing Equipment

30,00025,000

Semiconductor Equipment

20,000Demand Drivers
15,00010,0005,000

Robotics
Working Machines

0'71 '72 '73 '74 '75 '76 '77 '78 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 15 16 17 18 19 （FY）

3

Operational Risks
1.Plant and Equipment Investment Trends
Because the majority of HDS Group’s products are sold as components for industrial machinery such as industrial robots, semiconductor
manufacturing equipment, and flat-panel display manufacturing equipment, plant and equipment investment trends have an influence on theoperating performance of the HDS Group.
In particular, for semiconductor and flat-panel display manufacturing equipment industries, while there is large growth from improved
conditions in the semiconductor device and panel markets and from manufacturing technology innovations, an unexpected market contraction
resulting from supply-demand adjustments or other developments could adversely affect the operating performance of the HDS Group.

2.Research and Development Results
The HDS Group develops and puts on the market distinctive, high-value-added products by intensively allocating resources to the researchand development division as a technology and technical skills organization in the motion control field. A delay in the market release or market
penetration of the resulting new products despite the continuous allocation of resources to research and development could adversely affectthe operating performance of the HDS Group.

3.Product Quality
The HDS Group has received ISO9001 certification and otherwise strives to strengthen its quality assurance system to boost customer
satisfaction and gain market advantages. Nevertheless, the emergence of unexpected product defects or other quality issues could adversely
affect the operating performance of the HDS Group.

4.Fluctuations in Foreign Exchange Rates
The HDS Group has two consolidated subsidiaries in the US, one consolidated subsidiary in China, one consolidated subsidiary in South
Korea, and one consolidated subsidiaries in Germany which has nine consolidated subsidiaries in Europe, and we are actively advancing
internationalization in our businesses. Consequently, foreign exchange rate fluctuations sometimes have a negative effect on the businessactivities of the HDS Group. Foreign exchange rate fluctuations also affect the yen-equivalent value of the Group’s assets and liabilities andrevenues and expenses from transactions denominated in foreign currencies, and may have a negative effect on the HDS Group’s operating
results and financial conditions.

5.Retirement Benefits Obligations
Harmonic Drive Systems and some HDSI consolidated subsidiaries have defined benefit pension plans or lump-sum retirement benefit plans.
Revisions of the assumptions for calculating retirement benefits obligations and retirement benefits expenses, changes in the investment
environment for pension assets, and other financial developments could adversely affect the Group’s operating performance and financial
conditions.

6.Other Risks
Changes in the economic and political environment and the occurrence of natural disasters, wars, terrorism, and other unpredictable events
that cannot be avoided by the HDS Group alone could adversely affect the Group’s operating performance and financial conditions.
*The above is a summary version. For full details, please refer to the latest Annual Securities Report “Yukashouken Houkokusyo” ( in Japanese).

4Mid-term to Long-term Management Strategies and Management Targets
Mid-term to Long-term Management Strategies, and Issues to be Addressed
The Group has formulated a medium-term management plan for the fiscal years ending March 31, 2019 to 2021. The final year of thisplan coincides with our 50th anniversary of establishment.
In the near future we expect the operating environment to be severe. That said, we remain convinced about opportunities for high levelsof growth over the medium to long term. In the markets where we are active—mechatronics and precision speed reducers—demand isforecast to continue rising for products used in industrial robots and collaborative robots. Behind this demand is the shift toward
manufacturing automation and investment in labor savings in emerging markets, while companies in emerging markets cope with labor
shortages and boost productivity.
Accordingly, we will strive to respond flexibly to short-term fluctuations in the operating environment. At the same time, we will implement
strategies in line with the policies outlined in our long-term vision and medium-term management plan. By maintaining a balance
between defensive and offensive approaches in our management strategy, we aim to enhance corporate value over the medium to longterm.
Our long-term vision and medium-term management plan are outlined below.

Long-term Vision(Aimed-for corporate structure)Continue to be without peer in the motion control industry through provision of high-value products and services.
(Aimed-for position)• A trusted actuator maker having original technology• A leading company in the precision speed reducer field

Mid-term Management Plan for fiscal years 2018–2020
50th Anniversary of Our Founding
Seizing the rapidly expanding growth opportunities, advance to the next stage（Basic policies and strategies）(a) Major increase in global production capacity
Raise capacity at each production site, spreading out from Japan to North America, Germany, and South Korea(b) Raising the capability of each Group company and building greater comprehensive strength
Strengthen the business foundations of each Group company and achieve higher corporate value

5Mid-term to Long-term Management Strategies and Management Targets(c) Improving customer satisfaction by raising QCDS capability
Mechatronics

AccuDrive®, HarmonicPlanetary®

HarmonicDrive®

• Develop new markets and applications
with original products and services• Strengthen service and support
capability• Raise the level of new productdevelopment and core technologies• Deploy sales strategies based on thecharacteristics of each region• Strengthen development and production
technologies• Normalize and reduce product lead time
• Provide distinctive value in the form ofhigh added value products and problemsolving ability(d) Strengthening the business foundation underlying growth• Acquire and train human resources in line with sound growth• Enhance business management platforms drawing on IT• Carry out business management with the environment, society, and governance in mind(e) Making moves toward future growth
Foster an institutional climate able to meet changes, even venturing into creative destruction

Management Indices Targets
The HDS Group has established the following management indices targets.
•Profit Margin: At least 20%•

Return on Equity (ROE): At least 10%

6Factors that Affect HDSI
（Non-consolidated basis)
one hundred million ¥one hundred million ¥500

25,000450
400

20,000350
300

15,000250
200

10,000

150
100

5,000

50
0

0

(FY)
Non-Consolidated Sales (right axis)

Sales of Semiconductor Equipment made in Japan

Source: Semiconductor Equipment Association of Japan, Japan Robot Association

7

Robot shipping amountSales Composition by Application Fields（Non-consolidated basis)

Turnover (%) in FY2019
0.2%
0.6%
1.5%
1.2%

44.9%

21.7%
5.7%

3.4%

6.4% 3.2%

11.2%

Applications
Robotics

Semiconductor Equipment

Flat Panel Display Equipment

Machine Tools

Gearbox for Motor Manufactures

Optical Devices

Excavation System for the Oil

Measuring Machines

Printing Machines

Transporter

Others (including parts and materials for subsidiaries in US and Germany)

8

Semiannual Sales Composition by Application Fields（Non-consolidated basis)

Million ¥25,00020,00015,00025,22924,020

3,300

3,309

449

475

1,320
1,210
1,768

1,314
1,204
1,044
2,455

3,341

10,527

10,000
5,000

2,326
126

1,962
114

739
488

13,326

12,941

9,260
522
635
440

1,163

1,055

4,926

3,960

First period

Second period

0First period

Second period

FY2018FY2019Robotics

Semiconductor Equipment

Flat Panel Display Equipment

Gear box for Motor Manufactures

Machine Tools

Optical Devices

Excavation System for the Oil

Measuring Machines

Printing Machines

Transpoter

Others9Performance Summary Operating Results
During the fiscal year ended March 31, 2020, the HDS Group’s business environment was severe as more companies in the
global manufacturing sector adopted a careful approach toward capital investment due in part to prolonged trade friction between the
US and China. Entering the second half of the fiscal year, environments surrounding order bookings showed signs of recovery,
particularly in the Asian market, which includes Japan. However, the spread of the novel coronavirus pandemic that broke out in thelatter stages of the fiscal year gave rise to an unprecedented increase in uncertainty concerning the future of the global economy.
During the fiscal year ended March 31, 2020 (from April 1, 2019 to March 31, 2020), the business environment surrounding the HDSGroup was characterized by depressed orders, as manufacturers around the world, starting with China in particular, postponed orcurtailed capital investment in the first half of the year. This was exacerbated by order adjustments at client companies in response torobust upfront orders they had placed in the previous fiscal year. In the second half of the year, we were able to confirm that orders
had indeed bottomed out, as some clients made progress in liquidating excess inventory and semiconductor-related demand
recovered. Nonetheless, consolidated orders for the full year fell 33.0% year on year to 30,029 million yen. Further, due to the decline
in orders, consolidated net sales were down 44.7% year on year to 37,487 million yen.
By application, sales of products for use in industrial robots declined year on year due to inventory adjustments of our products atclient companies and our distributors. On the other hand, sales of products for use in collaborative robots, which differ fromconventional industrial robots in that they are proven safe to be operated alongside humans, increased year on year. Further,although semiconductor-related demand somewhat recovered starting in the latter half of the year, sales to semiconductor production
equipment manufacturers decreased year on year for the full year. Sales of products for use in flat panel display manufacturing
equipment were also down year on year, hurt by sluggish orders for capital equipment.
To overcome the difficult business environment, we worked to minimize depreciation expenses by partially suspending capital
investment and reduce costs through thorough cost management. However, such efforts were not enough to offset the impact oflower net sales, and operating income dropped 99.6% year on year to 67 million yen. This decline in operating income, together withthe drawing down of deferred tax assets, resulted in a net loss attributable to owners of parent of 832 million yen (versus net incomeof 11,601 million yen in the previous fiscal year).
By product type, sales of speed reducers were 28,031 million yen (down 50.7% year on year) and sales of mechatronics products
were 9,456 million yen (down 13.4% year on year), accounting for 74.8% and 25.2% of net sales, respectively.
During the fiscal year ended March 31, 2020, the second year of our medium-term management plan (covering the period spanningfrom April 1, 2018 through March 31, 2021), we implemented relevant measures associated with the plan. Despite these efforts,
results fell short of our financial goals.
On the sales front, we endeavored to book orders by pitching solutions aimed at contributing to accelerating automation in
manufacturing sectors worldwide and a variety of rapidly progressing robot technologies while responding to increasingly
sophisticated and diverse customer needs.
10Performance Summary Operating Results
The Group has also been devoted to opening up new markets that are expected to grow by thoroughly exploring and applying its
own original technologies.
To maintain and improve quality amid rapid fluctuations in production volume, we implemented process improvement thatincorporated both employee training and automation while enhancing quality management systems throughout our supply chain.
Additionally, to raise quality at all production sites that have expanded their production capacities (in Japan, Germany, and the US)
to a unified high standard, we have endeavored to maintain and raise quality under our Common Global Quality initiative.
In terms of R&D, we strove to expand and enrich our basic research through efforts to establish new principles and theories andachieve new technologies as we aimed to further develop HarmonicDrive®. At the same time, we have worked to develop andcommoditize elements that are potentially essential to next-generation motion control technology. Moreover, we have further
strengthened coordination between R&D divisions based in Japan and Germany. We have conducted initiatives aimed at raising theefficiency and research levels of our R&D activities through interdivisional implementation of development themes, researchexpertise, research equipment and facilities, and human resources.
Starting in 2017, we have endeavored to strengthen HarmonicDrive® production capacities at sites in Japan, the US, and Europe in
anticipation of medium-term demand growth. In Japan, we completed construction on a new wing at the Ariake Factory (Hotaka
Ariake, Azumino, Nagano Prefecture) in September 2019. Currently, we are preparing to construct a production line with the aim ofmaking the factory a production site for specially designated projects involving expansion in production volume. Furthermore, welaunched operations at the Matsumoto Factory (Matsumoto, Nagano Prefecture), where we manufacture crossed roller bearings thatare key mechanical components of our products, in March 2019. In the US, we finished construction on a new wing adjacent to oneof our existing factories in January 2020. Moving forward, we will strive to increase our customer satisfaction within the North
American market. To do so, we will raise our local competitiveness in the US in terms of cost, delivery speed, and service by
expanding our production capacity. In Germany, we have augmented existing factories and completed enhancements to our
production system with the goal of preparing for increases in demand. These efforts included arrangements to lease new factory
space nearby.
While striving to increase production capacity, the Group has also continuously conducted initiatives targeting higher productivity andshorter product lead times. n accordance with our efforts to raise productivity, we accelerated employee training and skill transfer
associated with processes that require advanced and proficient labor. On the other hand, we reduced the manpower required forother processes through active investment in automation. To shorten product lead times, we decided to introduce a new production
management system and targeted the establishment of a production framework that is capable of flexibly responding to variations indemand while continuing to apply our extensive expertise regarding high-mix low-volume manufacturing.

11Performance Summary Operating Results
To combat the spread of the novel coronavirus pandemic, the Group established an internal task force on February 3, 2020 and has
done its utmost to prevent the spread of the disease while prioritizing the safety and security of all stakeholders, including employees,
customers, and suppliers, above all else. So far, we have incurred no health hazards or impact to factory operations or supply chainsas a result of the novel coronavirus pandemic. Moving forward, we will continue to devote ourselves to thorough infection prevention
measures.

Performance of reportable segments is stated below:<Japan>Sales fell 58.9% year on year to 18,612 million yen, impacted by marketwide adjustment in the factory automation market, as well as
inventory correction at the Group’s customers and distributors. As a result, we experienced a decline in sales for major application
sectors, including products for use in industrial robots, semiconductor production equipment, flat panel display manufacturing
equipment, and gearboxes for motor manufacturers. Segment income (ordinary income) decreased by 85.6% year on year to 2,488
million yen due in part to lower sales and higher depreciation expenses.
<North America>
Performance was strong overall when compared to the Japan and Europe segments. However, sales declined 8.4% year on year to6,240 million yen due in part to lower demand for some product applications, including for use in semiconductor production
equipment. Segment income (ordinary income) was down 30.6% year on year to 954 million yen.
<Europe>
Sales dropped 19.4% year on year to 12,634 million yen mainly because of a decline in demand for products used in industrial
robots. The decline is due in part to widespread adjustment in the European economy and, as in the Japan segment, customer
inventory correction. Furthermore, we incurred segment loss (ordinary loss) of 800 million yen due to lower sales and 1,462 million
yen in amortization of intangible assets recorded upon the acquisition of shares in Harmonic Drive SE.

12

Results ⅰ Net Sales, EBIT
（Consolidated basis)

Net Sales

EBIT
EBIT=Ordinary income + Interest paid － Interest income（Million ¥）（Million ¥）67,80970,00017,46218,00060,00050,00043,596
AVE. 5-yr

16,00054,33914,00012,252
12,00037,48740,00010,00030,00028,27830,069

8,000

9,216
AVE. 5-yr
7,832

7,955

6,000

20,0004,000

10,000

2,000

579

0

0
2015

2016

2017

2018

2015

2019 （FY）

13

2016

2017

2018

2019 （FY）

Results ⅱ EBIT to Net Sales Ratio, EPS（Consolidated basis)

EBIT to Net Sales Ratio

EPS
（¥）

（%）

225.0035

200.00215.42175.00
30

27.7

26.5

25

20.8 AVE. 5-yr

150.0025.8

120.52125.0022.5

100.00
75.00

20

50.00
15

93.76 AVE. 5-yr 86.90
54.60

25.00

-8.65

0.00

10

-25.00

5
0
2016

2017

2018

2019

2016

2017

2018

2019

（FY）

Dividends paid per share

1.5
2015

2015

（FY）

FY

2015

2016

2017

2018

2019

Dividends(¥)

18

20

26

38

20

※1. Net income attributable to owners of parent for fiscal 2016 included 13,963 million yen of
valuation gain (gain on step acquisition) because the consolidation as a group subsidiary of theGerman company Harmonic Drive AG, previously accounted for under the equity method, required
revaluation of the existing equity holding at the market value of the additionally acquired equity.

14

Results ⅲ Total Assets, Equity Ratio（Consolidated basis)

Equity Ratio

Total Assets（%）（Million ¥）140,000

133,190

120,000

52,49940,00020,00044,88590
80

35,988

76.1

74.8

76.4

56.9

60

72.0 AVE. 5-yr

50
40

48,74923,92275.5

70

27,73680,00060,000127,427

96,788100,000

100

137,995

69,05180,69093,11091,43930
20
1024,827

0

0
2015

2016
Current Assets

2017

2018

2019

（FY）

FixedAssets

15

2015

2016

2017

2018

2019

（FY）

Sales Structure by Regions（Consolidated basis)

By Regions

By Regions（Million ¥）67,80970,000100%

7,554
60,00054,3397,222

50,00015,952

14.7

13.9

7.7

6.0

75%

17.2

13,50640,00030,00028,27820,000

4,170
2,174
4,850

30,069
4,189
1,798
4,574

6,856

17,08237,487

24.8

10.1

4,555

11.2

12.2

23.5
33.7
10.1

50%

5,482

16.6

12,63437,44528,12810,000

15.2

13.3

60.4

64.9
51.8

25%

6,240

55.2
37.5

19,506

14,056
0%

0
2015

2016

Domestic

2017

North America

2018

Europe

2019

（FY）

2015

Domestic

Other Region

16

2016

2017

North America

2018

Europe2019

Other Region（FY）Sales Structure by Product Types（Consolidated basis)

By Product Types

By Product Types（Million ¥）100%

67,80970,00010,92360,000

20.9

20.0

17.8

16.1

79.1

80.0

82.2

83.9

2015

2016

2017

2018

25.2

54,33950,0009,695

37,48740,00050%
30,00028,278
5,915

30,06956,885

6,009

74.8

44,64320,00010,0009,456

22,362

24,0592015

2016

28,0310

Reducers

2017

2018

2019

0%
（FY）

Mechatronics

Reducers

17

Mechatronics

2019

（FY）

Profitability EBIT to Total Assets Ratio, ROE（Consolidated basis)

ROE

EBIT to Total Assets Ratio
（%）

（%）

30

50

42.8

45

25

40
35

20

30

16.1
15

15.5
AVE. 5-yr

25

9.3
AVE. 5-yr

10

12.7

20
15

9.2

10

8.2

10.5

13.6

11.4

5

5

-0.8

0

0.5

2015

0

2016

2017

2018

2019

-5

2015

2016

2017

2018

2019

（FY）

18

（FY）

Stability

Interest Coverage Ratio, Debt / Equity Ratio（Consolidated basis)

Debt / Equity Ratio

Interest Coverage Ratio
Interest Coverage Ratio = Net Cash provided by operating activities / Interest paid-net（Times）（Times）
1,200

0.5

1,122.2

1,000

0.4

800

600

400

0.28

0.3

682.5
581.1

0.2

539.28AVE. 5-yr

0.1
200

213.1

97.4

0.08
AVE. 5-yr

0.07
0.02

0.02

0.02

0

0
2015

2016

2017

2018

2019

（FY）

19

2015

2016

2017

2018

2019

（FY）

R&D Investments（Consolidated basis)（Million ¥）

（%）

2,476

2,500
2,000

1,915 AVE. 5-yr

1,500

1,404

20.0

2,195

2,114

1,383
10.0

1,000

5.0

4.6

2015

2016

5.9

500
0

3.9

3.7

2017

2018

R & D Expenditure

Fiscal Year
Number of R&D persons
Share of total employees (%）

0.0

2019

（FY）

Percentage of Net Sales

2015

2016

2017

2018

2019

66

86

111

129

139

12.5

9.9

11.5

11.6

12.7

20

Capital Expenditures（Consolidated basis)（Million ¥）25,00023,87620,00015,0009,879 AVE. 5-yr

10,000

5,000

0

4,296

4,576

2015

2016

7,892

8,757

2017

※ Purchases of tangible and intangible fixed assets

21

2018

2019

（FY)

Consolidated Balance Sheets（Million ¥）FY2015FY2016FY2017FY2018FY2019Current Assets

23,922

27,73652,49944,88535,988Fixed Assets

24,827

69,05180,69093,11091,439Tangible fixed Assets

9,807

14,64421,30640,85245,500Intangible fixed Assets

181

42,623

43,58239,53835,791

Investment and other Assets

14,837

11,78315,802

12,718

10,146

Total Assets

48,74996,788133,190

137,995

127,427

Total Liabilities

9,858

39,387

29,86529,59425,129Current Liabilities

5,944

23,934

13,18015,944

5,127

Long-term Liabilities

3,913

15,453

16,685

13,65020,002

Total Net Assets

38,891

57,400103,324

108,400

102,297

Shareholders’ Equity

32,40150,39389,21597,64094,016

Other Comprehensive Income

4,720

4,661

10,448

6,545

3,391

－

－

625

625

625

1,769

2,345

3,034

3,589

4,263

48,74996,788133,190

137,995

127,427

Subscription rights to shares
Minority Interest （Non-controlling Interests)

Total Liabilities and Net Assets

22Consolidated Statement of Income（Million ¥）FY2015FY2016FY2017FY2018FY2019Net sales

28,27830,06954,33967,80937,487Gross profit

13,286

13,86625,70330,44625,484

SG&A

5,667

6,052

13,104

13,542

11,935

Operating income

7,618

7,813

12,59816,90367

Ordinary income

7,829

7,958

12,22817,464499

Net income attributable to owners of parent

5,001

19,732

8,059

11,601▲832

23

Consolidated Statement of Cash Flows（Million ¥）FY2015FY2016FY2017FY2018FY2019Cash flow from operating activities

6,499

7,225

9,233

15,121

10,950Cash flow from investing activities▲4,394▲32,522▲8,171▲22,399▲12,537

Cash flow from financing activities▲1,384

24,64817,493▲3,271

2,362

Effect of exchange rate changes on cash and cash equivalents

▲11

▲121

95

▲171

▲33

Net increase (decrease) in cash and cash equivalents

708

▲770

18,651▲10,720742

10,4399,668

28,32017,60018,342

Cash and cash equivalents at end of year24

Share Price Trend
Share Price
HDSI’s Share Price (Closing)

7,000

Tokyo Stock Price Index (Closing)
（￥）

（￥）

2,400
6,000
2,100

5,000

Number of shares of common stock

issued and outstanding:
96,315,400 shares (As of March 31, 2020)
Number of shareholders:
10,847 persons (As of March 31, 2020)

1,800

Market capitalization:
1,500

4,000

¥454,843,501,875(As of March 31, 2020)

1,200
3,000
900
2,000
600
1,000

HDSI’s Share Price(Closing)

Tokyo Stock Price Index(Closing)0
2019/4

2019/5

2019/6

2019/7

2019/8 2019/9

2019/10 2019/11 2019/12

2020/1 2020/2 2020/3

25

300

Note: The Tokyo Stock Price Index (‘TOPIX’) is a composite
index of all common stocks listed on the First Section ofTokyo Stock Exchange.

0Harmonic Drive Systems Inc. is listed on JASDAQ standard marketof Tokyo Securities Exchange , Inc.

Investors’ Guide FY2019
Year ended March 31, 2020

Appendix

Results forecasts on this document are based on the management’s decisions for future businessstrategies and performance, and may include risks from the business environment, uncertainties,
and other factors. For this reason, the understanding is that the actual business results may notagree with the business prospects as presented on this document.

November 11, 202026

Outlook for FY03/21
FY03/21 Outlook
The business environment surrounding our Group during the fiscal year ending March 31, 2021 has
been characterized by a gradual recovery in orders that occurred as our customers consumed theirinventories of our products. However, the international spread of the COVID-19 pandemic has caused
rising uncertainty in both the global economy and our operating environment, and we anticipate that thisunpredictability will continue to be a factor for the foreseeable future.
Responding to this environment, our Group will emphasize the keywords of “safety” and “security” as
we strive to protect customers, suppliers, employees, and their families from infection as our top priority.
We will simultaneously focus strongly on maintaining operations at all production bases and enhancing
collaboration throughout our supply chain. Additionally, to achieve our goal of “providing customer
satisfaction that exceeds expectations,” we will work to further expand our competitiveness byimproving the quality of our products and services, reducing costs and shortening lead times throughproduction reforms, and implementing initiatives aimed at strengthening and accelerating our problemsolving capabilities.
In regard to our consolidated earnings forecast for the fiscal year ending March 31, 2021, based on theabove business environment, our Group projects net sales of ¥35,000 million (-6.6% YoY), operating
loss of ¥800 million (versus operating income of ¥67 million in the previous fiscal year), ordinary loss of¥450 million (versus ordinary income of ¥500 million in the previous fiscal year), and net loss
attributable to owners of parent of ¥450 million (versus net loss attributable to owners of parent of ¥830
million in the previous fiscal year).

27

Forecast ⅰ Net Sales, Operating Income（Consolidated basis)

Net Sales

Operating Income（¥ Million ）（¥ Million ）80,00020,00067,80970,00016,90318,00060,00016,00054,33937,48740,00030,00012,59814,00050,000

Forecast

35,00012,00010,0007,813

30,069

8,000
6,000

20,0004,000

10,0002,000

67Forecast

0

0
2016

2017

2018

2019

2016

2020 （FY）-2,000

28

2017

2018

2019

2020

-800

（FY）

Forecast ii

Operating Income to Net Sales Ratio, EPS（Consolidated basis)

EPS

Operating Income to Net Sales Ratio
（¥）

（%）

250.00

26.0
23.2

25.0

215.4224.9
200.00150.00120.52

15.0

86.90

100.00

50.00

5.0

0.2
2016
-5.0

2017

2018

2019

2020

（FY）

0.00

2016

-2.3
Forecast

2017

2018

2019

-8.65
-50.00

29

2020

（FY）

-4.67
Forecast※1 Net income attributable to owners of parent for fiscal 2016 included 13,963 million yen of valuation gain (gainon step acquisition) because the consolidation as a group subsidiary of the German company Harmonic Drive
SE, previously accounted for under the equity method, required revaluation of the existing equity holding at themarket value of the additionally acquired equity.

Forecast iii

Dividends paid per share（Consolidated basis)

Dividends paid Per share（¥）

Dividends paid per share (left axis)（¥ Million ）40

Basic Policy on Earnings Distribution
At HDSI, our basic policy is to distribute earnings inaccordance with operating performance.

30

Forecast

While our general dividend policy is to maintain an annual
dividend payout ratio of 30% of net income attributable toowners of parent, we determine return to shareholders
through comprehensive considerations including dividend
continuity and the maintenance of sufficient internal
reserves.

20

38

20

20

26

10

For future business development, internal reserves aremostly invested in such areas as researching anddeveloping new products, expanding and improving
production facilities, and upgrading information
management systems. Internal reserves are also used foragile execution of capital policies.

20

0
2016

2017

2016

2018

2017

2018

2019

2019

2020

（FY）

2020

30

Business Activity － Products
Leadership in Total Motion Control

November 11, 202031

Total Motion Control
Our business Domain

Developing and producing Precision Control Equipment andComponents for a broad range of applications, focus on “Total
Motion Control”

Schematic Concept of Total Motion Control

Speed
Reducers

Sensors

Controllers

MotorsOthersDrivers32

History of Harmonic Drive Systems Inc.
1950 1960 1970
55
64
History

InventedHD

First
Introduced
to Japan

76

J/V
USM+
Hasegawa
Gear Works

1990

1980
79
100%
subsidiaryof USM/
EMHART

95
Current HDSI

2000
98

2010

ISO ISO
9001 14000 (IPO)

Products

Equipments for Optical, Aero, Space and Environment

Semiconductor and Flat Panel Display Equipment

Our
GrowthRobotics

Before Dawn

Harmonic Concert (Classical music concert)

Community
RelationsHarmonic Lecture Meeting

TRIAD
33

History of Sales（Million ¥）History of Sales（Non-consolidated basis）

50,000Co-bots,
Professional robots
etc.
State-of-the-art
medical equipment

45,00040,00035,000Flat Panel Display
Manufacturing Equipment

30,00025,000

Semiconductor Equipment

20,00015,00010,0005,000

Demand Drivers

Robotics
Working Machines

0'71 '72 '73 '74 '75 '76 '77 '78 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 15 16 17 18 19 （FY）

34

Sales Structure by Product Types（Non-consolidated basis）

Turnover (%) in FY 2019

Controller

Actuator

1.2%
17.7% 17.5%

HarmonicDrive®
(Component type)

11.5%
52.1%
HarmonicDrive®
(Unit type)

Planetary Gear

35

Principle and Advantages of “HarmonicDrive®”
Flexspline

Circular Spline

Wave Generator
The flexspline is deflected by the wave
generator into an elliptical shape, so theflexspline teeth to engage with those of thecircular spline at the major axis and to becompletely disengaged across the minor axis.

A clockwise rotation of the wave
generator causes the flexpline torotate in the opposite direction while
subjecting it to elastic deformation.

Advantage of “HarmonicDrive®”
Compact Design/ Reduced WeightNon-backlash
Hollow Construction
High Reduction Ratio by Single Stage
High Efficiency
High Torque Capacity
High Positioning Accuracy and Repeatability
High Torsional Stiffness
Simple Installation and Assembly
Low Noise and Smoothness operation
36

When the wave generator rotates
one revolution clockwise, theflexpline moves counterclockwise by
two teeth relative to the circularspline.

Features and Benefits “ Compact and Lightweight”
Comprised of just three basic components

Compact and Lightweight

Circular Spline

Flexspline

Wave Generator
37

Features and Benefits “ Zero Backlash”

Θ

Clearance between
mated gear teeth

Backlash
1,000mm

Backlash

Applications
General Industrial
Machinery

Backlash

Backlash after 1m

Our Products

8.7mm

None

0.5 degrees

Transporters and Processing
Machinery

0.05～0.25 degrees

0.9mm～4.3mm

Robotics and Semiconductor
Equipment

0～0.02degrees

0～0.3mm38

Feature Applications
Industrial robots
Hayabusa 1. 2 Photograph courtesy of JapaneVTOL

Aerospace Exploration Agency (JAXA)

Optical-infrared telescope “Subaru”
installed on Mauna Kea on the island of
HawaiiPhotograph courtesy of the National
Astronomical Observatory of Japan,
National Institutes of Natural Sciences

Robotic Surgical System

Cobot Photograph courtesy of Techman Robot Inc.

39

Target Segment Image
Price
High positioning accuracy

Servomotors + Reducers
Robotics, Semiconductor
Equipment

Normal positioning accuracy(Inverter motors or
Stepping motors or
Servomotors) + Reducers

Focusing on
expansion of torque

Transporters, Processing
Equipment etc.

General-purpose motors + Reducers

General Industrial Machinery
Accuracy
Note: This graph is conceptual. The shape, size, and position of images used do not accurately reflect market size or product positioning.

40