To prevent the spread of the novel coronavirus infection, the Company is not holding a
results briefing to present its business results for the fiscal year ended March 31, 2020, to
analysts.
We therefore respectfully request that, in addition to the financial results summary, you
accept this results presentation document (with explanatory notes) as an alternative tothe briefing session.

1

Following is an explanation of the Company’s results for the fiscal year ended March 31,
2020.

2

This table compares the results for the fiscal year ended March 31, 2020 with the revised
forecast announced on November 12, 2019.
• Sales and profit exceeded targets.
(1) Reasons for the difference in sales
Company sales (non‐consolidated basis) came in above the forecast level owing toorders exceeding the revised forecast’s assumptions.
The reason for the greater‐than‐expected orders (non‐consolidated basis) and theactual orders by application are presented in a separate slide.
While fourth quarter (Oct.‐Dec.) results in China were below forecast, the results
at our European and North American businesses were largely as expected.
(2) Reasons for the difference in operating income
As sales of group companies in Japan, especially the parent company (non‐consolidated basis) exceeded expectations, the increase in capacity utilization
largely boosted profitability beyond forecast.

3This table compares full‐year results on a year‐on‐year basis.
• As expected at the start of the fiscal year, sales and profit declined sharply from thehistoric highs recorded in the previous fiscal year.
(1) Reasons for decline in sales
Large decline in sales (‐44.7% YoY) was due to lower demand for automation andfor labor‐saving investments, especially in China, because of worsening US‐China
trade frictions. Sales also were negatively affected by customers and distributors
adjusting their inventories of HDS products.
(2) Reasons for decline in operating income
Responding to the severe operating environment, we endeavored to cut costs,
especially fixed costs, by suspending some capital investments, conducting
thorough reviews of all expenditures, and reducing personnel expenses byadjusting staff levels and reducing compensation. Despite these efforts, operating
income fell sharply owing to the impact from lower sales and an increase indepreciation expenses owing to capital investment in the previous fiscal year.
(3) Reasons for decline in net income
We unfortunately had to report a net loss, largely owing to posting of an
impairment loss on idle assets as an extraordinary loss and to the impact ofreversing deferred tax assets.

4This table shows the results of main group companies.
(1) US: HD Systems and Harmonic Drive L.L.C.
(subsidiaries with R&D, production, and sales functions)
The sales decline was milder than in Japan and Europe as the companies’ customers
include a relatively smaller number of industrial robot manufacturers and sales to
medical device and aerospace industry customers remained relatively strong.
Nonetheless, we could not avoid declines in sales and profits.
(2) Japan: Harmonic AD(subsidiary involved in manufacture of planetary‐gear speed reducers)
Sales and profits decreased due to sharp decline in sales to makers ofsemiconductor manufacturing equipment (a main application for planetary‐gear
speed reducers), as well as sales declines of gearheads to motor manufacturers, andproducts for industrial‐robot application.
(3) China: Harmonic Drive Systems (Shanghai) (China sales company)
A slowdown in the Chinese FA market and inventory adjustments reduced sales toforeign capital and domestic robot manufacturers.
(4) Germany: Harmonic Drive SE
Sales fell due to the slowdown in the European economy and, more specifically, toinventory adjustments at robot manufacturers. Profits declined owing to increases in
fixed costs, such as depreciation and personnel expenses.

5This table compares the parent company’s non‐consolidated results on a year‐on‐yearbasis.
• Non‐consolidated sales fell nearly 60%, much larger than the decrease in consolidated
sales. The YoY decline reflects the adverse comparison with the high level of sales
recorded in the previous fiscal year.

6This graph shows the quarterly trend in orders by application (non‐consolidated basis).
• Although overall volume was weak in the fiscal year ended March 31, 2020,
orders increased quarter‐on‐quarter for four consecutive periods. In particular,
figures from the third quarter onward have confirmed that orders havebottomed out.
• We believe the bottoming out reflects increasing demand from makers ofsemiconductor manufacturing equipment amid a resurgence of investment in
the semiconductor industry since last autumn, as well as the progress ininventory adjustments at our distributors and customers, especially industrial
robot manufacturers.
• Although we understand that customer and distributor inventories were nearappropriate levels as of March 2020, the adjustments continue and it willprobably be awhile before all customers and distributors complete theiradjustments.
• The impact of the novel coronavirus pandemic on non‐consolidated orders
through March 2020 was minimal. However, we cannot be optimistic about the
future trend, as uncertainties abound. We therefore will keep a close eye on theorders trend.

7This graph shows the half‐year trend in non‐consolidated sales by application.
• In the fiscal year ended March 31, 2020, first‐half sales fell sharply YoY owing to
the decline in orders from the previous fiscal year.
• In the second half, orders began to improve and sales returned to an upward
trend in the fourth quarter, but second‐half sales dropped further versus thefirst half.
• By application, the fall in sales to industrial robot makers, especially major
Japanese manufacturers, had the biggest downside impact on sales.
• As a result, non‐consolidated sales were weak throughout the fiscal year.

8This slide shows the factors behind the year‐on‐year change in operating income.
(1) Negative factors• Lower sales reduced operating income by ¥16,522 million• A decline in the marginal profit ratio and inventory adjustments shaved another¥277 million from operating income. The fall in the marginal profit ratio was notdue to price cuts caused by changes in the competitive environment or tosoaring prices of raw materials and higher costs for outsourced processing.
Rather, it was due to a change in the sales mix of products.
(2) Positive factors• Reduced manufacturing‐related fixed costs boosted operating income by ¥1,751
million. The reduction was achieved despite an increase in the depreciation
charge, as we were able to reduce personnel expenses by adjusting staff levels
and reducing compensation of executives and employees. We also madesignificant cuts to general expenses.
• Lower SG&A expenses boosted operating income by ¥1,580 million. As was thecase with fixed manufacturing costs, the reduction in SG&A expenses wasachieved by reducing personnel expenses and exerting thorough controls on allother general expenses.
While the unprecedented 60% fall in sales caused a big drop in profitability, company‐
wide management was switched to crisis mode, and the fixed cost cuts we madelowered the sales break‐even point enough that we managed to generate a profit at theoperating income level.

9Next, let’s look at assets on our consolidated balance sheet.
(1) Total assets
Total assets as of March 31, 2020 came to ¥127,427 million, ¥10,568 million lessthan a year earlier.
(2) Current assets
Current assets decreased by ¥8,897 million, primarily owing to the decrease intrade receivables caused by lower sales. Cash, deposits and marketable securities
increased slightly to ¥19,570 million. We thus have secured enough cash assets to
support business operations for the foreseeable future.
(3) Fixed assets
Tangible fixed assets increased by ¥4,647 million. The increase reflects theconstruction of a new wing at our Ariake Factory (Azumino, Nagano Prefecture) in
anticipation of the need for increased production capacity in the near future. Achange in accounting standards that led to the posting of previously off‐balance
sheet lease assets of overseas subsidiaries also added to the increase in on‐balance
sheet fixed assets. On the other hand, intangible fixed assets decreased by ¥3,747
million owing to the impact of regular depreciation and the forex impact on theconversion of foreign currency denominated assets.

10

Next, let’s look at assets on our consolidated balance sheet.
(1) Total assets
Total assets as of March 31, 2020 came to ¥127,427 million, ¥10,568 million lessthan a year earlier.
(2) Current assets
Current assets decreased by ¥8,897 million, primarily owing to the decrease intrade receivables caused by lower sales. Cash, deposits and marketable securities
increased slightly to ¥19,570 million. We thus have secured enough cash assets to
support business operations for the foreseeable future.
(3) Fixed assets
Tangible fixed assets increased by ¥4,647 million. The increase reflects theconstruction of a new wing at our Ariake Factory (Azumino, Nagano Prefecture) in
anticipation of the need for increased production capacity in the near future. Achange in accounting standards that led to the posting of previously off‐balance
sheet lease assets of overseas subsidiaries also added to the increase in on‐balance
sheet fixed assets. On the other hand, intangible fixed assets decreased by ¥3,747
million owing to the impact of regular depreciation and the forex impact on theconversion of foreign currency denominated assets.

11

Consolidated cash flows were as shown in this slide.

12

Next, we will report on the status of initiatives being taken under our current medium‐
term plan.

13• The Company’s operating environment has been complicated by an increasingly
cautious stance toward capital investment in China and countries around the world
owing to the prolonged US‐China trade frictions that emerged in early 2018.
• The orders environment showed signs of recovery in the latter half of FY2019,especially in Japan and other Asian markets, but the outbreak of the novel coronavirus
infections near the end of the fiscal year has led to an unprecedented heightening of
uncertainty about the outlook for the global economy. In this operating environment,
we must regretfully admit that achieving the targets for the final year of the current
medium‐term plan will be difficult.
• Despite the challenges presented by our operating environment, we have been flexibly
and steadily implementing each of the initiatives set forth in the basic policies of thecurrent medium‐term management plan.

14• To expand global production capacity, we have completed investments in plant
construction at three key production bases (Japan, Germany, and the United States).
• Considering the orders trend seen since last year, we have postponed some of ourplans for investing in production facilities. However, we expect demand to expand overthe longer term and will carry out future capex flexibly in line with changes in demand
trends.

15• The increase in orders received from FY2017 stretched out our production lead timeto nearly one year, causing great inconvenience for our customers. Accordingly, themedium‐term management plan includes four key measures for raising QCDS
capabilities in order to increase customer satisfaction.
(1) Expand production capacity ⇒ We have built factories and invested in production
equipment at each of our production sites around the world.
(2) Promote automation by introducing advanced production technologies andstrengthening quality controls ⇒ We seek to further reduce costs by improving
productivity.
(3) By strengthening cooperation and support in the supply chain, we have achieved
more solid relationships and structures.
The above measures enabled us to restore more normal production lead times.
• To further shorten lead times,(4) We decided to implement a new production management system and havestarted preparing for its startup.

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With robot technologies evolving in various application fields, we have strengthened our
proposal capability to better satisfy customers’ increasingly sophisticated and diversified
expectations.
• We have strengthened the cooperation between product development and sales andhave established a support system capable of quicker responses. As a result, thedevelopment of products for new applications such as advanced medical care (surgicalrobots), power‐assist, mobility, and aerospace is progressing.
• With the demand for increasingly small and lightweight devices only expected toincrease in the future, we are developing and expanding our lineup of small andlightweight products that will be compatible with and contribute to the increasingly
small size and light weight of these devices.
• In addition, to promote new technologies and elemental research, we are conducting
joint research projects with external research institutes and encouraging mutual useof the Group’s research resources. We will continue to promote advanced R&D inorder to create new value.

17

We have strengthened our management base in order to respond flexibly to the rapidlychanging business environment.
• Since the novel coronavirus outbreak, we have created work environments at
production sites that prioritize "safety" and "security" by rethinking commuting
methods, eliminating the 3 Cs (closed and crowded spaces and close contact) in our
offices, and establishing telework systems.
• We have extended the mandatory retirement age for our employees to 70 and arecreating paths that support transfer of skills and securing skilled human resources.
• We also have provided various types of support to out partner companies that haveseen a sharp drop in orders.
• To ensure sound cash flows, we have halted unnecessary and nonurgent investments
and are thoroughly curtailing expenses. In preparation for future funding needs, inMarch 2020, we secured a commitment line of ¥8.5 billion.

18

Next, we will explain our understanding of the operating environment upon which we arebasing our earnings guidance for the fiscal year ending March 31, 2021.

19

Consolidated orders received have been on a moderate recovery trend, after bottomingin the second quarter of the previous fiscal year, as customers’ inventory adjustments
progress.
• To date, the direct impact of the novel coronavirus pandemic on our business has
been negligible.
(1) All our production bases in Japan, Germany, and the United States are operating
normally, and our supply chain, including partner companies, is in good shape.
(2) If anything, the demand for robots, a core application for our products, is expected
to increase as robot makers push forward with labor‐saving and production
reforms designed to eliminate "3 C" conditions at production sites worldwide.
(3) Demand from the semiconductor sector is also robust, as ongoing 5G‐related
investments are being supplemented by increasing PCs‐related demand and for
greater data center capacity in response to the increase in telework and so‐called“nest consumption,” which refers to the online shopping by people staying at
home during the coronavirus pandemic.
• Meanwhile, faced with an unpredictable global economic environment, we will
manage our business keeping a close eye on unexpected reductions in orders.

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We will now offer our view on the general situation facing society today.
• The novel coronavirus pandemic is expected to subside, and some economic activity is
now resuming.
• That said, the pandemic’s end remains uncertain, and it is assumed that the social
situation will remain severe for a long time to come.
(1) Unprecedented economic turmoil
Economic indicators are expected to show biggest decline since the Great
Depression, and the IMF forecasts that developed countries’ 2020 economic
growth rates will plunge even if the pandemic ends in the second half of the year.
(2) Worldwide concerns about employment
Concerns that unemployment rates of more than 10% in developed countries willcause stagnation in consumer activities (middle class’ concerns about future could
prompt them to postpone or forego purchases).
(3) Growing concern that rekindling of US‐China trade friction could fragment the
global economy
Rekindling of US‐China trade friction and global economic fragmentation caused bynationalistic policies are likely to exacerbate economic turmoil.
(4) Uncertain post‐coronavirus social structure“Corona shock” may shake the conventional understanding of economy andlifestyle, leading to changes in values and behavior.

21• Using this “corona shock” as an opportunity, we will establish an unwavering basic
policy and implement various reforms.
• First and foremost, we will place our highest priority on the safety and security of ouremployees and other stakeholders in order to protect their lives and health. We will
strive to achieve maximum operational efficiency by creating the infrastructureneeded for teleworking, decentralizing our sales bases (introduction of a hub system,etc.) and adapting to society’s “new normal”.
• Further, we plan to expand such efforts into work‐style reforms that improve
employees’ quality of life (QoL).
• We recognize this as a major challenge that will require new approaches and methods
for employee training and human resource development.
• We will maintain the production systems that enable us to fulfill our responsibility ofsupplying our customers with needed products. To ensure the safety of everyone
working at our factories, the Company will enforce social distancing practices,
continue to attentively monitor and check the health of our employees, and movetoward a more advanced production system (labor saving, etc.) in order to meet the
expected rise in demand after the coronavirus pandemic.
• Given the outlook for an economic crisis, we will endeavor to secure the cash flow
essential to the Company’s survival. We have already secured a commitment line ofcredit for ¥8.5 billion, and we plan to add to that in the future. We will continue tostrengthen our fund procurement system to ensure our ability to secure necessary
operating capital going forward.

22

Performance Forecast for Fiscal Year Ending March 31, 2021
Next, we will explain our performance forecast for the fiscal year ending March 31, 2021.

23

This table shows our forecast for consolidated results in the first quarter of the fiscal year
ending March 31, 2021.
• The Group’s operating environment has been showing signs of recovery since last
autumn, with demand for semiconductor manufacturing equipment rebounding
and inventory adjustments making progress at our distributors and customers,
especially industrial robot manufacturers.
• Meanwhile, although the novel coronavirus pandemic has had no significant
impact on our business to date, a reasonable estimation of its impact on theGroup’s future business results is difficult to make at this time. We therefore arelimiting our forecast to the first quarter, with projections for the rest of the year
undecided at this time.
• Our forecast for the first quarter (with year‐on‐year changes) is as shown in thetable.
 We forecast consolidated net sales of ¥9,500 million. In the first quarter ofthe fiscal year ended March 31, 2020, the orders environment was extremely
severe and orders booked were few, but our order backlog at the start of theperiod was higher than it is now. We were therefore able to post first quarter
sales of ¥11,652 million. Given the current business environment and thesmaller order backlog, we forecast consolidated net sales in the first quarterof the fiscal year ending March 31, 2021 to be ¥2,152 million less than a year
earlier.
 Turning to our profit forecast, we expect consolidated operating income to fall
¥1,304 million year‐on‐year to ¥200 million, mainly owing to the projected
decline in sales. After a challenging previous fiscal year that resulted in large
decreases in sales and profits, the business environment for the fiscal year
ending March 31, 2021 also looks likely to be difficult with little or no roomfor optimism. We therefore will continue our efforts to thoroughly control
costs.
Our forecast for consolidated capex, depreciation, and R&D expenditures in the fiscal year
ending March 31, 2021 are ¥2,300 million, ¥7,000 million, and ¥2,700 million,
respectively.

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This graphs shows the quarterly trends for consolidated net sales and operating income
over the past three years plus our forecast for the first quarter of this fiscal year.
(1) Net sales• Since peaking in the second quarter of the fiscal year ended March 31, 2019,
net sales has declined for six consecutive quarters.
• This downtrend has been fueled by the global deterioration in capex
sentiment brought about by intensifying US‐China trade frictions, which hascome on top of a strong negative impact from inventory adjustments for our
products by our customers and distributors.
• Our sales forecast for the first quarter of the fiscal year ending March 31,
2021 anticipates the first quarter‐on‐quarter increase in sales in sevenquarters, as we expect inventory adjustments to progress and demand forsemiconductor manufacturing equipment to increase.
(2) Operating income• Operating income peaked in the third quarter of the fiscal year ended March
31, 2019 and has since followed the downward trend set by net sales, and wehave most unfortunately posted operating losses for three straight quarters
since the second quarter of the previous fiscal year.
• In the first quarter of the fiscal year ending March 31, 2021, we look forward
to posting our first operating profit in three quarters.
Accordingly, while we expect first quarter sales and profits to fall year‐on‐year, as notedon the previous slide, we look for both to increase quarter‐on‐quarter, with operating
income moving back into the black.

25

This table shows our forecast for non‐consolidated results in the first quarter of the fiscal
year ending March 31, 2021.
(1) Sales• Our forecast for first quarter non‐consolidated sales assumes that orders
volume will be about the same as in the first quarter of the previous fiscal
year.
• As a result, we expect net sales to fall 11.9% year‐on‐year to ¥5,300 million.
(2) Operating income• Please refer to the next slide.

26

This slide provides a factor analysis of the year‐on‐year change in the Company’s non‐consolidated operating income.
(1) Negative factors• The decline in sales is expected to depress operating income by ¥331 million.
• In terms of SG&A expenses, we expect R&D expenditures, depreciation, etc. toincrease by ¥150 million.
(2) Positive factors• Changes in the marginal profit ratio and inventories are expected to boost profit
by ¥50 million, mostly reflecting changes in the sales mix of products.
• Lower manufacturing fixed costs and other cost reductions are expected to makea ¥280 million positive contribution to operating income. Use of the decliningbalance method to depreciate machinery and equipment is expected to reduce
depreciation from the previous fiscal year’s level. Lower personnel expenses andthe absence of the production line transfer costs posted in the first quarter ayear earlier is expected to support operating income.
Considering the above factors, we forecast non‐consolidated operating income toreach ¥350 million.

27

This concludes the presentation of our performance results for the fiscal year ended
March 31, 2020.

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