Fanuc : Corporate Governance Report

Corporate Governance Report	FANUC CORPORATION

Last Update: July 6, 2022

FANUC CORPORATION

Kenji Yamaguchi, President Contact: Naoki Yukisada, Manager, Public Relations & Shareholder Relations Department TEL: [phone] Securities Code: 6954

https://www.fanuc.co.jp/eindex.html

The corporate governance of FANUC CORPORATION (the "Company") is described below.

1. Basic Views on Corporate Governance and Basic Information on Capital Structure,

Corporate Attributes and Other Matters

1. Basic Views

The Company conduct business activities aiming to provide indispensable values throughout the world through incessant technological innovations in the field of factory automation, and to continue to be a company that is trusted by all stakeholders.

Knowing that corporate governance is essential to our business activities, we ensure they adhere to our basic principles, "Genmitsu (Strict Preciseness) and Tomei (Transparency)".

We have adopted various measures to improve corporate governance such as increasing the ratio of our outside directors, and transitioning into a company guided by an Audit and Supervisory Committee. We will continue to strengthen corporate supervisory functions, accelerate the advancement of our business decision-making systems, and promote management efficiency, all with the goal of achieving sustainable growth and enhanced corporate value.

The Corporate Governance Guidelines (the "Guidelines") is posted on the Company's website to provide basic views and other matters concerning corporate governance of the Company. (https://www.fanuc.co.jp/en/sustainability/policy/guideline.html)

[Reasons for Non-compliance with the Principles of the Corporate Governance Code]

The Company has implemented all of the Principles of the Corporate Governance Code which was revised in June 2021, including principles for the Prime Market.

[Disclosure Based on the Principles of the Corporate Governance Code] Updated

[Principle 1.4 Strategic Share Holdings (So-called"Cross-Shareholdings" in the Corporate Governance Code)]

1 The Company will hold shares of other companies only when it is deemed necessary for the maintenance and expansion of the business of our Group from a medium and long-term perspective based on the benefits, such as the development of new products, the stable procurement of parts and materials, the maintenance of business relationships with customers, etc., upon considering the holding costs, etc. as well. Every year, we will perform an assessment based on such perspectives, and will strive to reduce the number of shares for which the holding significance is determined to be tenuous.

- 1 -

2 In exercising our voting rights of cross-held shares, we will comprehensively consider impact on our business and on management of such other companies, and other such matters, from a medium and long-term perspective, and then we will appropriately exercise such voting rights.

[Principle 1.7 Related Party Transactions]

For transactions involving director conflicts of interest and the like, such directors must obtain approval of the Board of Directors as required by laws and regulations, and we will provide guidance to officers and employees from time to time so that they will not impair the shared interests of shareholders.

[Supplementary Principle 2.4.1 Ensuring Diversity when Promoting Core Human Resource Personnel] 1. Ensuring Diversity

Our Group-wide initiatives favor human resource diversity and respect the individuality of each employee, including their own value systems, encouraging each one of them to demonstrate their unique abilities (Diversity & Inclusion). This envisages greater organizational strength and sustainable growth. Thus, before promoting an employee to executive employees, candidates are evaluated in a comprehensive manner, focusing not on gender, nationality, or hiring route, but mainly on capability, character, and aptitude.

2. Diversity Goals

[Appointing Women to Executive Employees]

We pro-actively promote talented women to executive employees. We aim to increase the percentage of female executive employees from 3.5% (as of the end of March 2022) to 5% or more by 2030. *1

[Promotion of Foreign Nationals]

We offer various career opportunities, regardless of nationality, promoting talent on a global scale across the Group. *2

[Promotion of Mid-Career Recruits]

We pro-actively hire experienced mid-career talent (a policy in effect since 2014), and continue efforts to promote employees who were hired mid-career to executive employees. *2

*1 Changes in the proportion of newly appointed female executive employees are as follows: 4.2% in FY2018, 4.7% in FY2019, 8.5% in FY2020, and 5.8% in FY2021.

*2 When considering appointment for executive employees, we do not assume that their aptitude depends on nationality or hiring period. We do not set fixed goals, but instead allow for flexibility in the best promoting practices for the future.

3. Human Resource Development Policies for Diversity; Work Environment Improvement Policies; Current Situation Regarding Policy Results

[Support for the Advancement of Women]

∙ This support is based on the plans, including "Plan of Action for the General Employers" in accordance with the Act on the Promotion of Female Participation and career Advancement in the workplace.

[Increasing the Percentage of Female Employees]

∙ We aim to fill 10% of all full-time employee positions with women across the entire company, and promote the hiring of women.

∙ We identify female candidates for future executive employees, and promote their systematic training.

∙ Many of our female executive employees have recently been playing active roles in different sectors within the company (including two at the executive officer level).

∙ In order to attract more female technical engineers, we provide opportunities for female students to

• 2 -

communicate with female engineers, including through school visits. [Support for Continued Working Without a Career Break]

• Our improved employment system offers maternity leave, childcare leave, and shorter work hours until children graduate from elementary school.
• To enable employees to balance work with childcare, caring for the aged, and medical treatment, we strive to create comfortable work environments for both male and female employees, by cutting back on long working hours, encouraging employees to take advantage of their annual leave days, and introducing a system that permits annual leave time to be taken on an hourly basis.

[Fostering a Supportive Corporate Culture]

• We are promoting the creation of networks that connect senior and junior female employees, so that women with more experience in the company can advise others on matters unique to female workers.
• We plan to conduct unconscious bias training for both male and female employees.

[Helping Employees Reach Their Full Potential, Regardless of Nationality, Gender, etc.]

• We are working to create comfortable work environments for foreign employees, through such efforts as offering faith-friendly meals in company facilities.

For more details regarding our diversity-targeted efforts, please refer to information available on our website, Promotion of Employee Diversity & Equal Opportunity: https://www.fanuc.co.jp/en/sustainability/social/employees/diversity.html

[Principle 2.6 Roles of Corporate Pension Funds as Asset Owners]

In order to secure future benefit resources in a stable manner while considering the risks, the corporate pension fund is making investments for the purpose of securing overall profits that are deemed to be necessary in the long term.

Under the fund, the Asset Management Committee, which is composed of executives and staff of the Accounting Department and the Human Resources Department, is established. The asset management policy and asset composition ratio according to policy are evaluated by the Asset Management Committee, and then determined at the Conference of Representatives. Investment status is monitored on a regular basis.

The party who is entrusted with the investment of the fund accepts the Japanese version of the Stewardship Code.

The fund incorporates personnel who have the appropriate skills as well as having office workers attend outside seminars, etc. in order to improve their skills.

[Principle 3.1 Full Disclosure]

1. Company Objectives (e.g., Business Principles), Business Strategies and Business Plans

1. Vision

To provide indispensable values throughout the world through incessant technological innovations in the field of factory automation, and to continue to be a company that is trusted by all stakeholders.

2. Management Policies

FANUC has consistently pursued factory automation since 1955 when it started the development of NCs (numerical controls).

The targets at its beginnings were to become a company, though small in size, having the robustness of a giant with roots firmly spread in the ground, and to concentrate on technology to go forward, by "walking a straight and narrow path." This is being pursued to this day.

- 3 -

In order to turn this vision into reality, the FANUC Group has established "Genmitsu (Strict Preciseness)" and "Tomei (Transparency)" as its basic principles. In these principles lie the belief that a company will last forever and be sound with strict preciseness, and that the corruption of an organization and downfall of a company will start from a lack of transparency.

FANUC engages in the FA, ROBOT and ROBOMACHINE businesses. The FA Business encompasses basic technologies consisting of NCs, servos and lasers, which are also applied to the ROBOT and ROBOMACHINE Businesses. In addition, by actively incorporating IoT/AI technologies in all three areas, the company endeavors to make FANUC products more efficient for customers to use.

Being true to its origins as a supplier of capital goods, maintenance and service support is provided for FANUC products for as long as they are used by customers.

Through such activities, the FANUC Group contributes to the development of manufacturing industries in Japan and overseas, by promoting automation and efficiency in customers' factories. FANUC expects to steadily grow in the field of factory automation, which is extremely promising in the mid-to-long term.

3. Management Strategies

FANUC is thorough in implementing its basic principles of "Genmitsu (Strict Preciseness)" and "Tomei (Transparency)," and promotes the following policies united as a group. By doing so, the FANUC Group aims to become an ever-lasting organization by increasing our customers' feelings of assurance and trust towards us, as well as by adapting to severe changes in the environment.

< one FANUC >

Under the slogan of "one FANUC," the three Businesses of FA, ROBOT and ROBOMACHINE collaborate to offer total solutions, and the Group bonds together to take good care of our customers throughout the world. This is a unique advantage of the FANUC Group which we leverage to the fullest.

Especially, the combined usage of CNC machine tools and ROBOTs, and the combined usage of ROBOMACHINEs and ROBOTs, are perceived as key concepts in developing products.

< Reliable, Predictable, Easy to Repair >

Considering our foundation as a producer of capital goods that are used in manufacturing sites, FANUC is meticulous in ensuring that our products are "Reliable, Predictable, Easy to Repair" in their development, to minimize downtime and maximize the operating rate in our customers' factories.

< Ease of Use >

As demands for factory automation increase while acquiring skilled workers becomes more difficult, further emphasis is placed on ease of use in developing products, to deal with this situation.

< Strengthening Competitivity >

In order to develop highly competitive products and introduce them to the market, FANUC vigorously invests in research and development. By narrowing down to our area of expertise, which is factory automation, and aggressively investing in R&D in this area, products which are highly competitive are developed and released. This leads to the enrichment of intellectual property.

< Service First >

"Service First" is a basic policy followed by the FANUC Group. Through "Service First," high level maintenance service in line with FANUC's global standards are provided anywhere in the world, as well as "Lifetime Maintenance" of FANUC products for as long as they are used by our customers. Particularly, lifetime maintenance, which is difficult for our competitors to imitate, is a primary feature of the FANUC Group, which shall continue to be focused on.

< Fortifying the Corporate Structure >

Basic policies from the past to make the company stronger will be promoted from a long-term perspective. These include making our products more competitive, strengthening sales and service activities, advancing factory automation and robotization, reducing expenses and time, and streamlining

- 4 -

operations.

< IoT / AI Technology >

By actively applying IoT and AI technologies to all fields of FA, ROBOT and ROBOMACHINE, customers' manufacturing processes are made more efficient.

< Responsibility to Supply >

As a supplier of capital goods, FANUC will fulfill its responsibilities to supply under any circumstance. For this end, manufacturing sites and service offices are being increased and established in various locations so that service activities can be maintained. Furthermore, measures are being taken to strengthen our supply chain. Examples are procuring parts from multiple suppliers, and having an adequate amount of parts in stock.

< Enrichment of Human Capital >

From the viewpoint that human resources is most vital for mid-to-long term growth, improvements in the work environment and motivation of employees are considered important topics to be addressed. In addition, looking towards the future, FANUC strongly invests in human capital to employ necessary people and educate employees. Through such efforts, human capital is continuously enriched.

< Management Indices >

In addition to operating margins, ordinary margins and ROE, market shares are regarded as being critical management indices. Assessments and judgments are made comprehensively based on such indices.

< Actions to Prevent Infection >

Highest priority is placed on the prevention of infection and spread of infection to our customers, partners, employees and their families as well as the community. FANUC shall continue to supply products and offer services to our customers placing safety first.

1. Basic Views and Guidelines on Corporate Governance
   We think it is important for the practical functioning of governance to share such an easy-to-understand and simple principle among all officers and employees of the Group.
   We have the code of conduct while practicing "Strict Preciseness and Transparency," we will make efforts to maintain a high level of awareness of officers and employees of our Group into the future.
2. Board Policies and Procedures in Determining the Remuneration of the Senior Management and Directors.
   For remuneration of directors (except for directors who are Audit and Supervisory Committee Members), we determine an amount of remuneration of inside directors, basically based on their positions, that consists of performance-based remuneration, fixed remuneration and stock-based remuneration, and an appropriate amount of fixed remuneration of outside directors from the standpoint of ensuring independence, which are both determined by resolution of the Board of Directors to the extent approved at the shareholders' meeting. This decision shall be made by the Board of Directors after consultation with the Nomination and Remuneration Committee, which is chaired by independent outside director and the majority of which is composed of independent outside directors.
3. Board Policies and Procedures in the Appointment and Dismissal of Senior Management and the Nomination of Director Candidates
   The appointment and dismissal of the candidates for directors, including the President and CEO, shall be conducted by the Board of Directors after consultation with the Nomination and Remuneration Committee, which is chaired by independent outside director and the majority of which is composed of independent outside directors.
4. • 5 -