IN-DEPTH: NUCLEAR ENERGY IN

UPDATED JUNE 2016 INTRODUCTION electricity-generating equipment in order to meet electricity demands.3 According to the The March 2011 earthquake, tsunami and the World Nuclear Association, Japan currently resulting partial reactor meltdown at relies on imports for approximately 84% of Electric Power Company’s (“TEPCO’s”) its primary energy needs, which, according Fukushima Daiichi Power Station resulted to the finance ministry, cost the country in heightened scrutiny placed on the use approximately ¥24 trillion (roughly $250 of nuclear energy and the safety of nuclear billion) in 2012.4 facilities in Japan. The event was rated by the International Atomic Energy Agency as After halting all nuclear operations in 2012, a Level 7 “major accident,”1 the highest level the Japanese government asked businesses on the International Nuclear and Radiological and households to cut their electricity Event Scale, and generated considerable usage by at least 15% in order avoid possible debate regarding the safety and desirability blackouts. However, meeting energy of nuclear power production. demands during the summer months, when electricity usage peaks, brought increased Given the increased scrutiny placed on the concern that energy needs would not production of nuclear energy in Japan, Glass be met. In response, in June 2012, then- Lewis recommends that shareholders look Prime Minister Yoshihiko Noda delivered a closely at proposals regarding companies’ speech in which he stated that he wanted nuclear operations, as mismanagement of to resume operation of Kansai Electric’s these operations can have significant health, Ohi reactors 3 and 4. According to Noda, policy, safety, environmental, regulatory and “[c]heap and stable electricity is vital. If all legal implications. the reactors that previously provided 30% NUCLEAR ENERGY IN JAPAN of Japan’s electricity supply are halted, or 5 The Nuclear Energy Institute, a policy kept idle, Japanese society cannot survive.” organization for the nuclear technologies According to Kinya Shintani, the chairman of industry, states that as of April 2016, Japan the Ohi town assembly, the local economy maintains 43 nuclear reactors with 40,290 and employment were significantly affected MW of nuclear capacity. Japan has the by the halted nuclear power generation. third-highest nuclear capacity by country, Shintani stated that “[l]argely understanding behind the United States and . Prior the necessity of nuclear power and taking to the 2011 earthquake, Japan relied on into consideration the residents’ opinions as nuclear power for 30% of its electricity, well as the impact on consumers’ livelihoods and had planned to expand that share to and the economy, we decided to agree to 6 nearly 50% by 2030 through the creation a restart.” On June 17, 2012, Noda declared of 14 new nuclear reactors. However, in the that, following a meeting with several Cabinet wake of the Fukushima Daiichi disaster, ministers, the Ohi plant could be operated then-Prime Minister Naoto Kan publicly safely and subsequently approved a restart 7 abandoned these expansion plans in May for its reactors. In July 2012, Kansai Electric 8 2011. 2By May 2012, all remaining nuclear resumed operation of these reactors, but reactors were temporarily idled, leaving in September 2013, both reactors were

Japan with no clear nuclear energy policy 3 Phred Dvorak, Eleanor Warnock. “Japan to Take Its Last and without atomic power for the first time Reactor Offline.” Wall Street Journal. May 4, 2012. 4 Aaron Sheldrick, Osamu Tsukimori. “Japan Faces Higher Fuel Bill in over 40 years. This reduced generation as Nuclear Shutdown Enters Third Year.” Reuters. March 13, 2013. led some utilities companies to restart 5 Roland Buerk. “Japan ‘Must Restart’ Two Nuclear Reactors, Noda Warns.” BBC News. June 8, 2012. older thermal-powered plants and to lease 6 Linda Sieg, Yoko Kubota. “Japan Town OKs Reactor Restarts.” China Daily. May 15, 2012. 1 Shinichi Saoshiro, Mayumi Negishi. “Japan Raises Nuclear Crisis 7 Jacob Adelman, Yuji Okada. “Noda Ends Japan Nuclear Freeze, to Same Level as Chernobyl.” Reuters. April 12, 2011. Risking Backlash at Polls.” Bloomberg. June 17, 2012. 2 Martin Fackler. “Japan to Cancel Plan to Build More Nuclear 8 Osamu Tsukimori, Aaron Sheldrick, Linda Sieg. “Japan Restarts Plants.” New Times. May 10, 2011. First Reactor Since Fukushima Crisis.” Reuters. July 1, 2012. 1 again shut down for regular maintenance decommission and ongoing litigation. and for a regulatory assessment.9 In May Further, the Takahama shutdown has been 2014, the Fukui District Court ruled that the particularly detrimental to the industry Ohi reactors could not be restarted on the because the court in the district where the grounds that structural deficiencies in the reactor operates had lifted its injunction reactors’ safety measures would violate the against the plant, showing how plaintiffs can “fundamental rights to life” of those who live try different judges due to the wide swath within 250 km of the plant.10 The same court of areas affected by reactors.18 In addition, ruled in May 2015 that Kansai Electric could on April 14, 2016, Japan experienced seismic not restart its two reactors at its Takahama tremors, including a 7.3 earthquake, leading plant based on similar safety concerns.11 In to renewed calls for closure at the remaining December 2015, the Fukui District Court reactors. Approximately 100 mayors overturned this injunction, allowing Kansai and town heads belonging to Mayors for Electric to restart its Takahama reactor No. a Nuclear Power Free Japan have publicly 3 in January 2016 and announce its plans to urged the central government to reevaluate restart reactor No. 4 in late February 2016.12,13 its earthquake standards and propose that However, a radioactive water leak at the No. the government should grant localities within 4 reactor was reported in February 2016, 30 km of a nuclear plant the legal authority and the reactor was restarted that month to approve or reject reactor restarts.19 but shut down after only a few days due Despite Japan’s nuclear power capacity after a problem with a generator triggered currently being limited to two reactors, it an alarm which caused an automatic does not appear that there is an immediate 14,15 shutdown. Additionally, in March 2016, need for increased nuclear production in the Otsu District Court issued an injunction order to meet the country’s energy needs. to halt Kansai Electric’s No. 3 and No. 4 As of April 2015, a government report reactors, stating the firm failed to show suggested that Japan will have enough the public that those reactors were safe for electricity supply to meet peak demand 16 operation. The ruling, which required an during the summer months without the immediate halt in generation, resulted in the need to start any of its 48 remaining idled largest drop in Kansai Electric’s share price nuclear reactors. The report stated that 17 since October 1987. Japan’s regional utilities should be able to The Nuclear Energy Institute’s Japan maintain a 3% or greater reserve margin in Nuclear Update, as of May 2016, states supply capacity on average, even with the that Sendai 1 and 2 are the only reactors potential for an extremely hot summer, with currently operating, with other reactors necessary power-sharing between utilities in various stages of prestart inspections, to ensure adequate regional supplies and continued conservation efforts. This could 9 ”Japan Shuts Down Only Operating Nuclear Reactor for be due to the fact that Japan has made Maintenance as Fukishima Crisis Worsens.” New York Daily News. September 15, 2013. concerted efforts to finance clean energy. 10 “Reflect on Fukui Nuclear Ruling.” . According to an annual Pew Charitable May 23, 2014. 11 “Japan Court Upholds Nuclear Power Plant Injunction.” Trusts report, the most recent of which was Phys.org. May 19, 2015. published in April 2014, Japan experienced 12 Kentaro Hamada. “Japan Court Clears Way to Restarting Kansai Electric Nuclear Plants.” Reuters. December 24, 2014. the fastest clean energy investment 13 Eric Johnson. “Third Reactor Restart Spurs Fears Over Shaky growth in the world in 2013, increasing its Kansai Evacuation Plans.” Japan Times. January 29, 2016. 14 “Radioactive water leak found at Takahama No.4 reactor, investments by 80%, behind only China and posing restart delay.” The Japan Times. February 21, 2016. the United States. The report also shows a 15 “Takahama Reactor Automatically Shuts Down After Alert: Kansai Electric.” Japan Times. February 29, 2016. 18 Robin Harding. “Japan’s Nuclear Restart Stymied by Courts.” 16 Mayumi Negishi. “Japanese Court Orders Shutdown of Nuclear . April 6, 2016. Reactors.” The Wall Street Journal. March 9, 2016. 19 Eric Johnston. “Despite Assurances, Quakes Prompt Calls 17 “Kansai Electric plunges after reactor halt” The Financial to Switch off Japan’s Nuclear Reactors.” The Japan Times. Times. March 9, 2016. April 18, 2016. 2 lack of diversification, as over 93% of Japan’s This shift also places the NRA under the clean energy investments are in solar power. regulation of the Environment Ministry.24 In addition, 70% of Japanese respondents in Under this reorganization, Japan’s Atomic regular polls want to end nuclear power in the Energy Commission, established under the country, with most supporting the effort led Atomic Energy Basic Law of 1955, continues by the Democratic Party of Japan to phase in its role of planning overall strategy for the out nuclear power by the 2030s.20 However, use of nuclear energy in Japan. Japan has also faced noted difficulties in In January 2013, the NRA approved more establishing a renewable infrastructure to rigorous safety standards for Japanese replace nuclear power, including low grid nuclear power plants that specifically capacity, a deregulated energy market and addressed design-basis standards, severe 21 construction inefficiencies. accident countermeasures and standards Despite the country’s investment on to mitigate damage associated with alternative energy sources and general earthquakes and tsunamis. These new, public opposition to a nuclear restart, stricter safety standards could place a Prime Minister Abe has pressed for reviving greater burden on companies operating nuclear power, stating that Japan “cannot do in the nuclear industry and have caused without” nuclear power as it was necessary significant delays in restarting nuclear in “secur[ing] the stability of energy generation in Japan. The NRA has indicated supply”.22 The country’s heavy dependence that completing safety checks within the on imported energy has generally been seen three-year timeframe specified by Prime as a drag on the Prime Minister’s program Minister Abe’s nuclear policies, which ends to revive Japan’s economy as this program December 2015, would be impossible.25 This is involves significant monetary easing, which likely due to the current reactors’ insufficient increases the cost of imports.23 safety measures. According to a survey of ’ 16 nuclear facilities, as of February OVERSIGHT OF NUCLEAR 2013, none of them met the NRA’s new OPERATIONS safety standards.26 The new safety standards The Nuclear Regulation Authority (“NRA”), require that companies, among other things, which is modeled after the U.S. Nuclear build secondary control centers to manage Regulatory Commission (“NRC”), is an emergency cooling systems and radiation independent agency, established under filter vents and make more thorough Japan’s Environment Ministry, that is assessments of seismic activities, as building largely responsible for the safety regulation reactors on active faults is prohibited under concerning nuclear activity. In an effort to Japanese law. Additionally, nuclear plants address independence concerns regarding will be required to maintain robust tsunami Japan’s nuclear regulatory bodies, the NRA defenses, including seawalls and water-tight was formed in September 2012 by separating doors that are strong enough to withstand the former Nuclear and Industrial Safety large tsunamis.27 Regulations also require Agency from the Ministry of Economy, reactors to close and undergo maintenance Trade and Industry, and combining it with at least once every 13 months.28 Further, the former Nuclear Safety Commission. implementing the new standards required

20 Daniel Aldrich, James Platte, Jennifer Sklarew. “Despite 24 “Japan Gets a New Nuclear Safety Body, Now Needs to Write Meltdowns, a Tsunami and Public Opposition, Japan May Soon Rules.” . September 20, 2012. Restart a Nuclear Power Plant – or Several.” The Washington Post. 25 Osamu Tsukimori. “Japan’s New Government Sticks to Three- July 20, 2015. year Nuclear Safety Goal.” Reuters. December 27, 2012. 21 Joe Jackson. “Despite Nuclear Fears, Japan Solar Energy 26 The Asahi Shimbun. “Survey: No nuclear plants meet new Sector Slow to Catch On.” Al Jazeera America. January 23, 2016. safety standards.” Asia & Japan Watch. February 24, 2013. 22 AFP. “Shinzo Abe Says Japan ‘Cannot Do Without’ Nuclear 27 Tsuyoshi Inajima, Yuji Okada. “Japan Atomic Safety Rules May Power.” The Economic Times. March 10, 2016. Keep Reactors Closed for Years.” Bloomberg. January 31, 2013. 23 Leo Lewis. “Japan Poised for Nuclear Restart.” Financial 28 Kanoko Matsuyama. “Shutdown of Japan’s Last Nuclear Times. August 10, 2015 Reactor Raises Power Concerns.” Bloomberg. September 15, 2013. 3 for operation could be extremely costly; the quake and a series of over 1000 smaller electric power companies expect the cost of earthquakes hit the region in late April 2016, implementing the new standards to total ¥1.1 causing public concern for the safety of the trillion ($11.75 billion), with Kansai Electric reactors. However, both reactors remained stating that it expects to incur costs of online throughout the earthquakes, and no ¥285.5 billion in the medium- to long-term problems were reported.35 in order to maintain its operations.29 JAPANESE NUCLEAR POLICY Given the difficulty and significant expenses In September 2012, amid heavy protests over incurred in meeting these new regulatory reactivating the Ohi reactors, the Japanese standards, the status of many of Japan’s government announced its intentions to reactors remains uncertain. According to a completely phase out nuclear power by the Reuters analysis, between one-third and two- 2030s. The plan would involve a strict 40- thirds of the nation’s nuclear reactors are year limit on the lifetime of reactors while projected to pass safety checks. Moreover, aiming to triple the share of renewable while the NRA signed off on the safety of a power to 30% of its energy mix.36 However, third reactor in May 2015, it is estimated that in December 2012, the newly-re-elected as many as 17 of Japan’s reactors may never Liberal Democratic Party, led by current be switched back on again on account of not Prime Minister Shinzo Abe appeared to meeting these standards.30 Restarting these reverse course, stating that it had yet to reactors will also present seismological, determine if it would uphold this policy. economic, logistical and political problems.31 Rather, it intended to establish a three-year In many cases, the biggest hurdles are local deadline, by which it must decide whether or sentiment and the cost of compliance. For not to restart more of its nuclear reactors.37 example, the resumption of operations of In February 2013, the government revised its Kyushu Electric Power Company’s Sendai position on the matter when it announced reactors 1 and 2 has been fast-tracked by that it would begin restarting its idled regulators, but has also faced significant nuclear reactors after new safety guidelines, local opposition. Proponents of the restart of established by the newly-formed NRA, these reactors argue that it will revitalize the were in place. Although two reactors have local economy.32 However, despite protests, resumed commercial operation, it is uncertain a provisional injunction against restarting when or if many of the other reactors will the Sendai reactors was dismissed by the be restarted given public opposition and Kagoshima District Court, allowing the plant expensive safety standards.38 In April 2014, to commence the restart of its operations. Prime Minister Abe’s cabinet approved a The Sendai reactor No.1 was restarted on new energy policy which officially reversed August 11, 201533 and began commercial the prior government’s decision to gradually operation on September 10, 2015. Reactor phase out nuclear power in the country. The No. 2 was restarted on October 15, 2015 and plan reinstated nuclear power as a national started commercial operation on November policy defining it as an “important baseload 17, 2015.34 Recently, a magnitude 7.3 earth- power source” along with coal and hydro

power. Reuters suggested that the policy 29 “Japan’s Nuclear Plants Unlikely to Restart in 2013” MarketWatch. March 3, 2013. was “too little too late for Japan’s moribund 30 Kentaro Hamada, Yuka Obayashi. “Japan Approves Third Nuclear Plant For Restart.” Reuters. May 20, 2015. 31 Mari Saito, Aaron Sheldrick, Kentaro Hamada. “Japan May Only 35 “Nuclear power plant stays online in Japan despite 1,000 Be Able to Restart One-Third of Its Nuclear Reactors.” Reuters. quakes, public concern.” Reuters. April 29, 2016 April 2, 2014. 36 Risa Maeda, Aaron Sheldrick. “Japan Aims to Abandon 32 Mari Saito. “In Post-Fukushima Policy Test, Japan Town Rallies Nuclear Power by 2030s.” Reuters. September 14, 2012. for Nuclear Re-Start.” Reuters. April 13, 2014. 37 Osamu Tsukimori, Aaron Sheldrick, Michael Perry. “Japan’s 33 “Japan Restarts First Nuclear Power Plant Since Fukushima.” New Government Sticks to Three-year Nuclear Safety Goal.” BBC News. August 11, 2015. Reuters. December 27, 2012. 34 “Second Reactor in Japan Brought Back Fully Online After 38 Martin Fackler, Hiroko Tabuchi. “Japan to Begin Restarting Idled Fukushima Nuclear Crisis.” Japan Times. November 17, 2015. Nuclear Plants, Leader Says.” New York Times. February 28, 2013. 4 atomic industry,” which is experiencing Takahama nuclear power plants meet their significant losses leading companies to new safety regulations, though formal request capital infusions from the govern- approval will only accrue after hearings by ment.39 However, in April 2015, Japan’s the Japan Atomic Energy Commission and cabinet made additional steps to revive the the Ministry of Economy, Trade and Industry, industry with a proposal for making nuclear as well as a public invitation for scientific energy account for 20-22% of the country’s and technological comments.46 40 electricity mix by 2030. Further, a May 2015 As of April 2016, of Japan’s 42 reactors that report from Japan’s Ministry of Economy, are operable and potentially able to restart, Trade and Industry estimates that even amid 24 are in the process of restart approvals and increased regulation, nuclear power will the first two Sendai reactors were restarted remain the cheapest power source available in August and October 2015. Regarding the 41 to the country through 2030. reactors not likely to be restarted, Prime The Japan Ministry of Economy, Trade Minister Abe entered into a joint venture with and Industry estimated in May 2013 that French President Francois Hollande during the nuclear shutdown is costing the utility a May 2014 visit to France. The agreement companies approximately $13 billion a established a new company, ANADEC, year.42 As such, it is not surprising that many a combination of units of French energy companies are eager to resume nuclear company, Areva, and Japan’s Atox Co. The production as soon as possible. In May 2013, newly formed ANADEC will decommission it was reported that Tepco, Shikoku Electric and dismantle Japanese nuclear power Power, Kyushu Electric Power, Kansai Electric plants starting with the stabilization and Power and Hokkaido Electric Power planned clean-up of the Fukushima site. to apply to the NRA to restart their reactors.43 While these companies were permitted to RISKS ASSOCIATED WITH submit these applications, the timeframe NUCLEAR POWER PRODUCTION for when operations are resumed is heavily IN JAPAN dependent upon the NRA. These evaluations Due to the heightened attention paid to typically take a minimum of six months to Japan’s nuclear activity as a result of the one year to complete, thus delaying the Great East Japan Earthquake and tsunami restart of reactors at significant expense to and the risks that operating nuclear reactors 44 many companies. As such, since this report, present, particularly in a seismically volatile only Kyushu Electric Power’s Sendai plant and tsunami-prone geographic region, we reactors have been restarted. In March 2016, believe it is prudent for companies involved Shikoku Electric announced its decision to in the nuclear power industry to evaluate retire and decommission its No.1 reactor at their exposure to: the Ikata plant.45 In addition, in February 2016, the NRA disclosed that Units 1 and Direct Risk: 2 of the Kansai Electric Power Company’s According to the U.S. Environmental Protection Agency, radioactive materials

39 “Japan Approves Energy Plan Reinstating Nuclear Power.” found at nuclear power plants include Reuters. April 11, 2014. enriched uranium, low-level radioactive 40 “Japan Wants a Chunk of Its Energy to Come From Nuclear Power by 2030.” Business Insider. April 23, 2015. waste and spent nuclear fuel, which can 41 “Nuclear Remains Cheapest Power Source Despite Fukushima pose mild to significant hazards to health Meltdowns: Government.” Japan Times. May 11, 2015. 42 Javier E. David. “A Yen for Nuclear Energy: Japan’s Power depending on exposure levels. According to Conundrum.” CNBC. May 5, 2013. Thomas B. Cochran, a physicist at the Natural 43 Tsuyoshi Inajima. “Tepco Nuclear Restart Depends on Safety Call as Shares Surge.” Bloomberg. May 19, 2013. Resources Defense Council, globally there 44 “Japan’s Nuclear Plants Unlikely to Restart Operations This Year: Survey.” Japan Times. March 4, 2013. 45 “Safety Upgrade Costs Spur Shikoku Electric to Ditch Plan to 46 “NRA Approves Takahama 1 and 2 Safety Standards.” World Restart Aging Ehime Reactor.” Japan Times. March 25, 2016. Nuclear News. February 25, 2016. 5 have been 12 notable accidents involving Committee attributes this low rate of impact nuclear facilities since 1959.47 Incidents at to the Japanese government’s quick action Three Mile Island in 1978, Chernobyl in 1986 and evacuation of affected communities.51 and Fukushima Daiichi in 2011 have caused However, in May 2016, a statistical study many to look more closely at the potential published in the Journal of Epidemiology on for, and the long-term impacts of, a major the screening undertaken in the Fukushima nuclear accident. Some studies suggest Prefecture found that instances of thyroid minimal damage from nuclear incidents. For cancer among children were 20 to 50 times example, a U.N. monitoring project found higher than average.52 In direct contrast, that, aside from a significant increase in studies released around the same time curable thyroid cancer among those exposed found no evidence of radioactive cesium as children, there was “no scientific evidence after examination of over 2,700 children in of increases in overall cancer incidence or Fukushima and other prefectures, concluding mortality rates” among residents of the that there is “low risk of internal exposure” Chernobyl region.48 Further, while more to radioactive materials,53 whereas a study than 13,000 people have been confirmed by the International Atomic Energy Agency dead in Japan after the earthquake and found that an increase in childhood thyroid tsunami, there have been no radiation-linked cancer attributable to the Fukushima deaths reported and only 21 plant workers accident is unlikely.54 49 experienced minor radiation sickness. Regulatory/Legal Risk: However, a June 2012 study by Stanford researchers estimated that radiation from In April 2016, Japan’s electricity market the Fukushima Daiichi disaster may cause an was fully deregulated, and gas utilities are additional 15 to 1,300 cancer deaths globally due to follow suit in 2017. The deregulation as a result of exposure to radioactive of the market is anticipated to increase emissions. While the wide number range competition across Japan and is expected reflects uncertainties about the effect and to end regional monopolies. It also may transmission of radioactive emissions, and allow Japan’s energy business to break into the methods used by the researchers to the Asian market and other markets with 55 calculate their impact, the study found significant electricity demands. Despite that the incident will most likely cause 130 continued government support for nuclear, cancer-related deaths.50 In contrast, a 2014 its role in a deregulated industry is less clear. study from the UN Scientific Committee on In order to meet the Government’s 2030 the Effect of Atomic Radiation, similar to goal that 20-22% of Japan’s total energy be that produced after Chernobyl, determined sourced from nuclear, around 30 working that although there is a “theoretical reactors will be required, but currently only possibility that the risk of thyroid cancer two are in operation. Following deregulation, among the group of children most exposed the cost of bringing nuclear plants back to radiation could increase,” generally, “[n] online may become unfeasible for energy o discernible changes in future cancer companies, and they may instead look to rates and hereditary diseases are expected cheaper methods of generating energy, due to exposure to radiation as a result of 51 Fredrik Dahl. “Fukushima Meltdown Unlikely to Lead to Large the Fukushima nuclear accident.” The UN Number of Cancers – U.N. Scientists.” Reuters. April 2, 2014. 52 Yuri Kageyama. “Researcher: Children’s Cancer Linked to 47 Matthew L. Wald. “Keeping Score on Nuclear Accidents.” Fukushima Radiation.” . October 8, 2015; Maria New York Times. April 12, 2011. Khan. “Japan: Study Finds Higher Thyroid Cancer in Children 48 Holman W. Jenkins, Jr. “Coal is More Dangerous Than Living Near Fukushima Nuclear Plant.” International Business Nuclear.” Wall Street Journal. April 13, 2011. Times. October 8, 2015. 49 Taiga Uranaka, Chisa Fujioka. “TEPCO Still Working on Plan to 53 “No Radioactive Cesium Detected in Fukushima Children: End Japan Nuclear Crisis.” Reuters. April 13, 2011; Gary Was. “The Survey.” The Mainichi. October 9, 2012. Case for Nuclear Power – Despite the Risks.” The Conversation. 54 Louis Charbonneau. “Fukushima-Related Child Cancers May 18, 2015. Unlikely to Rise: IAEA.” Reuters. August 31, 2015. 50 Jason Gale. “Fukushima Radiation May Cause 1,300 Cancer 55 Hirofumi Matsuo. “Energy Deregulation Threatens to Break Deaths, Study Finds.” Bloomberg. July, 2012. up Japanese Monopolies.” Financial Times. March 29, 2015. 6 such through the use of coal-fired plants.56 against the government or plant operators in As previously mentioned, in 2013 the NRA Japan due to safety concerns. For example, established safety standards that could delay in 2003, residents sued Chubu Electric, or prohibit continued nuclear operations for the operator of the Hamaoka reactor. The some reactors. For example, in May 2013, residents claimed that Hamaoka’s standards the NRA found evidence that Japan Atomic were inadequate in light of seismic predictions Power Co.’s Tsuruga plant, which contains the and that a major earthquake could cause country’s oldest reactor, lies on an active fault a reactor meltdown that could adversely line, both facts that could permanently shut affect the environment and human health. down the plant. Moreover, the permanent However, judges ruled against the plaintiffs closure of this plant could indicate further in November 2007, finding that there were no mandated reactor decommissionings, issues with safety assessments and measures as there are five other facilities that are at the plant. Additionally, residents near the suspected by the NRA to be sitting on active Shika nuclear plant in Ishikawa successfully fault lines. According to estimates, Japan sued to shut down a new reactor in 1999, Atomic would reportedly suffer ¥256 billion arguing that designs were not up to recent ($2.5 billion) in losses if new regulations earthquake resistant standards. Similarly, were to close three of its reactors, which, a district court ordered the shutdown of a as of April 2014, seem very certain as those Hokuriku Electric Power Company plant in three reactors are deemed “unlikely” to be 2006, as it had not met adequate earthquake brought back online.57 Permanent closures resistance standards. However, this decision 59 and subsequent losses could have significant was reversed in 2009. In mid-2013, anti- implications for shareholders of publicly nuclear advocates sought to have Kansai traded electric companies. While Japan Electric Power’s Ohi plant, which, at the time, Atomic Power Company is a privately-held contained Japan’s only active reactors, shut company, it has 10 significant shareholders down amid warnings by seismologists that that hold 90.4% of its stock, the majority the reactors sit above an active fault line. of which are Japan’s publicly-traded power In April 2013, a Japanese court rejected an 60 companies. According to corporate data, injunction to decommission these reactors. the firm’s largest shareholders include As previously mentioned, this petition was Tepco (28.2% shareholder), Kansai Electric not successful. However, the plant was shut Power Company (18.5% shareholder), Chubu down in 2013 for regular maintenance, and, Electric Power Company (15.1% shareholder) in 2014, the Fukui District Court ruled that it and Hokuriku Electric Power Company (13.1% would not allow the restart of the plant’s two 61 shareholder). Further, Hokuriku Electric nuclear reactors. In December 2015, the Power Co.’s Shika nuclear power plant may Fukui District Court rejected an injunction be forced to decommission a reactor after a to block the restart of two reactors at the finding by the Nuclear Regulation Authority Ohi plant, stating that an injunction was not that “it is reasonable to assess” the fault needed as the reactors are still undergoing under one of the reactor buildings is active.58 regulatory checks and thus restart is not imminent.62 As previously mentioned, as Companies operating in the nuclear industry of the writing of this report, all but two of also have a heightened exposure to litigation Japan’s reactors are currently shuttered, for that could temporarily halt or permanently routine maintenance or otherwise. suspend certain plant operations. Since the late 1970s, major lawsuits have been filed 59 Norimitsu Onishi, Martin Fackler. “Japanese Officials Ignored or Concealed Dangers.” New York Times. May 16, 2011. 56 “Japan’s Energy Policy Takes a Hit with Another Reactor 60 Risa Maeda, Mari Saito. “Japan Court Rejects Request to Shutdown.” Nikkei Asian Review. March 26, 2016. Shut Down Ohi Nuclear Reactors.” Reuters. April 16, 2013. 57 Tsuyoshi Inajima, Yuji Okada. “Japan’s Nuclear Watchdog 61 “Reflect on Fukui Nuclear Ruling.” The Japan Times. Shows Its Bark Has Some Bite: Energy.” Bloomberg. May 16, 2013. May 23, 2014. 58 Koji Kitabayashi. “Experts: Fault Beneath No. 1 Reactor at 62 Kentaro Hamada. “Japan Court Clears Way to Restarting Shika Plant is Active.” The Asahi Shimbun. April 27, 2016. Kansai Electric Nuclear Plants.” Reuters. December 24, 2015. 7 Additionally, in December 2012, eight U.S. been flooded by the tsunami and contained Navy sailors, involved in aid efforts during radioactive water. The plaintiff alleges, the Fukushima Daiichi disaster sued Tepco in however, that Tepco told the workers the California claiming that they were sickened basement was safe even though it knew of the by the exposure to radiation and were given contamination. The plaintiff has also stated false assurance over the reactor meltdown.63 that he actually never entered the water, and By March 2013, 26 plaintiffs, along with as just worked near it and has not developed many as 100 others in the process of joining any health issues. He is seeking ¥11 million the legal action, refiled a suit demanding (roughly $107,000) in compensation.69 more than $2 billion in compensation as a In October 2015, Japan’s Health ministry result of radiation exposure. The amended awarded compensation to the worker in a suit sought at least $40 million in damages move that was interpreted as recognition for each claimant as well as the establishment by the ministry that the worker’s cancer was of an approximately $1 billion fund for future linked to his work at the plant.70 As such, the healthcare expenses.64 In early 2014, the outcome of this case could be instructive for sailors again refiled because their 2013 suit all future legal claims and litigation. was thrown out by the judge on account of a An additional lawsuit, filed in September lack of jurisdiction to rule on the conspiracy 2014, against Tepco alleges that hazard charge. The suit, which named Tepco as pay promised to workers working on the the only defendant, was filed on behalf decommissioning of the Fukushima Daiichi of approximately 70,000 U.S. plaintiffs, plant had not been paid out. A lawyer for including 5,500 sailors, who were in Japan the plaintiffs stated that the lack of hazard 65 during the incident. In October 2014, the pay was causing skilled workers to leave the appropriateness of the suit’s jurisdiction project, making it “a place for amateurs only.” was approved by a judge, thus allowing the The lawsuit is seeking almost $600,000 66 case to proceed against Tepco. On June 11, in unpaid wages from Tepco and its 2015, a California judge denied Tepco’s bid contractors, stating that Tepco was allowing to dismiss the now-$1 billion class action the subcontractors to skim funds allocated 67 lawsuit to Japan, and in April 2016, the to wages in order to boost their own profits. California court rejected Tepco’s appeal and The case is the first of its kind, where granted the plaintiff’s motion to expedite, employees are suing a utility for the labor 68 allowing the case to continue in California. practices of its construction contractors.71 Further, in May 2014, what appears to be the Further, the former mayor of Futaba, first employee suit against Tepco was filed Katsutaka Idogawa, further filed another by a 48-year old Japanese man. The plaintiff, lawsuit against Tepco and the central a contract employee working for Tepco’s government in May 2015 as a result of his original contractor and subcontractor, was exposure to excessive radiation since the 2011 hired along with five other workersafter the disaster. Idogawa claims that poor disaster nuclear incident to enter the basement of management by both parties caused him to the Fukushima No. 3 reactor building in order receive radiation over the annual limit during to install electric cables. The basement had the early phase of the disaster, and seeks ¥148.5 million in damages. He has further 63 Tom Watkins, Lateef Mungin. “U.S. Navy Sailors Sue Japan over Nuclear Accident.” CNN. December 28, 2012. 64 Chisaki Watanabe. “Tepco Faces Growing Suit by U.S. Troops Over Radiation Exposure.” Bloomberg. March 17, 2013. 65 David McNeill. “Stakes High As Ailing U.S. Navy Sailors Take on 69 Esther Tanquintic-Misa. “Fukushima Milestone: Plant Tepco over Fukushima Fallout.” The Japan Times. March 10, 2014. Worker Files Lawsuit Versus TEPCO Over Radiation Exposure.” 66 Jacob Adelman. “Sailors Can Sue Tepco in U.S. Over International Business Times. May 9, 2014. Radiation, Judge Says.” Bloomberg. October 30, 2014. 70 Umberto Bacchi. “Fukushima worker has radiation-related 67 Matt Sharp. “Fukushima Op Can’t Shift $1B Navy Radiation cancer says Japanese government.” International Business Times. Suit to Japan.” Law 360. June 12, 2015. October 20, 2015. 68 Juan Rodriguez. “9th Circ. Agrees to Speed Up Sailors’ $1B 71 “Fukushima Workers Sue Tepco Over Unpaid Wages, Reliance Fukushima Suit.” Law 360. April 5, 2016. on Contractors.” Reuters. September 2, 2014. 8 invited Futaba residents to join the lawsuit.72 Reputational Risk: In late 2015, Tepco agreed to a settlement for The direct effects on shareholder value an undisclosed amount over a dairy farmer of reputational harm stemming from who committed suicide after the Fukushima a company’s operations are uncertain. nuclear crisis created economic hardships However, given the climate of public concern for the victim.73 Further, in April 2016, a surrounding this issue, companies with District Center ordered Tepco to pay nuclear operations are exposed to potentially about ¥30 million to a couple for economic significant reputational risks that could and health damages incurred as a result adversely affect shareholder value. Prior to of the couples’ decision to voluntarily flee the Fukushima Daiichi incident, opposition the radiation in Fukushima Prefecture after to nuclear power had waned as popular and the disaster.74 In April 2016, a Tokyo District political focus turned toward the pursuit Court ordered Tepco to pay ¥31 million to of proven, reliable energy alternatives, the families of two former patients at a local with concomitant reduced greenhouse hospital who died after being forced to gas emissions. However, after the nuclear evacuate following the Fukushima disaster.75 disaster, there have been massive setbacks In the first criminal action to be taken in in the development of new nuclear energy. relation to the 2011 disaster, in February While Japan was preparing to establish 14 2016, three former Tepco executives were new nuclear reactors, following the nuclear charged with contributing to deaths and crisis, these plans were quickly halted and injuries stemming from the disaster. An efforts to reduce energy consumption independent judicial panel of citizens ruled and turn to alternate sources of electricity 79 in July 2015 that Tepco’s former chairman, were introduced. Even long after the and two former vice presidents should go Great East Japan Earthquake and despite on trial, which is expected to begin in 2017.76 the government’s insistence that Japan must resume nuclear generation, public As of the writing of this report, Tepco is opposition has remained strong. In a June facing over 30 different group lawsuits 2012 Pew Research Center survey, nearly across the country, representing over 70% of Japanese citizens surveyed believed 77 10,000 plaintiffs. As a result of the lawsuits that the country should reduce its reliance and other costs related to the Fukushima on nuclear energy, which was up from 44% incident, Tepco has required a ¥1 trillion the previous year. Further, 80% of those government bailout, plans to spend ¥2 surveyed stated that they were unhappy with trillion on decommissioning the plant and the government’s handling of the nuclear has paid ¥5.9 trillion in compensation to crisis.80 This sentiment was echoed when, on 78 residents as of February 2016. March 10, 2013, the second anniversary of the Fukushima Daiichi disaster, thousands of protesters marched in the Japanese capital in continued protest against nuclear power. A survey taken around that time showed 72 “Ex-Futaba Mayor Sues State, Tepco Over Fukushima Nuclear Disaster.” Japan Times. May 21, 2015. that approximately 70% of Japanese 73 “Tepco Settles Suit Over Suicide of Fukushima Dairy Farmer.” citizens surveyed wanted to phase out Japan Times. December 1, 2015. 81 74 “Tepco to Compensate Couple for Damages from Voluntary nuclear power eventually. More recently, Fukushima Evacuation.” Japan Times. February 18, 2016. a 2015 survey by Asahi Shimbun found that 75 “Court Orders Tepco to Pay 31 Million Yen Over Deaths of Fukushima Patients.” The Mainichi. April 28, 2016. 59% of respondents were opposed to the 76 Justin McCurry. “Former Tepco Bosses Charged Over Fukushima Meltdown.” . February 29, 2016. 79 Christopher Joyce. “Nuclear Nations Turn to Natural Gas and 77 “Fukushima Nuclear Disaster Evacuees Establish Liaison Renewables.” National Public Radio. May 16, 2011. Group for Lawsuit Plaintiffs.” The Mainichi Daily. February 15, 2016. 80 Malcolm Foster. “Poll: Japanese Opposition to Nuke Power 78 Mayumi Negishi. “Japan Indicts Three Former Tepco Stronger.” Associated Press. June 5, 2012. Executives Over Fukushima Nuclear Disaster.” The Wall Street 81 Mari Saito, Sophie Knight. “Thousands in Japan Anti-Nuclear Journal. February 29, 2016. Protest Two Years After Fukushima.” Reuters. March 10, 2013. 9 restart of all nuclear plants.82 The Mainichi Fukushima Daiichi disaster, stating that it newspaper similarly found, in 2015, that 57% had been afraid to consider the risk of such of respondents opposed the restart of the a large tsunami prior to the accident, as an Kyushu Electric Power Co.’s Sendai plant admission of such could have resulted in (the only plant now under operation), and public pressure to shut down its reactors.86 that only 30% of residents were in favor of This admission came months after the restarting the plant. Among other issues, the July 2012 release of the official Fukushima nuclear issue has caused the approval rating nuclear accident investigation report by an of Prime Minister Abe to drop to 32%, commission of the National lowest since he took power in late 2012.83 Diet of Japan, Japan’s federal legislative Governance Risk: body. The report concluded that not only was the incident “manmade” but it “was the Although the creation of the NRA may result of collusion between the government, assuage some such concern, in light of the the regulators and TEPCO, and the lack meltdown at Fukushima Daiichi, there has of governance by said parties” (p.16). The been growing worry over a seeming pattern commission further recommended that of negligence in nuclear power production Tepco and other nuclear reactor operators in Japan. For example, in 2000 a nuclear undergo corporate reform, including inspector alerted Japan’s main nuclear enhanced risk management, safety and regulator about a cracked steam dryer at governance standards and disclosure. Tepco’s Fukushima Daiichi Power Station, a defect which he believed was being A 2015 International Atomic Energy Agency concealed. If exposed, this crack would have report further highlighted Tepco’s failure to forced Tepco to undertake costly repairs. properly mitigate certain risks associated Ultimately, an investigation revealed that with seismic activities. The report, which was executives had hidden far more serious compiled by approximately 180 experts from problems with the reactors, including cracks 42 countries, totals 240 pages and highlights in the shrouds that covered the reactor a number of failures on the part of Tepco, core.84 Additionally, residents near Tepco’s including its insufficient consideration of plant in Niigata sued the government in “low probability, high consequence external attempts to overturn its decision to grant events.” As such, the report found that the license for building the plant, arguing Tepco did not implement a sufficient safety that nuclear regulators had ignored and assessment and lacked protection for the denied the existence of an active nearby emergency diesel generators, battery rooms fault line. A 2007 6.8-magnitude earthquake and other vital systems against tsunami- 87 subsequently damaged the plant, causing caused flooding.“ fire and radiation leaks. Tepco later admitted OTHER RISKS ASSOCIATED WITH that it had determined the existence of a NUCLEAR OPERATIONS 12-mile long fault line in the sea near the plant in 2003.85 In addition to the aforementioned risks, companies with nuclear operations must In October 2012, Tepco officially admitted consider all aspects of their operations and for the first time that it had failed to take should mitigate any associated risks. In stronger safety measures to prevent the 2011 recent years, shareholders have expressed concerns regarding specific aspects of 82 Nyshka Chandran. “Japan’s Return to Nuclear Meets with Fear and Loathing.” CNBC. August 10, 2015. nuclear operations, including the use of 83 Julie Makinen, Jake Adelstein. “Japan Restarts a Nuclear Reactor, 4 Years After Fukushima. What’s at Stake?” Los Angeles Times. August 11, 2015. 86 Martin Fackler. “Japan Power Company Admits Failings 84 Norimitsu Onishi, Ken Belson. “Culture of Complicity Tied to on Plant Precautions.” New York Times. October 12, 2012. Stricken Nuclear Plant.” New York Times. April 26, 2011. 87 “IAEA Report on Fukushima Slams Lack of Tsunami 85 Norimitsu Onishi, Martin Fackler. “Japanese Officials Ignored Preparedness Despite Awareness of Threat.” Japan Times. or Concealed Dangers.” New York Times. May 16, 2011. May 25, 2015. 10 plutonium-thermal fuel and the management volume and radiotoxicity of final high- of spent fuel rods. level waste to be disposed; and promoting MOX Fuel non-proliferation by reducing plutonium inventories. Plutonium-thermal (“pluthermal”) energy generation refers to the use of plutonium Despite its benefits, on account of the risks fuel in thermal nuclear power plants. This presented by pluthermal energy production, fuel, or mixed oxide fuel, which is commonly there has been significant public opposition referred to as MOX fuel, is a mixture of to the use of MOX. For example, in April uranium and plutonium that is reprocessed 2014 the city of Hakodate filed a lawsuit from spent uranium. In contrast, most other against the government on account of the reactors are fueled by uranium. According Oma Nuclear Power Plant project which, if to the World Nuclear Association (“WNA”), completed, would house the world’s first MOX is relatively less expensive to produce MOX-only reactor. The complaint alleges and typically produces more energy than that any accident at this site would be enriched uranium. The WNA also states that “far more devastating than the Fukushima MOX has been in use as a fuel source since disaster because its core will contain a large 1963, and came into commercial use in the amount of highly toxic [weapons-grade] 90 1980s. Currently, about 40 nuclear reactors plutonium.” Construction on the Oma site in Europe are licensed to use MOX as fuel, began in 2008 with a 2014 completion target and over 30 are doing so. The WNA also date. The operator, J-Power, subsequently notes that MOX is widely used in Japan and halted construction after the Fukushima plans to use MOX in one third of its reactors disaster but resumed construction in mid- 91 in the near future. 2013. Hakodate’s anti-nuclear campaign has been joined by two former Japanese The use of MOX fuel could expose companies Prime Ministers – Junichiro Koizumi and to more substantial risks than just those Morihiro Hosokawa – who traveled to the city associated with nuclear operations. For to promote their lawsuit against Oma.92 As example, in a 2001 paper, scientist Edwin of writing this report, the suit is still pending. S. Lyman concluded that disposal of MOX fuel could present significant public risk, Spent Nuclear Fuel Storage Safety including incidents of latent cancer. Dr. Among many concerns sparked by the Lyman also mentions concerns regarding disaster at the Fukushima Daiichi nuclear potential increases in the probability of plant, major consideration has been given to accidents occurring due to the use of MOX how companies will manage and store spent fuel.88 Additionally, the use of plutonium nuclear fuel rods after generation. Spent can raise issues of security, as the type of nuclear fuel is typically stored in “pools,” plutonium that is used in the production of or tanks of boron-infused water to regulate MOX fuel is also the type that is used in the their temperature while they continue to production of nuclear weapons.89 However, decay. While pool storage facilities are Areva, a French energy company that considered relatively safe, power failures currently provides MOX fuel to Japanese or other disruptions in the cooling systems power companies, states that MOX fuel could potentially cause fuel rods to ignite offers the following advantages: preserving and release hazardous radiation.93 After natural uranium resources and contributing to the security of energy supply; reducing 90 “Hokkaido Prods Tokyo on Oma Plant.” The Japan Times. environmental impacts by reducing the May 13, 2014. 91 Chico Harlan. “In Japan, Two Years After Fukushima Nuclear Accident, Work Resumes on New Plant.” The Washington Post. 88 Edwin S. Lyman. “Public Health Risks of Substituting March 10, 2013. Mixed-Oxide for Uranium Fuel in Pressurized-Water Reactors.” 92 “Ex-PMs Visit Hakodate to Stop Nuke Plant.” The Japan Times. Science & Global Security, Volume 9, pp.33-79. 2001. October 29, 2015. 89 Jo Becker, William J. Broad. “New Doubts About Turning 93 Mark Benjamin. “How Safe Is Nuclear-Fuel Storage in the Plutonium Into a Fuel.” New York Times. April 10, 2011. U.S.?.” Time. March 23, 2011. 11 approximately five years, spent nuclear fuel cessation of nuclear generation in Japan has can be moved into steel-reinforced “dry also caused Japan’s utilities companies to casks,” which provide better resistance accumulate 120 million pounds of uranium, against natural disasters and relief when as the companies were still required to maximum capacity has been reached in honor their purchase contracts beyond storage pools. This has led to a debate as 2011.96 However, decisions as to how spent to whether dry-cask storage should be nuclear fuel waste is stored will likely have implemented earlier and more frequently. In to be made in the near future, as storage the United States, a 2011 Nuclear Regulatory capacity is rapidly shrinking. As of May 2015, Commission task force conducted a safety of all 15 nuclear plants that operators are review of nuclear plants in an attempt seeking to restart, only four have more than to safeguard against a disaster similar to 10 years before they run short on capacity. what was experienced in Fukushima, which Storage may be of especially significant included a review of spent fuel pool safety. concern at Chubu Electric’s Hamaoka According to the NRC website, “[t]he NRC plant, which could exceed the storage believes spent fuel pools and dry casks both capacity of its storage pools within two provide adequate protection of the public years of being restarted.97 health and safety and the environment. Environmental Risks Therefore there is no pressing safety or security reason to mandate earlier transfer While in a nuclear emergency, protecting of fuel from pool to cask.” Additionally, humans is the priority, there are also the Massachusetts Institute of Technology, environmental impacts which may be cause among other groups, has recommended that for concern. Outside of emergency situations, spent nuclear fuel be removed from storage nuclear power can be a contentious facilities at reactor sites and placed in environmental issue which poses potential regional geological repositories where they reputational risks to companies. According to can be safely monitored and protected.94 the U.S. Energy Information Administration, while nuclear power reactors do not Since the 1970s, most of Japan’s spent produce direct greenhouse gas emissions nuclear fuel waste has been stored at a and therefore do not contribute directly to temporary facility in a village in the Aomori climate change, the sourcing and process- prefecture. The prefecture had permitted ing of uranium fuel and the construction this disposal with the understanding that and decommissioning of nuclear facilities the government would move the waste may generate greenhouse gas emissions if elsewhere in 30 to 50 years. As such, the the fuel for those processes is derived from government has been required to come up fossil fuels, as the processes for mining with a permanent storage solution, which and refining uranium require large amounts it appears to have done in December 2013. of energy. Pursuant to the new storage system, the government must devise its own list of There are also significant environmental risks scientifically suitable permanent storage posed a nuclear accident. An IAEA report sites and then receive permission from describing the environmental consequences each prospective location. As of May 2015, of the Chernobyl accident observed varying Japan still had no permanent disposal impacts to the atmospheric, aquatic, solution for 17,000 metric tons of highly terrestrial, and urban environments in radioactive waste, which has increased costs many European countries. Radiation that is to decommission reactors.95 Further, the released into the environment can transfer

94 David L. Chandler. “Report: Storage for Spent Nuclear Fuel 96 James Conca. “As The World Warms To Nuclear Power, The More Crucial Than Ever.” MIT News. April 26, 2011. Outlook For Uranium Is Up.” Forbes. January 4, 2016 95 Yuriy Humber, Masumi Suga, Emi Urabe. “Japan’s 17,000 Tons 97 “Spent-Nuclear Fuel Issues Plague Restarts.” The Japan Times. of Nuclear Waste in Search of a Home.” Bloomberg. July 9, 2015. May 26, 2015. 12 between the air, water, soil and biota and may parties which, though typical for its politics, transfer into drinking water or foodstuffs, adds to the uncertainty surrounding its thereby delivering radiation doses in nuclear policy and approach. As such, various ways to people.98 For example, many companies with nuclear operations certain fish populations in the region must remain flexible in order to not only surrounding the Fukushima Daiichi plant ensure that they are meeting regulatory following the accident in 2011 were found requirements but also that they are able to to contain radioactive iodine and cesium manage their business in a manner that will at levels which, in some cases, exceeded be in the best interests of shareholders. We the regulatory limits set by the Japanese believe that companies in this industry must government. Public concerns regarding the make certain that they have mitigated any safety of seafood remained high for years safety risks associated with their operations following the disaster, and as of March 2015, to the best extent possible and that they the seafood industry in the vicinity of the have provided an adequate governance plant was operating at less than 10% of its structure that will offer oversight of issues previous capacity. In an attempt to assuage related to safety and compliance. Generally, public concerns and revive its seafood we believe a well-functioning board will industry, the Fukushima Prefecture and the provide these assurances and will further Fukushima Fishery Cooperatives introduced provide shareholders with adequate testing and published the results of its disclosure regarding the steps it has taken inspections weekly in newspapers and online. to ensure safety and compliance with any However, even if full-scale fishing is resumed, current or upcoming regulations regarding convincing consumers to buy seafood nuclear operations. 99 sourced from the area remains a challenge. We recognize that nuclear energy production Public health concern regarding radiation in Japan is a controversial and quickly in food following Fukushima prompted the changing issue that is likely to generate Food and Agriculture Association and the scrutiny and concerns from regulators, World Health Organization to jointly release investors and the public. Since the 2011 advice on the safety of food sourced from Fukushima Daiichi disaster, governments, Japan and other countries. However, the shareholders and regulators have been statement confirmed that contamination increasingly vocal regarding the emphasis was only found in food produced in areas placed by companies on the safety of their where radioactive material was deposited, operations and investors have regularly and that monitoring regulations and used annual meetings as an opportunity to international standards for the acceptable express related concerns. limits for radioactivity in foods were already in place.100 As the potential environmental, health- related, regulatory, reputational and CONCLUSION governance risks from nuclear operations Regulations regarding nuclear operation are have become more fully realized, we believe still uncertain as Japan’s current nuclear policy that investors should be cognizant of the was only recently announced. In addition, aforementioned risks in order to ensure since the 2011 Fukushima nuclear incident, that companies are providing appropriate Japan has elected two Prime Ministers and disclosure and oversight of nuclear three cabinets from two different ruling operations in order to mitigate these risks to the best extent possible. 98 International Atomic Energy Agency. “Radiation, People and the Environment.” February, 2004. 99 Ann Weru. “Fukushima’s Fish Industry Yet to Recover.” United Nations Office for Disaster Risk Reduction. March 31, 2015. 100 “FAQs: Japan Nuclear Concerns.” World Health Organization. September, 2011. 13 DISCLAIMER © 2016 Glass, Lewis & Co., Glass Lewis Europe, Ltd., and CGI Glass Lewis Pty Ltd. (collectively, “Glass Lewis”). All Rights Reserved. This report is intended to provide research, data and analysis of proxy voting issues and, therefore, should not be relied upon as investment advice. Glass Lewis analyzes the issues presented for shareholder vote and makes recommendations as to how Glass Lewis believes institutional shareholders should vote their proxies, without commenting on the investment merits of the securities issued by the subject companies. Therefore, none of Glass Lewis’ proxy vote recommendations should be construed as a recommendation to invest in, purchase, or sell any securities or other property. Moreover, Glass Lewis’ proxy vote recommendations must be construed solely as statements of opinion, and not as statements of fact, and may be revised based on additional information or any other reason at any time. The information contained in this report is based on publicly available information. While Glass Lewis exercises reasonable care to ensure that all information included in this report is accurate and is obtained from sources believed to be reliable, no representations or warranties express or implied, are made as to the accuracy or completeness of any information included herein. In addition, Glass Lewis shall not be liable for any losses or damages arising from or in connection with the information contained herein or the use or inability to use any such information. Glass Lewis expects its subscribers possess sufficient experience and knowledge to make their own decisions entirely independent of any information contained in this report. Subscribers are ultimately and solely responsible for making their own voting decisions. This Glass Lewis report is intended to serve as a complementary source of information and analysis for subscribers in making their own voting decisions and therefore should not be relied on by subscribers as the sole determinant in making voting decisions. All information contained in this report is protected by law, including but not limited to, copyright law, and none of such information may be copied or otherwise reproduced, repackaged, further transmitted, transferred, disseminated, redistributed or resold, or stored for subsequent use for any such purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person without Glass Lewis’ express prior written consent. Glass Lewis recommends all clients carefully and periodically evaluate, among other things, Glass Lewis’ research philosophy, approach, methodologies and conflict management, avoidance and disclosure policies and procedures. For information on Glass Lewis’ policies and procedures including treatment of conflicts of interests, please visit: http://www.glasslewis.com/about-glass-lewis/disclosure-of-conflict/.

14 SAN FRANCISCO Headquarters Glass, Lewis & Co., LLC One Sansome Street Suite 3300 San Francisco, CA 94104 Tel: +1 415-678-4110 Tel: +1 888-800-7001 Fax: +1 415-357-0200

NEW YORK Glass, Lewis & Co., LLC 44 Wall Street Suite 2001 New York, NY 10005 Tel: +1 212-797-3777 Fax: +1 212-980-4716

AUSTRALIA CGI Glass Lewis Pty Limited Suite 5.03, Level 5 255 George St Sydney NSW 2000 Australia Tel: +61 2 9299 9266 Fax: +61 2 9299 1866

IRELAND Glass Lewis Europe, Ltd. 15 Henry Street Limerick, Ireland Phone: +353 61 292 800 Fax: +353 61 292 899

GERMANY IVOX Glass Lewis GmbH Maximilianstr. 6 76133 Karlsruhe Phone: +49 721-35 49 622 Fax: +49 721-35 49 621

COPYRIGHT 2016 GLASS, LEWIS & CO., LLC 15