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Corporate Governance

Structure of the Investment Corporation

Japan Logistics Fund, Inc. (JLF) shall have at least one executive director and at least two supervisory directors. Additionally, there shall be at least one more supervisory director than there are executive directors.
The institutions of JLF comprise: a general meeting of JLF unitholders; one executive director; three supervisory directors; a board of directors meeting comprising JLF’s executive and supervisory directors; and an accounting auditor. Please click here (link to an overview of the investment corporation) for its present composition.

Description of the Institutions

1. General Meeting of Unitholders

Specific matters related to JLF as set forth in the Act on Investment Trusts and Investment Corporations (AITIC) or in JLF’s Articles of Incorporation (Articles) are to be decided at a general meeting of unitholders made up of JLF unitholders. Unless otherwise stipulated by law or the Articles, decisions at the general meeting of unitholders are to be made based on a majority of votes by unitholders in attendance. Changes to the Articles or other decisions set forth under AITIC Article 93(2)2 (Special Decisions) require a quorum. To form that quorum, unitholders owning a majority of units outstanding must be in attendance. Additionally, Special Decisions require at least two-thirds of the votes from that quorum. General meetings of unitholders take place twice a year in principle.

2. Executive and Supervisory Directors and the Board of Directors

In addition to executing the business of JLF, an executive director has the authority to take any judicial or extra-judicial acts related to the business of JLF on behalf of JLF.
A supervisory director has the authority to supervise the conduct of business by the executive director(s).
The board of directors (Board) has the authority to approve the convocation of a general meeting of unitholders and the execution of other specific responsibilities set forth in the AITIC. The Board also has the authorities set forth in the AITIC and the Articles, as well as the authority to supervise the conduct of business by the executive director(s). Unless otherwise stipulated by law or the Articles, decisions at a Board meeting require that a majority of persons qualified to vote are in attendance and that a majority of those in attendance vote in favor.

3. Accounting Auditor

In addition to auditing the financial statements and the like of JLF, if the Accounting Auditor (Auditor) finds the conduct of business by the executive director(s) to be improper or discovers any material violation of law or the Articles, the Auditor shall report to a supervisory director and take other actions set forth by law.

Organization, Personnel and Procedures As They Relate to Internal Controls and Supervision by Supervisory Directors

The executive director(s) holds a Board meeting once a month in principle and reports on matters for approval as set forth by law. The executive director(s) also reports detailed information on the operations of JLF and the status of business operations at JLF’s asset management firm, Mitsui & Co., Logistics Partners Ltd. (MLP). Based on this reporting process, the supervisory directors, who are in a position of independence from MLP or interested parties, acquire accurate information and maintain a regime capable of supervising the status of business operations by the executive director(s).

Under the asset management agreement, JLF has the right to receive a variety of reports from MLP. Through the exercise of said right, JLF maintains a regime capable of supervising the status of business operations at MLP. Furthermore, JLF has set forth insider trading control rules and strives to prevent insider trading by directors.

Internal Controls, Supervision by the Supervisory Directors and Collaboration with the Auditor

To secure effective auditing through the implementation of organizational and efficient supervision with limited personnel resources, the supervisory directors perform supervision from a position of expertise backed by their own experience and knowledge.
In addition to auditing the financial statements and the like of JLF, if the Auditor finds the conduct of business by the executive director(s) to be improper or discovers any material violation of law or the Articles, the Auditor shall report to a supervisory director and take other actions set forth by law. In doing so, the Auditor attempts to work together with the supervisory directors.

Status of a Management Regime vis-à-vis Entities Related to JLF

The executive director of JLF simultaneously holds the concurrent position of President of MLP. In that capacity, the executive director receives reports on a daily basis on the status of business operations from the administrative agent and other entities and reports the status of business operations at these various related entities to the supervisory directors at Board meetings. Additionally, the executive director learns about the status of internal controls and governance at the related entities as necessary to put in place a regime for managing the status of business operations.

For details please refer to the latest marketable securities report (yuuka shouken houkokusho).

Rules Against Conflicts of Interest

MLP sets forth the following rules for transactions, including the acquisition of operating assets, that MLP causes JLF to enter into with an interested party of MLP.

1. Basic Principles

MLP must not cause JLF to enter into transactions to benefit the interests of interested parties at the expense of the interests of JLF.

2. The Scope of Interested Parties
Interested party Examples
1. Interested parties as stipulated by AITIC Article 201(1) ・ Mitsui & Co., Ltd.
・ Mitsui & Co. Asset Management Holdings Ltd.
・ Mitsui Bussan & Idera Partners Co.,Ltd.
・ Subsidiaries of Mitsui & Co., Ltd.
・ Sumitomo Mitsui Trust Bank, Ltd.
・ Kenedix, Inc.
・ And others
2. Shareholders with a stake of 5% or more of MLP’s outstanding shares ・ Mitsui & Co. Asset Management Holdings Ltd.(Interested party under the AITIC)
・ Sumitomo Mitsui Trust Bank, Ltd. (Interested party under the AITIC)
・ Kenedix, Inc. (Interested party under the AITIC)
3. Corporations owning more than 50% of voting rights in any parties applicable to 2 above. ・ Mitsui & Co., Ltd.
・ Sumitomo Mitsui Trust Holdings, Inc.
・ And others
4. Corporations in which any parties applicable to 2 and 3 above own more than 50% of voting rights, either directly or indirectly. ・ Subsidiaries of Sumitomo Mitsui Trust Bank, Ltd.
・ Subsidiaries of Kenedix, Inc.
5. Special purpose companies in which any parties applicable to 1 or 2 above own more than a 50% equity stake, silent partnership stake or preferred stake. ・ Kazu LLC (Seller of the Kazo Logistics Center)
・ KRF3 Ltd. (Seller of the Yokohama Fukuura Logistics Center)
・ And others
6. Corporations that have entered into asset management agreement with any parties applicable to 1 or 2 above. ・ Special purpose companies that have entered into asset management agreement with a subsidiary of Mitsui & Co., Ltd.
・ And others
* Represents only some examples and is by no means comprehensive.
3. Transactions Subject to the Rules
Transaction Transaction terms and conditions
1. Acquisition of operating assets (real estate, real estate beneficial interests in trust and other assets) Real estate and the like shall be acquired at an amount that is equal to or lower than the appraisal value (for development properties, the amount shown in a pricing survey) per a real estate appraiser that is independent from MLP.
2. Sale of operating assets (real estate, real estate beneficial interests in trust and other assets) Real estate and the like shall be sold at an amount that is equal to or higher than the appraisal value (for development properties, the amount shown in a pricing survey) per a real estate appraiser that is independent from MLP.
3. Lease of operating assets Lease shall be made at appropriate leasing terms taking into consideration market rent and the like based on market data and the like prepared by a third party.
4. Outsourcing of property management services After acquiring estimates from multiple bidders, the work shall be outsourced at rational terms taking into consideration the volume and substance of the service.
5. Brokerage of property purchases, sales and leasing A rational amount of compensation shall be paid taking into account the difficulty of the service, the price of the purchase, sale or lease agreement, and other factors. The amount of the compensation shall fall within the range stipulated in the Building Lots and Buildings Transaction Business Act. (In the case of beneficial interests in trust, compensation shall be based on the lot or building that is subject to the interest.)
6. Placing orders for construction work After acquiring estimates from multiple bidders, the order shall be placed at rational contract terms taking into consideration the difficulty, the timeframe and other factors of the construction work.
7. Investments in stakes and the like in silent partnerships Investments in stakes and the like in silent partnerships shall be made at rational and reasonable terms.
8. Other transactions Terms of the transactions must be fair and reasonable.
4. Flow Decision-making for Transactions with Interested Parties

(1) In the event that MLP causes JLF to enter into a transaction falling under the above “3. Transactions Subject to the Rules” with an interested party, MLP must confirm that the terms of the transaction fall within the scope set forth above in 3., and that the transaction shall be subject to deliberation by the Compliance Committee and the approval of the MLP’s Board of Directors except in cases where the transaction is a minor transaction as set forth below in (2) a. and b. Each department shall submit the prescribed documents to the MLP’s Board of Directors when entering into a transaction with an interested party in accordance with the type of transaction.
(2) Minor transactions that do not require deliberation by the Compliance Committee and the approval of the MLP’s Board of Directors are set forth below in a. and b.
a. Transactions concerning the acquisition or transfer of securities, the lending and borrowing of securities, the acquisition or transfer of real estate, or the lending and borrowing of real estate
Transactions set forth in Article 245-2 of the Ordinance for the Enforcement of the Act on Investment Trusts and Investment Corporations with a contracted amount of less than 50 million yen per transaction
b. Transactions other than those set forth above in a.
Transactions with a contracted amount of less than 50 million yen per transaction
(3) In the event that JLF enters into a transaction with an interested party and the transaction falls under the transactions set forth below, the approval of the JLF’s Board of Directors and the consent of JLF based on said approval shall be obtained prior to the execution of the transaction with an interested party after obtaining the approval of the MLP’s Board of Directors based on the above (1) and (2).
a. Acquisition or transfer of securities
b. Lending and borrowing of securities
c. Acquisition or transfer of real estate
d. Lending and borrowing of real estate
(4) Notwithstanding the above (3), the following transactions do not require the approval of the JLF’s Board of Directors and the consent of JLF based on said approval
Transactions prescribed in Article 245-2 of the Ordinance for the Enforcement of the Act on Investment Trusts and Investment Corporations

In the Same Boat with Our Unitholders

MLP has introduced frameworks aimed at placing directors and employees of MLP and unitholders of JLF “in the same boat.”

・ MLP’s commitment to the growth of unitholder value over the mid- to long-term
・ Increase awareness among directors and employees of JLF’s unit price and business performance to enhance the quality of management operations

Specific Initiatives

1. Incentive Plan

Establish management indexes related to JLF’s business performance and unit price and pay incentive bonuses to directors and employees tied to achievement rates.

2. Employee Stock Purchase Plan

Through participation in an employee stock purchuse plan at a securities firm, directors and employees can buy JLF investment units.

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