M E S S A G E F R O M T H E C H A I R M A N

T A B L E O F C O N T E N T S

Message from the Chairman, President and CEO

About VF Corporation

Our CoalitionsThe Way We WorkOur ValuesOur Performance and Growth

The VF Corporation Global Compliance Framework

VF - Owned Factories• The Ideal Plant Model• WRAP Principles and Certification

VF Suppliers

• The VF Corporation Global Compliance Principles• The VF Corporation Terms Of Engagement• The VF Audit Process

- Audit of Supplier Facilities- Timing of Audits- The Audit Process- Facility Ratings- Audit Defects by Region- Suppliers and Audits by Region- FLA Certification- Exceptions to the Supplier Audit Process- Training

Our Commitment to Improving the VF Compliance Program

Appendix: Anatomy of a Supplier Audit

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M E S S A G E F R O M T H E C H A I R M A N , P R E S I D E N T A N D C E O

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VF Corporation is one of the world’s oldest and largestapparel suppliers. From a small glove and mittencompany in Reading, Pennsylvania, we have developedinto one of the world’s leading suppliers of brandedapparel, with sales in excess of $6 billion and operationsin approximately 150 countries. We are proud that weaccomplished this growth while maintaining a culture ofintegrity, honesty, respect and consideration that is thefoundation of VF’s values.

VF’s values are at the core of our Global CompliancePrinciples. A decade ago, as our expansion and growthaccelerated, we began to rely more on contractedfactories to manufacture VF merchandise. At the sametime, we began to search for ways to ensure not only thatour products were made to the highest standards, butalso that the individuals involved in making them weretreated in a manner consistent with VF’s values. And so,in 1997 we adopted our Global Compliance Principlesand established processes to ensure our supplierscomplied with them.

VF inspects supplier facilities to ensure that each onemeets the criteria laid out in our Global CompliancePrinciples. These Principles, which are consistent withinternationally-recognized labor standards, are thearticulation of our commitment - to ourselves, to ourcustomers, to our suppliers and to our employees - thatevery item of clothing we make will be made in factoriesthat comply with the Principles. We will only work withfactories that will make and carry out that commitmentwith us, and we do not hesitate to walk away from thosewho do not.

We also work closely with Worldwide ResponsibleApparel Production (WRAP), an independent third-partyauditing organization, to ensure that the factories we ownand operate comply with WRAP-certified standards. Weare determined to hold our own factories to the same highstandards to which we hold our suppliers’ factoriesaround the world. Two of our brands are also subject to

VF is committed to continually improving our compliance process.

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the Fair Labor Association (FLA) Code of Workplace Conduct; as a result, the suppliers who make thosebrands are subject to FLA certification.

Over the years we have learned that compliance is an evolving process. We have learned that successdepends upon our ability to react to changing conditions in our factories while continuing to uphold VF’sGlobal Compliance Principles. When VF first began overseas operations, for example, violations were bothcommon and readily apparent. Over the years we have found that physical safety and hygiene havegenerally improved at supplier factories, and we have found fewer instances of particular types of violations,such as those involving child labor laws. However, we have also found more instances in recent years ofsuppliers disguising wage and hour violations, making compliance more difficult to monitor and enforce. Werecognize that our processes must keep up with the changes in our supplier base so that we can maintainour standards.

On an ongoing basis we respond to all inquiries we receive regarding our factories and suppliers andseriously consider any concerns they raise. We believe that our employees and customers, shareholdersand other stakeholders are interested in both the progress we make and the obstacles we face. For thatreason, we are publishing this first Global Compliance Report and intend to issue updated reportsperiodically.

Our hope is that this Report conveys the seriousness of our commitment and the rigor of our approach,and the candid acknowledgment that even as we make progress, the issues we face will not disappearanytime soon from our global supply chain or from our industry.

Thank you for your interest in VF and in the initiatives we have undertaken to ensure VF’s values are upheldwherever our products are made.

Mackey J. McDonald

Chairman, President andChief Executive Officer

A B O U T V F C O R P O R A T I O N

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OUR COALITIONS

With more than $6 billion in annual sales, VF Corporation1 is one of the world’s foremostmanufacturers of branded apparel. Headquartered in Greensboro, North Carolina, weoperate in approximately 150 countries with 53,000 full-time employees. We also sourceour production with over a thousand contracted facilities around the world in any givenyear. We own some of the best-known apparel brands in the world, which are managedwithin five product categories, or “coalitions”:

JeanswearVF Corporation sells more jeans than any other company in the world, with a portfolio thatincludes the Wrangler ®, Lee®, Riders ®, Rustler ®, Chic ® and Gitano® brands.

IntimatesOur intimate apparel brands include such well-known names as Vanity Fair ®, Vassarette®,Bestform ® and Lily of France ® in the United States and Belcor ®, Bolero® and Gemma® inEurope.

OutdoorOur Outdoor coalition includes the JanSport ®, Eastpak ® and The North Face® brands, aswell as the Vans®, Napapijri ®, Kipling ® and Reef ® brands that we acquired in 2004 and2005.

ImagewearOur Imagewear coalition is a leader in both occupational (industrial, career and safety)apparel and licensed apparel. For example, VF Corporation is the largest non-militaryapparel supplier to the United States government. Through our licensed sports apparelbusiness, we operate under licenses from the National Football League, NationalBasketball Association, Major League Baseball, Harley-Davidson Motor Company andothers.

SportswearIn 2003, we acquired the Nautica® brand, which became the foundation of our Sportswearcoalition; this acquisition also included the John Varvatos® brand, a collection of luxurymen’s products.

1 “VF Corporation” and “VF” refer to VF Corporation and its subsidiaries.


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THE WAY WE WORK

Over the past decade, the structure and operations of VF Corporation have evolvedsignificantly. In 1995, most of our products were made in factories owned and operated byVF. Over the past decade, acquisitions and changing market dynamics have required VFto adopt a more balanced global sourcing structure. By the end of 2004, 40 percent ofproducts sold by VF worldwide were made in factories we own and operate and 60 percentwere made by third-party suppliers, including licensed products.

The following charts show where our products are made. The information is as of July 31,2005, and includes sewing facilities, as well as laundry, embroidery and screen printingfacilities, and, for suppliers, includes licensees.

NUMBER OF VF CORPORATION SUPPLIERS BY REGION

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Some of the products we make carry trademarks owned by other companies, and include the TommyHilfiger ®, UFO ®, Nike ® and Harley-Davidson ® brands, and the National Football League, Major LeagueBaseball and NASCAR. VF also licenses other companies to produce items under VF-owned trademarks.Examples of this would include Wrangler ® hats and watches, Nautica ® eyewear, Vanity Fair ® slippers andVassarette ® hosiery.

Every factory that manufactures VF apparel (whether for VF or its apparel licensees) and every factory thatmanufactures apparel for VF (whether under a VF-owned trademark or a trademark of another company)is subject to our Global Compliance Principles.

NUMBER OF VF CORPORATION OWNED AND OPERATED FACILITIESBY COUNTRY

Due to rounding, total numbers add up to more than 100%


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VF-OWNED FACTORIES

VF SUPPLIERS

NUMBER OF LOCATIONS

50+

15 - 50

6-15

>5

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VF-OWNED FACTORIES

VF SUPPLIERS

NUMBER OF LOCATIONS

50+

15 - 50

6-15

>5


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OUR VALUES

At VF Corporation, we strive to maintain leadership in the apparel industry while maintaining highstandards of excellence and integrity. These standards are embodied in our Values Statement:

THE VF CORPORATION VALUES STATEMENT

VF is the global leader in creating powerful brands of apparel. Theconsumer is the focus of everything we do.

We are the best at bringing people comfort and quality in ourbrands. We know our consumers, where they are and where they’reheaded. We are dedicated to our retail partners. We believe intreating our associates, our colleagues and all those we serve in thecourse of doing business with the highest levels of honesty, integrity,consideration and respect.

Our world-class people are the source of our success. As acompany, we bring excellence in operations and the latesttechnology to the art of apparel. We bring to market the rightproducts at the right time. Working together, we have a bright futurebecause we create superior products and market them withexceptional skill.

All these things mean success - forour associates, our retailers, ourshareholders, our communities, andthe millions of people who feel goodin our brands.

VF's Audit Team - Asian Region

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OUR PERFORMANCE AND GROWTH

VF Corporation reported record sales and earningsin 2004: net sales jumped 16 percent, topping the$6 billion mark for the first time in our history, whileearnings increased 17 percent to a record $4.21per share. We expect record sales and earningsagain in 2005.

VF Corporation is a publicly-traded company listedon the New York Stock Exchange trading under thesymbol VFC.

For more information on VF Corporation, its brandsand its financial performance, please visit ourwebsite at www.vfc.com.

Final Inspection - Mongolia

VF CORPORATION FINANCIAL HIGHLIGHTS

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VF’s management strongly believes that every individual has certain basic rights: the right to faircompensation; the right to associate freely and bargain collectively; the right to work free fromdiscrimination and harassment; and the right to a safe, clean workplace. These beliefs, amongothers, are embodied in our Global Compliance Framework, which includes the Ideal PlantModel and WRAP Global Principles, applicable to VF-owned and operated facilities, and the VFCorporation Global Compliance Principles, applicable to our suppliers and licensees.

VF-OWNED FACTORIES

By the end of 2004, 40 percent of VF products sold by VF worldwide were made infactories we own and operate and 60 percent were made by third party suppliers (thesenumbers do not include licensed products). By mid-2005, almost all of the VF-owned andoperated facilities (55 of 63) were WRAP-certified (see below for a more detailedexplanation of the WRAP certification process).

THE IDEAL PLANT MODEL

All of the factories we own and operate are subject to the requirements set forth in the VFCorporation Ideal Plant Model (IPM), which since 1993 has defined the safety standardsfor our owned and operated facilities.The IPM sets forth criteria that are used to objectivelygrade safety performance in certain key areas against best-in-class (or, industry leading)safety practices. The IPM was developed to provide safe, clean and comfortable workingenvironments for all of our associates. Over the years the performance of our facilitiesrelative to the IPM criteria has improved tremendously, and in 2004 our owned facilitiesachieved a safety score of 96% of the maximum possible safety score under the IPM ratingsystem. Our owned and operated manufacturing plants are also subject to our BusinessCode of Conduct, Ethics Helpline reporting, human resources policies and other policiesand programs applicable to all facilities VF operates. Facility managers are trained in therequirements of the IPM and occupational safety and health standards.

All of VF’s facilities are monitored annually for compliance with the IPM and most of thoseaudits are conducted by an independent auditor. After completing the annual audit, theauditor assigns one of the following five ratings to each of sixteen evaluation criteria:

T H E V F C O R P O R A T I O N G L O B A L C O M P L I A N C E F R A M E W O R K

Numerical Rating Definitions0 Unacceptable1 Some elements in place2 Most elements in place3 Meets IPM guidelines4 Exceeds IPM guidelines

The sixteen evaluation criteria are as follows:1. General Guidelines2. Housekeeping3. Safety Committee4. Loss Review5. Ergonomics6. Lockout/Tagout7. Hazard Communication8. Occupational Health9. Facility Safety Hazard Controls

10. Electrical/Mechanical Safety Hazards11. Environmental/Regulatory Concerns12. Emergency Procedures13. Property Conservation14. Response to Recommendations and Loss

Documentation15. Personal Protective Equipment16. Special Emphasis Programs

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Any performance categories receiving an audit score of 2 or lessmust have a written corrective action plan indicating the personresponsible and a scheduled compliance date. A copy of thisplan must be sent to the coalition safety coordinator within twoweeks of the completion of the IPM evaluation. A follow-up auditmust be conducted within one year, but is usually completedwithin a much shorter time period.

WRAP PRINCIPLES AND CERTIFICATION

In addition to adherence to the IPM requirements, VF-owned andoperated facilities are required to comply with the WorldwideResponsible Apparel Production (WRAP) certification process.

The WRAP program has 12 stated principles that aim to ensurethat factories produce goods under lawful, humane and ethicalconditions. These principles, which prohibit forced and childlabor and call for the right to associate freely and bargaincollectively, are consistent with those adopted by VF Corporationin our Global Compliance Principles (pertaining to suppliers), as well as those set forth by the InternationalLabor Organization.

In order to become WRAP-certified, individual factories must apply to WRAP, and then they are given aself-assessment handbook explaining WRAP’s principles and procedures. After the factories documenttheir adoption of these principles, they notify WRAP that they are ready to be monitored. WRAP thenauthorizes the factories to hire independent monitors from a pre-approved list.

A factory has six months to submit the evaluation report to WRAP with a favorable recommendation. Duringthe one-year certification period, all facilities, especially those that needed a second audit, are subject tounannounced inspections.

VF Corporation has been affiliated with WRAP since its inception in 2000. Candace S. Cummings, VF’sVice President - Administration, General Counsel and Secretary, has been a member of WRAP’s Board ofDirectors since its inception as well. By mid-2005, the majority of VF-owned manufacturing facilities (55 of63) were WRAP-certified. The remaining eight facilities are in the process of becoming certified by WRAP.

For more information on WRAP, please visit www.wrapapparel.org.

VF SUPPLIERS

The Global Compliance Principles set forth the basic requirements that suppliers must meet in order to produceVF apparel.We encourage suppliers to promote best practices and continuous improvement in all of their factories.

In 1997, we adopted an initial set of twelve principles as VF’s Global Compliance Principles. Since then,the Principles have been modified to keep pace with evolving standards and expectations. Most recently,in September 2004, we modified the Principles to make more explicit our recognition of freedom ofassociation (Principle 6) and to strengthen our affirmation of women’s rights (Principle 10). We also addedPrinciple 15 to reflect U.S. Customs guidelines, which require factories to establish security procedures foroutbound cargo shipments to the United States.

The VF Corporation Global Compliance Principles are consistent with the core labor standards set forthby the International Labor Organization in its Declaration on Fundamental Rights and Principles at Work,adopted in 1998. They are also consistent with the codes established by the two principal externalindependent monitoring and certification frameworks with which we engage - the Worldwide ResponsibleApparel Production (WRAP) and the Fair Labor Association (FLA).


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Principle 1 - Legal and Ethical BusinessPracticesVF Authorized Facilities must fully comply with allapplicable laws of the countries in which they arelocated including all laws, regulations and rulesrelating to wages, hours, employment, labor,health and safety, the environment, immigration,and the apparel industry. Employers must beethical in their business practices.

Principle 2 - Child LaborNo person shall be employed at an age youngerthan 15 (or 14 where consistent with InternationalLabor Organization guidelines) or younger than theage for completing compulsory education in thecountry of manufacture where such age is higherthan 15. All VF Authorized Facilities must observeall legal requirements for work of employees under18 years of age, particularly those pertaining tohours of work and working conditions.

Principle 3 - Forced LaborVF Authorized Facilities will not use involuntary orforced labor - indentured, bonded or otherwise.

Principle 4 - Wages and BenefitsVF recognizes that compensation packages varyby country. All VF Authorized Facilities mustcompensate their employees fairly by providingcompensation packages comprising wages andbenefits that, at the very least, comply with legallymandated minimum standards or the prevailingindustry wage, whichever is higher, and shallprovide legally mandated benefits. Employeesmust be fully compensated for overtime accordingto local law and each employee must be providedwith a clear, written accounting for each pay period.

Principle 5 - Hours of WorkVF Authorized Facilities must ensure employees’hours worked shall not, on a regularly scheduledbasis, exceed the lesser of (a) the legal limitationson regular and overtime hours in the jurisdiction inwhich they manufacture or (b) 60 hours per weekincluding overtime (except in extraordinarybusiness circumstances). Employees must beinformed at the time of hiring if mandatoryovertime is a condition of employment. Allemployees will be entitled to at least one day offin every seven-day period.

Principle 6 - Freedom of Association andCollective BargainingVF Authorized Facilities shall obtain and complywith current information on local and national lawsand regulations regarding Freedom of Associationand Collective Bargaining. No employee shall besubject to harassment, intimidation or retaliationin their efforts to freely associate or bargaincollectively.

Principle 7 - Health and SafetyVF Authorized Facilities must provide theiremployees with a clean, safe and healthy workenvironment, designed to prevent accidents andinjury to health arising out of or occurring duringthe course of work. All VF Authorized Facilities arerequired to comply with all applicable, legallymandated standards for workplace health andsafety in the countries and communities in whichthey operate.

THE VF CORPORATION GLOBAL COMPLIANCE PRINCIPLES

These Compliance Principles apply to all facilities that produce goods for VF Corporation, or any of itssubsidiaries, divisions, or affiliates, including facilities owned and operated by VF and its contractors,agents and suppliers herein referred to as “VF Authorized Facilities”.

While VF recognizes that there are different legal and cultural environments in which factories operatethroughout the world, these Compliance Principles set forth the basic requirements all factories mustmeet in order to do business with VF.

VF strongly encourages contractors, agents, and suppliers to exceed these Compliance Principles andto promote best practices and continuous improvement throughout all of their factories. These GlobalCompliance Principles or their equivalent must be posted in all major workplaces, translated into thelanguage(s) of the employees.

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Principle 8 - NondiscriminationWhile VF Corporation recognizes and respects culturaldifferences, employment - including hiring, remuneration,benefits, advancement, termination and retirement -should be based on ability and not on belief or any otherpersonal characteristics. VF Authorized Facilities maynot discriminate on the basis of race, age, color, nationalorigin, gender, religion, sexual orientation, disability,political opinion, or social or ethnic origin.

Principle 9 - Harassment VF Authorized Facilities must treat all employees withrespect and dignity. VF Authorized Facilities may notsubject employees to corporal punishment, physical,sexual, psychological or verbal harassment or abuse. Inaddition, VF Authorized Facilities may not use monetaryfines as a disciplinary practice.

Principle 10 - Women’s Rights VF Authorized Facilities must ensure that womenworkers will receive equal remuneration, includingbenefits, equal treatment, equal evaluation of the qualityof their work, and equal opportunity to fill all positionsopen to male workers. Pregnancy tests will not be acondition of employment, nor will they be demanded ofemployees. Workers who take maternity leave (of aduration determined by local and national laws) will notface dismissal nor threat of dismissal, loss of seniority ordeduction of wages, and will be able to return to theirformer employment at the same rate of pay andbenefits. Workers will not be forced or pressured to usecontraception. Workers will not be exposed to hazards,including glues and solvents, which may endanger theirsafety, including their reproductive health. Facilities shallprovide appropriate services and accommodation towomen workers in connection with pregnancy.

Principle 11 - Subcontracting VF Authorized Facilities will not utilize subcontractors in themanufacturing of VF products or components without VF’swritten approval and only after the subcontractor hasagreed to comply with the Terms of Engagement, includingthese Global Compliance Principles.

Principle 12 - Monitoring and Compliance VF Authorized Facilities will maintain on site alldocumentation necessary to demonstrate compliancewith these Global Compliance Principles. VF and itssubsidiaries will undertake affirmative measures, such asannounced and unannounced on-site inspections ofproduction facilities, to monitor compliance with theseGlobal Compliance Principles. VF Authorized Facilitiesmust allow VF representatives full access to productionfacilities, employee records and employees for confidentialinterviews in connection with monitoring visits. In addition,VF Authorized Facilities must respond promptly toreasonable inquiries by VF representatives concerning thesubjects addressed in the audit.

Principle 13 - Informed Workplace VF Authorized Facilities should inform employees aboutthe workplace standards orally and through the postingof standards in a prominent place and undertake otherefforts to educate employees about the standards on aregular basis.

Principle 14 - Worker Residence (Dormitory) Dormitories of VF Authorized Facilities must provide aclean, safe, and healthy residence environment. Thedormitory design must provide adequate privacy,security, and freedom of movement for all occupants.Dormitory facilities must comply with all applicable,legally mandated standards, for public domiciles in thecountries and communities in which they are located.

Principle 15 - Facility Security It is VF Corporation policy that all suppliers establishfacility security procedures to guard against theintroduction of non-manifested cargo into outboundshipments. Such items would include drugs, biologicalagents, explosives, weapons, radioactive materials,illegal aliens, and other contraband.

Violations of these Global Compliance Principles will be appropriately remedied at the cost of thefacility. VF reserves the right to take necessary measures to ensure future compliance with theseGlobal Compliance Principles. Failure to comply with these Global Compliance Principles mayultimately result in termination of the relationship between VF and the Authorized Facility.

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THE VF CORPORATION TERMS OF ENGAGEMENT

The cornerstone of VF's Global Compliance Framework is the VF Corporation Terms ofEngagement.

The Terms of Engagement, which include the Global Compliance Principles, ensure that, despitecultural and legal differences among the many countries where VF Corporation produces orsources goods, our suppliers adhere to a single set of policies, and that our apparel ismanufactured in a manner compatible with the high standards that have contributed to theoutstanding reputation of our brands and our company.

VF Corporation requires all suppliers to submit a signed Terms of Engagement document prior tothe placement of any orders for VF products.

A signed document is good for the life of the relationship between VF Corporation and therespective supplier. A new copy does not have to be signed on an annual basis unless the contentor context of the Terms change significantly.

By agreeing to the Terms of Engagement, each contractor, supplier and agent agrees to abide byand implement it, and to require each of its VF-approved and authorized subcontractors to do thesame. A failure to meet this commitment will compel VF Corporation to reevaluate, and possiblyterminate, our relationship with the supplier.

Adherence to the VF Corporation Terms of Engagement, including the Global CompliancePrinciples, is enforced through regular audits conducted by auditors employed or contracted by VFCorporation.


I. Ethical StandardsVF Corporation will only do business with contractors,suppliers and agents who operate within a set ofethical standards compatible with VF’s Code ofBusiness Conduct.

II. Legal RequirementsVF Corporation will only do business with contractors,suppliers and agents that comply with the applicablelaws and regulations of the jurisdictions in which theyoperate.

III. Intellectual Property RightsWe will not do business with contractors, suppliers andagents who do not respect the intellectual propertyrights of the company’s brands.

IV. Product LabelingAll VF contractors, suppliers and agents mustaccurately label the company’s products with thecountry of origin, in compliance with the laws of theUnited States and those of the country of manufacture.For products shipped to countries other than theUnited States, the laws of the importing country willprevail.

V. IndemnificationEvery VF contractor will indemnify and hold VFharmless from and against all losses arising out of orresulting from such contractor’s failure to adhere tothese Terms of Engagement.

VI.VF Corporation Global Compliance PrinciplesAll VF manufacturers will manufacture products inaccordance with the VF Global Compliance Principles.

THE VF CORPORATION TERMS OF ENGAGEMENT

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At VF Corporation, we have made a commitment -to ourselves, to our customers and to our suppliers- that every item of apparel we make, or that welicense others to make, will be made in factoriesthat conform to our Global Compliance Framework.We take this commitment very seriously. That iswhy we require our suppliers to adhere to theGlobal Compliance Principles. That is also why, formore than eight years, we have had in place anaudit process designed to ensure that our supplierscomply with these requirements.

Audit of Supplier Facilities

Every supplier facility that manufactures apparel forVF and every supplier facility that manufacturesapparel for our licensees is audited for compliancewith the Global Compliance Principles.

We recognize four different categories of supplierfacilities that are subject to VF’s supplier auditprocess:

THE VF AUDIT PROCESS

• Cutting, manufacturing, finishing and shipping facilities. All primary suppliers of VF merchandise and VF-licensed apparel must sign the VF Corporation Terms of Engagement and pass a factory audit prior to the placement of an order for VF apparel.

• Licensees. Each apparel licensee must present a list of its primary suppliers to VF Corporation prior to the placement of any order for the production of VF-licensed apparel.To be eligible to start production of VF-licensed apparel each facility must sign the VF Corporation Terms of Engagement and must pass a factory audit.

• Embroidery, screen printing and laundry facilities. A list of all sub-contractors engaged in embroidery, screen printing or laundry activities must be presented to VF prior to the placement of any order for production of VF apparel. Each facility will be required to sign the VF Corporation Terms of Engagement and may be inspected at the discretion of VF.Although a determination to inspect the factory will depend upon the country of origin and the volume of production, most such facilities are, in fact, inspected.

• Facilities that manufacture promotional items. Promotional items include items given to retailers, customers and employees, such as key chains, coffee mugs, pens, dolls, umbrellas, and similar products. The manufacturer of such items must present a list of suppliers to VF Corporation and sign the VF Terms of Engagement. Suppliers may be randomly selected and inspected at the discretion of VF Corporation.

A supplier’s bra manufacturing facility


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Facilities that manufacture commercially-purchased products and raw materials are not subject to VF’ssupplier audit process. These include the following:

• Commercially-purchased products. Commercially-purchased products are ‘off the shelf’products purchased by VF Corporation for resale. Such products include industrial work shoes, caps, jackets, and similar items sold as part of uniforms. Suppliers of these products must sign the VF Terms of Engagement, acknowledging that their suppliers are compliant with applicable laws and regulations regarding workers’ rights, health and safety.These factories are not inspected by VF.

• Raw Materials. Raw materials are component materials that are commercially purchased with no VF brand identity, such as fabric, thread, and blank tee shirts, and are out of the scope of VF’s supplier audit process. An exception to this policy would be a vertical operation where the raw material is manufactured at the same address that the final assembly of VF branded apparel takes place. Such a facility would require a full audit.

VF Corporation’s suppliers are audited by a team of VF employees or independent third-party auditors.As a member of the Fair Labor Association (FLA), factories producing apparel under the JanSport ®

and LeeSport ® brands are subject to unannounced audits by FLA-authorized personnel. Similarly,many of the companies for whom we manufacture private-label products, or products carryingtrademarks under license to us, also conduct unannounced audits of our facilities.

TIMING OF AUDITS

For new suppliers, our audit process effectively begins before production for VF Corporation gets underway.Prior to the placement of any purchase orders for production of VF apparel, we require every supplier topresent us with a list of all factory locations that will manufacture products for VF. VF Corporation must benotified of their names and locations at least 45 days prior to the start of planned production. This will allowenough time to schedule and perform the audit and generate the audit report. These factories are permittedto produce samples on a limited basis while the audit is being scheduled.

Apparel manufacturing cannot begin until the VF Corporation Terms of Engagement have been signedand the facility has successfully passed an initial audit.Violation of the Terms of Engagement can resultin the termination of existing contracts, purchase orders and/or apparel licensing agreements.

After the initial audit, our policy is to inspect every factory a minimum of once per year for the durationof the relationship with VF Corporation.

THE AUDIT PROCESS

A typical audit can last anywhere from six hours to two days, depending on the size of the factory and thenumber of workers employed at the location.

The auditor begins the audit with an opening meeting with the factory manager or his representatives toreview the audit process and the Global Compliance Principles.

The actual audit includes a thorough inspection of the building for health and safety issues. Factoryrecords such as those involving payroll, operating licenses and employee personnel records are reviewedfor compliance with local laws. A random sample of employees is interviewed - in a private and safeenvironment without the presence of factory managers or supervisors - to evaluate working conditions.

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PROPOSEDFACTORY

AREAS OF NON - COMPLIANCE

ORDERSPLACED

AREAS OF IMPROVEMENT

ORDERSPLACED

NON - COMPLIANCERESOLVED

ORDERSPLACED

NO AREAS OF NON -

COMPLIANCE

12MONTHANNUAL

AUDIT

MAJOR NON - COMPLIANCE

NOORDERS

NON - COMPLIANCERESOLVED

NO PROGRESSSITUATION

DETERIORATED

NO PROGRESSSITUATION

DETERIORATED

REJECTED

ACCEPTED

ACCEPTED TOBE UPGRADED

ACCEPTED TOBE UPGRADED

FACTORYINSPECTION

90 DAYFOLLOW - UP

90 DAYFOLLOW - UP

THE VF AUDIT PROCESS


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FACILITY RATINGS

At the completion of each factory audit a rating is awarded to each facility. If the audit isconducted by a VF-employed auditor, the factory receives a rating of “Accepted”,“Accepted to be Upgraded” or “Rejected.” If an independent audit company conducts theaudit, the factory receives only the audit report and CAP from the auditor; a rating isassigned after a certified VF Corporation compliance auditor reviews the audit report. Allfactories will receive a written notification of the results within 14 calendar days of theaudit.

THE THREE RATINGS:

ACCEPTEDA factory is rated “Accepted” when there are no major outstanding safety, health or laborissues. Any factory that receives an “Accepted” rating is certified to produce VFmerchandise or related licensed products for a period of 12 months, at which time a follow-up audit will be conducted.

In certain cases the certification period can be extended to 18 months. A factory canqualify for this extended certification period if it has a strong history as a compliant facility,has an internal support structure that can sustain a compliant environment or is located ina country where conformity with the local law is closely monitored. Such extensions aregranted at the discretion of VF Corporation.

ACCEPTED TO BE UPGRADEDA factory is rated “Accepted to be Upgraded” if it is generally in compliance but certainsafety, health, or labor issues are discovered during the course of the audit. The types ofissues that would result in this rating include but are not limited to: missing exit signs,incomplete personnel files (including age verification and signed work contracts),obstructed fire fighting equipment or exits, occasional excessive working hours andinconsistent payment of overtime. A factory will only be rated “Accepted to be Upgraded”if the factory has committed to correct the problems in accordance with the applicable CAP.

If the factory denies the auditor access to the building, fails to provide requesteddocuments or refuses to allow employee interviews, the factory is automatically rejected.In addition, VF Corporation will not, under any circumstances, tolerate any attempt toinfluence the outcome of an audit - either through a cash payment, gifts or any othermethods. Any such attempt will result in the automatic rejection of the factory.

At the end of an audit a closing meeting is held between the factory representative and theVF-authorized auditor, at which time the factory representative is advised of any problemsnoted during the audit. If problems are noted, the VF-authorized auditor reviews aCorrective Action Plan (CAP) with the factory representative; the factory has 90 - 180 daysto implement the CAP. Depending on the severity of the problems, a follow-up audit isscheduled 90-180 days from the day of the initial audit to ensure that the CAP has beenimplemented. The factory has three chances to successfully implement the CAP and passthe audit with an “Accepted” rating. Some factories that have improved from an “Acceptedto be Upgraded” rating to an “Accepted” rating have gone on to have long termrelationships with VF.

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A factory that has been rated “Accepted to be Upgraded” isallowed to produce VF apparel or related licensed productsfor a period of three months, at which time a follow-up auditis conducted. Such a factory is expected to remediate theitems on the CAP prior to the follow-up audit. Every factorywith this rating has three chances to achieve the “Accepted”level. If after the third audit the factory has not attained thislevel, it is dropped to the status of “Rejected” (discussedbelow). If a factory is rejected, VF policy dictates that openpurchase orders can be finished and shipped, but no furtherorders can be placed with the facility.

In select cases, when a factory straddles the line between“accepted” and “accepted to be upgraded”, or when theCAP can be easily completed and corroborated with the aidof photographs and documents, the follow-up audit periodcan be extended - at the discretion of VF Corporation - to sixmonths.

REJECTEDIf serious safety, health, or labor issues are found at afactory it is rated as “Rejected” and no products can bemanufactured at the facility for VF until the situation hasbeen resolved. Incidents of child labor, the use ofinvoluntary or forced labor, physical or verbal abuse,attempted bribes, or falsified records are automatic groundsfor rejection. Other reasons for rejection could include anaccumulation of certain types of less serious violations, ahistory of wage violation or non-cooperation of factorymanagement.

If, at a later date, the factory feels that it has taken correctiveaction to merit another audit, we will reconsider the facilityfor production and conduct another audit. If a factoryreceives two consecutive “Rejected” ratings, no furtheraudits can be conducted until a waiting period of 12 monthshas elapsed.

A COMMITMENT TO SECURITY

VF Corporation is partnering with U.S.Customs and Border Protection tosupport the Customs and TradePartnership Against Terrorism initiative(C-TPAT). This initiative is designed toprevent potentially dangerous or illegalcargo or contraband - such as drugs,weapons, explosives, biological agents,hazardous chemicals, and even people -from being loaded into shippingcontainers headed for the United States.As part of our participation in the C-TPATprogram, we have added a check of plantsecurity measures to our factory audits.These checks include interviews withsecurity guards as well as a review ofexisting policies and procedures relatingto facility security.

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AUDIT DEFECTS BY REGION

VF Corporation conducts comprehensiveaudits of all of its supplier facilities. Asdescribed above, those facilities that do notmeet our standards are given a “Rejected”rating, at which time we terminate ourrelationship with that supplier. Listed below aresome of the many questions our auditors askas they tour each facility.

As the accompanying chart illustrates, whenwe conduct our supplier audits, most factoriesare rated “Accepted” or “Accepted to beUpgraded”, but the audits do reveal a variety ofviolations of our Global Compliance Principles.These violations are distributed across allregions in which we operate. However, certainviolations are more common than others - andcertain regions are home to the greatestnumber of facilities where code violations aredetected. The numbers show frequency ofviolations found, not severity of violations, butgive an overall sense of the pattern ofviolations. As we described earler, although wewill work with a supplier for a period of time toallow them to improve their compliance if theydemonstrate a commitment to improve, we donot rate a factory as “Accepted” until it complieswith all of our Global Compliance Principles.The following chart provides samples ofdefects found by region for the period July 1,2004, through July 1, 2005.

The most common overall violation weobserved in our supplier audits is a failure tocomply with legally mandated minimum wageor prevailing wage standards, followed by afailure to limit work and overtime hours to 60hours per week. In addition, we have seen atendency among suppliers to ignore the labor,health and safety laws of the countries in whichthey are located, and to not properlycompensate their employees for overtime.However, we also often find factories eager todo business with VF and willing to upgradetheir practices and comply with ourrequirements.


0 - 10%10 - 25%25 - 50%>50%

North Africa / Middle East / TurkeyEgypt, Morocco, Tunisia, Turkey

Latin AmericaColombia, Costa Rica, DominicanRepublic, El Salvador, Haiti,Honduras, Mexico, Nicaragua, Peru

China RegionChina PRC, Hong Kong, Mongolia,Taiwan

Upper North AmericaCanada, USA

Southeast AsiaCambodia, Korea, Macao, Thailand,Vietnam

EuropeBulgaria, France, Greece, Italy,Macedonia, Moldova, Poland,Portugal, Romania, Spain

Indian Sub ContinentBangladesh, India, Mauritius,Pakistan, Sri Lanka

Pacific BasinAustralia, Indonesia, Malaysia,Philippines, Saipan

COUNTRIES IN EACH REGION:

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AUDIT DEFECTS IDENTIFIED BY REGION

General PrincipleDoes the facility comply with all applicable laws of the country in which they are located?

Hiring PracticesDoes the facility obtain and retain proof of age for each employee?Does the facility comply with Juvenile / Young worker regulations?

Does the facility have proper voluntary overtime practices? Is forced labor not allowed?Does the facility utilize any improper employee deposits or withholding payment practices?

Wages and HoursDoes the facility comply with legally mandated minimum wage

standards or the prevailing wage, whichever is higher?Are all employees receiving at least the minimum wage?

Are employees properly compensated for all overtime?Are accurate time records maintained for employees?

Does the facility provide an understandable wage statement?Does the facility keep regular working hours and days?Is a day of rest allowed in each seven day work period?

Does the facility limit hours worked to 60 hours on a regular basis?

Worker Management CommunicationAre workers allowed to join or form worker's organizations without penalty?

Does the factory have an employee - management communication system?

Working ConditionsAre first aid supplies available?

Are emergency evacuation plans posted?Can Alarms be heard throughout the factory?Are emergency evacuation drills conducted?

Are emergency exits adequate?Are exits unlocked and kept clear?

Are aisles kept clear of obstructions?Is emergency lighting in place?

Is fire detection and fire fighting equipment installed?Are fire extinguishers available and clearly marked?

Is machinery equipped with safety devices?Do employees use appropriate protective equipment?

Is workplace free from electrical / mechanical hazards?Is potable water provided with individual drinking containers?

Is work surface lighting sufficient?Are sanitary toilet areas available in sufficient quantity?

Does the dormitory have sanitary and sufficient toilets and showers segregated by gender?Are sanitary canteen facilities provided?

Are hazardous and combustible materials stored securely and safely disposed of?Are Material Safety Data Sheets maintained?Are heavy machinery inspections conducted?

Treatment of WorkersDoes the facility treat employees with respect and dignity?

Does the facility respect women's rights?Are employee records securely maintained on - site?

Are workers informed of VF's Compliance standards?

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VF SUPPLIERS AND AUDITS BY REGION(Including Rejected Factories)

VF is often compelled to terminate its relationships with factories that do not meet ourcompliance requirements. This chart illustrates the VF supplier factories subject to audit,factories rejected and never used, factories we downgraded to rejected and factories VFhas audited but are no longer using for production (inactive factories). As the chartillustrates, certain regions stand out as home to a significant number of rejections ordowngrades. For example, the China Region, with 462 factories subject to audit, had arejection rate of 21% during the measurement period. By comparison, Latin America, with349 factories subject to audit, had a rejection rate of only 1%.

In total, of 1,835 total factories subject to audit for the period July 1, 2004, through July 1,2005, 8% were rejected.

Factories ProductionFactories Rejected Factories Completed ActiveSubject -Never Downgraded Factory Factories % to Audit Used to Rejected Inactive on 7-1-05 Rejected

Pacific Basin 84 4 3 18 59 8%

Indian Sub Continent 263 9 6 50 198 6%

Europe 134 1 0 19 114 <1%

Southeast Asia 194 12 4 36 142 8%

Upper North America 204 0 1 22 181 <1%

China Region 462 64 36 34 328 22%

Latin America 349 5 0 55 289 1%

Africa/Middle East/Turkey 145 5 5 30 105 7%

Total 1,835 100 55 264 1,416 8%

(For an explanation of countries within each region see legend on page 22.)

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FLA CERTIFICATION

Our compliance process is complemented by our engagement with the Fair Labor Association (FLA). Manycolleges and universities desiring to ensure that products bearing their names are produced under fair workingconditions are affiliated with the FLA. As FLA members, schools require all of their licensees to participate in theFLA. Two of our brands - JanSport ® and Lee Sport ® - are used on college goods with college logos, and VFCorporation is a “Category B” member of the FLA with respect to these brands.

Every year, licensees that are FLA Category B members, such as VF Corporation, submit to the FLA a list offacilities that manufacture products under license from the FLA-affiliated schools. In our case, we submit to the FLAa list of the factories that produce JanSport ® and Lee Sport ® college-branded products - typically 45-50 factories.The FLA then audits five percent of the factories on this list.

The FLA requires these facilities to adopt the FLA workplace code, conduct internal company monitoring as wellas agree to be inspected by accredited independent external monitors. The FLA also issues a public report everyyear on its members’ implementation of the FLA standards and the remedial steps it has taken, where necessary.

For more information on the FLA, please visit www.fla.org.

EXCEPTIONS TO THE SUPPLIER AUDIT PROCESS

In certain limited situations, VF Corporation is willing to grant partial exemptions from our supplier audit process.These cases are as follows:

Outside CertificationFactories may be exempted from a VF Corporation supplier audit if they are currently certified by an internationallyknown factory certification program, such as SA8000 (sponsored by Social Accountability International) orWorldwide Responsible Apparel Production (WRAP).

To qualify for an exemption, the supplier must furnish VF Corporation with the letter of certification clearly showingthe program name, factory name and address, registration number, and the certification expiration date. We do notaccept letters of certification from other manufacturers or retailers.

VF Corporation may perform random audits to validate the effectiveness of these outside certification programs.

New AcquisitionsSuppliers, whether involved in direct or licensee production, that have a relationship with VF as a result ofacquisitions must be audited and submit a signed Terms of Engagement within 12 months of the acquisition. VFCorporation will organize a training session within 60 days of the acquisition in order to clarify compliancerequirements and begin the process of preparing suppliers for the initial audit.

Due to the challenges of transitioning into the VF compliance program, factories that receive a “Rejected” statusafter the initial audit are given an extra three months to achieve the “Accepted to be Upgraded” level. During thisthree-month period, the affected VF Corporation brand(s) will be able to continue to place orders with the factory.However, if the factory fails to be upgraded in the re-audit, no further orders may be placed.

TRAINING

VF Corporation recognizes that many of our suppliersbenefit from training - both in understanding our compliancerequirements as well as in developing their own proceduresto meet the requirements. We either conduct these trainingsessions ourselves or hire independent contractors to do so.For example, Verité, Inc., the international non-profit socialauditing firm, works with us to train suppliers producingapparel for our Nautica ® brand. Also, after we acquire acompany, we hold training sessions for suppliers to thenewly-acquired company.

When we first begin working with a supplier, we providegroup training sessions to the facility’s management teamcovering VF Corporation’s Global Compliance Frameworkand supplier audit process. Key suppliers that are havingproblems meeting our compliance requirements are offeredthe opportunity to receive training and support from VFauditors or independent consultants, provided that theydemonstrate a commitment to meeting the goals set forth inour Global Compliance Framework. If they accept the offer,VF Corporation works with the supplier to assess workingconditions and develop a training program to remediate theidentified problems. VF Corporation policy dictates thatpurchase orders can be placed with this supplier only uponnotification from the trainer that a program has beenestablished. A final review is conducted by VF Corporationauditors at the conclusion of the training to ensurecompliance.

All VF Corporation employeesinvolved in the procurement of VFmerchandise are responsible forthe distribution of the VFCorporation Global CompliancePrinciples to authorized suppliers,agents, licensees and factories.In addition, VF Corporationrequires the Global CompliancePrinciples to be posted in all majorworkplaces and translated into thenative language(s) of theemployees.

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VF Global Compliance Principlesposters in Khmer, English andChinese in a contractor factory inCambodia.

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Eye protection for mechanical repair

Hearing protection duringembroidery process

Respiratory protection during sandblasting operations

Examples of PersonalProtective Equipmentin VF Supplier Facilities

O U R C O M M I T M E N T T O I M P R O V I N G T H E V F C O M P L I A N C E P R O G R A M

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Consolidate SuppliersAt any given time, VF works with more than 1,000 facilities worldwide. In many casesthe volume of VF production is less than 5% of the supplier’s production capacity.Moreover, the duration of the relationship with many suppliers is limited to oneproduction season - and, in some cases, to one purchase order. This reality reflectsour rapid growth over the last several years, partly through acquisitions, and a changein our mix of apparel suppliers as VF evolves to include production of more fashionmerchandise and adds more suppliers with additional capacity or specific technicalexpertise. At times, this expanding network of suppliers can stretch our complianceresources. Accordingly, VF is in the process of consolidating our supplier base to theextent possible. A supply chain with fewer contractors producing greater volumes forVF will give us more leverage and allow our compliance staff to work more closelywith individual factories.

Return AuditsOur compliance policy requires auditors to return to factories rated “Accepted to beUpgraded,” within 90 days of the initial audit. An analysis of our data indicates that,primarily due to cost, geographical dispersion, the sheer number of suppliers and theavailability of staff resources, we are not meeting this requirement on a consistentbasis. A reduction in the number of suppliers and hiring additional auditors will allowus to ensure adherence to our return audit policy.

Systems UpgradeOur current database holds report data from 4,600+ factories, including thoroughhistories of audits performed; current ratings and problems found; copies of pertinentdocuments; and, in some cases, photographs. However, the system’s architecturedoes not allow us to extract statistical data easily across all factories. Accordingly, itcan be difficult to analyze our compliance data on a global basis. We are planning toimplement a new system in 2006, which should help us improve our evaluation,reporting and overall compliance process.

VF management is serious about our commitment to ensuring adherence to our GlobalCompliance Framework. We are also committed to continual improvement of ourcompliance process. We recognize that as we make progress the underlying issues andchallenges may change or diminish over time, but they will continue in some form over aglobal supply chain like ours that spans six continents and some 75 countries. We alsoknow that even as we improve compliance in a particular country or on a certain set ofissues, there are lessons to be learned and best practices to be transferred that willstrengthen our performance and that of our suppliers.

Over the next several years, we will be addressing six closely related sets of issues andchallenges to improve our compliance process:

•

•

•

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Integrate AcquisitionsOver the last few years, VF has been aggressively building its brand portfolio through acquisitions. It is VF’spolicy that every newly-acquired company must be integrated into the VF Global Compliance Framework within12 months of its acquisition, which means that every supplier must have signed a VF Terms of Engagement, bein the VF database, and must have participated in a factory audit within this period. Incorporating these facilities,many of which may not have participated in such a stringent compliance program in the past, has proved to bea challenge. For future acquisitions, we have designed a group training session to introduce suppliers to the VFprogram as early in the acquisition integration process as possible.

Engage LicenseesAs we have stated elsewhere in this report, all VF licensees for apparel are subject to our GlobalCompliance Principles. In some cases, new licensees producing mostly non-apparel products (such asfurniture, eyewear and linens) and their industries have not been subjected to the types of complianceprocedures and audits that have become routine in our industry. We intend to find ways to strengthenour initial compliance and training efforts with new non-apparel licensees to bring them up to VF standards.

Enhance TrainingWhile we currently are not in a position to train every supplier, we hope that the consolidation of oursuppliers will allow us to expand and improve the coverage of our supplier training efforts. We are nowadding personnel to provide training for key suppliers in order to help them meet our standards. We intend tofurther expand the scope of our training efforts over the next several years.

•

•

•

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Our policy requires us to audit every factory producing VF merchandise once per calendaryear to ensure compliance with our Global Compliance Principles.

As illustrated in this appendix, each audit is based on detailed checklists of questions tobe asked, conditions to be observed and practices to be evaluated, all exploring andtesting compliance with our Global Compliance Principles.Two broad areas of focus - laborpractices and health and safety - guide our auditors as they examine facilities for properpayment of wages, employment records, proper air and lighting, established emergencyprocedures, accurate record keeping and dozens of other specific criteria that determinecompliance with our Principles.

Sometimes our supplier factories demonstrate compliance without significant problems,and, as a result, pass our annual audits. Some reveal violations of our Principles that mustbe addressed if “Accepted” status is to be achieved and our relationship with the particularsupplier is to be maintained. Often our suppliers succeed in correcting these violations.But there are times our suppliers lack the will or the capacity to make the necessarychanges, and we are then compelled to terminate our relationship with them. VFCorporation will not maintain a relationship with any supplier facility that does not meet thestandards set forth in our Global Compliance Principles.

This section illustrates the audit process to which both our supplier factories and facilitiesproducing VF-licensed goods are subject.

Initiation of the Supplier Audit Process

When the VF factory audit team gets a request from abusiness unit to use a particular factory, a member of theaudit team sends the factory the VF Terms ofEngagement and Global Compliance Principles, a set ofdocuments regarding the audit and a list of factorydocuments the auditor will need to review.

The auditor begins the audit with an openingmeeting with the factory manager or hisrepresentatives to review the audit process and the

Global CompliancePrinciples. The auditoralso reminds themanager that the

auditor will need to receive a signedTerms of Engagement from thesupplier by the end of the audit.

Screen shotsof our Audit

Database

Data includes outside certifications,rating and activity history

Data available in 26 languages.Main screen houses basicinformation about factory

Questionnaire on Compliance withVF’s Global Compliance Principles

A P P E N D I X : A N A T O M Y O F A S U P P L I E R A U D I T

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For each For For each Global Compliance Principle there is a detailed questionnaire designed toidentify facets of the supplier’s operations and to help the auditor assess compliance with eachPrinciple. The following are examples of questions asked:

Principle 7

Health and Safety

All VF Authorized Facilities must provide their employees with a clean, safe and healthy work environment,designed to prevent accidents and injury to health arising out of or occurring during the course of work. AllVF Authorized Facilities are required to comply with all applicable, legally mandated standards forworkplace health and safety in the countries and communities in which they operate.

SAMPLE FACILITY QUESTIONS

1. Does the facility comply with the principle as stated?2. Does the facility have a written and posted safety and security program?3. Have personnel been trained on safety and security issues?4. Does the facility have a Health & Safety Committee including facility workers and management,

conducting regular meetings, and keeping meeting minutes?5. Does the facility conduct employee training for first aid and safety and are first aid responders identified

and properly trained? (Offer suggestions to facility for badges or buttons for trained employees)6. Does the facility have first aid supplies available, easily accessible, maintained as recommended by a

local medical provider or as required by law, and regularly inspected?7. Are there contingency plans for dealing with serious injuries?8. Are there accident investigation procedures?9. Are lockout/tagout programs in compliance with legal standards?10. Is there a hazard communication safety program in place?11. Is there a program for fire protection/prevention?12. Does the facility have emergency evacuation diagrams posted in conspicuous locations in the facility in

the native language(s) of the workers?13. Can the emergency/evacuation alarm be heard in all areas of the factory?14. Does the facility conduct fire/emergency evacuation drills at least twice a year?

If “Yes” are there records noting date and details?15. Does the facility have an adequate number of properly located and clearly marked emergency exits

available?16. Are exits easily accessible, kept clear, and kept unlocked during working hours?17. Are aisles kept clear from obstructions at all times?18. Are emergency lights placed above exits and stairwells?

After the introductory session, the auditor asks questions of management to get basic informationregarding the facility and its capacity, such as: what type of products it makes, the quantity of products, thenumber of customers, whether the factory has undertaken a compliance audit before and whether thefactory has any open corrective action plans from other audits that may have been conducted with othercompanies. Our auditors often find that the factories we audit have been audited by other significantapparel companies who also have compliance programs.

SAMPLE QUESTIONNAIRES


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THE FACTORY WALK-THROUGH

The auditor then conducts a factory walk-through, usually accompanied by the owner or humanresource director or, in the larger facilities, the safety manager.The auditor is equipped with varioussafety measuring tools, such as a light meter and a sound meter to measure decibel levels.

If possible, the auditor obtains a floor plan of the facility, and ensures that the walk-through ismethodical and complete. All areas of the factory are inspected from the piece goods receipt andstorage area through the finishing and shipping areas. The auditor attempts to follow the work flowto be as comprehensive and consistent as possible.

During the factory walk-through the auditor will, for example, open doors, count toilets, check workrooms, check the lifts and elevators, walk around the premises outside the factory and check fueltanks for compliance with local laws. If the factory has dormitories the auditor will also, among otherthings, inspect the dormitories, check safety measures, fire alarms, living conditions and make surethat the shower and toilet facilities are segregated by gender.

The auditor has a detailed checklist of well over 100 items that need to be reviewed. For example:

• VF Corporation’s Global Compliance Principles should be prominently posted and accessible to all workers, and should be posted in the language(s) of the workers

• Relevant national or regional labor laws should be posted• Factory personnel policies should cover wages, benefits, deductions, vacations, leaves, regular

and overtime hours, among many other specified things, and prohibit harassment and abuse of any kind

• The factory should maintain a thorough personnel file for each employee, and proof of age must be included in the personnel file of each employee

• Workers must regularly receive clear and complete pay slips• There should be a suggestion box through which employees can express grievances

Auditors will note whether the factory provided pay slips, whether the workers are getting wageson time, whether the minimum wage is being paid, whether each day of work is mentioned on thetime cards, the number of hours worked in a week, and whether day-care facilities are available forworkers’ children if required bylocal law. Auditors areeducated on local lawsregarding wages, hours andother matters and know whatto look for to assesscompliance with applicablelaws, as well as the GlobalCompliance Principles.

A supplier factory in China

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EMPLOYEES

Are the factory’s personnel policies comprehensive, codified, and effectively communicated to the workers? Y _ N _

Do the policies cover:Wages Y _ N _Benefits and Deductions Y _ N _Vacations / Leave Y _ N _Regular and Overtime Hours Y _ N _Overtime Rates Y _ N _Discipline and Punishment Y _ N _Grievance Procedures Y _ N _Harassment / Abuse Y _ N _Discrimination Y _ N _

Are any national or local labor laws posted? Y _ N _

Is there any evidence of forced labor? Y _ N _

What is the minimum age of employment without restrictions? _______

Are foreign contract workers employed? Y _ N _

Is there evidence of verbal, sexual, physical, or psychological harassment or abuse? Y _ N _

Are women given pregnancy tests or asked about their pregnancy status prior to or during employment? Y _ N _

Freedom of Association

Does the factory have a recognized Union? Y _ N _

If yes, what percent of workers are members of the union?_______

If no, have there been attempts to unionize this facility? Y _ N _

How do the factory’s employees bring work - related issues and grievances to management’s attention?________________________________________________________________________________

Is there a procedure for management to follow - up on an issue or grievance? Y __N _

Does management allow workers to associate freely? Y __N _

Are workers penalized for efforts to join or form worker’s organizations? Y __N _

Have there been any work stoppages / worker strikes? Y __N _

Comments:

COMPENSATION AND WORK HOURS

Do all workers receive a base wage of no less than the legal minimum wage? Y _ N _

Are workers paid the legal overtime rate for overtime hours worked? Y _ N _

Are workers given pay slips that provide information for workers to calculate their wages? Y _ N _

Is the factory in compliance with laws that limit the number of regular and overtime hours? Y _ N _

Do workers punch their own time card? Y _ N _

How often are workers paid? (circle one)Daily Weekly Bi - weekly Monthly

In what form are workers paid? (circle one)Cash Check Direct Deposit other

Do workers ever work more than 60 hours per week? Y __N _

Does the factory grant workers at least one day of rest in seven? Y __N _

Are workers permitted to refuse overtime without fear of penalty or reprisal of any kind? Y __N _

BENEFITS AND DEDUCTIONS

CIRCLE all benefits offered.

Social Security Medical Services Dental Retirement Workman’s Compensation Meals TransportationChild Care Housing UniformsEmployment Fee Paid National Holidays Paid Sick LeaveUnpaid Sick Leave Paid Vacation Unpaid Personal Leave Menstrual Leave Paid Maternity Leave Unpaid Maternity Leave

How are workers informed of their benefits?______________________________________________________________________

How long must workers be employed before they start receiving benefits? ___________

Are any workers excluded from receiving benefits? Y _ N _

Comments:

SAFETY

Are the alarm and emergency systems tested regularly? Y _ N _Are maintenance/testing records kept for alarm systems? Y _ N _

How many workers are trained in the use of fire - fighting equipment? ___________

How many times per year are fire drills conducted? _______

Does the factory have a formal fire safety/emergency preparedness program? Y _ N _

How close is the nearest fire station? ___________

Are workers who come in contact with chemicals trained in their proper handling? Y _ N _

Does factory have Trained/Certified Safety officer? Y _ N _

Does factory have an active Safety Committee? Y _ N _

HEALTH

Do workers have access to any medically trained personnel at this factory? Y __N _When are they present? ________________

How many employees are certified in first aid? __________

How close is the nearest medical facility? ______________

Does the factory maintain an injury log? Y _ N _

Are health examinations provided / conducted

Before hire Y _ N _

After hire Y _ N _

Comments:

EXITS

For areas with FEWER than 500 workers are there atleast 2 exits of appropriate width? Y _ N _

For areas with MORE than 500 workers are there at least3 exits of appropriate width? Y _ N _

Are exits located on opposite sides of the floor? Y _ N _

Is each workstation within 200 feet of an exit? Y _ N _

Are exits unlocked from inside? Y _ N _

Are exits unblocked? Y _ N _

Do exits lead to a safe place? Y _ N _

Do exit doors swing out? Y _ N _

Are exit signs visible from 100 feet, & illuminated with alight source that is backed up by battery? Y _ N _

Comments:

CONDITIONS/SAFETY MEASURES

Are electrical cables, wires, fuse boxes in good condition? Y _ N _

Are fuse boxes marked, have all slots covered, and unobstructed? Y _ N _

Do any wires cross walkways? Y _ N _

Are there holes in the floor/walls/ceiling/roof? Y _ N _

Are machines outfitted with safety devices?(pulley guards/two hand buttons on presses) Y _ N _

Is there any standing water? Y _ N _

Are floors dry and free of debris? Y _ N _

Is machinery equipped with Lock-out Safety devices? Y _ N _

Comments:

SAMPLE QUESTIONNAIRES

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SAMPLE SAFETY QUESTIONS

Are the alarm and emergency systems tested regularly?

Are maintenance/testing records kept for alarm systems?

How many workers are trained in the use of fire-fighting equipment?

How many times per year are fire drills conducted?

Does the factory have a formal fire safety/emergency preparedness program?

How close is the nearest fire station?

Are workers who come in contact with chemicals trained in their proper handling?

Does factory have Trained/Certified Safety officer?

Does factory have an active Safety Committee?

SAMPLE HEALTH QUESTIONS

Do workers have access to any medically trained personnel at this factory?

When are they present?

How many employees are certified in first aid?

How close is the nearest medical facility?

Does the factory maintain an injury log?

Are health examinations provided/conducted?Before hire?After hire?


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SAMPLE QUESTIONS REGARDING EXITS

For areas with FEWER than 500 workers are there at least 2 exits ofappropriate width?

For areas with MORE than 500 workers are there at least 3 exits ofappropriate width?

Are exits located on opposite sides of the floor?

Is each workstation within 200 feet of an exit?

Are exits unlocked from inside?

Are exits unblocked?

Do exits lead to a safe place?

Do exit doors swing out?

Are exit signs visible from 100 feet and illuminated with a lightsource that is backed up by battery?

On Health and Safety, there are

detailed checklists on exits,

aisles, and evacuation routes,

stairways and mezzanines, fire

extinguishers, alarm systems

and emergency preparation.

Auditors will note whether

stairways are blocked, whether

there is sufficient emergency

lighting on the production floor,

whether there are electrical

wires on the floor, whether

thumb guards are working and

many other details regarding

the facility.

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VENTILATIONFresh air circulation:

High: Work areas air-conditionedMedium: Fresh air drawn into area & circulatedLow: Ventilation of fresh air minimal

Indoor temperatures, when occupied by employees:Cold: Below 60ºF (15ºC)Comfortable: 60 - 90ºF (15º - 32ºC)Hot: Above 90ºF (32ºC)

AIR QUALITYChemical-like odors:

High: Odors not noticeableMedium: Odors noticeable*Low: Odors strong** List the chemicals used in this area

Airborne dust / fiber particles:High: Particles are not visible in the airMedium: Particles are visible but not denseLow: Particles are dense in the air

CHEMICAL SAFETYAre all chemicals properly labeled? Are all chemicals safely stored?Are there postings about chemical safety?Are MSDS Sheets in an accessible notebook? Is there any leakage or potential spillage of chemicalsinto the surrounding environment/water system?

TOILETS AND DRINKING WATER# Female workers: ___ # Female toilets:___# Male workers:___ # Male toilets:___Are the toilet facilities adequate in number?Do the toilet facilities provide an appropriate level ofprivacy?

VF Corporation uses checklists for medical care and accidents, cleanliness, equipment safety,including machine safety, electrical hazards, boiler/generator safety and elevators.

Among the many areas of Working Conditions reviewed, we use checklists on air quality/ventilation,temperatures, noise levels and lighting.

There is also a specific checklist covering worker dormitories.

On facility security, we document details regarding procedural security, physical security, accesscontrols, personnel security, education and training awareness, manifest procedures andconveyance security.


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WORKER INTERVIEWS

During the factory walk-through the auditor identifies employees to interview. The auditor always is either fluent in thelocal languages or is accompanied by an independent interpreter hired by VF. Depending on the size of the factory, theauditor will interview 15-25 employees. The employees will be selected from a variety of departments, including cafeteriaworkers, janitorial staff, production workers and others. The auditor is aware of the discomfort employees may feel indiscussing their employment and attempts to make them comfortable in the interview. The interviews take place in aprivate and safe environment without the presence of management. We recognize that there might be a benefit to off-site interviews, but we have found that when the auditor is interviewing a substantial number of people it is not practicalto take all of them off-site and, in our experience, that conducting the interview off-site does not enhance the interview.

The auditor then asks the factory human resources department for the employment files on each of the selectedemployees. During the interview the auditor will ask the employees many questions, such as: what their working hoursare, when they start and finish, whether weekends are worked, whether they get pay stubs, whether they know how theamount of pay is calculated and what deductions are made, and how overtime is calculated. The auditor then comparesthe data received in the interview with the employee file to determine whether the factory is maintaining accurate records.The auditor may ask the cafeteria workers whether employees are working on weekends, evenings and holidays. Nomanagers are present during the interviews.The auditor listens carefully to the employees’ answers and modifies the lineof questioning in response to what he or she hears from the employees to identify and explore any problem areas.

RECORDS REVIEW

The auditor will spend considerable time reviewing the factory’s records of employee hours worked. The auditor will lookat the payroll, time cards, overtime rate, number of hours, weekends and holidays worked. If the auditor suspects hoursor wage problems, he or she will ask further questions regarding those issues. Again, the forms and content of thequestions will vary depending on what the auditor finds or suspects.

During the audit process the auditor will make recommendations. For instance, the auditor will recommend that thefactory keep detailed records of fire drills, including photographs with the time and date stamped on photos.

The auditor will check for records of boiler inspections, compliance with local environmental laws and water testing.

SAMPLE QUESTIONS ON PERSONAL PROTECTION EQUIPMENT (PPE)PPE GEAR BEING USED BY WORKERS:NEEDED ALL SOME NONE POSTERS

_ Gloves ___ ___ ___ ____ Boots ___ ___ ___ ____ Dust Masks ___ ___ ___ ____ Filtered Masks ___ ___ ___ ____ Respirators ___ ___ ___ ____ Aprons ___ ___ ___ ____ Ear Plugs/Protection ___ ___ ___ ____ Goggles ___ ___ ___ ___


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THE AUDIT RATING

At the end of the factory walk-through and records inspection, the auditor will have a meetingwith the manager and usually the owner of the facility. The auditor will go through the auditfindings item by item and develop a hand-written corrective action plan (CAP), if deficienciesare identified. If the audit results in a CAP the factory management is told that a follow-up auditwill be conducted within approximately 90 days to determine whether the CAP has beencompleted.

The auditor’s ultimate determination of the factory rating is a subjective one. There are someitems listed elsewhere in this report, such as attempts to bribe auditors, child labor andrefusing access to documentation that will result in an automatic rejection. A factory may alsobe rejected based on an accumulation of deficiencies that are indicative of management’s stylein the factory, an unacceptable approach to wage and hour requirements or its approach tohealth and safety.

The auditor will give the factory a rating and follow up with delivery of an audit report withinfourteen days.

A follow-up audit to review the CAP, if applicable, is conducted in approximately 90 days.Otherwise, the factory will be re-audited twelve months thereafter.

M E S S A G E F R O M T H E C H A I R M A N

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