The CASE

Following is a note from the Club President which puts the affirmative case for the LEVY:

Dear Fellow Members,

We the undersigned are asking you to fill out the online proxy and participate in the upcoming Special General Meeting. No solution is perfect, but we wholeheartedly endorse the proposals on the Agenda and especially the Special Assessment. Since the financial downturn of late 2008, the number of Club memberships has declined from 3,756 by 460 to date and is projected to fall by up to 20% from our original projections by November 2012. Approving the Assessment will greatly improve the Club's flexibility to deal with the economic downturn and decline in memberships. Everyone understands that Members are justifiably concerned whether the Club has done enough before asking the Members to consider and approve an Assessment. Here are some of the steps the Club has taken to date.

Implemented various cost saving measures, including a hiring freeze beginning in April 2009 that has resulted in a reduction of 38 staff positions in the past twelve months, representing 88.4 million yen in annual savings and a decline of 12% in staff levels
Reduced total expenses, including labor costs, by 179 million yen (6.2%) for the 12 month period ending this past March
Greatly reduced projected staffing for the New Club representing a 221 million yen savings
Reduced Executive cash compensation by 13 million yen for the current year
Reduced bonuses for management for a savings of 16 million yen
Reduced staff benefits which will result in an annual saving of 24 million yen
Taken major steps to improve efficiency including outsourcing for a projected savings of 54 million yen
Approved a proposal to review and implement a management restructuring program once we complete the move into the new Club
Approved new initiatives including new member categories such as term memberships in order to help increase membership recruiting
Initiated a new sub-committee under the Membership Committee to focus strictly on membership recruitment issues

Through these and other measures, labor costs alone have been reduced by over 700 million yen (26%) relative to our original budgeting for the new Club.

The current Recovery Plan is the result of the efforts of over 25 people including Members and Management who spent hundreds of hours evaluating and vigorously debating many different options. This group, the Transition Working Group, forwarded its recommendations to the Board in April for review. The full report is available after log in to the Club website Board of Governors page at:

www.tokyoamericanclub.org/news-a-info/committees-a-management/board-of-governors.html

We encourage you to take a look at it.

The Transition Working Group will continue to look for ways to both enhance revenues and decrease expenses at the Club. In addition to their report a profit and loss statement and summary of key performance indicators are also available to offer a clear perspective on the club’s financial condition. These are available after log in to the Club website Board of Governors page at:

www.tokyoamericanclub.org/news-a-info/committees-a-management/board-of-governors.html

At the Town Hall meetings a question was raised on the timing of an Assessment. We are forecasting a significant cash flow shortage in 2011. The Board thinks it prudent to address the shortfall as soon as possible and requests a vote before summer holidays. A positive decision on the Assessment will put us in a better position with our lender. A timely decision will also allow us to better determine service levels in the new facility. The Club has been receiving much constructive feedback on its plan and will give serious consideration to all the views of the members as we go forward.

If we the Members collectively decide not to implement the Assessment, there are no magic bullets to realize significant further cost savings without considering additional service reductions. The fundamental question which the Transition Working Group addressed and which we as Members have to answer is whether we prefer an Assessment or whether we prefer cuts to service and new or additional fees for existing activities such as parking, recreation, and food and beverage. We believe that the majority of Members would prefer the 114,000 yen Assessment (9,500 yen per month for 12 months) that has been proposed rather than a reduction in service and the imposition of an array of fees. If you are in agreement with this, we encourage you to participate and vote in favor of the Assessment. The following link will allow you to quickly and easily vote by online proxy: https://eballot3.votenet.com/tokyoamericanclub. [Your voting password was previously sent by email. If you do not have it, please contact the Membership Office. Phone: 03-4588-0687 Email: membership@tac-club.org ]

As much as one can applaud the earnest endeavours of the TWG who have given selflessly of their time and energy in the interests of the Club, the structural issues are so profound that the proposed levy will at best buy the Club 12 months.

The Club has a labor bill of Yen 1,800,000,0000.

The Club has a structural deficit of Yen 812,000,000 in 2011 trending down to Yen 513,000,000 in 2013.

The levy will raise approximately Yen 300,000,000 of that in 2011.

Staffing reductions are commendable but when a 12% reduction in staff equates to a 4% reduction in labor costs it raises questions.

The balance of the revenue enhancement package is at best wishful thinking, especially where it relates to a rapid ramp up in member numbers producing Yen 262,000,000 in 2011.

Nowhere is the F&B issue addressed. It seems that frontline staff reductions and giving up on substantial banquet capability is a tacit acknowledgement of the reality of the current economic conditions continuing for the foreseeable future.

It is up to each and every member to make up their own mind but like every one of life's problems, delaying the inevitable is to compound the mistakes.

I see no acknowledgement of the real predicament; which makes it highly likely that the levy will be a recipe for pouring good money after bad.

Members' equity in the Club has been wiped out in toto.

If you owe the bank a million you have a problem. If you owe them a hundred million, they have a problem.