USA_NKE.pdf

Morningstar Equity Analyst Report | Report as of 2 Feb 2023 22:18, UTC | Reporting Currency: USD | Trading Currency: USD | Exchange: NEW YORK STOCK EXCHANGE, INC. Page 1 of 22

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Nike Inc Class B NKE QQQ 1 Feb 2023 22:24, UTC

Last Price Fair Value Estimate Price/FVE Market Cap Economic MoatTM Moat TrendTM Uncertainty Capital Allocation ESG Risk Rating Assessment1

129.06 USD2 Feb 2023

134.00 USD22 Dec 2022 01:15, UTC

0.96 200.80 USD Bil2 Feb 2023

Wide Stable Medium Exemplary ;;;;;1 Feb 2023 06:00, UTC

Price vs. Fair Value

100

150

200

Fair Value: 134.0022 Dec 2022 01:15, UTC

Last Close: 129.06Over ValuedUnder Valued

2018 2019 2020 2021 2022 YTD

0.99 0.96 1.32 1.30 0.87 0.96 Price/Fair Value

19.84 37.87 40.64 18.61 -29.04 10.30 Total Return %

Morningstar Rating

Total Return % as of 2 Feb 2023. Last Close as of 2 Feb 2023. Fair Value as of 22 Dec 2022 01:15, UTC.

Contents

Business Description

Business Strategy & Outlook (22 Dec 2022)

Bulls Say / Bears Say (22 Dec 2022)

Economic Moat (21 Dec 2022)

Fair Value and Profit Drivers (21 Dec 2022)

Risk and Uncertainty (21 Dec 2022)

Capital Allocation (21 Dec 2022)

Analyst Notes Archive

Financials

Appendix

Research Methodology for Valuing Companies

Important Disclosure

The conduct of Morningstar’s analysts is governed by Code of Ethics/Code of

Conduct Policy, Personal Security Trading Policy (or an equivalent of), and

Investment Research Policy. For information regarding conflicts of interest, please

visit: http://global.morningstar.com/equitydisclosures.

The primary analyst covering this company does not own its stock.

1The ESG Risk Rating Assessment is a representation of Sustainalytics’ ESG Risk

Rating.

Wide-Moat Nike’s Powerful Brand and Digital Strategy

Allowing It to Overcome Market Turmoil

Business Strategy & Outlook David Swartz, Senior Equity Analyst, 22 Dec 2022

We view Nike as the leader of the athletic apparel market and believe it will overcome current

challenges despite near-term inventory and economic issues. Our wide moat rating on the company is

based on its intangible brand asset, as we believe it will maintain premium pricing and generate

economic profits for at least 20 years. Nike, the largest athletic footwear brand in all major categories

and in all major markets, dominates categories like running and basketball with popular shoe styles.

While it does face significant competition, we believe it has proven over a long period that it can

maintain share and pricing.

We think Nike’s strategies allow it to maintain its leadership position. Over the last few years, Nike has

invested in its direct-to-consumer network while cutting many wholesale accounts. In North America

and elsewhere, the firm has reduced its exposure to undifferentiated retailers while increasing its

connections with a small number of retailers that bring the Nike brand closer to consumers, carry a full

range of products, and allow it to control the brand message. Nike’s consumer plan is led by its Triple

Double strategy to double innovation, speed, and direct connections to consumers. Triple Double

includes cutting product creation times in half, increasing membership in Nike’s mobile apps, and

improving the selection of key franchises while reducing its styles by 25%. We think these strategies

will allow Nike to hold share and pricing.© Morningstar 2023. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner, without the prior written consent of Morningstar. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869. Please see important disclosures at the end of this report.

Morningstar Equity Analyst Report | Report as of 2 Feb 2023 22:18, UTC | Reporting Currency: USD | Trading Currency: USD | Exchange: NEW YORK STOCK EXCHANGE, INC. Page 2 of 22

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Nike Inc Class B NKE QQQ 1 Feb 2023 22:24, UTC

Last Price Fair Value Estimate Price/FVE Market Cap Economic MoatTM Moat TrendTM Uncertainty Capital Allocation ESG Risk Rating Assessment1

129.06 USD2 Feb 2023

134.00 USD22 Dec 2022 01:15, UTC

0.96 200.80 USD Bil2 Feb 2023

Wide Stable Medium Exemplary ;;;;;1 Feb 2023 06:00, UTC

Although its recent results in China have been inconsistent due to supply issues, virus-related

restrictions, and a political controversy, we still believe Nike has a great opportunity for growth there

and in other emerging markets. The firm experienced double-digit annual sales growth in six of the past

eight years in greater China and, fueled by high government investment in athletics, we think it will do

so again after the current difficulties have passed. Moreover, with worldwide distribution and huge e-

commerce platform that exceeded $10 billion in fiscal 2022, Nike should benefit as more people in

China, Latin America, and other developing regions move into the middle class and gain broadband

access.

Bulls Say David Swartz, Senior Equity Analyst, 22 Dec 2022

u Nike has a great opportunity in fast-growing markets like China. More than 70% of Nike’s growth over

the next five years may come from outside North America.

u Nike’s Triple Double strategy of increased innovation, direct-to-consumer sales, and speed may improve

margins and share. Membership growth in its digital channel has exceeded expectations.

u We anticipate Nike’s gross margins will rise by about 30 basis points per year after fiscal 2024 through

automation, e-commerce, and higher prices. Nike is pulling back from undifferentiated retailers to

increase full-priced sales.

Bears Say David Swartz, Senior Equity Analyst, 22 Dec 2022

u As a worldwide business, Nike is exposed to global issues like the war in Ukraine, shipping delays,

currency volatility, and high input costs. Nike's long-term results could be affected if these problems

persist.

u Nike has recently suffered poor results in China as rising nationalism has boosted native brands and

virus-related restrictions have disrupted operations. Nike cannot afford to lose significant share in this

critical sportswear market.

u Nike has struggled to manage its inventory, requiring markdowns to clear excess product that have

negatively impacted margins.

Economic Moat David Swartz, Senior Equity Analyst, 21 Dec 2022

We assign a wide moat rating to Nike based on its intangible brand asset. Nike is the largest athletic

apparel company in the world, with nearly $47 billion in revenue in fiscal 2022. Its revenue has

increased in nine of the past 10 years, with the pandemic-affected fiscal 2021 as the sole exception.

Nike produces apparel and footwear for professional and amateur athletes, sports equipment, and

sports-inspired fashion for both athletes and nonathletes alike. As evidence of its competitive edge, the

firm's adjusted returns on invested capital, including goodwill, have averaged 37% over the past

decade. We forecast that the company's average annual adjusted ROICs, including goodwill, will exceed

its weighted average cost of capital over the next 20 years, as required for our wide moat rating. We

Sector Industry

t Consumer Cyclical Footwear & Accessories

Business Description

Nike is the largest athletic footwear and apparel brand

in the world. It designs, develops, and markets athletic

apparel, footwear, equipment, and accessories in six

major categories: running, basketball, football (soccer),

training, sportswear, and Jordan. Footwear generates

about two thirds of its sales. Nike’s brands include Nike,

Jordan, and Converse (casual footwear). Nike sells

products worldwide and outsources its production to

more than 300 factories in more than 30 countries. Nike

was founded in 1964 and is based in Beaverton, Oregon.

© Morningstar 2023. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner, without the prior written consent of Morningstar. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869. Please see important disclosures at the end of this report.

Morningstar Equity Analyst Report | Report as of 2 Feb 2023 22:18, UTC | Reporting Currency: USD | Trading Currency: USD | Exchange: NEW YORK STOCK EXCHANGE, INC. Page 3 of 22

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Nike Inc Class B NKE QQQ 1 Feb 2023 22:24, UTC

Last Price Fair Value Estimate Price/FVE Market Cap Economic MoatTM Moat TrendTM Uncertainty Capital Allocation ESG Risk Rating Assessment1

129.06 USD2 Feb 2023

134.00 USD22 Dec 2022 01:15, UTC

0.96 200.80 USD Bil2 Feb 2023

Wide Stable Medium Exemplary ;;;;;1 Feb 2023 06:00, UTC

CompetitorsNike Inc Class B NKE Under Armour Inc A UAA VF Corp VFC Hanesbrands Inc HBI

Fair Value134.00Uncertainty : Medium

Last Close129.06

Fair Value15.50Uncertainty : High

Last Close12.78

Fair Value61.00Uncertainty : Medium

Last Close31.14

Fair Value22.00Uncertainty : High

Last Close6.28

Economic Moat Wide None Narrow Narrow

Moat Trend Stable Stable Stable Stable

Currency USD USD USD USD

Fair Value 134.00 22 Dec 2022 01:15, UTC 15.50 28 Nov 2022 17:04, UTC 61.00 5 Dec 2022 20:18, UTC 22.00 16 Nov 2022 03:44, UTC

1-Star Price 180.90 24.03 82.35 34.10

5-Star Price 93.80 9.30 42.70 13.20

AssessmentFairly Valued 2 Feb 2023 Under Valued 1 Feb 2023 Significantly

Undervalued

1 Feb

2023

Significantly

Undervalued

1 Feb

2023

Morningstar Rating QQQ1 Feb 2023 22:24, UTC QQQQ1 Feb 2023 22:24, UTC QQQQQ1 Feb 2023 22:24, UTC QQQQQ1 Feb 2023 22:24, UTC

Analyst David Swartz, Senior Equity Analyst David Swartz, Senior Equity Analyst David Swartz, Senior Equity Analyst David Swartz, Senior Equity Analyst

Capital Allocation Exemplary Standard Exemplary Standard

Price/Fair Value 0.96 0.82 0.51 0.29

Price/Sales 4.20 1.05 1.04 0.47

Price/Book 13.15 3.18 3.98 4.50

Price/Earning 36.58 27.19 29.30 8.62

Dividend Yield 0.97% — 6.35% 6.89%

Market Cap 200.80 Bil 5.41 Bil 12.29 Bil 3.04 Bil

52-Week Range 82.22—149.46 6.38—20.65 25.05—66.96 5.65—16.75

Investment Style Large Growth Small Core Mid Value Small Value

estimate Nike's weighted average cost of capital at 9% and expect its annual adjusted ROICs, including

goodwill, to average 63% over the next decade. We believe Nike has been the preferred sportswear

brand in the world since the 1980s and that it will remain so for many years.

Nike achieves premium pricing on many products, supporting our view of its brand power. Its

performance athletic shoes are the most expensive on the market. At footlocker.com, for example, Nike

produces most of the styles of men's performance basketball shoes that cost $170 or more per pair (as

of December 2022). Some fashionable Nike shoes retail for prices associated with luxury footwear

brands. For example, luxury retailer farfetch.com lists dozens of styles of Nike sneakers at prices above

$1,000 per pair. Moreover, as evidence of Nike's enduring popularity, older and limited-edition shoes are

regularly sold in resale markets for more than $10,000 per pair.

We believe Nike's wide moat is supported by its worldwide reach. The company ships products to more

than 190 countries, operates more than 1,000 stores (two thirds outside of the U.S.), and has another © Morningstar 2023. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner, without the prior written consent of Morningstar. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869. Please see important disclosures at the end of this report.

Morningstar Equity Analyst Report | Report as of 2 Feb 2023 22:18, UTC | Reporting Currency: USD | Trading Currency: USD | Exchange: NEW YORK STOCK EXCHANGE, INC. Page 4 of 22

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Nike Inc Class B NKE QQQ 1 Feb 2023 22:24, UTC

Last Price Fair Value Estimate Price/FVE Market Cap Economic MoatTM Moat TrendTM Uncertainty Capital Allocation ESG Risk Rating Assessment1

129.06 USD2 Feb 2023

134.00 USD22 Dec 2022 01:15, UTC

0.96 200.80 USD Bil2 Feb 2023

Wide Stable Medium Exemplary ;;;;;1 Feb 2023 06:00, UTC

6,000 or so branded stores that are operated by franchisees. We estimate Nike's annual revenue to be

about double that of the world's second-largest sportswear firm, narrow-moat Adidas. Nike produced

$29 billion in fiscal 2022 footwear sales, more than the combined footwear sales of Adidas, Puma, and

no-moat Under Armour. It has market-leading share in footwear in all markets and major categories and

ships more than 800 million pairs of shoes per year. It is also the leader in athletic apparel, producing

$13.6 billion in apparel sales in fiscal 2022. Although Nike is an American brand, 59% of fiscal 2022

sales of the brand came from outside of North America. We believe that no athletic apparel company

will be able to approach its global market share in at least the next 20 years, supporting our view that it

has a wide moat.

Nike's brand is enhanced by its large e-commerce business in the U.S. and other countries. We estimate

that Nike generated more than $10 billion in e-commerce sales from its digital marketplaces in fiscal

2022, having grown from about $1.5 billion in fiscal 2015. Nike expects digital sales from its own

channels to increase to 40% of its sales in fiscal 2025, up from about 24% in fiscal 2022. We think this

growth is achievable as more consumers in developing markets (such as China, India, and Latin

America) move into the middle class and gain access to broadband services. Nike is investing heavily in

its digital services. Its apps, known as NikePlus, have about 160 million members. Its Training Club and

Run Club apps are the largest apps in their fields in the U.S. and Europe and its SNKRS app for hard-

core shoe collectors reportedly has several million members. Nike produces limited-edition products that

are exclusive to members of NikePlus. For example, more than one third of Cristiano Ronaldo's Mercurial

soccer cleats are available only on nike.com and its apps. Many Nike-sponsored athletes, including

Ronaldo, have tens and even hundreds of millions of social media followers. Nike uses their fame to

promote its products to a huge audience at relatively low cost. The firm supports its e-commerce with

some innovative digital products, such as NikeConnect, a service that allows people to take a picture of

a Nike product and identify it. This is a useful service, as Nike estimates there are 5 billion individual

Nike products in the world. We believe Nike's large digital community creates goodwill among its best

customers and promotes the brand. While other athletic apparel companies have e-commerce, none of

them have the reach of Nike. We think its apps support our wide moat rating.

Nike sponsors many of the world's most popular athletes and teams in virtually all major sports. Athletes

sponsored by Nike include Cristiano Ronaldo (football/soccer), LeBron James (basketball), Kevin Durant

(basketball), Mike Trout (baseball), Giancarlo Stanton (baseball), Rafael Nadal (tennis), Serena Williams

(tennis), Alex Morgan (soccer), Michael Jordan, and many track and field athletes. Teams and leagues

sponsored by Nike include the NFL, the NBA, many U.S. and international college teams, many national

soccer leagues, and the national soccer teams of numerous nations, including Brazil, France, and

England. In 2020, for the first time, Nike's swoosh logo appeared on the front of every Major League

Baseball uniform. Nike is the sponsor of choice for athletes and teams due to its status as the world's

Morningstar Equity Analyst Report | Report as of 2 Feb 2023 22:18, UTC | Reporting Currency: USD | Trading Currency: USD | Exchange: NEW YORK STOCK EXCHANGE, INC. Page 5 of 22

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Nike Inc Class B NKE QQQ 1 Feb 2023 22:24, UTC

Last Price Fair Value Estimate Price/FVE Market Cap Economic MoatTM Moat TrendTM Uncertainty Capital Allocation ESG Risk Rating Assessment1

129.06 USD2 Feb 2023

134.00 USD22 Dec 2022 01:15, UTC

0.96 200.80 USD Bil2 Feb 2023

Wide Stable Medium Exemplary ;;;;;1 Feb 2023 06:00, UTC

largest apparel brand and the tremendous success of its nearly 40-year relationship with Michael

Jordan. LeBron James famously turned down more money from Reebok to sign with Nike in 2003,

ultimately dooming Reebok to irrelevance in basketball shoes. Whether sponsored or not, athletes all

over the world wear Nike apparel while competing. For example, its Mercurial line of soccer cleats is the

most popular brand in England's Premier League. Also, about three fourths of the players in the NBA

wear Nike or Jordan shoes. We expect Nike's powerful brand will continue to allow it to sign the key

endorsement deals that will keep it on top.

Nike's brands have proven staying power, supporting our view that it can continue to earn economic

profits for at least the next 20 years. Michael Jordan signed with Nike in 1984 and retired from

basketball in 2003. Many millennials are not even old enough to have seen him play. Yet, Nike's upscale

Jordan brand produced $5.1 billion in (wholesale-equivalent) sales in fiscal 2022. While Jordan is Nike's

biggest star, James' shoes have been big sellers for Nike since he was a teenager. He signed a new

contract with Nike in 2015 that will reportedly pay him $30 million per year until 2048 (when he

celebrates his 64th birthday). Nike, which ships about twice as many pairs of shoes worldwide as

Adidas, has developed franchises with unusual longevity. We think Nike's key brands support our view

that it has a wide moat based on its brand intangible asset.

We believe Nike's innovations contribute to its brand and support our wide-moat view. Nike has been

known for its innovative products ever since it introduced running shoes with pressurized air in their

soles in the 1980s. Nike frequently releases new styles of running shoes. Recent editions to its large

family of shoes include Epic React (foam cushioning), VaporMax (new style of Air), and shoes with

ZoomX technology. Nike claims the ZoomX substance was developed for the aerospace industry and

returns as much as 85% of energy to the runner. While it may be hard to prove this claim, Nike's

dominance in running shoes is clear as the category produces about $4 billion in sales for the company.

Most of the world's leading track and field athletes wear Nike shoes. Its innovations allow it to maintain

premium pricing. Many Nike running shoes, such as the best-selling Air Zoom Pegasus, sell at prices

over $100 per pair. Nike Air Vapor Max, which sell for about $200 per pair at Foot Locker and other

stores, reportedly became the best-selling running shoe above $150 per pair within months of its launch

in 2017. We believe Nike is the leader in sports performance technology, providing a persistent

competitive edge.

We do not believe Nike has a moat based on a cost advantage. While Nike may have some cost

advantage over competitors in sponsorships due to its status as the premier sportswear brand, we don't

view this as significant or maintainable. Moreover, while endorsements are great for brand building,

they are difficult to quantify in terms of profit margins. While Nike's low double-digit operating margins

are very good, it is difficult to know if endorsements play a major role. It is possible that the firm simply

has expense leverage due its size. Nike has limited advantage in product costs as virtually all its © Morningstar 2023. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner, without the prior written consent of Morningstar. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869. Please see important disclosures at the end of this report.

Morningstar Equity Analyst Report | Report as of 2 Feb 2023 22:18, UTC | Reporting Currency: USD | Trading Currency: USD | Exchange: NEW YORK STOCK EXCHANGE, INC. Page 6 of 22

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Nike Inc Class B NKE QQQ 1 Feb 2023 22:24, UTC

Last Price Fair Value Estimate Price/FVE Market Cap Economic MoatTM Moat TrendTM Uncertainty Capital Allocation ESG Risk Rating Assessment1

129.06 USD2 Feb 2023

134.00 USD22 Dec 2022 01:15, UTC

0.96 200.80 USD Bil2 Feb 2023

Wide Stable Medium Exemplary ;;;;;1 Feb 2023 06:00, UTC

production is outsourced. Narrow-moat Shenzhou International, for example, is one of Nike's largest

suppliers but also produces apparel for narrow-moat Adidas, Puma, and others.

We do not believe Nike has a moat based on anything aside from its brand intangible asset. We do not

think it has a moat based on efficient scale. While Nike's financial resources and relationships with

suppliers likely allow for production investment unavailable to others in the short term, any advantage

in this area is likely to be transitory. Competitors can probably gain access to similar technologies.

Moreover, much of apparel manufacturing remains manually intensive. We do not believe there is any

network effect in the apparel business and switching costs are nonexistent. Competing products to

Nike's footwear and clothing are widely available.

Fair Value and Profit Drivers David Swartz, Senior Equity Analyst, 21 Dec 2022

We are lifting our fair value estimate on Nike’s shares to $134 from $129. Nike recorded a solid fiscal

2023 second quarter as its 17% (27% constant currency) sales growth eclipsed our 10% forecast.

Moreover, despite significant discounting to reduce its excessive amounts of out-of-season inventory, its

12.5% EBIT margin beat our 9.9% estimate. We now forecast 7% sales growth for the year, up from 4%

previously, and EPS of $3.20, up from $3.07. Even so, fiscal 2023 is a challenging year due to slowing

consumer spending and high markdowns in the apparel industry. Our fair value estimate implies a fiscal

2023 price/earnings ratio of 42 and an enterprise value/adjusted EBITDA ratio of 31. For fiscal 2024, we

forecast $4.18 in EPS on 9% sales growth as Nike's margins recover.

We forecast compound average sales growth for Nike of about 7% over the next 10 years. We expect it

will achieve compound annual revenue growth of about 4.5% in North America, in line with expected

market growth. We think Nike’s innovative product and e-commerce will allow it to hold its market

position and premium pricing. In greater China, its fastest-growing segment prior to recent challenges

(such as virus-related lockdowns and the forced labor controversy), we expect compound average

growth of 12% over the next decade.

Although we anticipate a decline to 44% in fiscal 2023 from 46% in fiscal 2022 due to the inventory

issue, we forecast Nike’s gross margins will gradually improve to 49.3% in fiscal 2032. The firm may

increase gross margins through greater production and distribution efficiencies, its shift to digital sales,

and price increases.

We think Nike’s operating margins will rise as it increases sales in greater China, its most profitable

market. We forecast overall operating margins will gradually increase to the high teens over the next

decade, up from a five-year historical average of 12.5%. In greater China, Nike has achieved segment

EBIT margins of at least 35% in six of the last seven fiscal years. Although its EBIT margin declined to

31% in the region in fiscal 2022 due to the recent tumult, we anticipate average operating margins of

Morningstar Equity Analyst Report | Report as of 2 Feb 2023 22:18, UTC | Reporting Currency: USD | Trading Currency: USD | Exchange: NEW YORK STOCK EXCHANGE, INC. Page 7 of 22

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Nike Inc Class B NKE QQQ 1 Feb 2023 22:24, UTC

Last Price Fair Value Estimate Price/FVE Market Cap Economic MoatTM Moat TrendTM Uncertainty Capital Allocation ESG Risk Rating Assessment1

129.06 USD2 Feb 2023

134.00 USD22 Dec 2022 01:15, UTC

0.96 200.80 USD Bil2 Feb 2023

Wide Stable Medium Exemplary ;;;;;1 Feb 2023 06:00, UTC

about 37% after fiscal 2023. In North America, we forecast segment operating margins of about 27% as

it increases its direct-to-consumer sales.

Our upside-case fair value estimate is $180. In this case, we forecast compound average annual revenue

growth of 8% over the next decade, including 10-year compound average growth of 6% in Nike’s North

America segment. Although the firm faces some lost sales from store closures, this case assumes it can

overcome this problem with e-commerce growth, innovative products, and high pricing. Further, our

upside case assumes 13% compound average growth for Nike’s greater China segment and 8% in

Europe, the Middle East, and Africa as the company outperforms Adidas on strength in international

football and other categories. On profitability, our upside scenario forecasts Nike’s gross margins

gradually increase to 51.3% in fiscal 2032 from 46% in fiscal 2022, while its operating margins reach

20.6%. In this case, Nike can slightly improve North America operating margins as full-priced sales

become a larger share of total sales. Its innovative products (such as Zoom and Joyride shoes) often sell

at full price, so increased innovation provides upside to margins. Moreover, Nike achieves high pricing

in China and has been gaining share in the country.

Our downside-case fair value estimate is $98. In this case, we assume 10-year compound average

growth of 3% for Nike’s North America segment, at the low end of our market growth expectation. The

firm’s North America growth may suffer if closures and discounting continue in the U.S. physical retail

market. It could also lose share in some categories to athleisure apparel from others. Our downside case

forecasts 5% compound average growth for Nike’s EMEA segment over the next decade as competition

intensifies. Further, this bear case assumes 11% compound average growth for its greater China

segment over the next 10 years. Although we expect Nike to remain a market leader, the Chinese

market is becoming increasingly competitive as American brands invest in the market. Nike may not be

able to maintain its high pricing if it fails to differentiate its brand and product. Further, our downside

scenario assumes the company’s gross margins rise to just 47.3% in fiscal 2032, while its operating

margins rise to just 15.7% in fiscal 2032. Nike’s margins in North America are at some risk to store

closures, discounting, and excessive inventory. Moreover, as there are many native sportswear brands

that sell low-priced activewear in China, the firm’s high prices and operating margins are vulnerable to

shifts in taste among local consumers.

Risk and Uncertainty David Swartz, Senior Equity Analyst, 21 Dec 2022

We assign a Medium Uncertainty Rating to Nike. Like many other multinational apparel and footwear

manufacturers, the company has struggled to manage its inventory due to shipping delays, virus

impacts, and slowing sales due to inflation’s impact on consumer spending. Nike has had to resort to

discounting some items to clear excess product. The firm has also been affected by increases in input

costs and by the strength of the U.S. dollar given its exposure to Europe, Asia, and other regions.

Morningstar Equity Analyst Report | Report as of 2 Feb 2023 22:18, UTC | Reporting Currency: USD | Trading Currency: USD | Exchange: NEW YORK STOCK EXCHANGE, INC. Page 8 of 22

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Nike Inc Class B NKE QQQ 1 Feb 2023 22:24, UTC

Last Price Fair Value Estimate Price/FVE Market Cap Economic MoatTM Moat TrendTM Uncertainty Capital Allocation ESG Risk Rating Assessment1

129.06 USD2 Feb 2023

134.00 USD22 Dec 2022 01:15, UTC

0.96 200.80 USD Bil2 Feb 2023

Wide Stable Medium Exemplary ;;;;;1 Feb 2023 06:00, UTC

Nike is exposed to weakness in U.S. physical retail. Department stores that carry Nike products have

closed stores and will close more. The sporting goods channel has also been challenged. However, the

firm should be able to make up for weakness in some areas of retail through its direct-to-consumer

sales.

The athleisure trend and growth in activewear has attracted new competition. While Nike is the market

leader in many categories and many markets, some competitors, such as narrow-moat Lululemon, have

found success with fashionable specialty products.

We do not believe the environmental, social, and governance risks that affect Nike will have a material

impact on its financial results or investment prospects. Nonetheless, the firm tends to be a lightning rod

for controversy due to its high visibility. There are ongoing controversies concerning the treatment of its

female and minority employees, its efforts to reduce taxation, and the treatment of workers in its supply

chain. Moreover, Nike has become entangled in a forced labor controversy in China that has caused a

consumer backlash in the country. While we anticipate the impact will be short-lived, any lasting effects

could be damaging, as China is the fastest-growing sportswear market in the world and Nike's most

profitable region. We may revisit our view of Nike’s ESG risks if any of these controversies endanger its

profit potential.

Capital Allocation David Swartz, Senior Equity Analyst, 21 Dec 2022

We assign an Exemplary capital allocation rating to Nike. In the 15 years between December 2007 and

December 2022, Nike generated an average annual return to investors of 14%, well above the 9%

average annual return of the Morningstar U.S. Market Total Return Index over the span. Nike is the

largest U.S.-based apparel firm and the largest athletic apparel company in the world. Its adjusted

ROICs, including goodwill, have averaged 38% over the past five years, well above its estimated

weighted average cost of capital of 9%.

Nike has a strong balance sheet, having operated in a net cash position for most of the past decade.

Although the firm issued $6 billion in unsecured notes when the pandemic hit in the spring of 2020, we

believe this was just a precaution, and that the firm now has more cash than it needs to fund operations

and capital return plans. We forecast Nike will generate an annual average of $7.1 billion in free cash

flow to equity (operating cash flow minus capital expenditures) over the next five years. Most of Nike’s

long-term debt matures after 2025.

Nike has been investing heavily in its direct-to-consumer efforts in recent years, and we have viewed

this as a sound and successful strategy. The firm has been expanding its physical store base and its

online operations. Its direct-to-consumer sales accounted for 42% of its Nike brand revenue in fiscal

2022, up from less than 20% before 2015. We estimate Nike’s fiscal 2022 capital expenditures at $1.5

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Nike Inc Class B NKE QQQ 1 Feb 2023 22:24, UTC

Last Price Fair Value Estimate Price/FVE Market Cap Economic MoatTM Moat TrendTM Uncertainty Capital Allocation ESG Risk Rating Assessment1

129.06 USD2 Feb 2023

134.00 USD22 Dec 2022 01:15, UTC

0.96 200.80 USD Bil2 Feb 2023

Wide Stable Medium Exemplary ;;;;;1 Feb 2023 06:00, UTC

billion (3% of sales), with much of the investment going into direct-to-consumer efforts. As it is a high

growth and high profit margin opportunity, we anticipate Nike will continue to build its direct-to-

consumer operations under CEO John Donahoe (who has an e-commerce background) for years to

come.

We think Nike has created value through acquisitions and dispositions. In 2003, Nike bought Converse

for just $305 million. Converse, known for its casual athletic canvas shoes, had gone bankrupt in 2001

and had just $205 million in sales in 2002, but Nike resurrected it. In fiscal 2022, Converse produced

$2.3 billion in sales and nearly $700 million in operating profit. While Nike continues to own Converse, it

has divested other brands. In 2012, for example, it sold Cole Haan for $570 million, 24 years after it had

bought it for $95 million. In 2019, Nike sold Hurley, which it had acquired in 2002, for an undisclosed

amount. We view dispositions of niche brands as beneficial to shareholders as they allow Nike to focus

on its core business.

Nike has returned significant cash to shareholders through dividends and stock buybacks. We project

the company will issue about $1.9 billion in dividends in fiscal 2023 and we expect its long-term

dividend payout ratio will be 31%. Nike also returns cash to shareholders through buybacks. In

November 2015, the company authorized a four-year, $12 billion stock-repurchase program. In June

2018, its board authorized a new four-year, $15 billion stock-repurchase program. Nike completed the

2015 buyback in the third quarter of fiscal 2019, having repurchased 192.1 million shares at an average

price of $62.47 and is now repurchasing stock under the 2018 program. Nike has reduced its share

count by roughly 15% over the past decade, and we expect it will repurchase $24 billion (net) in stock in

over the next five years. Unfortunately, in 2014-15, Nike repurchased billions of dollars of shares at

prices above our fair value estimate. If the company had halted buybacks instead, it could have

conserved cash for greater share buybacks in 2016-17 at prices below our fair value estimate.

Analyst Notes Archive

Wide-Moat Nike Overcomes Inventory and Other Challenges to Post Solid Q2 Sales; Shares

Attractive David Swartz, Senior Equity Analyst, 21 Dec 2022

Highlighted by a 17% (27% constant currency) revenue increase that eclipsed our 10% forecast, Nike

outperformed our expectations in fiscal 2023’s (November-ended) second quarter despite concerns of

slowing consumer spending due to inflation and widespread industry discounting. Nike itself has

needed to implement markdowns to clear an excessive amount of out-of-season apparel, especially in

North America. While its gross margin dropped 3 percentage points to 42.9% (slightly above our 42.3%

estimate) and its inventories remained high (up 43% from an unusually low level last year), we believe

both metrics are set to improve in the coming quarters due to sales momentum, product releases, and

the reopening of China’s economy after months of virus-related restrictions. Given these trends and the

Morningstar Equity Analyst Report | Report as of 2 Feb 2023 22:18, UTC | Reporting Currency: USD | Trading Currency: USD | Exchange: NEW YORK STOCK EXCHANGE, INC. Page 10 of 22

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Nike Inc Class B NKE QQQ 1 Feb 2023 22:24, UTC

Last Price Fair Value Estimate Price/FVE Market Cap Economic MoatTM Moat TrendTM Uncertainty Capital Allocation ESG Risk Rating Assessment1

129.06 USD2 Feb 2023

134.00 USD22 Dec 2022 01:15, UTC

0.96 200.80 USD Bil2 Feb 2023

Wide Stable Medium Exemplary ;;;;;1 Feb 2023 06:00, UTC

quarterly outperformance, we expect to lift our $129 fair value estimate on Nike’s shares by a mid-

single-digit rate. After this lift, we still view its shares as attractive despite a 13% jump in post-market

trading on Dec. 20. We believe Nike’s results in a difficult footwear and apparel market support our

wide moat rating based on its brand intangible asset.

Nike’s 12.5% quarterly EBIT margin outperformed our 9.9% forecast due to the sales outperformance.

We anticipate its EBIT margin will increase to the high teens over the next decade as the firm’s

profitability benefits from its ongoing shift to direct-to-consumer from wholesale. Indeed, Nike reported

that its direct sales increased 25% in the quarter, including a 34% jump in e-commerce. The latter

statistic affirms that its digital sales strategy is paying off and is not just a product of the pandemic.

Even so, we do not believe the company intends to pull away from wholesale operations entirely.

Instead, we anticipate it will use its wholesale partners to boost its loyalty program, which currently has

160 million active members.

A Turnaround May Be Closer Than Widely Believed in Apparel Manufacturing and Retailing David

Swartz, Senior Equity Analyst, 3 Oct 2022

Investors have forsaken apparel manufacturers and retailers, which we believe present numerous

attractive opportunities. These firms have struggled with many issues in 2022, including higher

inventories, lower operating margins, inflation, logistical challenges, tough comparisons with 2021, low

international travel, and an extremely strong U.S. dollar. However, we see positive signs. In recent

weeks, shipping has shown signs of normalizing, and gas prices have dropped. Moreover, we anticipate

inventory levels will improve as manufacturers cancel shipments and sales increase in the holiday

season (as is typical). In 2023, we anticipate the benefits of investments in supply chains and other

operations by many apparel firms will become more apparent. Consequently, despite widespread

pessimism in the market, we believe now is a good time to consider the many apparel stocks trading

well below our fair value estimates.

We highlight 10 firms in disparate parts of the apparel sector as especially undervalued. Some of them

trade at price/earnings ratios in the single digits on what we believe to be depressed earnings. On the

retail side, narrow-moat Nordstrom and no-moat Gap, Urban Outfitters, and Kohl’s trade at market levels

40% or more below our fair value estimates of $42, $25, $35.50, and $54, respectively. These four firms

generally reported solid results in 2021 but have stumbled with merchandising and inflation issues in

2022, leading to share price declines of 30% or more over the past year. Even so, we do not believe any

of them are at risk of financial distress.

On the producer side, wide-moat Nike, narrow-moat Hanesbrands, Adidas, and Shenzhou International,

and no-moat PVH and Under Armour trade at sizable discounts to our fair value estimates of $133, $24,

EUR 206, HKD 140, $131, and $15.70, respectively. As with the retailers, the shares of these firms have

Morningstar Equity Analyst Report | Report as of 2 Feb 2023 22:18, UTC | Reporting Currency: USD | Trading Currency: USD | Exchange: NEW YORK STOCK EXCHANGE, INC. Page 11 of 22

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Nike Inc Class B NKE QQQ 1 Feb 2023 22:24, UTC

Last Price Fair Value Estimate Price/FVE Market Cap Economic MoatTM Moat TrendTM Uncertainty Capital Allocation ESG Risk Rating Assessment1

129.06 USD2 Feb 2023

134.00 USD22 Dec 2022 01:15, UTC

0.96 200.80 USD Bil2 Feb 2023

Wide Stable Medium Exemplary ;;;;;1 Feb 2023 06:00, UTC

dropped sharply over the past year despite what we believe to be minimal risk of distress.

We Think Wide-Moat Nike’s Brand Value Holds Despite a Tough Near-Term Outlook; Shares

Undervalued David Swartz, Senior Equity Analyst, 30 Sep 2022

Although Nike’s sales performance in its (end-August) first quarter of fiscal 2023 eclipsed our forecast,

this result was overshadowed by a disappointing near-term outlook due to the U.S. dollar’s strength and

elevated inventories for the firm and peers in North America. Despite healthy demand, Nike has recently

struggled to manage its product deliveries due to shipping woes, leading to a surplus of out-of-season

inventory. Specifically, its quarter-end inventory jumped 44%. While markdowns will weigh on second-

quarter margins, we believe the worst of Nike’s inventory issues has passed as shipping has normalized

and sell-through appears solid. The firm reported strong back-to-school demand and double-digit sales

growth thus far in September.

Nike’s share price dropped about 9% in postmarket trading on the report, but we anticipate only a low-

single-digit percentage cut to our $133 fair value estimate, leaving shares attractive. In the first quarter,

Nike recorded constant-currency sales growth in the teens in every region except greater China, which

we view as evidence that its brand intangible asset, the source of our wide moat rating, remains intact.

Moreover, we expect a relatively quick recovery as Nike appears to have a solid lineup of new products

and should get a boost from the FIFA World Cup Qatar 2022 and other sporting events. We still believe

Nike can reach gross and operating margins of 48% and 17%, respectively, in about five years as its

direct-to-consumer, cost efficiency, and product enhancements take hold.

Nike’s first-quarter EPS matched our $0.93 forecast. While, due to discounting, its 44.3% gross margin

missed our estimate by 110 basis points, its 4% sales growth beat our 1% expectation despite even

more U.S. dollar appreciation than anticipated. Moreover, it second-quarter guidance of low-double-

digit sales growth exceeds our 7% estimate, although its gross margin is likely to miss our 45.5%

forecast by about 3 points as it clears inventory.

Wide-Moat Nike Continues To Deal With External Challenges As Fiscal 2023 Begins; Shares

Undervalued David Swartz, Senior Equity Analyst, 28 Jun 2022

Nike closed its (May-ended) fiscal 2022 with mixed results as significant virus-related disruptions in

China and continuing supply problems hampered sales. Moreover, the firm’s guidance for fiscal 2023

was soft due to unfavorable currency movement, high shipping costs, and uncertain consumer spending

amid high inflation. Specifically, Nike’s guidance suggests reported revenue growth may fall short of our

12% forecast due to the stronger U.S. dollar, while its gross margin may miss our 47.3% estimate by

around 130 to 180 basis points on greater discounting and higher shipping and other costs. Despite this

outlook, we think demand is generally healthy and expect some of these issues will abate as the fiscal

year progresses. Moreover, Nike intends to raise prices by mid-single-digit levels, which we think will be

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Nike Inc Class B NKE QQQ 1 Feb 2023 22:24, UTC

Last Price Fair Value Estimate Price/FVE Market Cap Economic MoatTM Moat TrendTM Uncertainty Capital Allocation ESG Risk Rating Assessment1

129.06 USD2 Feb 2023

134.00 USD22 Dec 2022 01:15, UTC

0.96 200.80 USD Bil2 Feb 2023

Wide Stable Medium Exemplary ;;;;;1 Feb 2023 06:00, UTC

accepted by the market due to its brand strength, the source of our wide-moat rating. Thus, we do not

expect to make any material change to our $133 fair value estimate, and view Nike’s shares as

attractive. We think investors are underestimating its brand strength and long-term growth prospects in

China, as well as the potential for margin enhancement as it continues to shift to direct-to-consumer

from wholesale distribution in North America.

Nike’s sales slipped 1% in the fourth quarter, missing our 1% growth estimate. Sales dropped 19% in

Greater China as lockdowns affected more than 100 cities. We believe results in the region are

improving as restrictions have been lifted. In North America, sales dropped 5%, a bit worse than our

negative 2% forecast, against a difficult comparison due to last year’s stimulus. While we think

consumer spending may be slowing due to inflation, we believe the impact on Nike is mild this far.

Meanwhile, the company reported strong 9% sales growth (20% constant-currency) in Europe, the

Middle East, and Africa, and is poised to continue this momentum with the World Cup and other major

football tournaments this year.

Wide-Moat Nike Overcomes Supply Woes and China Weakness to Post a Solid Q3; Shares Fully

Valued David Swartz, Senior Equity Analyst, 22 Mar 2022

Nike’s sales and profitability exceeded our estimates as it benefited from strong demand for activewear

in its (February-ended) fiscal 2022 third quarter. Given this result and a slight decrease in our long-term

tax rate assumption of 14% (we no longer expect a U.S. corporate tax hike), we expect to lift our $132

per share fair value estimate by a low-single-digit percentage. We view Nike’s shares, up about 6% in

post-market trading, as fairly valued.

Nike recorded 5% sales growth in the quarter, beating our 3% forecast, despite some shipping delays

that caused stock outs in North America. Demand for activewear was strong throughout the pandemic

and is receiving a further boost by the resumption of both amateur and professional sports.

However, for the second quarter in a row, Nike suffered a year-over-year sales decline in greater China.

While some of this weakness is attributable to virus-related restrictions, Chinese consumers have also

favored native sportswear brands in recent quarters to the detriment of both Nike and narrow-moat

Adidas. Although we believe Nike will return to growth in the region in the fourth quarter, this

nationalistic trend is worrisome as we forecast greater China will be its fastest-growing region over the

next 10 years, increasing at about 13% per year.

Nike recorded quarterly gross and operating margins of 46.6% and 15%, respectively, outperforming our

estimates of 46.2% and 13.6%. The firm believes that the supply chain challenges are abating, which

should further enhance its margins. While there is inflation pressure, Nike is implementing some price

increases, which we think will be accepted by the market. Our wide-moat rating on the company is

based on its brand intangible asset, as reflected in its strong pricing and gross margins. Nike has

Morningstar Equity Analyst Report | Report as of 2 Feb 2023 22:18, UTC | Reporting Currency: USD | Trading Currency: USD | Exchange: NEW YORK STOCK EXCHANGE, INC. Page 13 of 22

ß®

Nike Inc Class B NKE QQQ 1 Feb 2023 22:24, UTC

Last Price Fair Value Estimate Price/FVE Market Cap Economic MoatTM Moat TrendTM Uncertainty Capital Allocation ESG Risk Rating Assessment1

129.06 USD2 Feb 2023

134.00 USD22 Dec 2022 01:15, UTC

0.96 200.80 USD Bil2 Feb 2023

Wide Stable Medium Exemplary ;;;;;1 Feb 2023 06:00, UTC

targeted durable gross margins in the high-40s and operating margins in the high-teens by 2025, which

we view as achievable.

U.S. Corporate Tax Rate Unlikely to Change After Roadblocks Rise in Senate Julie Utterback, CFA,

Senior Equity Analyst, 23 Dec 2021

Given recent political developments around the Build Back Better bill, we are reversing our forecast that

the U.S. corporate tax rate will rise to 26% in 2022. We now believe the U.S. statutory tax rate will

remain at 21% at least through President Joe Biden’s remaining term, which ends in early 2025. Our

equity analysts will incorporate this new U.S. corporate tax rate assumption into their valuation models

in the coming weeks. We previously simulated the impact of various tax rate changes on covered U.S.

equities; reversing the statutory tax rate assumption to 21% results in a 3% average valuation increase,

all else being equal.

Given their slim majority in the Senate, Democrats needed to present a unified front to pass this bill, and

two Democratic senators presented roadblocks in recent months. First, Sen. Kyrsten Sinema opposed

raising the U.S. corporate tax rate, which led to consideration of funding methods other than a

corporate tax rate increase. Also, Sen. Joe Manchin has expressed opposition to the bill primarily

because providing the services included in recent proposals would wind up costing much more than the

$1.75 trillion headline number when extended for the typical 10-year term considered in the Senate's

budget reconciliation process.

Sinema's and Manchin’s current terms end in line with Biden's current term, so these roadblocks may

provide a hurdle to such a bill during that time frame. Also, considering recent polling numbers and

midterm election patterns, we would not be surprised to see Democrats lose a majority in at least one of

the congressional bodies after 2022’s election, which would prevent passage of such significant

legislation in the remainder of Biden’s term. Any way we slice it, the Build Back Better bill may not pass,

and even if a slimmed-down version passes in early 2022, we think it is highly unlikely that the U.S.

corporate tax rate will increase, given Sinema’s objections to that funding method. K

Morningstar Equity Analyst Report | Report as of 2 Feb 2023 22:18, UTC | Reporting Currency: USD | Trading Currency: USD | Exchange: NEW YORK STOCK EXCHANGE, INC. Page 14 of 22

ß®

Nike Inc Class B NKE QQQ 1 Feb 2023 22:24, UTC

Competitors Price vs. Fair Value

Under Armour Inc A UAA

Fair Value: 15.5028 Nov 2022 17:04, UTC

Last Close: 12.78Over ValuedUnder Valued

2018 2019 2020 2021 2022 YTD

0.84 1.29 1.42 1.33 0.66 0.82 Price/Fair Value

22.45 22.24 -20.51 23.41 -52.05 25.79 Total Return %

Morningstar Rating

Total Return % as of 2 Feb 2023. Last Close as of 2 Feb 2023. Fair Value as of 28 Nov 2022 17:04, UTC.

VF Corp VFC

100

150

200

Fair Value: 61.005 Dec 2022 20:18, UTC

Last Close: 31.14Over ValuedUnder Valued

2018 2019 2020 2021 2022 YTD

0.96 1.53 1.53 1.11 0.45 0.51 Price/Fair Value

-1.04 51.15 -12.36 -11.97 -59.55 12.79 Total Return %

Morningstar Rating

Total Return % as of 2 Feb 2023. Last Close as of 2 Feb 2023. Fair Value as of 5 Dec 2022 20:18, UTC.

Morningstar Equity Analyst Report | Report as of 2 Feb 2023 22:18, UTC | Reporting Currency: USD | Trading Currency: USD | Exchange: NEW YORK STOCK EXCHANGE, INC. Page 15 of 22

ß®

Nike Inc Class B NKE QQQ 1 Feb 2023 22:24, UTC

Hanesbrands Inc HBI

Fair Value: 22.0016 Nov 2022 03:44, UTC

Last Close: 6.28Over ValuedUnder Valued

2018 2019 2020 2021 2022 YTD

0.46 0.53 0.61 0.64 0.29 0.29 Price/Fair Value

-37.21 23.30 2.22 18.79 -58.37 -1.26 Total Return %

Morningstar Rating

Total Return % as of 2 Feb 2023. Last Close as of 2 Feb 2023. Fair Value as of 16 Nov 2022 03:44, UTC.

Morningstar Equity Analyst Report | Report as of 2 Feb 2023 22:18, UTC | Reporting Currency: USD | Trading Currency: USD | Exchange: NEW YORK STOCK EXCHANGE, INC. Page 16 of 22

ß®

Nike Inc Class B NKE QQQ 1 Feb 2023 22:24, UTC

Last Price Fair Value Estimate Price/FVE Market Cap Economic MoatTM Moat TrendTM Uncertainty Capital Allocation ESG Risk Rating Assessment1

129.06 USD2 Feb 2023

134.00 USD22 Dec 2022 01:15, UTC

0.96 200.80 USD Bil2 Feb 2023

Wide Stable Medium Exemplary ;;;;;1 Feb 2023 06:00, UTC

Morningstar Historical Summary

Financials as of 30 Nov 2022

Fiscal Year, ends 31 May 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 YTD TTM

Revenue (USD Bil) 25 28 31 32 34 36 39 37 45 47 26 49

Revenue Growth % 8.5 9.8 10.1 5.8 6.1 6.0 7.5 -4.4 19.1 4.9 10.2 6.0

EBITDA (USD Mil) 3,740 4,266 4,824 5,164 5,465 5,219 5,492 4,234 7,734 7,515 3,761 7,337

EBITDA Margin % 14.8 15.4 15.8 16.0 15.9 14.3 14.0 11.3 17.4 16.1 14.5 14.9

Operating Income (USD Mil) 3,238 3,680 4,175 4,502 4,749 4,445 4,772 3,115 6,937 6,675 3,282 6,379

Operating Margin % 12.8 13.2 13.6 13.9 13.8 12.2 12.2 8.3 15.6 14.3 12.6 13.0

Net Income (USD Mil) 2,472 2,693 3,273 3,760 4,240 1,933 4,029 2,539 5,727 6,046 2,799 5,634

Net Margin % 9.8 9.7 10.7 11.6 12.3 5.3 10.3 6.8 12.9 12.9 10.8 11.5

Diluted Shares Outstanding (Mil) 1,833 1,812 1,769 1,743 1,692 1,659 1,618 1,592 1,609 1,611 1,579 1,591

Diluted Earnings Per Share (USD) 1.35 1.49 1.85 2.16 2.51 1.17 2.49 1.60 3.56 3.75 1.77 3.54

Dividends Per Share (USD) 0.41 0.47 0.54 0.62 0.70 0.78 0.86 0.96 1.07 1.19 0.65 1.26

Valuation as of 31 Jan 20232013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Recent Qtr TTM

Price/Sales 2.7 2.9 3.5 2.6 3.0 3.2 4.0 5.9 5.8 3.8 3.8 4.1Price/Earnings 26.7 28.7 30.3 22.4 27.1 55.9 35.5 80.0 43.7 33.0 33.0 36.0Price/Cash Flow 23.3 28.9 24.5 26.2 30.6 21.4 32.5 75.8 39.2 42.0 42.0 75.8Dividend Yield % 1.11 1.04 0.93 1.3 1.18 1.11 0.89 0.71 0.68 1.07 1.07 0.99Price/Book 6.2 7.1 8.0 6.8 8.6 13.4 16.9 21.0 17.7 11.9 11.9 12.9EV/EBITDA 17.7 18.7 21.3 15.8 18.3 22.3 29.4 52.9 33.8 24.4 0.0 0.0

Operating Performance / Profitability as of 30 Nov 2022

Fiscal Year, ends 31 May 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 YTD TTM

ROA % 15.0 14.9 16.3 17.5 19.0 8.4 17.4 9.2 16.6 15.5 7.0 14.3ROE % 23.0 24.6 27.8 30.1 34.4 17.4 42.7 29.7 55.0 43.1 18.3 37.3ROIC % 21.3 21.9 25.0 26.6 27.8 13.0 30.8 15.1 24.6 22.6 10.1 20.3Asset Turnover 1.5 1.5 1.5 1.5 1.5 1.6 1.7 1.4 1.3 1.2 0.7 1.3

Financial LeverageFiscal Year, ends 31 May 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Recent Qtr TTM

Debt/Capital % 9.8 10.0 7.8 14.0 21.9 26.1 27.7 60.5 49.2 43.4 43.2 —Equity/Assets % 63.2 58.2 58.8 57.3 53.3 43.5 38.1 25.7 33.8 37.9 38.5 —Total Debt/EBITDA 0.4 0.3 0.3 0.4 0.7 0.7 0.6 3.1 1.7 1.7 3.3 —EBITDA/Interest Expense — — — — — — — — — — — —

Morningstar Analyst Historical/Forecast Summary as of 21 Dec 2022

Financials Estimates

Fiscal Year, ends 05-31-2022 2021 2022 2023 2024 2025

Revenue (USD Mil) 44,538 46,710 49,875 54,230 58,303

Revenue Growth % 19.1 4.9 6.8 8.7 7.5

EBITDA (USD Mil) 7,734 7,472 6,752 8,649 9,796

EBITDA Margin % 17.4 16.0 13.5 16.0 16.8

Operating Income (USD Mil) 6,937 6,675 5,859 7,637 8,656

Operating Margin % 15.6 14.3 11.8 14.1 14.9

Net Income (USD Mil) 5,727 6,046 5,021 6,415 7,286

Net Margin % 12.9 12.9 10.1 11.8 12.5

Diluted Shares Outstanding (Mil) 1,609 1,611 1,569 1,535 1,504

Diluted Earnings Per Share(USD) 3.56 3.75 3.20 4.18 4.84

Dividends Per Share(USD) 0.96 1.07 1.19 1.33 1.48

Forward Valuation Estimates2021 2022 2023 2024 2025

Price/Sales 4.8 4.0 4.0 3.7 3.4Price/Earnings 38.3 31.7 40.5 31.0 26.8Price/Cash Flow 36.1 41.4 51.5 24.7 28.0Dividend Yield % 0.7 0.9 0.9 1.0 1.1Price/Book 17.2 12.5 13.2 13.6 13.3EV/EBITDA 27.9 24.9 30.0 23.4 20.7

Morningstar Equity Analyst Report | Report as of 2 Feb 2023 22:18, UTC | Reporting Currency: USD | Trading Currency: USD | Exchange: NEW YORK STOCK EXCHANGE, INC. Page 17 of 22

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AppendixHistorical Morningstar RatingNike Inc Class B NKE 1 Feb 2023 22:24, UTC

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Morningstar Equity Analyst Report | Report as of 2 Feb 2023 22:18, UTC | Reporting Currency: USD | Trading Currency: USD | Exchange: NEW YORK STOCK EXCHANGE, INC. Page 18 of 22

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Research Methodology for Valuing Companies

Morningstar Equity Research Star Rating Methodology

Overview

At the heart of our valuation system is a detailed projec-tion of a company’s future cash flows, resulting from our analysts’ research. Analysts create custom industry and company assumptions to feed income statement, balance sheet, and capital investment assumptions into our glob-ally standardized, proprietary discounted cash flow, or DCF, modeling templates. We use scenario analysis, inde-pth competitive advantage analysis, and a variety of other analytical tools to augment this process. Moreover, we think analyzing valuation through discounted cash flows presents a better lens for viewing cyclical companies, high-growth firms, businesses with finite lives (e.g., mines), or companies expected to generate negative earnings over the next few years. That said, we don’t dis-miss multiples altogether but rather use them as support-ing cross-checks for our DCF-based fair value estimates. We also acknowledge that DCF models offer their own challenges (including a potential proliferation of estim-ated inputs and the possibility that the method may miss shortterm market-price movements), but we believe these negatives are mitigated by deep analysis and our longterm approach.

Morningstar’s equity research group (”we,” “our”) be-lieves that a company’s intrinsic worth results from the future cash flows it can generate. The Morningstar Rating for stocks identifies stocks trading at a discount or premi-um to their intrinsic worth—or fair value estimate, in Morningstar terminology. Five-star stocks sell for the biggest risk adjusted discount to their fair values, where-as 1-star stocks trade at premiums to their intrinsic worth.

Four key components drive the Morningstar rating: (1) our assessment of the firm’s economic moat, (2) our estimate of the stock’s fair value, (3) our uncertainty around that fair value estimate and (4) the current market price. This process ultimately culminates in our singlepoint star rat-ing.

1. Economic Moat

The concept of an economic moat plays a vital role not only in our qualitative assessment of a firm’s long-term investment potential, but also in the actual calculation of our fair value estimates. An economic moat is a structural feature that allows a firm to sustain excess profits over a long period of time. We define economic profits as re-turns on invested capital (or ROIC) over and above our es-

timate of a firm’s cost of capital, or weighted average cost of capital (or WACC). Without a moat, profits are more susceptible to competition. We have identified five sources of economic moats: intangible assets, switching costs, network effect, cost advantage, and efficient scale.

Companies with a narrow moat are those we believe are more likely than not to achieve normalized excess returns for at least the next 10 years. Wide-moat companies are those in which we have very high confidence that excess returns will remain for 10 years, with excess returns more likely than not to remain for at least 20 years. The longer a firm generates economic profits, the higher its intrinsic value. We believe low-quality, no-moat companies will see their normalized returns gravitate toward the firm’s cost of capital more quickly than companies with moats.

When considering a company's moat, we also assess whether there is a substantial threat of value destruction, stemming from risks related to ESG, industry disruption, financial health, or other idiosyncratic issues. In this con-text, a risk is considered potentially value destructive if its occurrence would eliminate a firm’s economic profit on a cumulative or midcycle basis. If we deem the probability of occurrence sufficiently high, we would not characterize the company as possessing an economic moat.

To assess the sustainability of excess profits, analysts per-form ongoing assessments of the moat trend. A firm’s moat trend is positive in cases where we think its sources of competitive advantage are growing stronger; stable where we don’t anticipate changes to competitive ad-vantages over the next several years; or negative when we see signs of deterioration.

2. Estimated Fair Value

Combining our analysts’ financial forecasts with the firm’s economic moat helps us assess how long returns on invested capital are likely to exceed the firm’s cost of capital. Returns of firms with a wide economic moat rat-ing are assumed to fade to the perpetuity period over a longer period of time than the returns of narrow-moat firms, and both will fade slower than no-moat firms, in-creasing our estimate of their intrinsic value.

Our model is divided into three distinct stages:

Stage I: Explicit Forecast

In this stage, which can last five to 10 years, analysts make full financial statement forecasts, including items such as revenue, profit margins, tax rates, changes in workingcapital accounts, and capital spending. Based on these projections, we calculate earnings before interest, after taxes (EBI) and the net new investment (NNI) to de-rive our annual free cash flow forecast.

Stage II: FadeThe second stage of our model is the period it will take the company’s return on new invested capital—the re-turn on capital of the next dollar invested (“RONIC”)—to decline (or rise) to its cost of capital. During the Stage II period, we use a formula to approximate cash flows in lieu of explicitly modeling the income statement, balance sheet, and cash flow statement as we do in Stage I. The length of the second stage depends on the strength of the company’s economic moat. We forecast this period to last anywhere from one year (for companies with no eco-nomic moat) to 10–15 years or more (for wide-moat com-panies). During this period, cash flows are forecast using four assumptions: an average growth rate for EBI over the period, a normalized investment rate, average return on new invested capital (RONIC), and the number of years until perpetuity, when excess returns cease. The invest-ment rate and return on new invested capital decline un-til a perpetuity value is calculated. In the case of firms that do not earn their cost of capital, we assume marginal ROICs rise to the firm’s cost of capital (usually attribut-able to less reinvestment), and we may truncate the second stage.

Stage III: Perpetuity

Once a company’s marginal ROIC hits its cost of capital, we calculate a continuing value, using a standard per-petuity formula. At perpetuity, we assume that any growth or decline or investment in the business neither creates nor destroys value and that any new investment provides a return in line with estimated WACC.

Because a dollar earned today is worth more than a dollar earned tomorrow, we discount our projections of cash flows in stages I, II, and III to arrive at a total present value of expected future cash flows. Because we are modeling free cash flow to the firm—representing cash available to provide a return to all capital providers—we discount future cash flows using the WACC, which is a weighted average of the costs of equity, debt, and pre-ferred stock (and any other funding sources), using ex-pected future proportionate long-term, market-value weights.

3. Uncertainty Around That Fair Value Estimate

Morningstar’s Uncertainty Rating is designed to capture the range of potential outcomes for a company’s intrinsic value. This rating is used to assign the margin of safety required before investing, which in turn explicitly drives our stock star rating system. The Uncertainty Rating is

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Research Methodology for Valuing Companies

Morningstar Equity Research Star Rating Methodologyaimed at identifying the confidence we should have in as-signing a fair value estimate for a given stock.

Our Uncertainty Rating is meant to take into account any-thing that can increase the potential dispersion of future outcomes for the intrinsic value of a company, and any-thing that can affect our ability to accurately predict these outcomes. The rating begins with a suggested rat-ing produced by a quantitative process based on the trail-ing 12-month standard deviation of daily stock returns. An analyst overlay is then applied, with analysts using the suggested rating, historical rating data, and their own knowledge of the company to inform them as they make the final Uncertainty Rating decision. Ultimately, the rat-ing decision rests with the analyst. Analysts take into ac-count many characteristics when making their final de-cision, including cyclical factors, operational and financial factors such as leverage, company-specific events, ESG risks, and anything else that might increase the potential dispersion of future outcomes and our ability to estimate those outcomes.

Our recommended margin of safety—the discount to fair value demanded before we’d recommend buying or selling the stock—widens as our uncertainty of the es-timated value of the equity increases. The more uncertain we are about the potential dispersion of outcomes, the greater the discount we require relative to our estimate of the value of the firm before we would recommend the purchase of the shares. In addition, the Uncertainty Rat-ing provides guidance in portfolio construction based on risk tolerance.

Our Uncertainty Ratings are: Low, Medium, High, Very High, and Extreme.

Margin of Safety

Qualitative Analysis Uncertainty Ratings QQQQQRating QRating

Low 20% Discount 25% PremiumMedium 30% Discount 35% PremiumHigh 40% Discount 55% PremiumVery High 50% Discount 75% PremiumExtreme 75% Discount 300% Premium

Our uncertainty rating is based on the interquartile range, or the middle 50% of potential outcomes, covering the 25th percentile–75th percentile. This means that when a stock hits 5 stars, we expect there is a 75% chance that the intrinsic value of that stock lies above the current market price. Similarly, when a stock hits 1 star, we ex-pect there is a 75% chance that the intrinsic value of that stock lies below the current market price.

4. Market Price

The market prices used in this analysis and noted in the report come from exchange on which the stock is listed which we believe is a reliable source.

For more details about our methodology, please go to https://shareholders.morningstar.com.

Morningstar Star Rating for Stocks

Once we determine the fair value estimate of a stock, we compare it with the stock’s current market price on a daily basis, and the star rating is automatically re-calcu-lated at the market close on every day the market on which the stock is listed is open. Our analysts keep close tabs on the companies they follow, and, based on thor-ough and ongoing analysis, raise or lower their fair value estimates as warranted.

Please note, there is no predefined distribution of stars. That is, the percentage of stocks that earn 5 stars can fluctuate daily, so the star ratings, in the aggregate, can serve as a gauge of the broader market’s valuation. When there are many 5-star stocks, the stock market as a whole is more undervalued, in our opinion, than when very few companies garner our highest rating.

We expect that if our base-case assumptions are true the market price will converge on our fair value estimate over time generally within three years (although it is im-possible to predict the exact time frame in which market prices may adjust).

Our star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, tax situation, time horizon, income needs, and complete investment portfolio, among other

factors.

The Morningstar Star Ratings for stocks are defined be-low:QQQQQ We believe appreciation beyond a fair risk ad-justed return is highly likely over a multiyear time frame. Scenario analysis developed by our analysts indicates that the current market price represents an excessively pessimistic outlook, limiting downside risk and maximiz-ing upside potential.

QQQQ We believe appreciation beyond a fair risk-ad-justed return is likely.

QQQ Indicates our belief that investors are likely to re-ceive a fair risk-adjusted return (approximately cost of equity).

QQ We believe investors are likely to receive a less than fair risk-adjusted return.

Q Indicates a high probability of undesirable risk-adjus-ted returns from the current market price over a multiyear time frame, based on our analysis. Scenario analysis by our analysts indicates that the market is pricing in an ex-cessively optimistic outlook, limiting upside potential and leaving the investor exposed to Capital loss.

Other Definitions

Last Price: Price of the stock as of the close of the mar-ket of the last trading day before date of the report.

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Research Methodology for Valuing Companies

Capital Allocation Rating: Our Capital Allocation (or Stewardship) Rating represents our assessment of the quality of management’s capital allocation, with particu-lar emphasis on the firm’s balance sheet, investments, and shareholder distributions. Analysts consider compan-ies’ investment strategy and valuation, balance sheet management, and dividend and share buyback policies. Corporate governance factors are only considered if they are likely to materially impact shareholder value, though either the balance sheet, investment, or shareholder dis-tributions. Analysts assign one of three ratings: "Exem-plary", "Standard", or "Poor". Analysts judge Capital Alloc-ation from an equity holder’s perspective. Ratings are de-termined on a forward looking and absolute basis. The Standard rating is most common as most managers will exhibit neither exceptionally strong nor poor capital alloc-ation.

Capital Allocation (or Stewardship) analysis published pri-or to Dec. 9, 2020, was determined using a different pro-cess. Beyond investment strategy, financial leverage, and dividend and share buyback policies, analysts also con-sidered execution, compensation, related party transac-tions, and accounting practices in the rating.

Sustainalytics ESG Risk Rating Assessment:The ESG Risk Rating Assessment is provided by Sustainalytics; a Morningstar company.

Sustainalytics’ ESG Risk Ratings measure the degree to which company’s economic value at risk is driven by en-vironment, social and governance (ESG) factors.

Sustainalytics analyzes over 1,300 data points to assess a company’s exposure to and management of ESG risks. In other words, ESG Risk Ratings measures a company’s un-managed ESG Risks represented as a quantitative score. Unmanaged Risk is measured on an open-ended scale starting at zero (no risk) with lower scores representing less unmanaged risk and, for 95% of cases, the unman-aged ESG Risk score is below 50.

Based on their quantitative scores, companies are grouped into one of five Risk Categories (negligible, low, medium, high, severe). These risk categories are absolute, meaning that a ‘high risk’ assessment reflects a compar-able degree of unmanaged ESG risk across all subindus-tries covered.

The ESG Risk Rating Assessment is a visual representa-tion of Sustainalytics ESG Risk Categories on a 1 to 5 scale. Companies with Negligible Risk = 5 Globes, Low Risk = 4, Medium Risk = 3 Globes, High Risk = 2 Globes, Severe Risk = 1 Globe. For more information, please visit sustainalytics.com/esg-ratings/

Ratings should not be used as the sole basis in evaluating a company or security. Ratings involve unknown risks and uncertainties which may cause our expectations not to occur or to differ significantly from what was expected and should not be considered an offer or solicitation to buy or sell a security.

Risk Warning

Please note that investments in securities are subject to market and other risks and there is no assurance or guar-antee that the intended investment objectives will be achieved. Past performance of a security may or may not be sustained in future and is no indication of future per-formance. A security investment return and an investor’s principal value will fluctuate so that, when redeemed, an investor’s shares may be worth more or less than their original cost. A security’s current investment performance may be lower or higher than the investment performance noted within the report. Morningstar’s Uncertainty Rating serves as a useful data point with respect to sensitivity analysis of the assumptions used in our determining a fair value price.

General Disclosure

Unless otherwise provided in a separate agreement, re-cipients accessing this report may only use it in the coun-try in which the Morningstar distributor is based. Unless stated otherwise, the original distributor of the report is Morningstar Research Services LLC, a U.S.A. domiciled financial institution.

This report is for informational purposes only and has no regard to the specific investment objectives, financial

situation or particular needs of any specific recipient. This publication is intended to provide information to assist in-stitutional investors in making their own investment de-cisions, not to provide investment advice to any specific investor. Therefore, investments discussed and recom-mendations made herein may not be suitable for all in-vestors: recipients must exercise their own independent judgment as to the suitability of such investments and re-commendations in the light of their own investment ob-jectives, experience, taxation status and financial posi-tion.

The information, data, analyses and opinions presented herein are not warranted to be accurate, correct, com-plete or timely. Unless otherwise provided in a separate agreement, neither Morningstar, Inc. or the Equity Re-search Group represents that the report contents meet all of the presentation and/or disclosure standards applic-able in the jurisdiction the recipient is located.

Except as otherwise required by law or provided for in a separate agreement, the analyst, Morningstar, Inc. and the Equity Research Group and their officers, directors and employees shall not be responsible or liable for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions within the report. The Equity Research Group encourages recipients recipients of this report to read all relevant is-sue documents (e.g., prospectus) pertaining to the secur-ity concerned, including without limitation, information relevant to its investment objectives, risks, and costs be-fore making an in vestment decision and when deemed necessary, to seek the advice of a legal, tax, and/or ac-counting professional.

The Report and its contents are not directed to, or inten-ded for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, pub-lication, availability or use would be contrary to law or regulation or which would subject Morningstar, Inc. or its affiliates to any registration or licensing requirements in such jurisdiction.

Where this report is made available in a language other than English and in the case of inconsistencies between the English and translated versions of the report, the Eng-lish version will control and supersede any ambiguities associated with any part or section of a report that has been issued in a foreign language. Neither the analyst, Morningstar, Inc., or the Equity Research Group guaran-tees the accuracy of the translations.

This report may be distributed in certain localities, coun-tries and/or jurisdictions (“Territories”) by independent third parties or independent intermediaries and/or distrib-utors (“Distributors”). Such Distributors are not acting as agents or representatives of the analyst, Morningstar,

Morningstar Equity Analyst Report | Report as of 2 Feb 2023 22:18, UTC | Reporting Currency: USD | Trading Currency: USD | Exchange: NEW YORK STOCK EXCHANGE, INC. Page 22 of 22

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Research Methodology for Valuing Companies

Inc. or the Equity Research Group. In Territories where a Distributor distributes our report, the Distributor is solely responsible for complying with all applicable regulations, laws, rules, circulars, codes and guidelines established by local and/or regional regulatory bodies, including laws in connection with the distribution third-party research re-ports.

Conflicts of Interestu No interests are held by the analyst with respect to the

security subject of this investment research report.u Morningstar, Inc. may hold a long position in the se-

curity subject of this investment research report that exceeds 0.5% of the total issued share capital of the security. To determine if such is the case, please click http://msi.morningstar.com and http://mdi.morningstar.com.

u Analysts’ compensation is derived from Morningstar, Inc.’s overall earnings and consists of salary, bonus and in some cases restricted stock.

u Neither Morningstar, Inc. or the Equity Research Group receives commissions for providing research nor do they charge companies to be rated.

u Neither Morningstar, Inc. or the Equity Research Group is a market maker or a liquidity provider of the security noted within this report.

u Neither Morningstar, Inc. or the Equity Research Group has been a lead manager or co-lead manager over the previous 12-months of any publicly disclosed offer of financial instruments of the issuer.

u Morningstar, Inc.’s investment management group does have arrangements with financial institutions to provide portfolio management/investment advice some of which an analyst may issue investment research re-ports on. However, analysts do not have authority over Morningstar’s investment management group’s busi-ness arrangements nor allow employees from the in-vestment management group to participate or influ-ence the analysis or opinion prepared by them.

u Morningstar, Inc. is a publicly traded company (Ticker Symbol: MORN) and thus a financial institution the se-curity of which is the subject of this report may own more than 5% of Morningstar, Inc.’s total outstanding shares. Please access Morningstar, Inc.’s proxy state-ment, “Security Ownership of Certain Beneficial Own-e r s a n d M a n a g e m e n t ” s e c t i o n h t t p s : / /shareholders.morningstar.com/investor-relations/fin-ancials/sec-filings/default.aspx

u Morningstar, Inc. may provide the product issuer or its related entities with services or products for a fee and on an arms’ length basis including software products and licenses, research and consulting services, data services, licenses to republish our ratings and research in their promotional material, event sponsorship and website advertising.

Further information on Morningstar, Inc.’s conflict of in-

t e r e s t p o l i c i e s i s a v a i l a b l e f r o m h t t p s : / /shareholders.morningstar.com. Also, please note analysts are subject to the CFA Institute’s Code of Ethics and Standards of Professional Conduct.

For a list of securities which the Equity Research Group currently covers and provides written analysis on please contact your local Morningstar office. In addition, for his-torical analysis of securities covered, including their fair value estimate, please contact your local office.

For Recipients in Australia: This Report has been issued and distributed in Australia by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544; ASFL: 240892). Morning-star Australasia Pty Ltd is the provider of the general ad-vice (‘the Service’) and takes responsibility for the produc-tion of this report. The Service is provided through the re-search of investment products.

To the extent the Report contains general advice it has been prepared without reference to an investor’s object-ives, financial situation or needs. Investors should con-sider the advice in light of these matters and, if applic-able, the relevant Product Disclosure Statement before making any decision to invest. Refer to our Financial Ser-vices Guide (FSG) for more information at http://www.morningstar.com.au/fsg.pdf.

For Recipients in New Zealand: This report has been is-sued and distributed by Morningstar Australasia Pty Ltd and/or Morningstar Research Ltd (together ‘Morning-star’). Morningstar is the provider of the regulated finan-cial advice and takes responsibility for the production of this report. To the extent the report contains regulated financial advice it has been prepared without reference to an investor’s objectives, financial situation or needs. In-vestors should consider the advice in light of these mat-ters and, if applicable, the relevant Product Disclosure Statement before making any decision to invest. Refer to our Financial Advice Provider Disclosure Statement at www.morningstar.com.au/s/fapds.pdf for more informa-tion.

For Recipients in Hong Kong: The Report is distributed by Morningstar Investment Management Asia Limited, which is regulated by the Hong Kong Securities and Fu-tures Commission to provide services to professional in-vestors only. Neither Morningstar Investment Manage-ment Asia Limited, nor its representatives, are acting or will be deemed to be acting as an investment profession-al to any recipients of this information unless expressly agreed to by Morningstar Investment Management Asia Limited. For enquiries regarding this research, please con-tact a Morningstar Investment Management Asia Limited Licensed Representative at https://shareholders.morning-star.com.

For recipients in India: This Investment Research is is-

sued by Morningstar Investment Adviser India Private Limited. Morningstar Investment Adviser India Private Limited is registered with the Securities and Exchange Board of India (Registration number INA000001357) and provides investment advice and research. Morningstar In-vestment Adviser India Private Limited has not been the subject of any disciplinary action by SEBI or any other leg-al/regulatory body. Morningstar Investment Adviser India Private Limited is a wholly owned subsidiary of Morning-star Investment Management LLC. In India, Morningstar Investment Adviser India Private Limited has one asso-ciate, Morningstar India Private Limited, which provides data related services, financial data analysis and software development. The Research Analyst has not served as an officer, director or employee of the fund company within the last 12 months, nor has it or its associates engaged in market making activity for the fund company.

*The Conflicts of Interest disclosure above also applies to relatives and associates of Manager Research Analysts in India # The Conflicts of Interest disclosure above also ap-plies to associates of Manager Research Analysts in In-dia. The terms and conditions on which Morningstar In-vestment Adviser India Private Limited offers Investment Research to clients, varies from client to client, and are detailed in the respective client agreement.

For recipients in Japan: The Report is distributed by Ib-botson Associates Japan, Inc., which is regulated by Fin-ancial Services Agency. Neither Ibbotson Associates Ja-pan, Inc., nor its representatives, are acting or will be deemed to be acting as an investment professional to any recipients of this information.

For recipients in Singapore: For Institutional Investor audiences only. Recipients of this report should contact their financial professional in Singapore in relation to this report. Morningstar, Inc., and its affiliates, relies on cer-tain exemptions (Financial Advisers Regulations, Section 32B and 32C) to provide its investment research to recipi-ents in Singapore.

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