Verizon Communications Inc VZ (XNYS) · Verizon Rumored to Acquire Charter Communications; Maintain $50 FVE for Verizon Bulls Say OVerizon Wireless is the clear leader in the industry,

htt p://global.morningstar.com/equitydisclosures

Investment Thesis Alex Zhao, CFA, Eq. Analyst, 14 December 2016

Verizon has focused relentlessly on network quality overthe years, cementing its reputation with customers andits position as the premier U.S. carrier. While we areskeptical that recent online media efforts, including theYahoo acquisition, will add value, we expect the firm willremain primarily focused on its core telecom business.

Verizon Wireless is a good business and the best of theU.S. carriers. The firm has been the most consistent ofthe industry's major players over the past 15 years,investing steadily in its networks and approaching themarket with a consistent brand message. VerizonWireless has regularly captured more than its share ofgrowth among higher-value postpaid customers. OnlyAT&T can match Verizon Wireless' scale, but we believeVerizon has several advantages over its primary rival,notably a more robust network built around uniformspectrum blocks and a more loyal customer base builtaround network and brand reputation.

Both T-Mobile and Sprint are now fighting for asustainable place in the wireless market. Regardless ofthe actions these firms take, we don't believe either hasthe resources to compete aggressively over the long term.We expect that both will price services within closeproximity to AT&T and Verizon over the long run as theyattempt to drive the cash flow needed to reinvest in theirnetworks. Ultimately, however, strategic mergers andacquisitions, under the direction of regulators, are likelyto determine the fate of these two firms, which createssome uncertainty for Verizon.

Verizon's fixed-line business (only 25% of sales followingthe latest Frontier transaction) is battling cable companiesto capture Internet access, phone, and televisioncustomers. Verizon has invested heavily in its networks,which has enabled solid consumer revenue growth andprovided a largely future-proof network. But, returns onthis investment have been poor, as we calculate fixed-lineasset turnover and margins trail most peers. We believeVerizon's position in the market providing services to largeenterprises and other carriers is stronger than in the

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Verizon Rumored to Acquire Charter Communications; Maintain $50 FVEfor Verizon

Bulls Say

OVerizon Wireless is the clear leader in the industry,with 112 million retail customers and coverage ofmore than 95% of the U.S. population.

OThe firm's wireless customers remain the mostloyal in the business thanks to a high-quality networkand strong reputation, both built through more than15 years of consistent investment.

OAmong the traditional phone companies, Verizonhas the best strategy for the long-term future of itsfixed-line business. Its FiOS network enablesunparalleled data speeds across nearly threequarters of its service footprint.

Bears Say

OVerizon Wireless is performing well, but the costof maintaining network quality is high. Wirelesscapital spending topped $11 billion in 2016 (16% ofwireless service revenue).

OVerizon Wireless will need all the spectrum itholds and more to meet data growth. Spending onspectrum, including the $10 billion spent in theAWS-3 auction, will hurt returns on capital.

OCustomers are increasingly replacing theirtraditional phone lines with wireless and dataservices or switching to competing carriers. Verizon'sability to extract high margins through its phonenetwork continues to decline.

Morningstar Pillars Analyst Quantitative

Economic Moat Narrow WideValuation QQQ Fairly ValuedUncertainty Medium MediumFinancial Health — Moderate

Current 5-Yr Avg Sector Country

Price/Quant Fair Value 0.97 1.03 0.99 1.04Price/Earnings 14.5 41.7 17.4 22.7Forward P/E 12.3 — 15.1 17.1Price/Cash Flow 7.2 4.8 5.9 13.1Price/Free Cash Flow 18.6 12.8 17.0 19.6Trailing Dividend Yield% 4.59 4.50 3.75 1.88

residential market, but this segment also faces stiff pricingpressure.

Analyst Note Alex Zhao, CFA, Eq. Analyst, 26 January 2017

According to multiple media reports, Verizon is rumoredto be in early talks with Charter Communications regardinga potential merger between Verizon and one of the largestcable companies in the U.S. Although we do not formallycover Charter Communications, we believe such a dealhas many favorable strategic aspects if a deal were tomaterialize. As terms and pricing of any deal is unknown,we will maintain our $50 fair value estimate for Verizon.Our narrow moat rating for Verizon also remains intact.

A merger between Verizon and Charter would likelyenhance economies of scale at both firms to strengthen ascale-based cost advantage. After acquiring Time WarnerCable in 2014 and Bright House Networks in 2015, CharterCommunications amassed a large cable footprint across28 states. With the three entities combined, Charter hasabout 25 million residential customers, compared withabout 12 million FiOS video and Internet customers servedby Verizon. A combination between Charter and Verizonwould form a residential customer base that accounts formore than a fifth of the 126.7 million households accordingto Census data in 2015.

The proposed merger, in our review, would also allow thecombining entity to wield significant bargaining powerwith content producers to obtain better rates onbroadcasting rights, since, roughly speaking, one in fiveAmerican households are served by this combined entityto watch video content through cable or on Internet. Weare more convinced about the increased bargaining powerhere, relative to the acquisition of Time Warner by AT&T.Verizon and Charter together would also close the loop ofvideo delivery by having a distribution network, ifintegrated well, that enables a wide variety of videoproduct offerings that range from traditional TV, to Internetprotocol-based streaming TV, and to mobile videoservices, such as AT&T’s DirecTV Now and Verizon G90.

Economic Moat

Source: Morningstar Equity Research

Source: Morningstar

Undervalued Fairly Valued Overvalued

Quantitative Valuation

i USA

VZ

Morningstar Equity Analyst Report | Report as of 26 Jan 2017 10:59, UTC | Page 1 of 14

Verizon Communications Inc VZ (XNYS)Morningstar Rating Last Price Fair Value Estimate Price/Fair Value Trailing Dividend Yield % Forward Dividend Yield % Market Cap (Bil) Industry Stewardship

25 Jan 201722:35, UTC

25 Jan 2017 02 Mar 201520:50, UTC

26 Jan 2017 26 Jan 2017 26 Jan 2017QQQ 49.12 USD 50.00 USD 0.98 4.59 4.64 202.89 Telecom Services Standard

© Morningstar 2017. 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 providedsolely 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 shallnot 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 anymanner, 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 orderreprints, call +1 312-696-6100. To license the research, call +1 312-696-6869. Please see important disclosures at the end of this report.

?

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Alex Zhao, Eq. Analyst, 24 January 2017

We base our narrow moat rating for Verizon on thestrength of its wireless business (around 75% of revenueand more than 85% of EBITDA following the most recentFrontier asset sale), which we believe is the best in theUnited States. Verizon Wireless and AT&T dominate theU.S. wireless industry, with about 60% of the retail marketbetween them. Verizon is the larger of the two giants,especially in the postpaid market, where it claims 27%more smartphone customers than its rival, a figure thathas been increasing recently as AT&T has struggled in thepostpaid market. Verizon's strong network and reputationhave served it well in the face of aggressive promotionfrom Sprint and T-Mobile.

Both Verizon and AT&T generate solid cash flow whilesimultaneously investing heavily in marketing andnetwork improvements, strength that the rest of theindustry can't match. As evidence of Verizon's scale, weestimate that Verizon Wireless serves more than 1,300customers per employee; T-Mobile serves around 1,000customers per employee; and U.S. Cellular, the nation'sfifth-largest carrier (and similarly focused on the postpaidmarket), serves about 700 customers per employee.Verizon Wireless also spends roughly half as much percustomer on advertising as U.S. Cellular despite spending9 times as much in absolute terms. Verizon's wirelessEBITDA margins are the class of the industry, typicallyrunning in the mid-40s as a percentage of revenue versusless than 40% at AT&T and 20%-25% at Sprint andT-Mobile.

After acquiring Alltel in early 2009, Verizon Wireless alsooffers the most comprehensive geographic coverage ofany wireless carrier in the nation, a position that webelieve is difficult for any other carrier to match, despiteT-Mobile's recent claims. In addition, Verizon Wirelesshas had a decade to build its brand and reputation aroundthe strength of its networks without interruption.Although not as strong an advantage as its scale, thisunbroken stretch stands in stark contrast to every othermajor wireless carrier in the U.S. We believe VerizonWireless' continued strong customer loyalty indicates

Close Competitors Currency (Mil) Market Cap TTM Sales Operating Margin TTM/PE

AT&T Inc T USD 254,176 164,064 16.84 17.54

Comcast Corp CMCSA USD 175,730 78,623 21.11 21.55

Sprint Corp S USD 36,588 32,437 2.45 0.00

that a large percentage of customers choose the firm forattributes it controls directly, including its networkreputation.

One of the biggest detriments to the competitive position,in our view, is U.S. spectrum policy. The AWS-3 spectrumauction demonstrates the extremely high prices spectrumcan fetch given that the U.S. government ultimatelydetermines how and when additional spectrum is madeavailable to the industry. We believe Verizon showed morediscipline than AT&T did during the AWS-3 auction, but itstill spent more than $10 billion, at very high prices relativeto recent past purchases. This spending will constrainfuture returns on invested capital, which we estimate onlymodestly exceed the firm's cost of capital. The FCC iscurrently conducting another spectrum auction, meaninganother round of spectrum spending is possible.

We aren't as enamored with the fixed-line side of thebusiness. About 40% of this unit's revenue comes fromthe residential market, where cable and wirelesscompanies have been stealing customers. We estimateVerizon now serves less than 35% of the households inits territory, down from nearly 50% five years ago. Webelieve that losing customers will make it difficult forVerizon to earn a solid return on FiOS network spendingor justify network upgrade spending beyond where FiOSalready exists.

Business and wholesale services generate the remainderof fixed-line revenue. We believe Verizon is wellpositioned in these markets because of the capabilities ofits networks, especially the local reach it has within itstraditional service territory. Few firms have the expertiseto deliver the complex networking services Verizon canoffer. We do expect increasing competition for smallbusiness customers, however.

Valuation Alex Zhao, Eq. Analyst, 24 January 2017

Our $50 per share fair value estimate assumes very modestwireless revenue growth set against relatively highwireless capital spending needs over the next five years.Customer growth has slowed in 2016, reflecting theimpact of continued competitive pressure from Sprint andT-Mobile that we believe will extend into 2017 or evenlonger, should the two be acquired or funded withadditional cash. We expect Verizon will eventually seecustomer growth bounce back somewhat as these two

Morningstar Equity Analyst Report |Page 2 of 14


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rivals shift their focus more towards cash flow, but thetiming of that rebound is likely to be pushed out. We stillonly expect only about 1% annual wireless servicerevenue growth over the next few years as the accountingfor phone installment plans shifts some sales to theequipment line.

While phone subsidies have pressured wirelessprofitability in recent years, Verizon Wireless has done asolid job of controlling costs. The cost of providing serviceto customers has steadily declined, dropping to less than$6 per retail customer per month from about $7.50 in 2010.This figure has started to increase recently, however, asVerizon adds more sites to its network to meet datademand. We expect this trend will continue over the nextseveral years.

The pace of customer phone upgrades accelerated in 2014with Apple's introduction of a larger iPhone but have tailedoff sharply since, providing a lift to wireless margins. Theintroduction of phone installment-plans, which requireVerizon to book all future payments up front, has mademargin comparisons from year to year difficult, but webelieve that these plans allow Verizon to better matchrevenue with phone upgrade activity. Overall, we expectVerizon’s wireless margin to remain steady over the nextfew years.

On the fixed-line side, weakness in the enterprise andwholesale businesses has offset respectable consumergrowth. FiOS has struggled to drive consumer customergrowth recently, however, as cable remains a fierce sourceof competition. We expect this segment will grow about3% annually, thanks primarily to steady pricing power. Wethink the enterprise business can return to growth in 2016,but this business is sensitive to employment. Thewholesale business is likely to remain in decline for theforeseeable future, but should shrink at a slower paceover the next few years. We believe total revenue willstabilize over the next couple of years, which should allowfixed-line margins to expand modestly.

Risk Alex Zhao, Eq. Analyst, 24 January 2017

The buyout of Vodafone's stake in Verizon Wireless in2014 eliminated a source of uncertainty, but also addedleverage right as the wireless business began reachingmaturity. The firm has made only modest progressreducing leverage over the two years since the transaction

closed, with acquisitions, spectrum purchases, andshareholder returns consuming most free cash flow andthe proceeds from asset sales.

Verizon Wireless and its rivals are turning to new servicesand devices to spur growth, but the revenue opportunityin these areas may not prove adequate to maintain thecurrent rate of growth across the industry. If smallercarriers such as Sprint and T-Mobile aren't able to gainmarket share and grow revenue, one or both may turn toincreasingly irrational pricing in attempt to reach stability.

On the fixed-line side of the business, cable companiesand wireless substitution continue to steal residentialcustomers in large numbers despite Verizon'snetwork-upgrade efforts. Predicting when residentialcustomer losses will slow is difficult, and the firm willlikely need to win customers back to generate a decentreturn on its investment in FiOS. If consumer revenuegrowth stalls or if the enterprise market continues tostruggle, Verizon may have trouble expanding fixed-linemargins as planned.

Management Alex Zhao, Eq. Analyst, 14 December 2016

We rate Verizon's stewardship as Standard on the wholeand relative to peers. The firm's capital-allocationdecisions haven't been perfect over the years, but itsrecord is still reasonably solid, especially relative toclosest peer AT&T. Past decisions to spin off fixed-lineassets and the directory publishing business at attractivevaluations have added value for shareholders, in our view.We also believe management was disciplined relative torival AT&T at the AWS-3 spectrum auction in 2015.

On the other hand, we believe the move into online mediathrough the acquisitions of AOL and Yahoo and thedevelopment of Go90 will destroy value for Verizon overtime. This effort has consumed about $10 billion of capitalsince 2014, or about $2.50 per share.

At the same time, Verizon has been shedding fixed assetsthat are deemed not core to its fixed line footprint, suchas selling wireless towers to American Tower for $5 billionin cash in 2015, fixed-line assets to Frontier for $9.9 billionin cash in early 2016, and most recently, 24 data centersto Equinix for $3.6 billion in cash. We see its decision tosell assets to Frontier and repurchase shares, rather thanrepay debt, as most questionable. Unlike past asset sales,



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the Frontier deal includes assets that have received heavyinvestment over the past decade. Also, Verizon will paytaxes on the sale proceeds, making the net value to thefirm unattractive, in our view. However, Verizon's furtherretreat from providing colocation services makes senseto us, as it is a better strategic move, in our view, forVerizon to work with larger carrier-neutral data centervendors, such as Equinix, by selling connectivity servicesto their tenants than competing against them directly.

Verizon has done a good job of presenting the measuresused to determine bonuses, though we don't like thatearnings per share determine 50% of the award. Also,bonuses were paid at 100% of target in 2015 despite thefact that the firm fell short of its targeted revenue rangeand free cash flow benefited from receivables sales.Bonus payouts in 2014 were lower than targeted,however, as EPS fell below the targeted range. We likethat equity compensation is largely in the form ofperformance stock units, which vest based on theperformance of Verizon shares and hitting cash flowtargets. Equity compensation is based on a three-yearperformance cycle and is paid in a mix of cash and shares.

Lowell McAdam, formerly president and COO, replacedIvan Seidenberg as CEO in 2011. He headed VerizonWireless from 2006 through October 2010. McAdam wasgiven a one-time $10 million equity award upon takingthe top spot, though the value of his annual stock awardsnow generally top this amount. In other matters, Verizonhas no poison pill and would require a shareholder voteto put one in place.



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Analyst Notes Archive

The Wireless Competitive Environment Again HitsVerizon's Growth; Shares Modestly UndervaluedMichael Hodel, Strategist, 20 October 2016

Verizon posted its second consecutive quarter of softwireless customer growth as the competitive landscaperemains intense. The firm lost 36,000 net postpaid phonecustomers during the third quarter versus a gain of430,000 a year ago, primarily as a result of weak customerinflows rather than a spike in defections. Managementcommented that promotion of new unlimited plans (likelyprimarily at T-Mobile and Sprint) hurt Verizon’s ability toattract customers for around three weeks during thequarter but that gross addition volumes have rebounded.Management didn't offer an update on the Yahootransaction, saying only that it is in the early stages ofreviewing the impact of the data breach. We remainskeptical of Verizon's general push into the online contentmarket. Overall, we expect Verizon will fall short of ourexpectations for 2016 but that the firm is faring reasonablywell in the face of wireless competition that isn’tsustainable over the longer term. We don't plan to changeour narrow-moat rating or $50 fair value estimate, leavingthe shares modestly undervalued.

Total wireless service revenue declined 5.2% year overyear, continuing the slow pace of improvement of the pastcouple quarters as the transition to unsubsidized rateplans moves forward. Importantly, services revenues andphone installment billings per account increased 3.2%,the strongest growth since 2014. Verizon also disclosedthat monthly postpaid phone customer churn was 0.9%during the quarter, roughly flat year over year. Thesemetrics continue to support our view that the firm'sposition as a premium carrier remains well entrenched.The wireless EBITDA margin expanded more than 1percentage point versus a year ago to 44.9%, as phonesales again declined year over year while the percentageof sales on installment plans increased. Cost controlwithin the segment remains excellent.

Verizon Disappoints With Continued WirelessSoftness, but Cost-Cutting Helped ProfitabilityAlex Zhao, Eq. Analyst, 24 January 2017

Verizon posted another quarter of soft wireless customergrowth as competition continues to be intense. The firmonly added 167,000 net postpaid phone customers during

the fourth quarter, far lower than a gain of 449,000 a yearago, on both weaker customer inflows and more customerdefections. Postpaid customer churn ticked up to 1.1% inthe quarter, versus 0.96% a year ago, but still decent inour view. We are disappointed as the weak performancedid not jive well with the firm's strong promotional effortsin what typically had been a strong quarter for Verizon.Management commented that they intended to remainlargely disciplined in pricing in response to new unlimitedplans (likely at T-Mobile and Sprint). We continue tobelieve that the intensity of promotions in the market isnot sustainable in the long run, and Verizon’s premiumpricing strategy fits well with its brand perception.Although we expect the competitiveness in themarketplace to prolong into 2017, alongside acquisitionrumors surrounding T-Mobile and Sprint, we believeVerizon’s market strength is intact, and we are affirmingour narrow-moat rating. We are incorporatingmanagement's guidance for 2017 into our forecast, butwe plan to keep our fair value estimate unchanged at $50per share, which implies that the share is fairly priced, inour view.

Total wireless service revenue declined 5% year over year,both for the fourth quarter and for 2016 overall, as thetransition to unsubsidized rate plans continued to weighon top-line growth. Verizon ended the year with 67% ofpostpaid customers on unsubsidized plans, compared withabout 40% in December 2015. An important figure thatwe watch is services revenue and phone installmentbillings per account, which increased by almost 3%,continuing the strong growth seen in 2016. This growthfigure, combined with low customer churn, supports ourview that the firm remains a premium carrier despiteslower customer growth recently.

Verizon Rumored to Acquire Charter Communications;Maintain $50 FVE for VerizonAlex Zhao, Eq. Analyst, 26 January 2017

According to multiple media reports, Verizon is rumoredto be in early talks with Charter Communications regardinga potential merger between Verizon and one of the largestcable companies in the U.S. Although we do not formallycover Charter Communications, we believe such a dealhas many favorable strategic aspects if a deal were tomaterialize. As terms and pricing of any deal is unknown,we will maintain our $50 fair value estimate for Verizon.Our narrow moat rating for Verizon also remains intact.



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A merger between Verizon and Charter would likelyenhance economies of scale at both firms to strengthena scale-based cost advantage. After acquiring TimeWarner Cable in 2014 and Bright House Networks in 2015,Charter Communications amassed a large cable footprintacross 28 states. With the three entities combined,Charter has about 25 million residential customers,compared with about 12 million FiOS video and Internetcustomers served by Verizon. A combination betweenCharter and Verizon would form a residential customerbase that accounts for more than a fifth of the 126.7 millionhouseholds according to Census data in 2015.

The proposed merger, in our review, would also allow thecombining entity to wield significant bargaining powerwith content producers to obtain better rates onbroadcasting rights, since, roughly speaking, one in fiveAmerican households are served by this combined entityto watch video content through cable or on Internet. Weare more convinced about the increased bargaining powerhere, relative to the acquisition of Time Warner by AT&T.Verizon and Charter together would also close the loop ofvideo delivery by having a distribution network, ifintegrated well, that enables a wide variety of videoproduct offerings that range from traditional TV, toInternet protocol-based streaming TV, and to mobile videoservices, such as AT&T’s DirecTV Now and Verizon G90.



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Verizon Communications Inc VZ QQQQ 26 Jan 2017 02:00 UTC

Last Close Fair ValueQ Market Cap Sector Industry Country of Domicile26 Jan 2017 26 Jan 2017 02:00 UTC 26 Jan 2017

49.12 51.57 202.9 Bil i Communication Services Telecom Services USA United States

There is no one analyst in which a Quantitative Fair Value Estimate and QuantitativeStar Rating are attributed to; however, Mr. Lee Davidson, Head of QuantitativeResearch for Morningstar, Inc., is responsible for overseeing the methodology thatsupports the quantitative fair value. As an employee of Morningstar, Inc., Mr.Davidson is guided by Morningstar, Inc.’s Code of Ethics and Personal SecuritiesTrading Policy in carrying out his responsibilities. For information regarding Conflictsof Interests, visit http://global.morningstar.com/equitydisclosures

Company ProfileVerizon Communications Inc is a provider of communications,information and entertainment products and services toconsumers, businesses and governmental agencies.

Quantitative Scores Scores

All Rel Sector Rel Country

Quantitative Moat Wide 100 99 99Valuation Fairly Valued 69 59 73Quantitative Uncertainty Medium 97 91 94Financial Health Moderate 71 71 71

Source: Morningstar Equity Research

i USA

VZ

Undervalued Fairly Valued Overvalued

ValuationCurrent 5-Yr Avg

SectorMedian

CountryMedian

Price/Quant Fair Value 0.97 1.03 0.99 1.04Price/Earnings 14.5 41.7 17.4 22.7Forward P/E 12.3 — 15.1 17.1Price/Cash Flow 7.2 4.8 5.9 13.1Price/Free Cash Flow 18.6 12.8 17.0 19.6Trailing Dividend Yield % 4.59 4.50 3.75 1.88Price/Book 9.9 9.4 2.4 2.5Price/Sales 1.6 1.3 1.4 2.1

ProfitabilityCurrent 5-Yr Avg

SectorMedian

CountryMedian

Return on Equity % 83.5 40.6 14.2 11.9Return on Assets % 5.8 3.5 5.0 4.6Revenue/Employee (K) 789.5 668.5 685.6 305.3

Financial HealthCurrent 5-Yr Avg

SectorMedian

CountryMedian

Distance to Default 0.7 0.7 0.6 0.5Solvency Score 509.2 — 557.3 585.0Assets/Equity 14.9 11.9 1.8 1.7Long-Term Debt/Equity 6.3 4.8 0.3 0.3

Price vs. Quantitative Fair Value

16

32

48

64

80

2013 2014 2015 2016 2017 2018 Quantitative Fair Value EstimateTotal ReturnSales/ShareForecast RangeForcasted PriceDividendSplit

Momentum: NeutralStandard Deviation: 16.13Liquidity: High

46.01 52-Wk 56.95

36.80 5-Yr 56.95

18.4 -0.4 3.5 20.4 -6.9 Total Return %-14.8 -13.3 2.8 8.0 -9.8 +/– Market (Morningstar US Index)4.22 4.57 4.79 4.26 — Trailing Dividend Yield %

— — — — 4.59 Forward Dividend Yield %64.5 9.8 18.9 15.6 14.5 Price/Earnings

1.2 1.4 1.5 1.7 1.6 Price/Revenue

Morningstar RatingQ

QQQQQQQQQQQQQQQ

2011 2012 2013 2014 2015 TTM Financials (Fiscal Year in Mil)110,875 115,846 120,550 127,079 131,620 127,894 Revenue

4.0 4.5 4.1 5.4 3.6 -2.8 % Change

12,880 13,160 31,968 19,599 33,060 28,780 Operating Income-12.1 2.2 142.9 -38.7 68.7 -12.9 % Change2,404 875 11,497 9,625 17,879 14,023 Net Income

29,780 31,486 38,818 30,631 38,930 28,133 Operating Cash Flow-16,244 -20,110 -17,184 -17,545 -27,717 -17,174 Capital Spending13,536 11,376 21,634 13,086 11,213 10,959 Free Cash Flow

12.2 9.8 17.9 10.3 8.5 8.6 % Sales

0.85 0.31 4.00 2.42 4.37 3.43 EPS-5.6 -63.5 1,190.3 -39.5 80.6 -21.5 % Change4.40 3.97 6.23 4.29 2.18 2.68 Free Cash Flow/Share

1.98 2.03 2.09 2.16 2.23 2.27 Dividends/Share13.78 11.60 11.79 3.99 3.10 5.02 Book Value/Share2,968 4,155 4,242 4,077 — 4,077 Shares Outstanding (Mil)

Profitability6.5 2.5 31.9 37.7 124.5 83.5 Return on Equity %1.1 0.4 4.6 3.8 7.5 5.8 Return on Assets %2.2 0.8 9.5 7.6 13.6 11.0 Net Margin %

0.49 0.51 0.48 0.50 0.55 0.53 Asset Turnover6.4 6.8 7.1 18.9 14.9 11.7 Financial Leverage

58.6 60.1 62.8 60.7 60.1 59.5 Gross Margin %11.6 11.4 26.5 15.4 25.1 22.5 Operating Margin %

50,303 47,618 89,658 110,536 103,705 102,739 Long-Term Debt

35,970 33,157 38,836 12,298 16,428 20,460 Total Equity1.3 1.3 1.4 1.4 1.5 1.5 Fixed Asset Turns

Growth Per Share1-Year 3-Year 5-Year 10-Year

Revenue % 3.6 4.4 4.3 6.6Operating Income % 68.7 35.9 17.7 10.1Earnings % 80.6 141.6 37.2 7.3Dividends % 3.2 3.2 3.0 3.3Book Value % 30.8 -30.6 -22.3 -12.3Stock Total Return % 6.5 5.4 9.9 6.2

Quarterly Revenue & EPSRevenue (Bil) Mar Jun Sep Dec Total2016 32.2 30.5 30.9 — —2015 32.0 32.2 33.2 34.3 131.62014 30.8 31.5 31.6 33.2 127.12013 29.4 29.8 30.3 31.1 120.6Earnings Per Share ()2016 1.06 0.17 0.89 — —2015 1.02 1.04 0.99 1.32 4.372014 1.15 1.01 0.89 -0.61 2.422013 0.68 0.78 0.78 1.76 4.00

Revenue Growth Year On Year %

4.3

6.8

3.82.4

5.03.2

0.6

-5.3-6.7

2014 2015 2016

Quantitative Equity Report | Release: 26 Jan 2017, 16:59, GMT-06:00 | Reporting Currency: USD | Trading Currency: USD | Exchange:XNYS

© Morningstar 2017. 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 andopinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore is not an offer to buy or sell a security; are not warranted to be correct, complete or accurate; andare 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 herein may not be reproduced, in any manner without the prior written consent of Morningstar. Please see important disclosures at the end of this report.

ß®

Page 1 of 1Page 7 of 14

Research Methodology for Valuing Companies

Qualitative Equity Research Overview

At the heart of our valuation system is a detailed projection of a company’s future cash flows, re-sulting from our analysts’ research. Analysts cre-ate custom industry and company assumptions to feed income statement, balance sheet, and capital investment assumptions into our globally standardized, proprietary discounted cash flow, or DCF, modeling templates. We use scenario analysis, in-depth competitive advantage analy-sis, and a variety of other analytical tools to aug-ment this process. Moreover, we think analyzing valuation through discounted cash flows pres-ents 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 dismiss multiples altogether but rather use them as supporting cross-checks for our DCF-based fair value estimates. We also ac-knowledge that DCF models offer their own chal-lenges (including a potential proliferation of esti-mated inputs and the possibility that the method may miss short-term market-price movements), but we believe these negatives are mitigated by deep analysis and our long-term approach.

Morningstar’s equity research group (“we”, “our”) believes 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 premium to their intrinsic worth—or fair value estimate, in Morn-ingstar terminology. Five-star stocks sell for the biggest risk-adjusted discount to their fair values, whereas 1-star stocks trade at premiums to their intrinsic worth.

Four key components drive the Morningstar rat-ing: (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 single-point star rating.

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 returns on invested capital (or ROIC) over and above our estimate of a firm’s cost of capital, or weight-ed 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 com-panies are those in which we have very high confi-dence 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.

To assess the sustainability of excess profits, analysts perform 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 stron-ger; stable where we don’t anticipate changes to com-petitive advantages over the next several years; or neg-ative 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

Margin of Safety

Market Pricing

Morningstar Fair Value Morningstar RatingTM For Stocks QQQQQ

StewardshipUncertainty

Economic MoatFinancial Health

Moat Trend

Morningstar Research Methodology for Valuing Companies

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 working-capital accounts, and capital spending. Based on these projections, we calculate earnings before in-terest, after taxes (EBI) and the net new investment (NNI) to derive our annual free cash flow forecast.

Stage II: Fade The 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, bal-ance 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 compa-nies with no economic moat) to 10–15 years or more (for wide-moat companies). 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 investment rate and return on new invested capital decline until a perpetuity value is calcu-lated. 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 attributable 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 dol-lar earned tomorrow, we discount our projections of cash flows in stages I, II, and III to arrive at a total pres-



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ent value of expected future cash flows. Because we are modeling free cash flow to the firm—rep-resenting cash available to provide a return to all capital providers—we discount future cash flows using the WACC, which is a weighted aver-age of the costs of equity, debt, and preferred 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 captures a range of likely potential intrinsic values for a company and uses it to assign the margin of safe-ty required before investing, which in turn explic-itly drives our stock star rating system. The Un-certainty Rating represents the analysts’ ability to bound the estimated value of the shares in a company around the Fair Value Estimate, based on the characteristics of the business underlying the stock, including operating and financial lever-age, sales sensitivity to the overall economy, product concentration, pricing power, and other company-specific factors.

Analysts consider at least two scenarios in addi-tion to their base case: a bull case and a bear case. Assumptions are chosen such that the ana-lyst believes there is a 25% probability that the company will perform better than the bull case, and a 25% probability that the company will per-form worse than the bear case. The distance be-tween the bull and bear cases is an important in-dicator of the uncertainty underlying the fair value estimate.

Our recommended margin of safety widens as our uncertainty of the estimated value of the eq-uity increases. The more uncertain we are about the estimated value of the equity, the greater the discount we require relative to our estimate of the value of the firm before we would recom-mend the purchase of the shares. In addition, the uncertainty rating provides guidance in portfolio construction based on risk tolerance.

Our uncertainty ratings for our qualitative analysis are low, medium, high, very high, and extreme.

3Low: margin of safety for 5-star rating is a 20% discount and for 1-star rating is 25% premium.

Price/Fair Value

2.75

2.25

1.75

1.25

0.75

0.25

* Occasionally a stock’s uncertainty will be too high for us to estimate, in which case we label it Extreme.

• 5 Star

• 4 Star

• 3 Star

• 2 Star

• 1 Star

Low

—

—

—

—

125%

105%95%

80%

—

—

Medium

—

—

—

135%

110%

90%

70%—

—

High

—

—

—

—

—

155%

115%

85%

60%

Very High*

175%

—

—

—

—

125%

80%

50%

Morningstar Research Methodology for Valuing Companies

3Medium: margin of safety for 5-star rating is a 30% discount and for 1-star rating is 35% premium. 3High: margin of safety for 5-star rating is a 40% discount and for 1-star rating is 55% premium. 3Very High: margin of safety for 5-star rating is a 50% discount and for 1-star rating is 75% premium. 3Extreme: Stock’s uncertainty exceeds the parameters we have set for assigning the appropriate margin of safety.

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 detail information about our methodology, please go to http://global.morningstar.com/equitydisclosures

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-cal-culated 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 thorough 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 impossible 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 below:

Five Stars QQQQQ We believe appreciation beyond a fair risk-adjusted re-turn is highly likely over a multiyear time frame. Scenar-io analysis developed by our analysts indicates that the current market price represents an excessively pessi-mistic outlook, limiting downside risk and maximizing upside potential.

Four Stars QQQQWe believe appreciation beyond a fair risk-adjusted re-turn is likely.

Three Stars QQQIndicates our belief that investors are likely to receive a fair risk-adjusted return (approximately cost of equity).



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Two Stars QQWe believe investors are likely to receive a less than fair risk-adjusted return.

One Star QIndicates a high probability of undesirable risk-adjusted returns from the current market price over a multiyear time frame, based on our analy-sis. Scenario analysis by our analysts indicates that the market is pricing in an excessively opti-mistic outlook, limiting upside potential and leav-ing the investor exposed to Capital loss.

Other Definitions:

Last Price: Price of the stock as of the close of the market of the last trading day before date of the report.

Stewardship Rating: Represents our assessment of management’s stewardship of shareholder capital, with particular emphasis on capital allo-cation decisions. Analysts consider companies’ investment strategy and valuation, financial le-verage, dividend and share buyback policies, ex-ecution, compensation, related party transac-tions, and accounting practices. Corporate governance practices are only considered if they’ve had a demonstrated impact on share-holder value. Analysts assign one of three rat-ings: “Exemplary,” “Standard,” and “Poor.” Ana-lysts judge stewardship from an equity holder’s perspective. Ratings are determined on an abso-lute basis. Most companies will receive a Standard rating, and this is the default rating in the absence of evidence that managers have made exceptionally strong or poor capital allocation decisions.

Quantitative Valuation: Using the below terms, intended to denote the relationship between the security’s Last Price and Morningstar’s quantita-tive fair value estimate for that security.

3Undervalued: Last Price is below Morningstar’s quantitative fair value estimate. 3Farily Valued: Last Price is in line with Morning-star’s quantitative fair value estimate. 3Overvalued: Last Price is above Morningstar’s quantitative fair value estimate.

Risk Warning

Please note that investments in securities are subject to market and other risks and there is no assurance or guarantee 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 performance. A security investment return and an in-vestor’s principal value will fluctuate so that, when re-deemed, an investor’s shares may be worth more or less than their original cost. A security’s current invest-ment performance may be lower or higher than the in-vestment performance noted within the report. Morn-ingstar’s Uncertainty Rating serves as a useful data point with respect to sensitivity analysis of the assump-tions used in our determining a fair value price.

Quantitative Equity Reports Overview

The quantitative report on equities consists of data, sta-tistics and quantitative equity ratings on equity securi-ties. Morningstar, Inc.’s quantitative equity ratings are forward looking and are generated by a statistical mod-el that is based on Morningstar Inc.’s analyst-driven equity ratings and quantitative statistics. Given the na-ture of the quantitative report and the quantitative rat-ings, there is no one analyst in which a given report is attributed to; however, Mr. Lee Davidson, Head of Quantitative Research for Morningstar, Inc., is respon-sible for overseeing the methodology that supports the quantitative equity ratings used in this report. As an employee of Morningstar, Inc., Mr. Davidson is guided by Morningstar, Inc.’s Code of Ethics and Personal Se-curities Trading Policy in carrying out his responsibilities.

Quantitative Equity Ratings

Morningstar’s quantitative equity ratings consist of: (i) Quantitative Fair Value Estimate, (ii) Quantitative Star Rating, (iii) Quantitative Uncertainty, (iv) Quantitative Economic Moat, and (v) Quantitative Financial Health (collectively the “Quantitative Ratings).

The Quantitative Ratings are calculated daily and de-rived from the analyst-driven ratings of a company’s peers as determined by statistical algorithms. Morning-star, Inc. (“Morningstar”, “we”, “our”) calculates Quan-titative Ratings for companies whether or not it already provides analyst ratings and qualitative coverage. In some cases, the Quantitative Ratings may differ from the analyst ratings because a company’s analyst-driven ratings can significantly differ from other companies in its peer group.

Quantitative Fair Value Estimate: Intended to represent Morningstar’s estimate of the per share dollar amount that a company’s equity is worth today. Morningstar calculates the Quantitative Fair Value Estimate using a statistical model derived from the Fair Value Estimate Morningstar’s equity analysts assign to companies. Please go to http://global.morningstar.com/equitydis-closures for information about Fair Value Estimate Morningstar’s equity analysts assign to companies.

Quantitative Economic Moat: Intended to describe the strength of a firm’s competitive position. It is calculated using an algorithm designed to predict the Economic Moat rating a Morningstar analyst would assign to the stock. The rating is expressed as Narrow, Wide, or None.

3Narrow: assigned when the probability of a stock receiv-ing a “Wide Moat” rating by an analyst is greater than 70% but less than 99%. 3Wide: assigned when the probability of a stock receiving a “Wide Moat” rating by an analyst is greater than 99%. 3None: assigned when the probability of an analyst receiv-ing a “Wide Moat” rating by an analyst is less than 70%.

Quantitative Star Rating: Intended to be the summary rating based on the combination of our Quantitative Fair Value Estimate, current market price, and the Quantita-tive Uncertainty Rating. The rating is expressed as One-Star, Two-Star, Three-Star, Four-Star, and Five-Star.

3One-Star: the stock is overvalued with a reasonable mar-gin of safety. Log (Quant FVE/Price) < -1*Quantitative Uncertainty 3Two-Star: the stock is somewhat overvalued.Log (Quant FVE/Price) between (-1*Quantitative Uncertainty, -0.5*Quantitative Uncertainty) 3Three-Star: the stock is approximately fairly valued.Log (Quant FVE/Price) between (-0.5*Quantitative Uncertainty, 0.5*Quantitative Uncertainty) 3Four-Star: the stock is somewhat undervalued.Log (Quant FVE/Price) between (0.5*Quantitative Uncertainty, 1*Quantitative Uncertainty) 3Five-Star: the stock is undervalued with a reasonable margin of safety. Log (Quant FVE/Price) > 1*Quantitative Uncertainty

Quantitative Uncertainty: Intended to represent Morn-ingstar’s level of uncertainty about the accuracy of the Quantitative Fair Value Estimate. Generally, the lower the Quantitative Uncertainty, the narrower the potential range of outcomes for that particular company. The rat-



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ing is expressed as Low, Medium, High, Very High, and Extreme.

3Low: the interquartile range for possible fair val-ues is less than 10%. 3Medium: the interquartile range for possible fair values is less than 15% but greater than 10%. 3High: the interquartile range for possible fair val-ues is less than 35% but greater than 15%. 3Very High: the interquartile range for possible fair values is less than 80% but greater than 35%. 3Extreme: the interquartile range for possible fair values is greater than 80%.

Quantitative Financial Health: Intended to reflect the probability that a firm will face financial dis-tress in the near future. The calculation uses a predictive model designed to anticipate when a company may default on its financial obliga-tions. The rating is expressed as Weak, Moderate, and Strong.

3Weak: assigned when Quantitative Financial Health < 0.2 3Moderate: assigned when Quantitative Financial Health is between 0.2 and 0.7 3Strong: assigned when Quantitative Financial Health > 0.7

Other Definitions:

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

Quantitative Valuation: Using the below terms, intend-ed to denote the relationship between the security’s Last Price and Morningstar’s quantitative fair value es-timate for that security.

3Undervalued: Last Price is below Morningstar’s quanti-tative fair value estimate. 3Farily Valued: Last Price is in line with Morningstar’s quantitative fair value estimate. 3Overvalued: Last Price is above Morningstar’s quantita-tive fair value estimate.

This Report has not been made available to the issuer of the security prior to publication.

Risk Warning

Please note that investments in securities are subject to market and other risks and there is no assurance or guarantee 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 performance. A security investment return and an in-vestor’s principal value will fluctuate so that, when re-deemed, 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 invest-ment performance noted within the report.

The quantitative equity ratings are not statements of fact. Morningstar does not guarantee the completeness or accuracy of the assumptions or models used in deter-mining the quantitative equity ratings. In addition, there is the risk that the price target will not be met due to such things as unforeseen changes in demand for the company’s products, changes in management, technol-ogy, economic development, interest rate development, operating and/or material costs, competitive pressure, supervisory law, exchange rate, and tax rate. For invest-ments in foreign markets there are further risks, gener-ally based on exchange rate changes or changes in po-litical and social conditions. A change in the fundamental factors underlying the quantitative equity ratings can mean that the valuation is subsequently no longer accurate.

For more information about Morningstar’s quantitative methodology, please visit www.corporate.morningstar.com.



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General DisclosureThe analysis within this report is prepared by the person(s) noted in their capacity as an analyst for Morningstar’sequity research group. The equity research groupconsists of various Morningstar, Inc. subsidiaries(“Equity Research Group)”. In the United States, thatsubsidiary is Morningstar Research Services LLC, whichis registered with and governed by the U.S. Securitiesand Exchange Commission.

The opinions expressed within the report are given ingood faith, are as of the date of the report and aresubject to change without notice. Neither the analystnor Equity Research Group commits themselves inadvance to whether and in which intervals updates tothe report are expected to be made. The written analysisand Morningstar Star Rating for stocks are statementsof opinions; they are not statements of fact.

The Equity Research Group believes its analysts makea reasonable effort to carefully research informationcontained in the analysis. The information on which theanalysis is based has been obtained from sourcesbelieved to be reliable such as, for example, thecompany’s financial statements filed with a regulator,company website, Bloomberg and any other therelevant press sources. Only the information obtainedfrom such sources is made available to the issuer whois the subject of the analysis, which is necessary toproperly reconcile with the facts. Should this sharing ofinformation result in considerable changes, a statementof that fact will be noted within the report. While theEquity Research Group has obtained data, statistics andinformation from sources it believes to be reliable,neither the Equity Research Group nor Morningstar, Inc.performs an audit or seeks independent verification ofany of the data, statistics, and information it receives.

General Quantitative DisclosureThe Quantitative Equity Report (“Report”) is derivedfrom data, statistics and information withinMorningstar, Inc.’s database as of the date of the Reportand is subject to change without notice. The Report isfor informational purposes only, intended for financialprofessionals and/or sophisticated investors (“Users”)and should not be the sole piece of information used bysuch Users or their clients in making an investmentdecision. The quantitative equity ratings noted theReport are provided in good faith, are as of the date of

the Report and are subject to change. WhileMorningstar has obtained data, statistics andinformation from sources it believes to be reliable,Morningstar does not perform an audit or seeksindependent verification of any of the data, statistics,and information it receives.

The quantitative equity ratings are not a market call,and do not replace the User or User’s clients fromconducting their own due-diligence on the security. Thequantitative equity rating is not a suitabilityassessment; such assessments take into account mayfactors including a person’s investment objective,personal and financial situation, and risk tolerance allof which are factors the quantitative equity ratingstatistical model does not and did not consider.

Prices noted with the Report are the closing prices onthe last stock-market trading day before the publicationdate stated, unless another point in time is explicitlystated.

General Disclosure (applicable to both Quantitativeand Qualitative Research)Unless otherwise provided in a separate agreement,recipients accessing this report may only use it in thecountry in which the Morningstar distributor is based.Unless stated otherwise, the original distributor of thereport is Morningstar Research Services LLC, a U.S.A.domiciled financial institution.

This report is for informational purposes only and hasno regard to the specific investment objectives,

financial situation or particular needs of any specificrecipient. This publication is intended to provideinformation to assist institutional investors in makingtheir own investment decisions, not to provideinvestment advice to any specific investor. Therefore,investments discussed and recommendations madeherein may not be suitable for all investors: recipientsmust exercise their own independent judgment as tothe suitability of such investments and recommendationsin the light of their own investment objectives,experience, taxation status and financial position.

The information, data, analyses and opinions presentedherein are not warranted to be accurate, correct,complete or timely. Unless otherwise provided in aseparate agreement, neither Morningstar, Inc. or theEquity Research Group represents that the reportcontents meet all of the presentation and/or disclosurestandards applicable in the jurisdiction the recipient islocated.

Except as otherwise required by law or provided for ina separate agreement, the analyst, Morningstar, Inc.and the Equity Research Group and their officers,directors and employees shall not be responsible orliable for any trading decisions, damages or otherlosses resulting from, or related to, the information,data, analyses or opinions within the report. The EquityResearch Group encourages recipients of this report toread all relevant issue documents (e.g., prospectus)pertaining to the security concerned, including withoutlimitation, information relevant to its investmentobjectives, risks, and costs before making an



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© Morningstar 2017. 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 providedsolely 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 shallnot 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 anymanner, 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 orderreprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.

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