NIKFA~1.txt file including following file info was copied from two Nike Inc. web site files FAQ-Environment and Nike Letter to Shareholders 1997, on Friday, June 19, 1998 5:38:14 PM; Modified Friday, February 13, 1998 12:10:12 PM; by D. Boje (File History).

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HOW CAN I RECYCLE MY SHOES?

REUSE-A-SHOE: Nike gives new life to your old athletic footwear. We'll take your old athletic shoes, grind them to bits and recycle them into Nike play surfaces in communities across the country. So far Nike has recycled over two million shoes, donating new sports surfaces to communities all across the country. So just bring them in, drop them off, and pat yourself on the back.

If you live in the following markets, there is a recycling center at one of our retail partners:

Atlanta - The Sport Shoe

Boston - City Sports

San Francisco - Lombardi's

Los Angeles - Frontrunners

Dallas - Oshmans

New York - Paragon

Chicago - Finishline

Detroit - Dicks Sporting Goods

Philly - City Sports

Other cities will be added as the program expands.

If you are not in one of our collection markets, you may mail your shoes (at your cost) to:

Reuse-A-Shoe

c/o Nike Recycling Center

26755 SW 95th

Wilsonville, OR 97070

HOW CAN MY GROUP OR ORGANIZATION RUN A SHOE COLLECTION

DRIVE?

If you are in one of our collection markets, you may take your shoes to the retailer. If you are taking in a large amount, please call them ahead of time. The retailer may be able to help your organization in your shoe drive. If you are interested in including them in your project, please call their marketing department.

WHAT IS "AIR TO EARTH"?

Air To Earth is an in-school environmental education program that is designed to teach fifth- and sixth-graders about how environmental sensitivity is practiced in a corporation. Air to Earth includes sections that range from basic environmental education to integrated projects that actually recycle old athletic shoes.

HOW CAN MY SCHOOL PARTICIPATE IN AIR TO EARTH?

Air to Earth is distributed to schools in our Reuse-A-Shoe collection markets. If you are interested in having the program for your classroom, have your teacher e-mail us.

DOES NIKE DONATE FOOTWEAR OR APPAREL?

Nike has forged partnerships with internationally recognized non-profit organizations. Regional or local grant making efforts are focused in NikeTown-based cities and communities where our employees live. Within these communities, Nike will consider grant requests for financial or product support by non-profit organizations that serve youth sports and recreation, education and youth mentorship, social entreprenuership, advocacy for women and girls, and environmental stewardship of youth.

HOW DO YOU RECYCLE YOUR SHOES?

The challenge in recycling is to separate the old shoes into as pure a materials as possible. Then, we look at different applications where the materials can be used. We call the recycled granulated material Nike Grind. Our focus is to develop Sports and Fitness products of equal or better performance using Nike Grind. We currently focus on Sports Surface applications and Nike product applications. Below is a list of the products made with Nike Grind.

Climbing Wall Landing Zone - manufactured and distributed by Enterprises

Synthetic Basketball Courts

Playground fall protection

Running Tracks

Snowboard Stomp Pads

WHAT’S REUSE-A-WHEEL?

Due to the success of our Reuse-A-Shoe program, Nike has started Reuse-A-Wheel. As of March 10, 1997, roller hockey and in-line skaters can turn-in worn out wheels to Chicks, Skate 2000 or Paragon participating locations for recycling. The wheels will be ground up into fine-grained urethane bits that can be made into a variety of athletic surfaces. Want some good karma? Reincarnate your worn-out wheels.

ENVIRONMENTAL ISSUES

Nike's roots lie in the lush forests of the Pacific Northwest. More than 25 years of helping others run and play in the outdoors has taught us that you can't separate the health of the human race from the health of the planet.

WHAT IS NIKE’S ENVIRONMENTAL MISSION?

To develop, through innovative design and teamwork, a sustaining business.

To conserve resources, cut waste, and reduce our impact on the environment within the context of our business practices.

To educate and encourage the participation of our employees, consumers, business partners and competitors in ecological endeavors.

To foster responsible outdoor athleticism and stewardship to preserve and restore the planet's outdoor playgrounds.

OK, SO DOES NIKE HAVE ANY ENVIRONMENTAL PROGRAMS OR DEPARTMENTS?

The Nike Environmental Action Team (NEAT) was founded in February, 1993, to coordinate and direct Nike's worldwide environmental programs. In particular, NEAT works toward reducing Nike's impact on the planet in the context of our policies, operations and products. One of NEAT's primary goals is to share these efforts with everyone; educating and encouraging widespread participation.

So far, Nike's environmental innovations have originated from Nike employees who are not involved directly in the environmental department. For example, our REGRIND, Reuse-A-Shoe and eco-friendly packaging strategies all stem from the ingenuity of Nike employees.

DOES NIKE DO ANYTHING TO MAKE ITS PRODUCTS MORE

ENVIRONMENTALLY FRIENDLY?

One of Nike's major ecological concerns is the impact our product has on the environment. We're ultimately seeking to align the life-cycle of all Nike apparel, equipment, accessories and footwear as closely as possible with natural cycles.

In this ecological challenge, our goal lies in eventually closing the loop on our product cycle, thereby reducing impact and eliminating waste. That would really mean making new products from the products you are done using. For details, read on.

HOW DOES NIKE DESIGN PRODUCTS WITH THE ENVIRONMENT IN

MIND?

When designing Nike products, we're designing not just for better athletic gear but for a better future. While maintaining Nike's strict standards for durability, performance and aesthetics, our research and design specialists are constantly seeking new ways to incorporate earth-friendly materials into products. So far we're using high-quality recycled materials for the outsoles, shoe linings, sock liners and innersoles of Nike shoes. To reach our ultimate goal of greening the supply chain, we specifically seek partnerships with ecologically-responsible suppliers who have made a commitment to sound business practices such as the adoption of water-quality initiatives.

IF YOU DON'T MANUFACTURE YOUR OWN PRODUCTS, HOW DO

YOU HELP YOUR BUSINESS PARTNERS ENVIRONMENTALLY INNOVATE THE MANUFACTURING PROCESS?

As soon as we've laid the design groundwork we're off and running – to our business partners.

That means pollution prevention and process innovation. Our specialists are working full time with our business partners to help improve their processes through innovation and teamwork. For example, Nike's own patented Regrind technology reuses the excess rubber from our outsole molds

– a program that keeps millions of pounds of solid-rubber waste out of landfills each year. In addition, we're freshening production methods by replacing volatile organic chemicals with cleaner, safer alternatives.

WHAT IS NIKE DOING TO HELP MAKE YOUR PACKAGING MORE ENVIRONMENTALLY FRIENDLY?

It's not yet possible to entirely eliminate packaging, but we're developing innovative techniques to minimize the waste. So far, we've reduced 18 different box styles down to two. The resulting corrugated cardboard box contains enough recycled content to save half a million trees per year and, as an added bonus, uses no glues, solvents, or heavy-metal inks.

HOW DOES NIKE MAKE THE ENVIRONMENT PART OF ITS BUSINESS

OPERATIONS?

Our efforts to ensure the future of our outdoor playground extend beyond the greening our products. Nike realizes the importance of integrating ecologically sustainable measures into all our business operations, providing education and imparting a sense of shared responsibility for the environment around the globe. Some of our operational approaches include:

Waste not, want not: Liberal application of the 3 R's (Reduce, Reuse and Recycle) is encouraged in all Nike operations, including the promotion of energy efficiency and responsible purchasing.

Our EARS are our guides: Environmental Action Representatives spread the ecological word at Nike facilities worldwide.

Leaders of the pack: Nike's Global Education Program brings together environmental representatives from around the world to encourage leadership in implementing sound practices with our subcontracted factories and suppliers.

Fertilizing the soil: Our philosophy of Environmental Giving includes supporting such programs as Leave No Trace, SOLV, the Nature

Conservancy, the Environmental Federation of Oregon and the Nike EarthWrite awards, in addition to other programs encouraging responsible outdoor athleticism, education and stewardship.

Assistant coaches: Nike is teaming up with organizations such as Business for Social Responsibility and a Regional group of the President's Council for Sustainable Development to help us develop green business practices.

Trips to vouch for: Through our award-winning Bike, Run, Skate/Carpool program, every time a Nike employee at any of our U.S. facilities uses an alternative mode of transportation to commute, they receive a $1 voucher redeemable for Nike goods and services.

Whatever sport you play, you couldn't do it without fresh air to breathe, clean water to drink and solid ground under your feet.

But when you're focused on that inside hoop drive, winning goal or final sprint to the finish, it's almost too easy to take your surroundings for granted.

It's easy to think that nature will always provide for all our sporting activities.

However, when you get right down to it, this great green outdoor playground of ours is downright vulnerable.

We ask a lot from the earth. It's only fitting that it should be asking for something in return.

Think about how sluggish you feel when you're out of shape. A few pounds overweight. A lack of muscle definition. Now think about how the earth feels. It's carrying around tons of excess waste, it's losing large quantities of natural resources on a daily basis. You could say that the earth is badly out of shape.

The way Nike sees it, a clean, healthy environment is essential not only to the future of the human race but to the future of sports.

That means our business – your playground. Without an outdoor playground, there would be nowhere to play. To this end, Nike has made the following commitments:

To develop, through innovative design and teamwork, a sustaining business. To conserve resources, cut waste, and reduce our impact on the environment within the context of our business practices.

To educate and encourage the participation of our employees, consumers, business partners and competitors in ecological endeavors.

To foster responsible outdoor athleticism and stewardship to preserve and restore the planet's outdoor playgrounds.

In everything we do at Nike, from the research and design, manufacturing, sale and recycling of our products to facility programs and public outreach, we look for ways to apply these principles globally to all our business practices.

One of Nike's champion ecological concerns is the impact our product has on the environment. We're ultimately seeking to align

the life cycles of all Nike footwear, apparel, equipment and accessories as closely as possible with natural cycles.

Consider the life cycle of a shoe. The path a Nike shoe runs – from design to manufacturing to marketing to post consumer use – can be compared to any type of athletic endeavor. Each step, from selecting the right gear to teaming together, is as important as the next in meeting the sporting challenge.

In this ecological challenge, our utmost goal lies in eventually closing the loop on our product cycle, thereby reducing impact and eliminating waste. When we reach this point we'll be entering the winner's circle. Until then, we're making every step we take count.

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TO OUR SHAREHOLDERS:

If I could photocopy this letter for 1997 and send it on to you for next year, I would be happy to do just that. It was that good a year.

It was the best year we have ever had, the best anybody has ever had in our business. Strong enough that our increase in revenues equaled the total annual sales of the No. 3 company in the industry.

Performance is in the details:

Revenues up 42%

Net Income up 44%

10-year return on equity (average) 27.5%

U.S. footwear up 36%

U.S. apparel up 70%

International revenues up 49%

These numbers represent the latest in a long run of market strength and innovation. And it shows. If you had invested $100 in the S & P 500 in 1987, that investment would be worth $395 today. The same $100 invested in in 1987 would be worth $3,094 today.

But that's the past, and while this document is called the "Annual Report," people inevitably want to know, "What are you going to do for me next year?" To do that, I first have to take a second to talk about the "filter obstacle," that haze we have to fight through to explain what goes on around this company.

Nike (and the entire industry) tends to be a bit misunderstood. The media prefer to treat us all as the entertainment portion of the business world. So, they feel free to exaggerate, to interpret, to extrapolate. To say they are prone to hyperbole would be an understatement. To say that is how they make their living would not.

More significant to us is the evolution of the financial community. I have repeatedly said that our industry is a new industry made up of pieces of some of the oldest industries - shoes, clothes, equipment and sports.

The financial community has made great strides in the past few years in understanding this industry. Even so, without complete understanding of where we know Nike and sports can go, they still get a little nervous about us based on their perceptions of the future.

Perceptions are important, but they make a poor substitute for insight. We see the future in increments of years, even decades. The financial community perceives the future as the coming six to 12 months. Many analysts continue to see (unjustifiably) Nike as a part of the fashion industry. Yes, there are some similarities, but there is a far greater distinction that underlies our growth prospects. That distinction is sports, a force that provides a much stronger platform than fabric, hemlines and idle whimsy.

Still, there is no way any of us in the industry can have quarter-to-quarter gains with no downturns (because even in great times overestimated sales can cause an inventory glut).

But, a well-managed firm can have great long-term trend line.

Nevertheless, any little earnings blip creates an enormous swing in market price, and gives the analyst community more tics and twitches than a third-base coach. It appears this is just a fact of life we will all have to live with for a few more years while we invest in a future we see and believe in, even if we're the only ones looking.

Some of that future we can predict; some of it we can't. When we set out to sell in the Czech Republic, we encountered problems with new laws, new currencies and customs. But we didn't have to explain to anyone what Nike is. That's the power of the brand.

When Tiger Woods turned pro, the experts said it would take a year for him to win his first tournament, and three years to win his first major. Today, when the tour's top money-winner and Masters champion goes down to the corner gas station to "fill 'er up," he signs an average of five autographs. (By the way, when we went to press a year ago, he was an economics student at Stanford. They taught him well. He learned he couldn't afford

to stay in college.)

When Nike started 25 years ago, one in 30 school-age girls was involved in organized sports. Today, it's one in five, and it's not just in the United States where these changes are happening. And, as we move toward 500 cable channels, content will reign supreme, and sports will continue to explode as the most compelling, emotional and border-indifferent source of content worldwide.

Let's get even more immediate than these examples. Let me say that I think FY '98 will be a pretty good year. Futures orders are up a respectable 18%, but where's the fun in being respectable? The difference between this year and last is this: Last year we had orders of biblical proportions, so we could look at the six months and say, "Hey, even we can't screw up that."

Now, as we go to press, orders are up a more normal number for the next six months. Obviously, the long-range thinkers are concerned that the deceleration of orders may continue into the second half of the coming year. And it might. If we knew, we would tell you. As a one-year investment, there is plenty of risk. But we are not a one-year investment, we are a company...

that is based on a brand, one with a genuine and distinct personality, and tangible, emotional connections to consumers the world over

that is rooted in sports, the fastest growing culture, growing so fast that it is becoming the one, true international language

that has been around 25 years and grown across them all because our horizon is more than 12 months away

that is made up of 17,000 teammates that stood this industry on its head

that includes the brightest, most committed, most sought-after people in the industry

that returned 10 times the S & P 500 average over the last 10 years.

We're set up for the future. On our way here, we've been able to run up industry records for financial performance. And, we're just getting started. As for next year, we have much to do. We will improve our footwear process, once again, so that you can see next spring that we are lifting again.

We'll continue to grow in apparel and international sales so that we are no longer looked at as just a U.S. shoe company. We'll get you to look out a little further, and to understand that it is still a fast-growing industry, and that we believe we are the only investment grade vehicle in that industry.

The future is bright, very bright, and we have the shades for it, and the people for it, and the drive and ideas and commitment for it. This year, 1997, marks Nike's 25th year, so we took some time in this document to look how far we've come and how far we have to go.

This penchant for the future prompted one analyst to say, "I don't know if Microsoft will be here 25 years from now, but I know Nike will be." As a great admirer of our neighbor 180 miles to the north, I consider that a great compliment, and an even better prediction.

Philip H. Knight

Chairman of the Board and Chief Executive Officer

25 years ago today Nike stuck its foot in the door of sports

by providing better shoes for competitive athletes. Simple. All it took was a passion for sports, a few good ideas, and the will to make it happen. Today, much in the world has changed. Athletes are stronger and faster than ever. Competition

is more intense than any time in history. When combined with advances in performance that technology can provide, the world frenzy for sports grows unabated.

TWENTY-FIVE YEARS FROM NOW, no one knows what the world will be like. But we're thinking about it. We know that we will be there, helping athletes perform better. All it will take is a passion for sports, a few good ideas, and the will to make it happen.

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ASIA PACIFIC

Nike was lifted out of the starting blocks by Asia Pacific. Back then, it was Nissho Iwai and Blue Ribbon Sports. Today, Nissho Iwai is still part of the team, but the `other' company has come to be known by a symbol - the Swoosh. One could say that we are the company formerly known as Nike, and nowhere is that face of change more evident than in the Pacific Rim.

It only seems appropriate that the region which helped bring us into the world of sports also helps take us into the new millennium and provide us with our largest market for future targeted growth. Asia Pacific is not just Nike's fastest growing region, it is the world's fastest growing region. Nike Asia Pacific revenues broke the $1 billion mark in 1997, reaching $1.2 billion by year-end, despite a negative currency effect of 14 percent.

Much like in 1996, growth in the region was led by Japan, where revenues surpassed $600 million. Our largest market outside the U.S., Japan accounted for just about half of the region's sales.

"So what's going on in Japan?" we are asked incessantly by the people who ask such things. The numbers speak for themselves with no translation needed: We speak the language, and the language is sports. We connect the Nike brand to our consumer: emotionally, culturally, and with local relevance. When an 8-year-old makes her first basket or scores his first goal, that little yelp of joy sounds the same in every language.

How much potential for growth is there in this region? An extraordinary amount. How will we capture the growth? We will continue to host events like Hoop Heroes where Michael Jordan, Charles Barkley, and friends helped raise the basketball consciousness in Yokohama. Nike athletes will be on the world stage in February in Nagano, Japan, host of the 1998 Winter Olympic Games. We will bring the cultural content found in sports to the streets of Shanghai, Melbourne and Seoul. We have laid a meaningful foundation in the region, and we will continue to build.

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NIKE (responds to critics in annual report)

THERE IS NO FINISH LINE

Nike is not here to create a new world order. We are not here to eliminate poverty and famine or lead the war against violence and crime. Our critics say that the world is going to hell in a Nike sports bag. Then again, our critics, for the most part, aren't athletes. Nike exists to be the best sports and fitness company in the world. We are here to inspire and motivate the athlete in all of us and advocate the love of sports. We live in the heart of sports and the athletes who play them.

Our competitive spirit prevents us from feeling content. The game is never over. The best victory is a challenged victory; it's much harder to crush the drive of an underdog. In our never-ending quest to be the world's best sports company, we will continue to support a child's right to play sports (P.L.A.Y.), and we will pour resources into preserving the environment (Re-Use a Shoe, Nike Environmental Action Team). And we will continue to lead our industry in embracing the best labor practices throughout the world.

Throughout this quest we will make mistakes. When we do, we'll be punished. By the media. By the public. By Wall Street. To be successful, to improve and consistently rise to higher levels, risks will have to be taken, mistakes will inevitably be made. This is part of the progress.

Nike exists for the love of sports. The "Swooshification of the world" should more appropriately be deemed the Sportsification of the world. We will mature in tandem with the inexorable penetration of sports into the global psyche.

In the view of many, our success in 1997 simply raised the bar and made 1998 our biggest challenge yet. We will come prepared, we will zig when the experts say zag, and bet the house on one thing: Like MJ in Game Five of the NBA Finals, we will show up. And we'll bring the shoes.

Fiscal 1997 represents the best year ever achieved by any company in the sports industry.