Five Cornerstones

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EXECUTIVECompensation Policy

Compensation Policy

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Source: Apple 2012 Proxy StatementCompensation Committee ReportAnnual Meeting of Shareholders, 2012

1. Team-Based Approach

2. More focus on superior performance than competitive peer company programs

3. Long Term Equity awards represent the best method to align incentives with the best interests of the Shareholders

4. Clear Performance Criteria

(a) No room for favoritism

5. Employment at Will

5 Key Themes

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Use of RSU’s (Restricted Stock Units) as long term equity rewards

Most effective way to attract and retain talent AND align executive interests with the shareholders

1. Team-Based Approach

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A restricted stock unit is a grant valued in terms of company stock, but company stock is not issued at the time of the grant.After the recipient of a unit satisfies the vesting requirement, the company distributes shares or the cash equivalent of the number of shares used to value the unit.If the plan rules allow it, the company may require or the recipient may choose to defer distribution to a later date.Vesting requirements may be met by the passage of time or by either company or individual performance. If the recipient does not meet the requirements the company set forth prior to the end of the vesting period, the units are typically forfeited to the company.Depending on plan rules, the participant or donor may be allowed to choose whether to settle in stock or cash.

Cash compensation opportunities for 2011 were BELOW the 25th percentile of peer companies

Deliberately set target & maximum bonus BELOW range of peer companies

2. Peer Companies

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Steve Jobs paid $1/year since 1997Base salaries for other officers approximately the median of peer companies

Bonuses represent relatively SMALL pct of executive total compensation

Company emphasizes long-term equity awards

For 2012, the target and maximum annual performance–based cash bonus levels for named executive officers are 100% and 200%, respectively, of the officer’s base salary.

3. Performance Bonuses

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Emphasize long-term shareholder value creation over annual operating resultsBonus program is therefore modestly fundedJobs did not participate;The target bonus of 50% of base salary is substantially lower than those of peer companies generally, where median target bonus payouts commonly range from 125% to 145% of base salary;The maximum bonus of 100% of base salary for exceptional performance is substantially lower than the maximum bonus opportunities generally provided at peer companies; andThe Company has no long-term cash bonus program.

Net Sales & Operating Income according to GAAP

Chosen because they reflect commonly recognized measures of overall company performance that are associated with creation of value for shareholders.

Payout structure is based on 50% for operating income and 50% of net sales because each measure is considered equally important in the company’s internal business plan.

4. Performance CriteriaPerformance goals are set at target and maximum levels based on objectives in the company’s internal business planTarget and maximum goals for net sales in 2011 represented an increase of 36% and 43%, respectively, over the company’s actual performance in 2011.Likewise, target and maximum goals for operating income in 2011 represent an increase of approximately 25% and 33%, respectively, over the company’s actual performance in 2010.No downward adjustments to the bonuses were made based on a subjective assessment of the officer’s overall performance.

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Executive Officers are employed at will.

The compensation program for executive officers does NOT include any of the pay practices listed on the right.

5. Employment at WillEmployment AgreementsSeverance agreementsTax payments in connection with a change in control of the companyTax reimbursementsSupplemental executive retirement benefitsThe company does not provide any perks or change in control benefits to the executive officers that are not available to other non-executive employees.

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Tim Cook was appointed CEO on August 24, 2011

The board granted Tim Cook 1 million RSUs as a promotion and retention award.

Tim Cook, CEO

50% of his award is scheduled to vest 5 years after the award dateThe remaining 50% of the award is scheduled to vest 10 years after the award date, subject to Cook’s continued employment with the company through the applicable vesting date.The RSU award is intended as a long-term retention incentive and should be viewed as compensation over the 10 year vesting period.

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Restricted Stock Units used for long-term equity awards

Cash Compensation BELOW peer companies

Cash bonus program is small part of overall executive compensation plan.

There is no long-term cash bonus program.

Important Details

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Cash bonuses are based 50% on net sales and 50% on operating income.

Subjective assessment of executive performance can only LOWER but not increase the cash bonus.

Executive officers serve “at will” without employment or severance agreements.

RSU awards generally vest over 4 years subject to continued employment.

1. Team-Based Approach

2. More focus on superior performance than competitive peer company programs

3. Long Term Equity awards represent the best method to align incentives with the best interests of the Shareholders

4. Clear Performance Criteria

(a) No room for favoritism

5. Employment at Will

5 Key Themes

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Lary R. Kirchenbauer

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