To Our Valued Shareholders, Employees, Customers Apple is committed to providing our customers with the best and most

original products on the market. We are constantly looking for ways to improve our products and continue being leaders in the technology industry. The global electronics market is always changing and at Apple we are proud to offer the most innovative products on the market today. Apple has transformed the personal computer, revolutionized the way we listen to music with iTunes and iPods, and changed the way we communicate through mobile devices with the iPhone. We are also leaders in the tablet market with the iPad. At Apple we are dedicated to making the best products on the market and will continue to strive for excellence in the future. We had a great year in sales even in tough economic times and an unpredictable market. Here is a financial recap of 2011: Net sales were $108.2 billion, a 66 percent increase from 2010 Gross margin was 43.8 billion, a 40 percent increase from 25.6 million in 2010 Net income was $25.9 billion, a 45 percent increase up from $14 billion in 2010 Diluted earnings per share were $27.68 in 2011 compared to $15.15 in 2010

Our performance for this year exceeded our expectations and shows how we are continuing to be a landmark brand that is providing products that people want to buy. In recent years stock markets have been subjected to extreme price and volume variations, and Apple stock has overachieved in the same volatile market. Many technology companies have experienced stock price variations that do not reflect the success of the company. We believe that our stock prices have reflected high future growth and we aim for high profitability in the future. Our Products and Services: The 66 percent increase in sales and revenue can be attributed to our success as a company in many areas. In January 2011, Apple opened the Mac App Store, which allows customers to install applications for their Macs. We offer a wide variety of applications for Macs and also offer Mac OS X operating system software. In 2011, iPhones and related products accounted for $47.1 billion in net sales. This number accounts for 43 percent of total net sales and we saw an 87 percent increase in iPhone revenue from last year. Part of this increase was the choice to expand the

iPhone network. In February 2011 we expanded distribution of the iPhone to Verizon Wireless, which contributed to the growth and success of the iPhone. We saw the largest increase in sales with the iPad, which was up 311 percent from 2010 with total net sales of $20.4 billion. iPad sales have shot up rapidly and account for 19 percent of total net sales. This year Mac net sales were $21.8 billion, an increase of 25 percent from last year. Part of the reason for the success was increase in sales from the new MacBook Air, which was updated July 2011. Sales of Macs are attributed to 20 percent of Apples total net sales. Our Progress: Because the technology industry is a rapidly evolving and highly competitive market, we invested a total of $2.4 billion into research and development in 2011, a 36% compared to 2010. We have increased the amount of resources going into R&D so we can enhance our current products and increase the variety of products that we have to offer. Our plans for future products include the iPad 3, which will be the best and most impressive iPad yet with retina display, 5MP iSight camera and ultrafast 4G LTE. We are creating new features for the iPod touch and iPod nano including lower prices, redesigned user interface, and improving built-in fitness features. We will also be introducing GarageBand for iPhone and iPod touch, which will revolutionize the way people create and record their own songs. In Remembrance: This year we experienced the death of Steve Jobs the co-founder, chairman and CEO of Apple. He was an innovative visionary who brought Apple to the success that it is today. Although we are saddened by his loss, we will do everything in our power to honor his memory and legacy by continuing to produce the best products possible with Steve in our hearts and minds. On behalf of everyone at Apple we want to thank you for your continued support. Sincerely, Tim Cook CEO, Apple