Apple (AAPL)

Base Salary—Executive Officers

Executive officers, other than the Chief Executive Officer, receive a base salary, cash bonus and stock options and/or restricted stock units. The Committee generally targets the base salaries at levels between the market median and the 75^th percentile, depending on individual performance, the scope of the individual’s responsibilities and his or her contribution to the Company’s continued growth. During fiscal 2004, the Committee engaged an outside compensation consultant to provide a comprehensive market study report on the Company’s compensation programs including compensation for its executive officers. The market data indicated that the base salary of many of the Company’s executives was below, and in some cases significantly below, the median level paid by comparable companies. As a result, several of the Company’s executives, including named executive officers, received an increase in base pay to bring them up to competitive levels. Because this comprehensive review and corresponding salary increases took place in the later half of fiscal 2004, none of the Company’s executive officers received a salary increase in fiscal 2005.

Base Salary—Executive Officers

        Executive officers, other than the Chief Executive Officer, receive a base salary and stock options and/or restricted stock units, but typically do not receive cash bonuses. The Committee targets the base salaries at levels above market median but because the Company has not paid its executives cash bonuses, the total cash paid to its executives is below the average paid by comparable companies. This lower total cash compensation is combined with stock option grants and/or restricted stock units so that a substantial portion of an executive's pay is dependent upon the Company's stock performance. In May 2004, the Committee reviewed each executive's performance, their contribution to the Company's continued growth and comparable market data. The market data indicated that the base salary of many of the Company's executives was below, and in some cases significantly below, the median level paid by comparable companies. As a result, several of the Company's executives, including named executive officers, received an increase in base pay to bring them up to competitive levels. Following the pay increase, the base salaries of the Company's executive officers is between market median and the 75^th percentile, depending on individual performance, the scope of the individual's responsibilities and his or her contribution to the Company's continued growth.