UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

(Amendment No.     )

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LOGOLOGO

Apple Inc.

 

 

(Name of Registrant as Specified In Its Charter)

 

 

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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

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LOGO

 

 

Apple Inc.

Notice of 20172018 Annual Meeting of

Shareholders and Proxy Statement


LOGO

In this Proxy Statement, the terms “Apple,” “we,” and “our” refer to Apple Inc. Information presented in this Proxy Statement is based on Apple’s fiscal calendar, other than references to particular years on the Apple Values page of the Proxy Statement Summary, in the opposition statements to shareholder proposals, and in the biographies of our directors and executive officers, each of which refers to the calendar year. The information contained onapple.com is not incorporated by reference into this Proxy Statement.

These materials were first sent or made available to shareholders on December 27, 2017.


LOGO

Apple Inc.

 

  

 

Notice of 20172018 Annual Meeting of Shareholders

  
 

1 Infinite LoopSteve Jobs Theater

Town Hall (Building 4)

Apple Park

Cupertino, California 95014

  

February 28, 201713, 2018

9:00 a.m. Pacific Time

 
 

 

The Notice of Meeting, Proxy Statement, and Annual Report on Form 10-K

are available free of charge atinvestor.apple.com.

 

 

Items of Business

 

 (a)To elect to the Board of Directors the following eight nominees presented by the Board: James Bell, Tim Cook, Al Gore, Bob Iger, Andrea Jung, Art Levinson, Ron Sugar, and Sue Wagner;

 

 (b)

To ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm for 2017;

2018;

 

 (c)

To vote on an advisory resolution to approve executive compensation;

 

 (d)

To vote onapprove the frequency of advisory votes on executive compensation;

amended and restated Apple Inc. Non-Employee Director Stock Plan;

 

 (e)

To vote on the shareholder proposals set forth in the proxy statement, if properly presented at the Annual Meeting; and

 

 (f)

To transact such other business as may properly come before the Annual Meeting and any postponements or adjournments thereof.

Record Date

Close of business on December 30, 201615, 2017

 

Sincerely,

LOGO

LOGO

Bruce SewellKatherine Adams

Senior Vice President,

General Counsel and Secretary

Cupertino, California

January 6,December 27, 2017

Your vote is important. Please vote.


Table of Contents

 

Proxy Statement Summary1
Frequently Asked Questions6
Directors, Corporate Governance, and Executive Officers13

Directors

13

Biographical Information for Our Director Nominees

14

Corporate Governance

19

Role of the Board of Directors

19

Board Leadership Structure

19

Board Committees

19

Board Oversight of Risk Management

20

Audit Committee Financial Experts

21

Code of Ethics

21

Review, Approval, or Ratification of Transactions with Related Persons

21

Transactions with Related Persons

22

Attendance of Directors at Annual Meetings of Shareholders

22

Compensation Committee Interlocks and Insider Participation

22

Communications with the Board

23

Compensation of Directors

24

Director Compensation—2016

25

Executive Officers

26
Executive Compensation28

Compensation Discussion and Analysis

28

Executive Compensation Tables

39

Summary Compensation Table—2016, 2015, and 2014

39

Grants of Plan-Based Awards—2016

41

Outstanding Equity Awards at 2016 Year-End

43

Stock Vested—2016

45

Potential Payments Upon Termination or Change in Control

46
Proposals48

Overview of Proposals

48

Proposal No. 1—Election of Directors

49

Proposal No.  2—Ratification of Appointment of Independent Registered Public Accounting Firm

50

Proposal No.  3—Advisory Vote to Approve Executive Compensation

52

Proposal No.  4—Advisory Vote on Frequency of Say-on-Pay Votes

53

Proposal No. 5—Shareholder Proposal

54

Proposal No. 6—Shareholder Proposal

56

Proposal No. 7—Shareholder Proposal

59

Proposal No. 8—Shareholder Proposal

62

Proposal No. 9—Shareholder Proposal

64

Other Matters

66
Audit and Finance Committee Report67
Security Ownership of Certain Beneficial Owners and Management68
Equity Compensation Plan Information71
Directions to the 2017 Annual Meeting of Shareholders

 

Attending the Annual Meeting – Advance Registration Required

We are pleased to welcome shareholders to Steve Jobs Theater at Apple Inc. | 2017 Proxy StatementPark for the 2018 Annual Meeting. To make sure we can accommodate as many attendees as possible, we are establishing a registration process. Shareholders will need to register in advance atproxyvote.com beginning at 8:00 a.m. Pacific Time on January 22, 2018 and registration will be on a first-come, first-served basis. Only shareholders as of the Record Date who have registered in advance and have a valid confirmation of registration will be admitted to the meeting.


Proxy Statement Summary

This summary highlights the proposalsYour proxy materials will include a unique control number to be acted upon, as well as financial, compensation,used atproxyvote.com to vote your shares and corporate governance information described in more detail elsewhere in this Proxy Statement. In addition, this summary provides a brief description of Apple’s values.

In this Proxy Statement, the terms “Apple,” “we,” and “our” refer to Apple Inc. The information contained onapple.com is not incorporated by reference into this Proxy Statement.

Annual Meeting Proposals

Proposal

Recommendation
of the Board

1.

Election of Directors

FOR each of the nominees

2.

Ratification of Appointment of Independent Registered Public Accounting Firm

FOR

3.

Say-on-Pay

Advisory Vote to Approve Executive Compensation

FOR

4.

Say-on-Pay Frequency

Advisory Vote on Frequency of Say-on-Pay Votes

1 YEAR

5.

Shareholder Proposal

Charitable Giving - Recipients, Intents and Benefits

AGAINST

6.

Shareholder Proposal

Diversity of Senior Management and the Board

AGAINST

7.

Shareholder Proposal

Shareholder Proxy Access Amendments

AGAINST

8.

Shareholder Proposal

Executive Compensation Reform

AGAINST

9.

Shareholder Proposal

Executives to Retain Significant Stock

AGAINST

Apple Inc. | 2017 Proxy Statement | 1


Compensation and Performance Highlights

For a detailed discussion of our executive compensation program, please see the “Compensation Discussion and Analysis” beginning on page 28.

2016 Compensation Program

Our executive compensation program is designed to be simple, effective, and link pay to performance, while reflecting the size, scope, and success of Apple’s business, as well as the responsibilities of our executive officers.

The elements of our program and highlights from 2016 are as follows:

Base Salary

  The annual base salary for our CEO was $3 million, and the annual base salary for each of our other named executive officers was $1 million.

Annual Cash Incentive

  The cash incentive program for our named executive officers measured net sales and operating income results against threshold, target, and maximum performance goals.

Long-Term Equity Incentives

  The equity awards granted to our named executive officers contain a substantial performance component based on Apple’s total shareholder return relative to the other companies in the S&P 500 over a three-year performance period.

2016 Named Executive Officer Target Pay Mix

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Tim Cook has not received an equity award since 2011
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The chart above shows target dollar values for each element of our named executive officers’ 2016 compensation. Annual cash incentives for 2016 paid out at 89.5% of target. For more information, please see the annual cash incentive discussion beginning on page 33.

Apple Inc. | 2017 Proxy Statement | 2


2016 Financial Performance and Annual Cash Incentive Payouts

Apple delivered another year of strong financial results in 2016. However, the two financial measures used to evaluate executive performance under our annual cash incentive program, net sales and operating income, declined from ourrecord-breaking 2015 levels. These results were below the target performance goals set by the Compensation Committee. As a result, the annual cash incentive payouts to our named executive officers were below target.

Net Sales

$215.6B

Operating Income

$60.0B

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Long-Term Equity Incentives and Total Shareholder Return

Apple is focused on creating long-term value for our shareholders, andregister for the three-year period from September 29, 2013 through September 24, 2016, our total shareholder return was 73.6%. Our executive compensation program is weighted considerably toward long-term equity awards. This practice creates a substantial retention incentive, encourages our executive officers to focusmeeting. If you have any questions aboutproxyvote.com or your control number, please contact the bank, broker, or other organization that holds your shares. The availability of online voting may depend on Apple’s long-term success, and aligns with the long-term interests of our shareholders.

2017 Compensation Program Updates

For 2017, we increased the performance-based component of our long-term equity incentives to 50%voting procedures of the grant date fair value of the award, placing an even greater emphasis on performance-based compensation for our executive officers.

Apple Inc. | 2017 Proxy Statement | 3


Corporate Governance

Apple believesorganization that effective corporate governance should include regular constructive discussions with our shareholders. We have a proactive engagement process that encourages feedback from our shareholders. This feedback helps shape our governance practices, which include:

A majority voting standard for uncontested elections of directors;

One or more holders entitled to cast at least 10% of votes are permitted to call a special meeting of shareholders;

Adoption of proxy access in 2015, and recently adopted enhancements to our proxy access bylaws to make it easier for shareholders to nominate director candidates;

Changes to the performance-based component of the long-term equity incentives under our 2017 executive compensation program; and

Stock ownership guidelines for our CEO, executive officers, and directors.

Board of Directors and Committees

LOGO  Chair  LOGO  Member               holds your shares.

      

Age as of

Annual Meeting

    

Director Since

(calendar year)

    

Audit

Committee

    

Compensation

Committee

    

Nominating

Committee

James Bell

 

 

    68    2015    LOGO            

Tim Cook

Chief Executive Officer

 

    56    2011               

Al Gore

 

 

    68    2003         LOGO      LOGO  

Bob Iger

 

 

    66    2011         LOGO      LOGO  

Andrea Jung

 

 

    58    2008         LOGO      LOGO  

Art Levinson

Chairman of the Board

 

    66    2000    LOGO            

Ron Sugar

 

 

    68    2010    LOGO            

Sue Wagner

 

 

    55    2014    LOGO          

7.6 Years

Average Tenure

2 New Directors

in Last Three Years

Apple Inc. | 2017 Proxy Statement | 4


Apple Values

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Inclusion and Diversity

apple.com/diversity

Apple believes diversity is more than one gender, race, or ethnicity. lt is the entire human experience.

Our hiring trends over the last three years show steady progress in attracting more women and under-represented minorities.

We achieved pay equity in the United States for similar roles and performance, and we are committed to maintaining pay equity.

LOGO

Accessibility

apple.com/accessibility

Apple believes that technology should be accessible to everyone.

Our products are powerful and affordable assistive devices, with built-in accessibility features such as VoiceOver, SwitchControl, and support for Made for iPhone hearing aids.

We received the 2016 Robert S. Bray Award from the American Council of the Blind for continued accessibility innovation across all of our products.

LOGO

Supplier Responsibility

apple.com/supplier-responsibility

Apple is committed to providing fair and safe working conditions, creating greater opportunities for workers, and transparently reporting on our efforts at every level of the supply chain.

As of December 2016, 100% of smelters/refiners committed to or are participating in third-party assessments for tin, tungsten, tantalum, gold, and cobalt.

We conducted 705 supply chain assessments on labor and human rights, health and safety, and environment in 2016, covering over 1.3 million workers in 30 countries.

LOGO

Education

apple.com/education

Apple believes education is a fundamental human right and that a quality education should be accessible to all.

Our ConnectED program has helped create transformative learning environments in 114 underserved U.S. schools, reaching over 4,000 teachers and 50,000 students.

The Apple Teacher program delivers free professional development for educators, and Everyone Can Code provides free materials to learn, write, and teach code.

LOGO

Privacy and Security

apple.com/privacy

Security is fundamental to the design of all Apple hardware, software, and services.

Apple has been protecting user data for over a decade with SSL and TLS in Safari, File Vault on Mac, and encryption that is built into iOS.

We utilize privacy by design to help create the best user experience and we never sell user data.

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Environment

apple.com/environment

Apple takes the same innovative approach to the environment as we do with our products.

We use 100% renewable energy in 23 countries, and 93% of the electricity in 2015 for our global operations comes from renewable sources.

In 2015, over 99% of the virgin paper used in our product packaging came from sustainably managed forests or controlled wood sources.

Apple Inc. | 2017 Proxy Statement | 5


Frequently Asked Questions

2017 Annual Meeting of Shareholders

When:

February 28, 2017

9:00 a.m. Pacific Time

Admission will begin at 7:30 a.m. Pacific Time

Where:

1 Infinite Loop

Town Hall (Building 4)

Cupertino, California 95014

Record Date:

December 30, 2016

Bring:

  Valid photo identification, such as a driver’s license or passport

  Proof of stock ownership as of the Record Date

The use of mobile phones, pagers, recording or photographic equipment, tablets, or computers is not permitted at the Annual Meeting.

General

Why am I receiving these materials?

You are invited to attend Apple’s 2017 Annual Meeting of Shareholders and vote on the proposals described in this Proxy Statement because you were an Apple shareholder on December 30, 2016 (the “Record Date”). Apple is soliciting proxies for use at the Annual Meeting. Attendees are welcome to visit the Apple Park Visitor Center after the Annual Meeting, including any postponements or adjournments.but we are not able to accommodate tours of the campus.

Even if you successfully register and plan on attending the Annual Meeting in person, we encourage you to vote your shares in advance using one of the methods described in this Proxy Statement to ensure that your vote will be represented at the Annual Meeting.

These materials were first sent

Apple Inc. | 2018 Proxy Statement


Table of Contents

Proxy Statement Summary1

Corporate Governance

7

Role of the Board of Directors

8

Board Committees

8

Annual Board and Committee Self-Evaluations

9

Board Leadership Structure

9

Board Oversight of Risk Management

10

Audit Committee Financial Experts

10

Code of Ethics

11

Review, Approval, or Ratification of Transactions with Related Persons

11

Transactions with Related Persons

12

Attendance of Directors at Annual Meetings of Shareholders

12

Compensation Committee Interlocks and Insider Participation

12

Communications with the Board

13

Directors

15

Directors

16

Nominees for Election

16

Compensation of Directors

21

Director Compensation—2017

22
Executive Officers25

Executive Compensation

29

Compensation Committee Report

30

Compensation Discussion and Analysis

30

Executive Compensation Tables

41

Summary Compensation Table—2017, 2016, and 2015

41

Grants of Plan-Based Awards—2017

43

Outstanding Equity Awards at 2017 Year-End

45

Stock Vested—2017

47

Potential Payments Upon Termination or Change of Control

48

Proposals

51

Proposal No. 1 – Election of Directors

52

Proposal No.  2 – Ratification of Appointment of Independent Registered Public Accounting Firm

53

Proposal No.  3 – Advisory Vote to Approve Executive Compensation

55

Apple Inc. | 2018 Proxy Statement


Proposal No.  4 – Approval of the Amended and Restated Apple Inc. Non-Employee Director Stock Plan

56

Proposal No. 5 – Shareholder Proposal

61

Proposal No. 6 – Shareholder Proposal

64

Other Matters

66

Other Information

67

Audit and Finance Committee Report

68

Security Ownership of Certain Beneficial Owners and Management

69

Equity Compensation Plan Information

72

General Information

73

Annex A - Apple Inc. Non-Employee Director Stock PlanA-1

Apple Inc. | 2018 Proxy Statement


Proxy Statement Summary

This summary highlights the proposals to be acted upon, as well as corporate governance and compensation information described in more detail in this Proxy Statement. In addition, this summary provides a brief description of Apple’s values.

Apple Inc. | 2018 Proxy Statement | 1


Corporate Governance

Our corporate governance framework includes a proactive engagement process. We encourage constructive dialogue and feedback from our shareholders to help shape our governance practices.

Excellence on our Board

Annual elections for directors

Majority voting standard for uncontested elections of directors

Annual board and committee evaluations

All members of the Audit and Finance Committee are financial experts

Progressive Shareholder Rights

Proactive adoption of proxy access and subsequent amendments to make it easier for shareholders to nominate director candidates

Shareholders entitled to cast at least 10% of votes are permitted to call a special meeting of shareholders

Long-Term Shareholder Alignment

Prohibition on short sales, transactions in derivatives, and hedging and pledging of Apple stock by our directors and executive officers

Robust stock ownership guidelines for our CEO, executive officers, and directors

Board of Directors and Committees

LOGO  Chair  LOGO  Member               

Audit and
Finance
Committee
Compensation
Committee

Nominating

 and Corporate 

Governance
Committee

Independent

    # of Other Public        

    Company Boards        

James Bell

LOGO3

Tim Cook(CEO)

1

Al Gore

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Bob Iger

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Andrea Jung

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Art Levinson(Chairman)

LOGO0

Ron Sugar

LOGO3

Sue Wagner

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For a detailed discussion of corporate governance and our directors, please see the “Corporate Governance” section beginning on page 7 and the “Directors” section beginning on page 15.

Apple Inc. | 2018 Proxy Statement | 2


Compensation Program Highlights

Our executive compensation program is designed to reward performance in a simple and effective way. It reflects the unparalleled size, scope, and success of Apple’s business and the importance of our executive officers operating as a high-performing team, while focusing on key measures of profitability and the creation of shareholder value.

Annual Base Salary

•  No change from 2016

•  $3 million for our CEO and $1 million for our other named executive officers

Annual Cash Incentive

•  No change in award opportunities from 2016

•  Variable cash compensation based on net sales and operating income results measured against threshold, target, and maximum performance goals

Long-Term Equity Incentives

•  No change from 2016 grant values

•  Increased allocation of performance-based RSUs to 50% of total award value

•  Performance-based RSUs vest based on Apple’s total shareholder return relative to other S&P 500 companies over a three-year performance period

•  Time-based RSUs vest over four and one-half years with the first vest date approximately two and one-half years after grant

2017 Named Executive Officer Target Pay Mix

LOGO

Tim Cook has not received an equity award since 2011                                                 
LOGO

The chart above shows target dollar values for each element of our named executive officers’ 2017 compensation. Annual cash incentives for 2017 paid out at 155.5% of target based on net sales of $229.2 billion and operating income of $61.3 billion, both of which exceeded target annual cash incentive plan goals.

For a detailed discussion of our executive compensation program, please see the “Compensation Discussion and Analysis” beginning on page 30.

Apple Inc. | 2018 Proxy Statement | 3


Apple Values

LOGO

Accessibility

apple.com/accessibility

Apple believes accessibility is a fundamental human right and technology should be accessible to everyone.

Our products are powerful and affordable assistive devices, with built-in accessibility features such as VoiceOver, SwitchControl, and support for Made for iPhone hearing aids.

In 2017, Apple received the ASB Louis Braille Award, DRLC Business & Technology Award, and ARC Catalyst Award for innovations in accessibility.

LOGO

Education

apple.com/education

Apple believes education is a fundamental human right and a quality education should be available to all.

Our ConnectED program has helped create transformative learning environments in 114 underserved U.S. schools, reaching over 4,000 teachers and 50,000 students.

The Apple Teacher program delivers free professional learning for educators, and Everyone Can Code provides free materials to learn, write, and teach code.

LOGO

Environment

apple.com/environment

Apple drives environmental responsibility in product design and manufacturing.

All the paper in iPhone X packaging is either recycled or from responsibly managed forests. Every gram of aluminum in iPhone 8 generates 11% fewer carbon emissions than in iPhone 7, and 83% fewer than iPhone 6.

Apple’s operations in 25 countries run on 100% renewable energy, and we are helping our suppliers make the same transition to clean energy that we have.

LOGO

Inclusion and Diversity

apple.com/diversity

Apple believes diverse teams make innovation possible.

Our female representation is steadily increasing, and we are proud of the progress we are making. From July 2016 to July 2017, half of our new hires in the U.S. were from underrepresented groups in tech.

We are also committed to supporting inclusion and diversity in the next generation of tech talent, and we invest in programs to give people everywhere the opportunity to realize their potential.

LOGO

Privacy and Security

apple.com/privacy

Apple believes privacy is a fundamental human right. Every Apple product is designed from the ground up to protect your privacy and security.

We believe your personal data belongs to you, not others.

Great experiences do not have to come at the expense of your privacy and security. Instead, they can support them.

LOGO

Supplier Responsibility

apple.com/supplier-responsibility

Apple educates and empowers the people in our supply chain, and helps preserve our environment’s most precious resources.

Since 2008, our suppliers have trained over 11.7 million people to understand their rights as employees, health and safety regulations, and the Apple Code of Conduct.

In 2016, all of our final assembly sites in China were UL Zero Waste to Landfill certified, and we diverted over 200,000 metric tons of waste from landfills.

Apple Inc. | 2018 Proxy Statement | 4


Annual Meeting Proposals

Proposal

Recommendation
of the Board

1.

Election of Directors

FOR

each of the nominees

2.

Ratification of Appointment of Independent Registered Public Accounting Firm

FOR

3.

Advisory Vote to Approve Executive Compensation

FOR

4.

Approval of the Amended and Restated Apple Inc.Non-Employee Director Stock Plan

FOR

5.

Shareholder Proposal

Shareholder Proxy Access Amendments

AGAINST

6.

Shareholder Proposal

Human Rights Committee

AGAINST

Apple Inc. | 2018 Proxy Statement | 5


Apple Inc. | 2018 Proxy Statement | 6


Corporate Governance

This section describes Apple’s corporate governance framework and the role and structure of our Board.

Apple Inc. | 2018 Proxy Statement | 7


Role of the Board of Directors

Apple’s Board oversees the CEO and other senior management in the competent and ethical operation of Apple on a day-to-day basis and assures that the long-term interests of shareholders are being served. To satisfy the Board’s duties, directors are expected to take a proactive, focused approach to their positions to ensure that Apple is committed to business success through the maintenance of high standards of responsibility and ethics.

Apple’s key governance documents, including our Corporate Governance Guidelines; Business Conduct Policy; Stock Ownership Guidelines; Prohibition on Hedging, Pledging, and Short Selling Apple Stock and committee charters, are available atinvestor.apple.com/corporate-governance.cfm. The governance structure fosters principled actions, informed and effective decision-making, and appropriate monitoring of compliance and performance. The Board met four times during 2017, and each member of the Board attended or madeparticipated in 75% or more of the aggregate of (i) the total number of meetings of the Board held during 2017, and (ii) the total number of meetings held by each committee of the Board on which such person served during 2017.

Board Committees

The Board has a standing Audit and Finance Committee (the “Audit Committee”), Compensation Committee, and Nominating and Corporate Governance Committee (the “Nominating Committee”). The Board has determined that the Chairs of each committee and all committee members are independent under applicable rules of The Nasdaq Stock Market LLC (“Nasdaq”), the New York Stock Exchange LLC (“NYSE”), and the Securities and Exchange Commission (“SEC”) for committee memberships. Each committee operates under a written charter adopted by the Board, which is available to shareholders on January 6, 2017.atinvestor.apple.com/corporate-governance.cfm.

What is includedAudit Committee

The Audit Committee assists the Board in these proxy materials?oversight and monitoring of:

 

  

The Notice of 2017 Annual Meeting of ShareholdersApple’s financial statements and other financial information provided by Apple to its shareholders and others;

 

 

  

This Proxy Statement for the Annual MeetingCompliance with legal, regulatory, and public disclosure requirements;

The independent auditors, including their qualifications and independence;

 

 

  

Apple’s Annual Report on Form 10-K forsystem of internal controls, including the year ended September 24, 2016 (the “Annual Report”)

If you requested printed versions by mail, these printed proxy materials also include the proxy card or voting instruction form for the Annual Meeting.

Apple Inc. | 2017 Proxy Statement | 6


Why did I receive a one-page notice in the mail regarding the internet availability of proxy materials instead of a full set of proxy materials?

Apple uses the internet as the primary means of furnishing proxy materials to shareholders. We are sending a Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”) to our shareholders with instructions on how to access the proxy materials online or request a printed copy of the materials.

Shareholders may follow the instructions in the Notice of Internet Availability to elect to receive future proxy materials in print by mail or electronically by email. We encourage shareholders to take advantage of the availability of the proxy materials online to help reduce the environmental impact of our annual meetings, and reduce Apple’s printing and mailing costs.

Apple’s proxy materials are also available atinvestor.apple.com.

I share an address with another shareholder, and we received only one paper copy of the proxy materials. How can I obtain an additional copy of the proxy materials?

Apple has adopted a procedure called “householding.” Under this procedure, Apple may deliver a single copy of the Notice of Internet Availability and, if you requested printed versions by mail, this Proxy Statement and the Annual Report to multiple shareholders who share the same address, unless Apple has received contrary instructions from one or more of the shareholders. This procedure reduces the environmental impact of our annual meetings, and reduces Apple’s printing and mailing costs. Shareholders who participate in householding will continue to receive separate proxy cards. Upon written or oral request, Apple will deliver promptly a separate copy of the Notice of Internet Availability and, if you requested printed versions by mail, this Proxy Statement and the Annual Report to any shareholder that elects not to participate in householding.

To receive, free of charge, a separate copy of the Notice of Internet Availability and, if you requested printed versions by mail, this Proxy Statement or the Annual Report, or separate copies of any future notice, proxy statement, or annual report, you may write or call Apple at the following email address, physical address, or phone number:

investor_relations@apple.com

Apple Investor Relations

1 Infinite Loop MS: 301-4IR

Cupertino, California 95014

(408) 974-3123

If you are receiving more than one copy of the proxy materials at a single address and would like to participate in householding, please contact Apple at the email address, physical address, or phone number above. Shareholders who hold shares in “street name” may contact their brokerage firm, bank, broker-dealer, or other similar organization to request information about householding.

What is the quorum requirement for the Annual Meeting?

Holders of a majority of the shares entitled to vote at the Annual Meeting must be present at the Annual Meeting in person or by proxy for the transaction of business. This is called a quorum. Your shares will be counted for purposes of determining if there is a quorum if:

You are entitled to vote and you are present in person at the Annual Meeting; orinternal audit function;

 

 

  

You have properly voted by proxy online, by phone or by submitting a proxy card or voting instruction form by mail.

Apple Inc. | 2017 Proxy Statement | 7


Broker non-votes and abstentions are counted for purposes of determining whether a quorum is present. If a quorum is not present, we may propose to adjourn the Annual Meeting to solicit additional proxies and reconvene the Annual Meeting at a later date.

Who will serve as the inspector of election?

A representative from Apple’s transfer agent, Computershare Trust Company, N.A. (“Computershare”), will serve as the inspector of election.

Who is paying the costs of this proxy solicitation?

Apple is paying the costs of the solicitation of proxies. Apple has retained Georgeson LLC to assist in the distribution of proxy materials and the solicitation of proxies from brokerage firms, banks, broker-dealers, and other similar organizations representing beneficial owners of shares for the Annual Meeting. We have agreed to pay Georgeson a fee of approximately $15,000 plus out-of-pocket expenses. You may contact Georgeson at (866) 828-4304.

Apple must also pay brokerage firms, banks, broker-dealers, and other similar organizations representing beneficial owners certain fees associated with:

Forwarding the Notice of Internet Availability to beneficial owners;Treasury and finance matters;

 

 

  

Forwarding printed proxy materials by mail to beneficial owners who specifically request them;Enterprise risk management, privacy, and data security; and

 

 

  

Obtaining beneficial owners’ voting instructions.The auditing, accounting, and financial reporting process generally.

 

In addition to solicitationsThe Audit Committee also appoints Apple’s independent registered public accounting firm and reviews the services performed by mail, the proxy solicitorfirm. The Audit Committee met eight times during 2017.

Compensation Committee

The Compensation Committee reviews and approves the compensation arrangements for Apple’s directors,executive officers, including the CEO, administers Apple’s equity compensation plans, and employees, without additional compensation, may solicit proxies on Apple’s behalf in person, by phone, or by electronic communication.

Where are Apple’s principal executive offices located and what is Apple’s main phone number?

Apple’s principal executive offices are located at 1 Infinite Loop, Cupertino, California 95014. Apple’s main phone number is (408) 996-1010.

What is Apple’s fiscal year?

Apple’s fiscal year isreviews the 52- or 53-week period that ends on the last Saturday of September. Unless otherwise stated, all information presented in this Proxy Statement is based on Apple’s fiscal calendar.

Voting

Who may vote at the Annual Meeting?

Each share of Apple’s common stock has one vote on each matter. Only “shareholders of record” as of the close of business on the Record Date are entitled to attend and vote at the Annual Meeting. As of the Record Date, there were 5,257,816,000 shares of Apple’s common stock issued and outstanding, held by 26,000 shareholders of record. In addition to shareholders of record of Apple’s common stock, “beneficial owners of shares held in street name” as of the Record Date can vote using the methods described below.

Board’s

 

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What is the difference betweencompensation. The Compensation Committee’s authority to grant equity awards may not be delegated to Apple’s management or others. For a “shareholder of record” and a “beneficial owner of shares held in street name”?

Shareholder of Record. If your shares are registered directly in your name with Computershare, you are the shareholder of record with respect to those shares.

Beneficial Owner of Shares Held in Street Name. If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the “beneficial owner of shares held in street name.” As a beneficial owner, you have the right to instruct your broker, bank, trustee, or nominee how to vote your shares. Most individual shareholders are beneficial owners of shares held in street name.

If I am a shareholder of record, how do I vote?

If you are a shareholder of record, there are four ways to vote:

In Person. You may vote in person at the Annual Meeting by requesting a ballot from an usher when you arrive.

Online. You may vote by proxy by visitinginvestorvote.com/AAPL and following the instructions provided in the Notice of Internet Availability.

Phone. If you request printed copies of the proxy materials by mail, you will receive a proxy card and you may vote by proxy by calling the toll free number found on the proxy card.

Mail. If you request printed copies of the proxy materials by mail, you will receive a proxy card and you may vote by proxy by filling out the proxy card and returning it in the envelope provided.

Even if you plan on attending the Annual Meeting in person, we encourage you to vote your shares in advance online, by phone, or by mail to ensure that your vote will be represented at the Annual Meeting.

If I am a beneficial owner of shares held in street name, how do I vote?

If you are a beneficial owner of shares held in street name, there are four ways to vote:

In Person. If you are a beneficial owner of shares held in street name and wish to vote in person at the Annual Meeting, you must obtain a “legal proxy” from the organization that holds your shares. A legal proxy is a written document that authorizes you to vote your shares held in street name at the Annual Meeting. Please contact the organization that holds your shares for instructions regarding obtaining a legal proxy.

You must bring a copydescription of the legal proxyCompensation Committee’s processes and procedures, including the roles of the independent compensation consultant and Apple’s executive officers in support of the Compensation Committee’s decision-making process, see the section entitled “Compensation Discussion and Analysis” below. The Compensation Committee met seven times during 2017.

Nominating Committee

The Nominating Committee assists the Board in identifying qualified individuals to become directors, makes recommendations to the Annual MeetingBoard concerning the size, structure, and ask for a ballot from an usher when you arrive. In order for your vote to be counted, you must hand both the copycomposition of the legal proxyBoard and your completed ballotits committees, and oversees and makes recommendations regarding corporate governance matters, including Apple’s Corporate Governance Guidelines. The Nominating Committee also oversees the annual Board performance evaluation process, including the format of the annual Board self-evaluation and whether to an usher to be provideduse a third-party facilitator. The Nominating Committee met four times during 2017.

In accordance with its charter and Apple’s Corporate Governance Guidelines, the Nominating Committee has evaluated and recommended to the inspectorfull Board each of election.the nominees named in this Proxy Statement for election to the Board.

Annual Board and Committee Self-Evaluations

Online. You may vote by proxy by visitingproxyvote.com and entering the control number found in your Notice of Internet Availability. The availability of online voting may depend on the voting process of the organization that holds your shares.

The Board and each of its committees conduct an annual self-evaluation, led by Art Levinson, the independent Chairman of the Board. This evaluation is intended to determine whether the Board and its committees are functioning effectively, and to provide them with an opportunity to reflect upon and improve processes and effectiveness.

Phone. If you request printed copies of the proxy materials by mail, you will receive a voting instruction form and you may vote by proxy by calling the toll free number found on the voting instruction form. The availability of phone voting may depend on the voting process of the organization that holds your shares.

Annual Board Self-Evaluations

Mail. If you request printed copies of the proxy materials by mail, you will receive a voting instruction form and you may vote by proxy by filling out the voting instruction form and returning it in the envelope provided.

Dr. Levinson conducts one-on-one discussions with each director to obtain his or her assessment of Board effectiveness and performance. A summary of the results is presented to the Nominating Committee on a “no-names” basis identifying any themes or issues that have emerged. The Nominating Committee then reports the results to the Board, which considers the results and any ways in which Board effectiveness may be enhanced.

Annual Committee Self-Evaluations

Each committee conducts an annual self-evaluation and reports the results to the Board. Each committee’s report includes an assessment of the committee’s compliance with Apple’s Corporate Governance Guidelines and the committee’s charter, as well as any ways in which committee effectiveness may be enhanced.

Board Leadership Structure

The Board believes its current leadership structure best serves the objectives of the Board’s oversight of management, the Board’s ability to carry out its roles and responsibilities on behalf of Apple’s shareholders, and Apple’s overall corporate governance. The Board also believes the separation of the Chairman and CEO roles allows the CEO to focus his time and energy on operating and managing Apple while leveraging the Chairman’s experience and perspectives. The Board periodically reviews its leadership structure to determine whether it continues to best serve Apple and its shareholders.

 

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How are proxies voted?Board Oversight of Risk Management

All shares representedThe Board believes that evaluating the executive team’s management of the various risks confronting Apple is one of its most important areas of oversight. In carrying out this critical responsibility, the Board has designated the Audit Committee with primary responsibility for overseeing enterprise risk management. In accordance with this responsibility, the Audit Committee monitors Apple’s significant business risks, including financial, operational, privacy, data security, business continuity, legal and regulatory, and reputational exposures, and reviews the steps management has taken to monitor and control these exposures. With respect to privacy and data security, the Audit Committee reviews reports from Apple’s General Counsel, Vice President of Corporate Information Security, Chief Compliance Officer, and Vice President of Internal Audit, including updates on risk management, Apple’s privacy program, and relevant legislative, regulatory, and technical developments.

The Audit Committee is assisted in its risk oversight duties by valid proxies received priorkey members of management, including Apple’s Chief Financial Officer, General Counsel, and Vice President of Internal Audit. Senior members of management responsible for risk management across a wide range of areas and functions report regularly to the takingAudit Committee, which itself reports regularly to the Board.

While the Audit Committee has primary responsibility for overseeing enterprise risk management, the other Board committees also consider risks within their areas of responsibility and apprise the Board of significant risks and management’s response to those risks. For example, the Nominating Committee reviews legal and regulatory compliance risks as they relate to corporate governance structure and processes, and the Compensation Committee reviews risks related to compensation matters. While the Board and its committees oversee risk management strategy, management is responsible for implementing and supervising day-to-day risk management processes and reporting to the Board and its committees on such matters.

In establishing and reviewing Apple’s executive compensation program, the Compensation Committee considers whether the program encourages unnecessary or excessive risk-taking and has concluded that it does not. Executive officers’ base salaries are fixed in amount and thus do not encourage risk-taking. Annual cash incentives are capped and payouts are formulaic and tied to specific company financial performance metrics. The majority of compensation provided to the executive officers is in the form of time-based and performance-based equity awards that vest over several years and help further align executive officers’ interests with those of Apple’s shareholders. The Compensation Committee believes that these awards do not encourage unnecessary or excessive risk-taking because the ultimate value of the vote at the Annual Meeting will be votedawards is tied to Apple’s stock price performance over several years and wherebecause awards are subject to regular vesting schedules to help ensure that a significant component of executive compensation is tied to long-term shareholder specifies by means of the proxy a choice with respect to any matter to be acted upon, the shares will be voted in accordance with the shareholder’s instructions.value creation.

Can I change my vote after I have voted?

You may revoke your proxyThe Compensation Committee has also reviewed Apple’s compensation programs for employees generally and change your vote at any time before the taking of the vote at the Annual Meeting.

In Person. You may revoke your proxy and change your vote by attending the Annual Meeting and voting in person. However, your attendance at the Annual Meeting will not automatically revoke your proxy unless you properly vote at the Annual Meeting or specifically request that your prior proxy be revoked by delivering a written notice of revocation prior to the Annual Meeting to Apple’s Secretary at 1 Infinite Loop, MS: 301-4GC, Cupertino, California 95014.

Online. You may change your vote using the online voting method described above, in which case only your latest internet proxy submitted prior to the Annual Meeting will be counted.

Phone. You may change your vote using the phone voting method described above, in which case only your latest telephone proxy submitted prior to the Annual Meeting will be counted.

Mail. You may revoke your proxy and change your vote by signing and returning a new proxy card or voting instruction form dated as of a later date, in which case only your latest proxy card or voting instruction form received prior to the Annual Meeting will be counted.

What happens if Ihas concluded these programs do not give specific voting instructions?

Shareholderscreate risks that are reasonably likely to have a material adverse effect on Apple. The Compensation Committee believes that Apple’s cash bonus programs and long-term equity awards provide an effective and appropriate mix of Record. If you are aincentives to help ensure performance is focused on long-term shareholder of record and you:

Indicate when voting online or by phone that you wish to vote as recommended by the Board; or

Sign and return a proxy card without giving specific voting instructions,

then the persons named as proxy holders, Luca Maestri and Bruce Sewell, will vote your shares in the manner recommended by the Board on all matters presented in this Proxy Statement and as they may determine in their best judgment with respect to any other matters properly presented for a vote at the Annual Meeting.

Beneficial Owners of Shares Held in Street Name. If you are a beneficial owner of shares held in street namevalue creation and do not provideencourage short-term risk taking at the organization that holds your shares with specific voting instructions, then the organization that holds your shares may generally vote your shares in their discretion on “routine” matters, but cannot vote on “non-routine” matters.expense of long-term results.

Which proposals are considered “routine” or “non-routine”?Audit Committee Financial Experts

The following proposal is considered a routine matter:

The ratification of the appointment of Ernst & Young LLP as Apple’s independent registered public accounting firm for 2017 (Proposal No. 2).

A broker or other nominee may generally vote in their discretion on routine matters, and therefore no broker non-votes are expected in connection with Proposal No. 2.

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The following proposals are considered non-routine matters:

Election of directors (Proposal No. 1);

Advisory resolution to approve executive compensation (Proposal No. 3);

Advisory vote on the frequency of advisory votes on executive compensation (Proposal No. 4); and

Each of shareholder proposals No. 5 through No. 9.

If the organizationBoard has determined that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, that organization will inform the inspector of election that it does not have the authority to vote on the matter with respect to your shares. This is generally referred to as a “broker non-vote.” Therefore, broker non-votes may exist in connection with Proposal No. 1 and Proposals No. 3 through No. 9.

What is the voting requirement to approve each member of the proposals?

With respect toAudit Committee qualifies as an “audit committee financial expert” as defined under applicable SEC rules and also meets the electionadditional criteria for independence of directors (Proposal No. 1), Apple’s bylaws provide that,audit committee members set forth in an uncontested election of directors, the affirmative vote of (i) a majority of the shares present or represented by proxy and voting at the Annual Meeting and (ii) a majority of the shares required to constitute a quorum is required to elect a director. An “uncontested election of directors” means an election of directors in which the number of candidates for election does not exceed the number of directors to be elected by the shareholders at that election.

Approval of Proposal No. 2, Proposal No. 3, and Proposals No. 5 through No. 9 requires, in each case, the affirmative vote of both (i) a majority of the shares present or represented by proxy and voting at the Annual Meeting and (ii) a majority of the shares required to constitute a quorum.

A plurality of the votes cast for Proposal No. 4 will be considered the shareholders’ preferred frequency for holding an advisory vote on executive compensation.

How are broker non-votes and abstentions treated?

Broker non-votes and abstentions are counted for purposes of determining whether a quorum is present. Only “FOR” and “AGAINST” votes are counted for purposes of determining the votes received in connection with each proposal (or, in the case of Proposal No. 4, votes for “1 Year,” “2 Years,” and “3 Years”). Broker non-votes and abstentions will have no effect on determining whether the affirmative vote constitutes a majority of the shares present or represented by proxy and voting at the Annual Meeting (or, in the case of Proposal No. 4, whether the vote for “1 Year,” “2 Years,” or “3 Years” constitutes a plurality of the shares voted on the proposal).

In addition, for each proposal other than Proposal No. 4, the affirmative vote equal to a majority of the shares necessary to constitute a quorum is also required for approval. Therefore, broker non-votes and abstentions could prevent the election of a director or the approval of a proposal because they do not count as affirmative votes.

Is my vote confidential?

Proxy instructions, ballots, and voting tabulations that identify individual shareholders are handled in a manner that protects your voting privacy. Apple will not disclose the proxy instructions or ballots of individual shareholders, except:

To allow for the tabulation and certification of votes;

To facilitate a successful proxy solicitation;

To assert claims for Apple;

To defend claims against Apple; and

As necessary to meet applicable legal requirements.

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If you write comments on your proxy card or ballot, the proxy card or ballot may be forwarded to Apple’s management and the Board to review your comments.

Where can I find the voting results of the Annual Meeting?

Preliminary voting results will be announced at the Annual Meeting. Final voting results will be tallied by the inspector of election after the taking of the vote at the Annual Meeting. Apple will publish the final voting results in a Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) within four business days following the Annual Meeting.

Director Nominations and Other Matters for the 2018 Annual Meeting of Shareholders

What is the deadline to propose matters for inclusion in the proxy materials for the 2018 annual meeting of shareholders?

The proposal must be received on or prior to September 8, 2017. All proposals must comply with Rule 14a-810A-3(b)(1) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

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Code of Ethics

WhatApple has a code of ethics, “Business Conduct: The way we do business worldwide,” that applies to all employees, including Apple’s principal executive officer, principal financial officer, and principal accounting officer, to the Board, and to independent contractors, consultants, and others who do business with Apple. The code is available atinvestor.apple.com/corporate-governance.cfm. Apple intends to disclose any changes in this code or waivers from this code that apply to Apple’s principal executive officer, principal financial officer, or principal accounting officer by posting such information on the deadlinesame website or by filing with the SEC a Current Report on Form 8-K, in each case if such disclosure is required by rules of the SEC or Nasdaq.

Review, Approval, or Ratification of Transactions with Related Persons

The Board has adopted a written policy for approval of transactions between Apple and its directors, director nominees, executive officers, greater than 5% beneficial owners, and each of their respective immediate family members, where the amount involved in the transaction exceeds or is expected to propose mattersexceed $120,000 in a single calendar year and the related party has or will have a direct or indirect interest in the transaction. A copy of this policy is available atinvestor.apple.com/corporate-governance.cfm. The policy provides that the Audit Committee reviews transactions subject to the policy and determines whether or not to approve or ratify those transactions. In addition, the Audit Committee has delegated authority to the Chair of the Audit Committee to pre-approve or ratify transactions under certain circumstances. In reviewing transactions subject to the policy, the Audit Committee, or the Chair of the Audit Committee, as applicable, considers among other factors it deems appropriate:

The related person’s interest in the transaction;

The approximate dollar value of the amount involved in the transaction;

The approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;

Whether the transaction was undertaken in the ordinary course of Apple’s business;

Whether the transaction with the related person is proposed to be, or was, entered into on terms no less favorable to Apple than terms that could have been reached with an unrelated third-party;

The purpose of, and the potential benefits to Apple of, the transaction;

Whether the transaction would impair the independence of a non-employee director;

Required public disclosure, if any; and

Any other information regarding the transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.

The Audit Committee has considered and adopted the following standing pre-approvals under the policy for considerationtransactions with related persons:

Employment as an executive officer of Apple, if the related compensation is approved (or recommended to the Board for approval) by the Compensation Committee;

Any compensation paid to a director if the compensation is consistent with Apple’s director compensation policies and is required to be reported in Apple’s proxy statement under Item 402 of SEC Regulation S-K;

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Any transaction with another company at which a related person’s only relationship is as an employee (other than an executive officer or director) or beneficial owner of less than 10% of that company’s equity, if the aggregate amount involved does not exceed the greater of $1 million or 2% of that company’s total annual revenue;

Any charitable contribution, grant, or endowment by Apple to a charitable organization, foundation, or university at which a related person’s only relationship is as an employee (other than an executive officer or director), if the aggregate amount involved does not exceed the greater of $1 million or 2% of the charitable organization’s total annual receipts; and

Any transaction where the related person’s interest arises solely from the ownership of Apple’s common stock and all holders of Apple’s common stock received the same benefit on a pro-rata basis, such as dividends.

A summary of new transactions covered by the standing pre-approvals, or approved or ratified by the Chair of the Audit Committee, if any, is provided to the Audit Committee for its review at each regularly scheduled Audit Committee meeting.

Transactions with Related Persons

Mr. Iger is Chairman and Chief Executive Officer of The Walt Disney Company. In the 2018ordinary course of business, Apple enters into commercial dealings with Disney that we consider arms-length, including sales arrangements, digital services content licensing agreements, and similar arrangements. Apple does not believe that Mr. Iger has a material direct or indirect interest in any of such commercial dealings.

The Board has determined that all Board members, other than Mr. Cook, are independent under applicable Nasdaq, NYSE, and SEC rules. In making these determinations, the Board considered the types and amounts of the commercial dealings between Apple and the companies and organizations with which the directors are affiliated.

Attendance of Directors at Annual Meetings of Shareholders

Apple expects all of its directors to attend the Annual Meeting. All of Apple’s directors who were standing forre-election in 2017 attended the 2017 annual meeting of shareholders, but not for inclusion inshareholders.

Compensation Committee Interlocks and Insider Participation

Ms. Jung, Mr. Gore, and Mr. Iger were members of the proxy materials?

The proposal must be received not earlier thanCompensation Committee during 2017. None of the closemembers of business on October 31, 2017 and not later than the closeCompensation Committee is or has been an executive officer of business on November 30, 2017. The proposal must be submittedApple, nor did any of them have any relationships requiring disclosure by a shareholderApple under Item 404 of record and must set forth the information required bySEC Regulation S-K. None of Apple’s bylaws. If you are a beneficial owner of shares held in street name, you can contact the organization that holds your shares for information about how to register your shares directly in your nameexecutive officers served as a shareholderdirector or a member of record.

What is the deadline to nominate individuals for electiona compensation committee (or other committee serving an equivalent function) of any other entity, an executive officer of which served as directors at the 2018 annual meeting of shareholders using proxy access?

A shareholder, or group of up to 20 shareholders, that has owned continuously for at least three years sharesa director of Apple stock representing an aggregateor member of at least 3% of our outstanding shares, may nominate and include in Apple’s proxy materials director nominees constituting up to 20% of Apple’s Board, provided that the shareholder(s) and nominee(s) satisfy the requirements in Apple’s bylaws. Notice of proxy access director nominees must be received not earlier than the close of business on August 9, 2017 and not later than the close of business on September 8,Compensation Committee during 2017.

What is

Apple Inc. | 2018 Proxy Statement | 12


Communications with the deadline to nominate individuals for election as directors at the 2018 annual meeting of shareholders, but not included in the proxy materials?

Director nominations that a shareholder intends to present at the 2018 annual meeting of shareholders, but does not intend to have included in Apple’s proxy materials, must be received not earlier than the close of business on October 31, 2017 and not later than the close of business on November 30, 2017. Notice of director nominations must be submitted by a shareholder of record and must set forth the information required by Apple’s bylaws. If you are a beneficial owner of shares held in street name, you can contact the organization that holds your shares for information about how to register your shares directly in your name as a shareholder of record.Board

Where do I send proposals and director nominationsAny matter intended for the 2018 annual meetingBoard, or for any individual member of shareholders?

Proposals and director nominations mustthe Board, should be sent either by maildirected to Apple’s Secretary at 1 Infinite Loop, MS: 301-4GC, Cupertino, California 95014, with a request to forward the communication to the intended recipient. In general, any shareholder communication delivered to Apple for forwarding to Board members will be forwarded in accordance with the shareholder’s instructions. However, Apple reserves the right not to forward to Board members any abusive, threatening, or by emailotherwise inappropriate materials. Information regarding the submission of comments or complaints relating to Apple’s accounting, internal accounting controls, or auditing matters is available atshareholderproposal@apple.cominvestor.apple.com/corporate-governance.cfm.

 

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Directors Corporate Governance,

This section describes the experience and Executive Officersqualifications of our Board members and how they are compensated.

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Directors

Apple’s Board consists of a diverse group of leaders in their respective fields. Most of our directors have senior leadership experience at major domestic and multinational companies. In these positions, they have gained significant and diverse management experience, including strategic and financial planning, public company financial reporting, compliance, risk management, and leadership development. They also have experience serving as executive officers, or on boards of directors and board committees, of other public companies, and have an understanding of corporate governance practices and trends. In addition, many of our directors have experience as directors or trustees of significant academic, research, nonprofit, and philanthropic institutions, and bring unique perspectives to the Board.

The Board and itsthe Nominating and Corporate Governance Committee (the “Nominating Committee”) believe the skills, qualities, attributes, and experience of our directors provide Apple with business acumen and a diverse range of perspectives to engage each other and management to effectively address effectively Apple’s evolving needs and represent the best interests of Apple’s shareholders.

The Nominating Committee considers candidates for director who are recommended by its members, by other Board members, by shareholders, and by management, as well as those identified by a third-party search firm retained to assist in identifying and evaluating possible candidates. In evaluating potential nominees to the Board, the Nominating Committee considers, among other things, independence, character, ability to exercise sound judgment, diversity, age, demonstrated leadership, skills, including financial literacy, and experience in the context of the needs of the Board. The Nominating Committee is committed to actively seeking out highly qualified women and individuals from minority groups to include in the pool from which Board nominees are chosen. The Nominating Committee considersevaluates candidates recommended by shareholders and evaluates them using the same criteria as for other candidates recommended by its members, other members of the Board, or other persons.

In addition, in December 2015, the Board adopted amendments to our bylaws to implement proxy access. A shareholder, or group of up to 20 shareholders, owning continuously for at least three years shares of Apple stock representing an aggregate of at least 3% of our outstanding shares for at least three years, may nominate and include in Apple’s proxy materials director nominees constituting up to 20% of Apple’s Board provided that the shareholder(s) and nominee(s) satisfy the requirements in the bylaws.pursuant to our proxy access provisions. In December 2016, the Board adopted additional amendments to our bylaws to enhance our proxy access framework and make it easier for shareholders to nominate proxy access candidates. For example:Nominating shareholders and nominees must satisfy the requirements set forth in our bylaws, which can be found atinvestor.apple.com/corporate-governance.cfm.

Apple no longer requires shareholders who nominate a proxy access candidate to recall loaned shares and hold them through the annual meeting. Ownership of loaned shares is deemed to continue if the shareholder(s) has the power to recall the loaned shares on five business days’ notice.

Apple increased the availability of proxy access by limiting the circumstances under which the maximum number of proxy access candidates is reduced. For example, Apple no longer reduces the number of proxy access candidates when an incumbent director was nominated through proxy access in the last two years and is subsequently supported by the Board for re-election.

Shareholders may now re-nominate a proxy access candidate regardless of the level of support received at the annual meeting.

Apple has extended the deadline by which nominating shareholders and proxy access candidates must provide certain information to Apple to ten business days from five business days.

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Apple has narrowed the scope of a nominating shareholder’s indemnification obligations to legal and regulatory violations arising out of a nominating shareholder’s actions or communications with Apple shareholders or out of information provided by a nominating shareholder to Apple.

Apple has limited the discretion of the Board to unilaterally interpret the proxy access provisions.

Biographical InformationNominees for Our Director NomineesElection

The following biographies below describe the skills, qualities, attributes, and experience of the nominees that led the Board and the Nominating Committee to determine that it is appropriate to nominate these directors. Each of the eight nominees currently serves on the Board. In this section (“Directors, Corporate Governance, and Executive Officers—Directors”), references to particular years refer to the calendar year.

 

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LOGOLOGO

Art Levinson,

66 years old

Director since 2000

Chairman of the Board

Audit Committee

Art Levinson 67, has served as the Chief Executive Officer of Calico, a company focused on health, aging, and well-being, since September 2013.

Dr. Levinson previously served as Chief Executive Officer of Genentech, Inc., a medical drug developer, from July 1995 to April 2009, and served as Genentech’s Chairman from September 1999 to September 2014.

Among other qualifications, Dr. Levinson brings to the Board executive leadership experience, including his service as a chairman and chief executive officer of a large international public company, along with extensive financial expertise and brand marketing experience.

Former Public Company Directorships

Within the Last Five Years

Amyris, Inc.

F. Hoffman-La Roche Ltd.

Selected Directorships and Memberships

Board of Directors, Broad Institute of Harvard and MIT

Board of Scientific Consultants, Memorial Sloan Kettering Cancer Center

Industrial Advisory Board, California Institute for Quantitative Biomedical Research

Advisory Council for the Lewis-Sigler Institute for Integrative Genomics

Advisory Council for the Princeton University Department of Molecular Biology

Former Public Company Directorships Within the Last Five Years

Amyris, Inc.

F. Hoffman-La Roche Ltd.

LOGOLOGO

Tim Cook,

56 years old

Director since 2011

Chief Executive Officer

Tim Cook 57, has been Apple’s Chief Executive Officer since August 2011 and was previously Apple’s Chief Operating Officer since October 2005.

Mr. Cook joined Apple in March 1998 and served as Executive Vice President, Worldwide Sales and Operations from 2002 to 2005. From 2000 to 2002, Mr. Cook served as Senior Vice President, Worldwide Operations, Sales, Service and Support. From 1998 to 2000, Mr. Cook served as Senior Vice President, Worldwide Operations.

Among other qualifications, Mr. Cook brings to the Board extensive executive leadership experience in the technology industry, including the management of worldwide operations, sales, service, and support.

Other Current Public Company Directorships

NIKE, Inc.

Selected Directorships and Memberships

Board of Directors, The National Football Foundation & College Hall of Fame, Inc.

Board of Trustees, Duke University

Board of Directors, Robert F. Kennedy Center for Justice and Human Rights

 

 

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LOGO

LOGO

James Bell,

68 years old

Director since 2015

Audit Committee

James Bell 69, is the retired Executive Vice President, Corporate President and Chief Financial Officer of The Boeing Company, an aerospace company.

Mr. Bell served as Boeing’s CFOin that role at Boeing from 2008 to 2012, having previously served as Executive Vice President, Finance and Chief Financial Officer from 2003 to 2008, and as Senior Vice President of Finance and Corporate Controller from 2000 to 2003. From 1992 to 2000, Mr. Bell held a series of positions with increasing responsibility at Boeing.

Among other qualifications, Mr. Bell brings to the Board financial and accounting expertise as a former chief financial officer of a large international public company, experience in strategic planning and leadership of complex organizations, and a global business perspective from his service on other boards.

Other Current Public Company Directorships

The Dow Chemical CompanyDowDupont Inc.

JPMorgan Chase & Co.

CDW Corporation

Selected Directorships and Memberships

Board of Trustees, Rush University Medical Center

LOGO

LOGO

Al Gore,

68 years old

Director since 2003

Compensation Committee

Nominating Committee

Al Gore 69, has served as Chairman of Generation Investment Management, an investment management firm, since 2004, and as a partner of Kleiner Perkins Caufield & Byers, a venture capital firm, since 2007.

Mr. Gore is also Chairman of The Climate Reality Project.

Mr. Gore was elected to the U.S. House of Representatives four times, to the U.S. Senate two times, and served two terms as Vice President of the United States.

Among other qualifications, Mr. Gore brings to the Board executive leadership experience, a valuable and different perspective due to his extensive background in digital communication and technology policy, politics, and environmental rights, along with experience in asset management and venture capital.

 

 

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LOGO

LOGO

Bob Iger,

66 years old

Director since 2011

Compensation Committee

Nominating Committee Chair

Bob Iger 67, has served as Chairman and Chief Executive Officer of The Walt Disney Company, a diversified media company, since March 2012.

Prior to that time, he served as President and Chief Executive Officer of Disney since October 2005, having previously served as President and Chief Operating Officer since January 2000 and as President of Walt Disney International and Chairman of the ABC Group from 1999 to 2000. From 1974 to 1998, Mr. Iger held a series of positions with increasing responsibility at ABC, Inc. and its predecessor Capital Cities/ABC, Inc.

Among other qualifications, Mr. Iger brings to the Board executive leadership experience, including his service as a chairman and chief executive officer of a large international public company, along with extensive financial expertise and experience in international business and brand marketing.

Other Current Public Company Directorships

The Walt Disney Company

Selected Directorships and Memberships

Board of Directors, National September 11 Memorial & Museum

Vice Chairman, U.S.-China Business Council

Co-Chairman, Partnership for a New American Economy

Member, American Academy of Arts & Sciences

Member, President’s Export Council

Board of Directors, Bloomberg Philanthropies

LOGO

LOGO

Andrea Jung,

58 years old

Director since 2008

Compensation Committee Chair

Nominating Committee

Andrea Jung 59, has served as the President and Chief Executive Officer of Grameen America LLC, a nonprofit microfinance organization, since April 2014, where she also serves on the Board of Directors.

Ms. Jung previously served as Executive Chairman of Avon Products, Inc., a personal care products company, from April 2012 to December 2012, and as Chairman of the Board of Directors of Avon from September 2001 to April 2012. Ms. Jung served as Chief Executive Officer of Avon from November 1999 to April 2012, and served as a member of the Board of Directors of Avon from January 1998 to December 2012.

Among other qualifications, Ms. Jung brings to the Board executive leadership experience, including her service as a chairman and chief executive officer of a large international public company, along with extensive brand marketing and consumer products experience.

Other Current Public Company Directorships

Daimler AG

General Electric Company

Selected Memberships

Committee for Economic Development

Former Public Company Directorships

Within the Last Five Years

Avon Products, Inc.

 

 

Apple Inc. | 20172018 Proxy Statement | 1719


LOGO

LOGO

Ron Sugar,

68 years old

Director since 2010

Audit Committee Chair

Ron Sugar 69, is the retired Chairman of the Board and Chief Executive Officer of Northrop Grumman Corporation, a global security company. Dr. Sugar served in this role from 2003 to 2010 and served as President and Chief Operating Officer from 2001 to 2003. Previous to Northrop Grumman, he held executive positions at Litton Industries and TRW Inc., where he served as Chief Financial Officer.

Dr. Sugar is a senior advisor to various businesses and organizations, including Ares Management, LLC, Bain & Company, Temasek Americas Advisory Panel, the G100 Network and the World 50.

Among other qualifications, Dr. Sugar brings to the Board executive leadership experience as a chairman and chief executive officer of a large international public company, financial expertise as a former chief financial officer, understanding of advanced technology, and a global business perspective from his service on other boards.

Other Current Public Company Directorships

Air Lease Corporation

Amgen Inc.

Chevron Corporation

Selected Directorships and Memberships

Member, National Academy of Engineering

Board of Trustees, University of Southern California

Board of Directors, Los Angeles Philharmonic Association

Board of Trustees, Boys and Girls Clubs of AmericaDirectors, Alliance College - Ready Public Schools

LOGO

Sue Wagner

55 years old

Director since 2014

Audit Committee

 

LOGO

Sue Wagner, 56, is aco-founder of BlackRock, Inc., an asset management company. Ms. Wagner served as BlackRock’s Vice Chairman from January 2006 to July 2012, and also served as a member of BlackRock’s Global Executive Committee and Global Operating Committee. During her tenure at BlackRock, Ms. Wagner served as BlackRock’s Chief Operating Officer and Head of Corporate Strategy, and led the alternative investments and international client businesses.

Among other qualifications, Ms. Wagner brings to the Board operational experience, including her service as chief operating officer of a large internationalmultinational public company, along with extensive financial expertise and experience in the financial services industry.

Other Current Public Company Directorships

BlackRock, Inc.

Swiss Re

Selected Directorships and Memberships

Board of Directors, Color Genomics, Inc.

Board of Trustees, Wellesley College

Board of Trustees, Hackley School

 

 

Apple Inc. | 2017 Proxy Statement | 18


Corporate Governance

Role of the Board of Directors

Apple’s Board oversees the CEO and other senior management in the competent and ethical operation of Apple on a day-to-day basis and assures that the long-term interests of shareholders are being served. To satisfy the Board’s duties, directors are expected to take a proactive, focused approach to their positions, and set standards to ensure that Apple is committed to business success through the maintenance of high standards of responsibility and ethics.

Apple’s key governance documents, including our Corporate Governance Guidelines and committee charters, are available atinvestor.apple.com/corporate-governance.cfm. The governance structure is designed to foster principled actions, informed and effective decision-making, and appropriate monitoring of both compliance and performance. The Board met four times during 2016, and each member of the Board attended or participated in 75% or more of the aggregate of (i) the total number of meetings of the Board held during 2016, and (ii) the total number of meetings held by each committee of the Board on which such person served during 2016.

Board Leadership Structure

The Board believes its current leadership structure best serves the objectives of the Board’s oversight of management, the Board’s ability to carry out its roles and responsibilities on behalf of Apple’s shareholders, and Apple’s overall corporate governance. The Board also believes the separation of the Chairman and CEO roles allows the CEO to focus his time and energy on operating and managing Apple and leverages the Chairman’s experience and perspectives. The Board periodically reviews the leadership structure to determine whether it continues to best serve Apple and its shareholders.

Board Committees

The Board has a standing Audit and Finance Committee (the “Audit Committee”), Compensation Committee, and Nominating Committee. The Board has determined that the Chairs of each committee and all committee members are independent under applicable rules of The NASDAQ Stock Market LLC (“NASDAQ”), the New York Stock Exchange LLC (“NYSE”), and the SEC for committee memberships. Each Committee operates under written charters adopted by the Board that are available atinvestor.apple.com/corporate-governance.cfm.

Audit Committee

The Audit Committee assists the Board in oversight and monitoring of:

Apple’s financial statements and other financial information provided by Apple to its shareholders and others;

Compliance with legal, regulatory, and public disclosure requirements;

The independent auditors, including their qualifications and independence;

Apple’s system of internal controls, including the internal audit function;

Treasury and finance matters;

Enterprise risk management, privacy, and data security; and

The auditing, accounting, and financial reporting process generally.

The Audit Committee also appoints Apple’s independent registered public accounting firm and reviews the services performed by the firm. The Audit Committee met nine times during 2016.

Apple Inc. | 2017 Proxy Statement | 19


Compensation Committee

The Compensation Committee reviews and approves the compensation arrangements for Apple’s executive officers, including the CEO, administers Apple’s equity compensation plans, and reviews the Board’s compensation. The Compensation Committee’s authority to grant equity awards may not be delegated to Apple’s management or others. For a description of the Compensation Committee’s processes and procedures, including the roles of the independent compensation consultant and Apple’s executive officers in support of the Compensation Committee’s decision-making process, see the section entitled “Compensation Discussion and Analysis” below. The Compensation Committee met seven times during 2016.

Nominating Committee

The Nominating Committee assists the Board in identifying qualified individuals to become directors, makes recommendations to the Board concerning the size, structure, and composition of the Board and its committees, monitors the process to assess the Board’s effectiveness, and oversees and makes recommendations regarding corporate governance matters, including implementing Apple’s Corporate Governance Guidelines. The Nominating Committee met four times during 2016.

The Nominating Committee has recommended to the full Board each of the nominees named in this Proxy Statement for election to the Board.

Board Oversight of Risk Management

The Board believes that evaluating the executive team’s management of the various risks confronting Apple is one of its most important areas of oversight. In carrying out this critical responsibility, the Board has designated the Audit Committee with primary responsibility for overseeing enterprise risk management. In accordance with this responsibility, the Audit Committee monitors Apple’s significant business risks, including financial, operational, privacy, data security, business continuity, legal and regulatory, and reputational exposures, and reviews the steps management has taken to monitor and control these exposures. With respect to privacy and data security, the Audit Committee reviews reports from Apple’s Vice President of Corporate Information Security, General Counsel, Chief Compliance Officer, and Vice President of Internal Audit, including updates on risk management, Apple’s privacy program, and relevant legislative, regulatory, and technical developments.

The Audit Committee is assisted by a Risk Oversight Committee consisting of key members of management, including Apple’s Chief Financial Officer and General Counsel. The Risk Oversight Committee reports regularly to the Audit Committee, which reports regularly to the Board.

While the Audit Committee has primary responsibility for overseeing enterprise risk management, the other Board committees also consider risks within their areas of responsibility and apprise the Board of significant risks and management’s response to those risks. For example, the Nominating Committee reviews legal and regulatory compliance risks as they relate to corporate governance structure and processes, and the Compensation Committee reviews risks related to compensation matters. While the Board and its committees oversee risk management strategy, management is responsible for implementing and supervising day-to-day risk management processes and reporting to the Board and its committees on such matters.

In establishing and reviewing Apple’s executive compensation program, the Compensation Committee considers whether the program encourages unnecessary or excessive risk-taking and has concluded that it does not. Executives’ base salaries are fixed in amount and thus do not encourage risk-taking. Annual cash incentives are capped and payouts are formulaic and tied to specific company financial performance metrics. The majority of compensation provided to the executive officers is in the form of time-based and performance-based equity awards that vest over several years and help further align executives’ interests with those of Apple’s shareholders. The Compensation Committee believes that these awards do not encourage unnecessary or excessive risk-taking because the ultimate value of the awards is tied to Apple’s stock price

Apple Inc. | 20172018 Proxy Statement | 20


performance over several years and because awards are subject to regular vesting schedules to help ensure that a significant component of executive compensation is tied to long-term shareholder value creation.

The Compensation Committee has also reviewed Apple’s compensation programs for employees generally and has concluded these programs do not create risks that are reasonably likely to have a material adverse effect on Apple. The Compensation Committee believes that Apple’s annual cash and long-term equity awards provide an effective and appropriate mix of incentives to help ensure Apple’s performance is focused on long-term shareholder value creation and do not encourage short-term risk taking at the expense of long-term results.

Audit Committee Financial Experts

The Board has determined that each member of the Audit Committee qualifies as an “audit committee financial expert” as defined under applicable SEC rules and also meets the additional criteria for independence of audit committee members set forth in Rule 10A-3(b)(1) under the Exchange Act.

Code of Ethics

Apple has a code of ethics, “Business Conduct: The way we do business worldwide,” that applies to all employees, including Apple’s principal executive officer, principal financial officer, and principal accounting officer, to the Board, and to independent contractors, consultants, and others who do business with Apple. The code is available atinvestor.apple.com/corporate-governance.cfm. Apple intends to disclose any changes in this code or waivers from this code that apply to Apple’s principal executive officer, principal financial officer, or principal accounting officer by posting such information on the same website or by filing with the SEC a Current Report on Form 8-K, in each case if such disclosure is required by rules of the SEC or NASDAQ.

Review, Approval, or Ratification of Transactions with Related Persons

The Board has adopted a written policy for approval of transactions between Apple and its directors, director nominees, executive officers, greater than 5% beneficial owners, and each of their respective immediate family members, where the amount involved in the transaction exceeds or is expected to exceed $120,000 in a single calendar year and the party to the transaction has or will have a direct or indirect interest. A copy of this policy is available atinvestor.apple.com/corporate-governance.cfm. The policy provides that the Audit Committee reviews transactions subject to the policy and determines whether or not to approve or ratify those transactions. In addition, the Audit Committee has delegated authority to the Chair of the Audit Committee to pre-approve or ratify transactions under certain circumstances. In reviewing transactions subject to the policy, the Audit Committee, or the Chair of the Audit Committee, as applicable, considers among other factors it deems appropriate:

The related person’s interest in the transaction;

The approximate dollar value of the amount involved in the transaction;

The approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;

Whether the transaction was undertaken in the ordinary course of business of Apple;

Whether the transaction with the related person is proposed to be, or was, entered into on terms no less favorable to Apple than terms that could have been reached with an unrelated third-party;

The purpose of, and the potential benefits to Apple of, the transaction;

Required public disclosure, if any; and

Apple Inc. | 2017 Proxy Statement | 21


Any other information regarding the transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.

The Audit Committee has considered and adopted the following standing pre-approvals under the policy for transactions with related persons:

Employment as an executive officer of Apple, if the related compensation is approved (or recommended to the Board for approval) by the Compensation Committee;

Any compensation paid to a director if the compensation is consistent with Apple’s director compensation policies and is required to be reported in Apple’s proxy statement under Item 402 of SEC Regulation S-K;

Any transaction with another company at which a related person’s only relationship is as an employee (other than an executive officer or director) or beneficial owner of less than 10% of that company’s equity, if the aggregate amount involved does not exceed the greater of $1 million, or 2% of that company’s total annual revenue;

Any charitable contribution, grant, or endowment by Apple to a charitable organization, foundation, or university at which a related person’s only relationship is as an employee (other than an executive officer or director), if the aggregate amount involved does not exceed the greater of $1 million, or 2% of the charitable organization’s total annual receipts; and

Any transaction where the related person’s interest arises solely from the ownership of Apple’s common stock and all holders of Apple’s common stock received the same benefit on a pro-rata basis, such as dividends.

A summary of new transactions covered by the standing pre-approvals, or approved or ratified by the Chair of the Audit Committee, if any, is provided to the Audit Committee for its review at each regularly scheduled Audit Committee meeting.

Transactions with Related Persons

Mr. Iger is Chairman and Chief Executive Officer of Disney. In the ordinary course of business, Apple enters into commercial dealings with Disney that we consider arms-length, including sales arrangements, Internet Services content licensing agreements, and similar arrangements. Apple does not believe that Mr. Iger has a material direct or indirect interest in any of such commercial dealings.

The Board has determined that all Board members, other than Mr. Cook, are independent under applicable NASDAQ, NYSE, and SEC rules. In making these determinations, the Board considered the types and amounts of the commercial dealings between Apple and the companies and organizations with which the directors are affiliated.

Attendance of Directors at Annual Meetings of Shareholders

Apple expects all of its directors to attend the Annual Meeting. All of Apple’s directors who were standing for re-election in 2016 attended the 2016 annual meeting of shareholders with the exception of Mr. Bell who was unable to attend for personal reasons.

Compensation Committee Interlocks and Insider Participation

Ms. Jung, Mr. Gore, Mr. Iger, and Dr. Levinson were members of the Compensation Committee during 2016. Mr. Iger was appointed to the Compensation Committee in place of Dr. Levinson in December 2015. None of the members of the Compensation Committee is or has been an executive officer of Apple, nor did any of them have any relationships requiring disclosure by Apple under Item 404 of SEC Regulation S-K. None of Apple’s executive officers served as a director or a member of a compensation committee (or other committee serving an equivalent function) of any other entity, an executive officer of which served as a director of Apple or member of the Compensation Committee during 2016.

Apple Inc. | 2017 Proxy Statement | 22


Communications with the Board

Any matter intended for the Board, or for any individual member of the Board, should be directed to Apple’s Secretary at 1 Infinite Loop, MS: 301-4GC, Cupertino, California 95014, with a request to forward the communication to the intended recipient. In general, any shareholder communication delivered to Apple for forwarding to Board members will be forwarded in accordance with the shareholder’s instructions. However, Apple reserves the right not to forward to Board members any abusive, threatening, or otherwise inappropriate materials. Information regarding the submission of comments or complaints relating to Apple’s accounting, internal accounting controls, or auditing matters is available atinvestor.apple.com/corporate-governance.cfm.

Apple Inc. | 2017 Proxy Statement | 23


Compensation of Directors

Members of the Board who are not also Apple employees (“Non-Employee Directors”) receive compensation for their service. Mr. Cook, our CEO, does not receive any compensation for his service as a member of the Board. The Compensation Committee annually reviews the total compensation of our Non-Employee Directors and each element of our Non-Employee Director compensation program. As part of this process, the Compensation Committee evaluates market data provided by its independent compensation consulting firm, Pay Governance LLC, and makes a recommendation to the Board. The Board determines the form and amount of director compensation after reviewing the Compensation Committee’s recommendation. Subject to shareholder approval, the Board approved an amended and restated Apple Inc. Non-Employee Director Stock Plan (the Apple Inc. 1997 Director Stock Plan, as proposed to be amended, has been renamed the “Apple Inc. Non-Employee Director Stock Plan”) that would, in addition to other changes, provide for an annual limit of $1.5 million for all compensation paid to a Non-Employee Director, as described in Proposal No. 4 below.

Cash Retainers. Non-Employee Directors receive an annual cash retainer of $100,000. In 2016,2017, the Chairman of the Board, Dr. Levinson, received an additional cash retainer of $200,000; the Chair of the Audit Committee, Dr. Sugar, received an additional cash retainer of $35,000; the Chair of the Compensation Committee, Ms. Jung, received an additional cash retainer of $30,000; and the Chair of the Nominating Committee, Mr. Iger, received an additional cash retainer of $25,000. All retainers are paid in quarterly installments.

Equity-Based Awards. A substantial portion of each Non-Employee Director’s annual retainer is in the form of equity. Under Apple’s 1997the Apple Inc. Non-Employee Director Stock Plan, (the “Director Plan”), Non-Employee Directors are granted restricted stock units (“RSUs”) on the date of each annual meeting of shareholders (each, an “Annual Director Award”). All Annual Director Awards vest on February 1 of the following year, subject to continued service on the Board through the vesting date. For 2016,2017, the number of RSUs subject to each Annual Director Award was determined by dividing $250,000 by the per share closing price of Apple’s common stock on the date of grant and rounding to the nearest whole share.

A Non-Employee Director who is newly appointed to the Board other than in connection with an annual meeting of shareholders will receive a grant of RSUs upon appointment (an “Initial Director Award”), except that a Non-Employee Director who joins the Board after February 1 of a particular year and prior to the annual meeting for that year will not receive an Initial Director Award. The number of RSUs subject to each Initial Director Award is determined in the same manner as described above for Annual Director Awards, but the grant date fair value of the award is pro-rated based on the portion of the year that has passed since the last annual meeting. Initial Director Awards are scheduled to vest on the next February 1 following the award.

Non-Employee Directors do not have the right to vote or dispose of the RSUs subject to these awards. If Apple pays an ordinary cash dividend on its common stock, each RSU award granted under the Apple Inc. Non-Employee Director Stock Plan will be credited with an amount equal to the per share cash dividend paid by Apple, multiplied by the total number of RSUs subject to the award that are outstanding immediately prior to the record date for such dividend. The amounts that are credited to each award are referred to as “dividend equivalents.” Any dividend equivalents credited to an award granted under the Apple Inc. Non-Employee Director Stock Plan will be subject to the same vesting, payment, and other terms and conditions as the unvested RSUs to which the dividend equivalents relate. The crediting of dividend equivalents is meant to treat the RSU award holders consistently with shareholders.

Equipment Program.Program and Gift Matching. Apple has an equipment program for the Board under which each Non-Employee Director is eligible to receive, upon request and free of charge, one of each new product introduced by Apple, and is eligible to purchase additional equipment at a discount. Additionally, each Non-Employee Director is

Apple Inc. | 2018 Proxy Statement | 21


eligible to participate in Apple’s matching gifts program, which matches charitable donations by a Non-Employee Director up to an aggregate of $10,000 per calendar year.

Non-Employee Directors do not receive any other compensation for serving on any committee or attending Board or committee meetings.

Stock Ownership Guidelines. Apple has stock ownership guidelines for our CEO, executive officers, and Non-Employee Directors. Under the guidelines, Non-Employee Directors are expected to own shares of AppleApple’s common stock that have a value equal to five times their annual cash retainer for serving as a director. Shares may be owned directly by the individual, owned jointly with or separately by the individual’s spouse, or held in trust for the benefit of the individual, the individual’s

Apple Inc. | 2017 Proxy Statement | 24


spouse or children. Each Non-Employee Director is required to satisfycurrently satisfies the stock ownership guideline by November 12, 2017, or within five years after first becoming subject to the guidelines. Other than Mr. Bell, who joined the Board in October 2015, each Non-Employee Director has already satisfied the stock ownership guidelines.

Director Compensation—20162017

The following table shows information regarding the compensation earned or paid during 20162017 to Non-Employee Directors who served on the Board during the year. The compensation paid to Mr. Cook is shown under “Executive Compensation” in the table entitled “Summary Compensation Table—2017, 2016, 2015, and 2014”2015” and the related tables. Mr. Cook does not receive any compensation for his service as a member of the Board.

 

Name    

Fees Earned or

Paid in Cash

($)

     

Stock Awards

($)(1)

     

All Other

Compensation

($)(2)

     

Total

($)

     Fees Earned or
Paid in Cash
($)
     Stock Awards
($)(1)
     All Other
Compensation
($)(2)
     

Total

($)

 
James Bell(3)     100,000       360,375       5,176       465,551  
James Bell     100,000      250,007      3,736      353,743 
Al Gore     100,000       250,028       2,464       352,492       100,000      250,007      7,204      357,211 
Bob Iger     125,000       250,028       2,261       377,289       125,000      250,007      7,877      382,884 
Andrea Jung     130,000       250,028       2,163       382,191       130,000      250,007      3,767      383,774 
Art Levinson     300,000       250,028       2,351       552,379       300,000      250,007      6,355      556,362 
Ron Sugar     135,000       250,028       5,494       390,522       135,000      250,007      12,419      397,426 
Sue Wagner     100,000       250,028       1,647       351,675       100,000      250,007      2,178      352,185 

 

 (1)

In accordance with SEC rules, the amounts shown reflect the aggregate grant date fair value of stock awards granted to Non-Employee Directors during 2016,2017, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC 718”). The grant date fair value for RSUs is measured based on the closing fair market valueprice of Apple’s common stock on the date of grant. See Note 1—Summary of Significant Accounting Policies found in Part II, Item 8, “Financial Statements and Supplementary Data” in the Notes to Consolidated Financial Statements in the Annual Report.Report on Form 10-K for the year ended September 30, 2017.

 

 

   

Each Non-Employee Director received an automatic Annual Director Award of 2,5801,825 RSUs on February 26, 2016,28, 2017, and the grant date fair value for each grantRSU was $250,028. Mr. Bell also received an automatic Initial Director Award of 1,007 RSUs on October 1, 2015, upon joining the Board. The Initial Director Award to Mr. Bell had a grant date fair value of $110,347, resulting in a total grant date fair value of RSUs to Mr. Bell during 2016 of $360,375.$136.99.

 

 

   

As of September 24, 2016,30, 2017, each Non-Employee Director held 2,580 shares subject to outstanding1,825 unvested RSUs. In addition, Mr. Gore had 275,779 shares subject toheld outstanding and unexercised options to purchase 205,779 shares, Ms. Jung had 109,590 shares subject toheld outstanding and unexercised options to purchase 9,590 shares, and Mr.Dr. Levinson had 247,394 shares subject toheld outstanding and unexercised options.options to purchase 177,394 shares.

 

 

Apple Inc. | 2018 Proxy Statement | 22


 (2)

The amounts shown reflect one or more products received under Apple’s Board of Directors equipment program.Equipment Program. For Dr. Sugar, the amount also includes matching charitable contributions under Apple’s matching gifts program in the amount of $10,000.

 

 

(3)

Mr. Bell joined the Board on October 1, 2015.

Apple Inc. | 2018 Proxy Statement | 23


 

Apple Inc. | 20172018 Proxy Statement | 2524


Executive Officers

BiographicalThis section includes biographical information for Apple’s executive officers, other than Mr. Cook, is listed below. Biographical information for Mr. Cook, who is both a director and an executive officer, can be found in the section entitled “Directors.” In this section (“Directors, Corporate Governance, and Executive Officers—Executive Officers”), references to particular years refer to the calendar year.Cook.

Angela Ahrendts, Senior Vice President, Retail, 56, joined Apple and assumed her current position in May 2014. Prior to joining Apple, Ms. Ahrendts served as director and Chief Executive Officer of Burberry plc, a luxury fashion company, from July 2006. Ms. Ahrendts also previously served as Executive Vice President at Liz Claiborne Inc., and as President of Donna Karan International. Ms. Ahrendts is also a member of the United Kingdom’s Prime Minister’s Business Advisory Council.

Eddy Cue, Senior Vice President, Internet Software and Services, 52, joined Apple in January 1989 and assumed his current position in September 2011. Mr. Cue’s previous positions with Apple include Vice President of Internet Services and Senior Director of iTunes Operations. Mr. Cue has also served as a director of Ferrari S.p.A., a luxury sports car company, since November 2012.

Craig Federighi, Senior Vice President, Software Engineering, 47, rejoined Apple in April 2009 and assumed his current position in August 2012. Prior to rejoining Apple, Mr. Federighi held several roles at Ariba, Inc., an enterprise software company, including Chief Technology Officer and Vice President of Internet Services. Prior to that, Mr. Federighi worked at NeXT and at Apple upon the acquisition of NeXT. Mr. Federighi’s previous positions with Apple include Vice President of Mac OS Engineering and Director of Engineering.

Luca Maestri, Senior Vice President, Chief Financial Officer, 53, joined Apple in March 2013 and assumed his current position in May 2014. Prior to assuming his current position, Mr. Maestri served as Apple’s Vice President and Corporate Controller. Prior to joining Apple, Mr. Maestri was Executive Vice President, Chief Financial Officer of Xerox Corporation, a business services and technology company, from February 2011 to February 2013. Prior to that, Mr. Maestri was Chief Financial Officer at Nokia Siemens Networks from October 2008 to February 2011, and he previously had a 20-year career with General Motors Corporation, where he served as Chief Financial Officer of GM Europe and GM Brazil, and held several executive positions with General Motors Corporation in Europe and Asia Pacific. Mr. Maestri served as a director of The Principal Financial Group from February 2012 to May 2015.

Dan Riccio, Senior Vice President, Hardware Engineering, 54, joined Apple in June 1998 and assumed his current position in August 2012. Mr. Riccio’s previous positions with Apple include Vice President of Product Design and Vice President of iPad Hardware Engineering. Prior to joining Apple, Mr. Riccio worked at Compaq Computer Corporation as Senior Manager of Mechanical Engineering.

Phil Schiller, Senior Vice President, Worldwide Marketing, 56, rejoined Apple in April 1997 and assumed his current position in February 2002. Prior to rejoining Apple, Mr. Schiller was Vice President of Product Marketing at Macromedia, Inc. from December 1995 to March 1997 and Director of Product Marketing at FirePower Systems, Inc. from 1993 to December 1995. Prior to that, Mr. Schiller spent six years at Apple in various marketing positions. Mr. Schiller has also served as a director of Illumina, Inc., a genetics company, since July 2016.

Bruce Sewell, Senior Vice President, General Counsel and Secretary, 58, joined Apple and assumed his current position in September 2009. Prior to joining Apple, Mr. Sewell served as Senior Vice President, General Counsel of Intel Corporation from 2005. Mr. Sewell also served as Intel’s Vice President, General Counsel from 2004 to 2005 and Vice President of Legal and Government Affairs, Deputy General Counsel from 2001 to 2004. Prior to joining Intel in 1995, Mr. Sewell was a partner in the law firm of Brown and Bain PC. Mr. Sewell has also served as a director of Vail Resorts Management Company, an operator of mountain resorts, since January 2013.

 

Apple Inc. | 20172018 Proxy Statement | 25


LOGO

Kate Adams, 53, oversees all legal matters, including corporate governance, intellectual property, litigation and securities compliance, global security, and privacy.

Kate joined Apple and assumed her current position in November 2017. Prior to joining Apple, Kate served as Senior Vice President and General Counsel of Honeywell International Inc., a diversified technology and manufacturing company, from April 2009. Prior to joining Honeywell in 2003, Kate was a partner at the law firm of Sidley Austin LLP and an Adjunct Professor of Law at Columbia Law School and New York University. Previously, she was a law clerk for Supreme Court Justice Sandra Day O’Connor, a trial attorney for the United States Department of Justice, Appellate Section, Environment and Natural Resources division, and a law clerk for Stephen Breyer, then chief judge of the U.S. Court of Appeals for the First Circuit.

LOGO

Angela Ahrendts, 57, oversees strategy, real estate and development, and operations of Apple’s physical stores, online store, and contact centers.

Angela joined Apple and assumed her current position in May 2014. Prior to joining Apple, Angela served as director and Chief Executive Officer of Burberry plc, a luxury fashion company, from July 2006. Angela also previously served as Executive Vice President at Liz Claiborne Inc., and as President of Donna Karan International.

LOGO

Eddy Cue, 53, oversees Apple’s content stores including the iTunes Store® and Apple Music®, as well as Apple Pay®, Maps, Apple’s iCloud® services, and Apple’s productivity and creativity apps.

Eddy joined Apple in January 1989 and assumed his current position in September 2011. Eddy’s previous positions with Apple include Vice President of Internet Services and Senior Director of iTunes Operations. Eddy has served as a director of Ferrari S.p.A., a luxury sports car company, since November 2012.

Apple Inc. | 2018 Proxy Statement | 26


LOGO

Craig Federighi, 48, oversees the development of iOS, macOS®, and Siri®.

Craig rejoined Apple in April 2009 and assumed his current position in August 2012. Prior to rejoining Apple, Craig held several roles at Ariba, Inc., an enterprise software company, including Chief Technology Officer and Vice President of Internet Services. Prior to that, Craig worked at NeXT and at Apple upon the acquisition of NeXT. Craig’s previous positions with Apple include Vice President of Mac OS Engineering and Director of Engineering.

Johny Srouji, Senior Vice President, Hardware Technologies, 52,

LOGO

Luca Maestri, 54, oversees the accounting, business support, financial planning and analysis, treasury, M&A, investor relations, internal audit, and tax functions at Apple.

Luca joined Apple in March 2013 and assumed his current position in May 2014. Prior to assuming his current position, Luca served as Apple’s Vice President and Corporate Controller. Prior to joining Apple, Luca was Executive Vice President, Chief Financial Officer of Xerox Corporation, a business services and technology company, from February 2011 to February 2013. Prior to that, Luca was Chief Financial Officer at Nokia Siemens Networks from October 2008 to February 2011. He previously had a 20-year career with General Motors Corporation, where he served as Chief Financial Officer of GM Europe and GM Brazil, and held several executive positions with General Motors Corporation in Europe and Asia Pacific. Luca served as a director of The Principal Financial Group from February 2012 to May 2015.

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Dan Riccio, 55, oversees the Mac®, iPhone®, iPad®, and iPod® engineering teams.

Dan joined Apple in June 1998 and assumed his current position in August 2012. Dan’s previous positions with Apple include Vice President of Product Design and Vice President of iPad Hardware Engineering. Prior to joining Apple, Dan worked at Compaq Computer Corporation as Senior Manager of Mechanical Engineering.

Apple Inc. | 2018 Proxy Statement | 27


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Phil Schiller, 57, oversees worldwide product marketing and leads Apple’s App Stores® across all Apple platforms and developer-related functions at Apple. Phil’s other marketing responsibilities include international, education, and business marketing.

Phil rejoined Apple in April 1997 and assumed his current position in February 2002. Prior to rejoining Apple, Phil was Vice President of Product Marketing at Macromedia, Inc. from December 1995 to March 1997 and Director of Product Marketing at FirePower Systems, Inc. from 1993 to December 1995. Prior to that, Phil spent six years at Apple in various marketing positions. Phil has served as a director of Illumina, Inc., a genetics company, since July 2016.

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Johny Srouji, 53, oversees custom silicon and hardware technologies including batteries, application processors, storage controllers, sensors silicon, display silicon, and other chipsets across Apple’s entire product line.

Johny joined Apple in 2008 and assumed his current position in December 2015. Johny’s previous positions with Apple include Vice President, Hardware Technologies, and Vice President, VLSI (Very Large Scale Integration). Prior to joining Apple, Johny worked in various engineering roles at IBM and Intel.

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Jeff Williams, 54, oversees Apple’s entire supply chain, service and support, and social responsibility initiatives. He also oversees the development of Apple Watch®, and is driving the company’s health initiatives.

Jeff joined Apple in June 1998 and assumed his current position in December 2015. Jeff’s previous positions with Apple include Senior Vice President, Operations; Head of Worldwide Procurement; and Vice President of Operations. Prior to joining Apple, Jeff worked in a number of operations and engineering roles at IBM from 1985 to 1998.

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Executive Compensation

This section describes the compensation program for our named executive officers and assumed his current position in December 2015. Mr. Srouji’s previous positions with Apple include Vice President, Hardware Technologies, and Vice President, VLSI (Very Large Scale Integration). Prior to joining Apple, Mr. Srouji worked in various engineering roles at IBM and Intel.includes the required executive compensation tables.

Jeff Williams, Chief Operating Officer, 53, joined Apple in June 1998 and assumed his current position in December 2015. Mr. Williams’s previous positions with Apple include Senior Vice President, Operations; Head of Worldwide Procurement; and Vice President of Operations. Prior to joining Apple, Mr. Williams worked in a number of operations and engineering roles at IBM from 1985 to 1998.

 

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Executive Compensation

Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the disclosures contained in the following “Compensation Discussion and Analysis.” Based on this review and discussion, the Compensation Committee recommended to the Board that the section entitled “Compensation Discussion and Analysis” be included in this Proxy Statement for the Annual Meeting.

Members of the Compensation Committee

Andrea Jung (Chair) | Al Gore | Bob Iger

Compensation Discussion and Analysis

Apple haddelivered another year of strongoutstanding financial resultsperformance in 2016.2017. Our year-over-year revenue growth rate accelerated during each quarter in 2017 and drove earnings per share growth of 11%. Our Services business alone has grown to the size of a Fortune 100 company with net sales of $30 billion and year-over-year growth of 23%.

Our executive compensation program is designed to reward performance in a simple and effective way. It reflects the unparalleled size, scope, and success of Apple’s business and the importance of our executive officers operating as a high-performing team, while focusing on key measures of profitability and the creation of shareholder value. Net sales were $215.6 billion and operating income was $60.0 billion. Net sales offor 2017 were $229.2 billion and $61.3 billion, respectively, and year-over-year our Services business grew 22% year-over-year and App Store revenue wasstock price increased 36.7%. We believe the highest ever. The compensation paid to our named executive officers for 20162017 appropriately reflects and rewards thistheir contributions to our performance.

In thisThis Compensation Discussion and Analysis we discussexplains the 20162017 compensation program for our named executive officers and the guiding principles and practices upon which it is based. OurTim Cook, Luca Maestri, Angela Ahrendts, Johny Srouji, Dan Riccio, and Bruce Sewell were our named executive officers for 2016 were:

Tim Cook

Chief Executive Officer

Luca Maestri

Senior Vice President, Chief Financial Officer

Angela Ahrendts

Senior Vice President, Retail

Eddy Cue

Senior Vice President, Internet Software and Services

Dan Riccio

Senior Vice President, Hardware Engineering

Bruce Sewell

Senior Vice President, General Counsel and Secretary

Mr. Cue,2017. Mr. Riccio and Mr. Sewell had the same total compensation according to SEC reporting rules, and as a result, we are reporting six named executive officers for 2016.2017. In October 2017, Apple announced that Mr. Sewell would retire from Apple, effective at the end of the calendar year.

Guiding Principles and Compensation Practices

Our executive compensation program is designed to attract, motivate,attracts, motivates, and retainretains a talented, entrepreneurial, and creative team of executives who willto provide leadership for Apple’s success in dynamic and competitive markets. We have a pay-for-performance philosophy for executive compensation based on the following principles:

Team-Based Approach. Our executive officers are expected to operate as a high-performing team, and accordingly, we apply a team-based approach to our executive compensation program with internal pay equity as a primary consideration. We believe that generally awarding the same base salary, annual cash incentive opportunity, and long-term equity awards to each of our executive officers, other than the CEO, successfully supportsis fundamental to this goal.approach.

Performance Expectations. We haveestablish clear performance expectations offor our executive team, and the design of our executive compensation program reflects these expectations. First, each executive officer must demonstrate exceptional personal

Apple Inc. | 2017 Proxy Statement | 28


performance in orderis expected to remain part of the executive team. We believe that individuals who underperform should either be removed from the executive team with their compensation adjusted accordingly, or be dismissed from Apple. Second, each executive officer must contribute to Apple’s overall success rather than focus solely on specific objectives within his or her primary area of responsibility. Our executive compensation program is designed to motivate exceptional performance that achieves our overall financial objectives and creates long-term shareholder value.

Apple Inc. | 2018 Proxy Statement | 30


Emphasis on Long-Term Equity Incentives. Our executive compensation program emphasizes long-term shareholder value creation by using both performance-based and time-based and performance-based RSUs to deliver long-term compensation incentives. The Compensation Committee believes that this is the most effective way to attractvest over multiple years, and retain a talented executive team and align executives’ interests with those of shareholders. As a result, our executive compensation program is weighted considerably toward long-term equity awards rather than cash compensation and our executives hold significant unvested RSUs at any particular time. This practice is intended to createcompensation. The emphasis on long-term RSU awards generates a substantial retention incentive, encourageencourages our executivesexecutive officers to focus on Apple’s long-term performance and success, and alignaligns executive compensation with the long-term interests of our shareholders. In 2017, the performance-based component of the RSUs was increased to 50% of the grant date fair value to place a greater emphasis on performance-based compensation for our executive officers.

Executive Compensation Policies and Practices. We follow soundOur compensation practices to supportprogram supports our guiding principles.principles and reflects our commitment to sound executive compensation policies and practices, as highlighted in the following table.

 

What We DoWhat We Don’t Do

Compensation Practices

 

Independent Compensation Consultant – Ourcompensation consultant

The Compensation Committee has directly retained an independent compensation consultant whichthat performs no services for Apple other than services for the Compensation Committee.

 

Annual compensation risk assessment

The Compensation Committee conducts an annual risk assessment of our compensation program.

Risk Managementmanagement

We prohibit short sales, transactions in derivatives of Apple securities, including hedging transactions, and pledging of shares by all executive officers. The Compensation Committee also conducts an annual compensation risk assessment.

 

Stock Ownership Guidelinesownership guidelines

We have robust stock ownership guidelines for our executive officers.

 

Equity Clawbackclawback policy

Our RSU agreements have a recoupment provision requiring repayment to Apple of any shares or other amount that may be paid in respect of RSUs in the event of certain acts of misconduct.

 

Performance-Based, Long-Term Equity – We emphasize long-term equity awards with a substantial performance-based component in our pay mix.

Vesting and performance conditions on dividend equivalents

 

Vesting and Performance Conditions on Dividend Equivalents

We apply the same vesting restrictions and performance conditions on dividend equivalents as on the underlying RSUs.

At-will employment

 

At-Will Employment

We employ our executive officers at will.

No pension or other special benefits

  

 

Change in Control Payments – We do not offer change in control payments or gross-ups of related excise taxes.

Special Perquisites – We do not provide executive perquisites that are not available to other employees generally.

Retirement Vesting – We do not include retirement acceleration provisions in equity awards.

Re-Pricing – We do not allow re-pricing of stock options without shareholder approval.

Pension or Other Special BenefitsWe do not provide pensions or supplemental executive retirement, health, or insurance benefits.

No change of control payments

We do not offer change of control payments or gross-ups of related excise taxes.

No retirement vesting

We do not include retirement vesting provisions in equity awards.

No repricing

We do not allow repricing of stock options without shareholder approval.

 

Apple Inc. | 20172018 Proxy Statement | 2931


Discretion and Judgment of the Compensation Committee

The Compensation Committee, consisting entirely of independent directors, reviews and approves the compensation of Apple’s executive officers and acts as the administering committee for Apple’s employee equity compensation plans.

Each year, the Compensation Committee conducts an evaluation of Apple’s executive compensation program to determine if any changes would be appropriate. In making these determinations, the Compensation Committee may consult with its independent compensation consultant and management, as described below; however, the Compensation Committee uses its own judgment in making final decisions regarding the compensation paid to our executive officers.

The Role of the Compensation Consultant. The Compensation Committee selects and retains the services of its own independent compensation consultant and annually reviews the performance of the selected consultant. As part of the review process, the Compensation Committee considers the independence of the consultant in accordance with SEC and NASDAQNasdaq rules.

Since 2014, the Compensation Committee has engaged the services of Pay Governance, an independent compensation consulting firm. During 2016,2017, Pay Governance provided no services to Apple other than services for the Compensation Committee, and worked with Apple’s management, as directed by the Compensation Committee, only on matters for which the Compensation Committee is responsible.

At the Compensation Committee’s request, Pay Governance regularly attends Compensation Committee meetings. Pay Governance also communicates with the Chair of the Compensation Committee outside committee meetings regarding matters related to the Compensation Committee’s responsibilities. In 2016,2017, the Compensation Committee generally sought input from Pay Governance on a range of external market factors, including evolving compensation trends, appropriate peer companies, and market data. Pay Governance also provided general observations about Apple’s compensation programs and managementabout management’s recommendations regarding the amount and form of compensation for our executive officers.

The Role of the Chief Executive Officer. At the Compensation Committee’s request, Mr. Cook provides input regarding the performance and appropriate compensation of the other executive officers. The Compensation Committee considers Mr. Cook’s evaluation of the other executive officers because of his direct knowledge of each executive officer’s performance and contributions. Mr. Cook is not present during voting or deliberations by the Compensation Committee regarding his own compensation.

The Role of Peer Companies and Benchmarking. The Compensation Committee reviews peer group composition each year. With the assistance of Pay Governance, the Compensation Committee identified groups of companies to serve as market reference points for compensation comparison purposes for 2016.2017. A primary peer group was developed for reference consisting of U.S.-based, stand-alone, publicly traded companies in the technology, media, and internet services industries that, in the Compensation Committee’s view, compete with Apple for talent. The threshold revenue and market capitalization requirements for a company to be considered for the primary peer group for 2017 were $15 billion and $35 billion, respectively. In addition, the Compensation Committee decided to keep Hewlett Packard Enterprise and HP Inc. in the primary peer group for consistency with the 2016 primary peer group even though neither company satisfied the market capitalization requirement. The companies in the primary peer group are listed below.

Apple Inc. | 2018 Proxy Statement | 32


Primary Peer Group

Alphabet

Disney

IBM

Time Warner

Amazon.com

EMC

Intel

Time Warner Cable

AT&T

Facebook

Microsoft

Twenty-First Century Fox

Cisco Systems

Hewlett Packard Enterprise

Oracle

Verizon

Comcast

HP Inc.

Qualcomm

A secondary peer group of premier companies that have iconic brands or are industry or category leaders, rely on significant R&D and innovation for growth, and require highly-skilled human capital was also considered as an additional reference set for the Compensation Committee. The companies in eachthe secondary peer group are listed below. Unless otherwise specified, references in this Compensation Discussion and Analysis to peer companies include both the primary and the secondary peer group companies.

Apple Inc. | 2017 Proxy Statement | 30


In June 2015, the Compensation Committee selected the following companies for the 2016 primary peer group:

 

 
Amazon.com

DisneySecondary Peer Group

IBM

Time Warner Cable

  
AT&T3M 

eBayCoca-Cola

 

Intel

Twenty-First Century FoxNike

  
CBSAmerican Express 

EMCGeneral Electric

 

Microsoft

VerizonPepsiCo

  
Cisco SystemsBoeing 

FacebookJohnson & Johnson

 

OracleProcter & Gamble

Viacom

Comcast

Google (now Alphabet)

Qualcomm

DIRECTV

Hewlett-Packard

Time Warner

The threshold revenue and market capitalization requirements for a company to be considered for the primary peer group for 2016 were $15 billion and $35 billion, respectively. In addition, although each was slightly below the thresholds, the Compensation Committee decided to retain Viacom and CBS in the primary peer group for consistency with the 2015 primary peer group. The Compensation Committee also decided to add Facebook to the primary peer group based on market capitalization, revenue similar to other companies in the primary peer group, and the fact that it competes with Apple for talent. Following the spinoff of Hewlett Packard Enterprise in November 2015, the Compensation Committee continued to include HP Inc. (formerly Hewlett-Packard) and Hewlett Packard Enterprises in the 2016 primary peer group.

Based on the revenue and market capitalization criteria described above, Apple continues to be significantly larger, than the companies selected for the 2016 primary peer group, with 2016by revenue of $215.6 billion and market capitalization measures, than the peer companies. Apple reported net sales of $601.4$229.2 billion during 2017 and had a market capitalization of $790.1 billion as of the end of 2016.2017.

Apple v. Peer Companies

 

                 

LOGOLOGO

In the tablechart above, the revenue shown for primary peer group companies is the amount reported by each company in its most recently filed annual report as of the Record Date, and market capitalization for primary peer group companies is the amount provided by Bloomberg L.P. as of September 23, 2016,29, 2017, the last trading day of Apple’s fiscal year. The table includes Alphabet, HP

Apple Inc., and Hewlett Packard Enterprise. The table | 2018 Proxy Statement | 33


chart does not include DIRECTV, EMC or Time Warner Cable, which either merged with or were acquired by another company before September 23, 2016.29, 2017.

Apple Inc. | 2017 Proxy Statement | 31


In June 2015, the Compensation Committee selected the following companies for the 2016 secondary peer group:

3M

Johnson & Johnson

American Express

Nike

Boeing

PepsiCo

Coca-Cola

Procter & Gamble

General Electric

The Compensation Committee reviews compensation practices and program design at peer companies to inform its decision-making process so it can set total compensation levels that it believes are commensurate with Apple’sthe relative size, scope, and performance.performance of Apple. The Compensation Committee, however, does not set compensation components to meet specific benchmarks as compared to peer companies, such as targeting salaries at a specific market percentile. The Compensation Committee believes that over-reliance on benchmarking can result in compensation that is unrelated to the value delivered by our executive officers because compensation benchmarking does not take into account the specific performance of the executive officers or the relative size, scope, and performance of Apple. The Compensation Committee’s executive compensation determinations are subjective and the result of the Compensation Committee’s business judgment, which is informed by the experiencesexperience of the members of the Compensation Committee as well as input from, and peer group data provided by, the Compensation Committee’s independent compensation consultant.

Shareholder Feedback. We value the feedback provided by our shareholders and have discussions with many of them on an ongoing basis regarding various corporate governance topics, including executive compensation. After considering a number of factors, including this feedback, the Compensation Committee approved an executive compensation program for 2017 that was similar to the 2016 program but changed the target equity award allocation as a percentage of the grant date fair value reported in the Summary Compensation Table from 60% time-based and 40% performance-based RSUs to 50% time-based and 50% performance-based RSUs. This change placed an even greater emphasis on performance-based equity awards for our executive officers.

Shareholders are also provided the opportunity to cast an annual advisory vote on executive compensation. At Apple’s 20162017 annual meeting of shareholders, shareholders indicated their overwhelming support for the compensation of our named executive officers, with approximately 95% of the votes cast onsupport for the say-on-pay proposal voted for the proposal. The design of the 2016Compensation Committee considered this result and shareholder feedback and approved an executive compensation program followsfor 2018 that is similar to the same design as 2015. However, for 2017 the Compensation Committee has continued to evolve our executive compensation program by changing the allocation of equity awards to our executive officers from 60% time-based and 40% performance-based RSUs to 50% time-based and 50% performance-based RSUs, thereby placing an even greater emphasis on performance-based equity awards for our executive officers.

program. The Compensation Committee will continue to consider shareholder feedback and the results of say-on-pay votes when making future compensation decisions.

20162017 Named Executive Officer Compensation

Our executive compensation program is designed to bereward performance in a simple and effective and link pay to performance, while reflectingway. It reflects the unparalleled size, scope, and success of Apple’s business as well asand the responsibilitiesimportance of our executive officers.officers operating as a high-performing team. It incorporates elements that create shareholder value by driving financial performance, retaining a high-performing and talented executive team, and aligning the interests of the executive team with the interests of shareholders. The main elements of the executive compensation program are:

Base salary

Annual cash incentive

Long-term equity incentives

are base salary, annual cash incentive, and long-term equity awards.

 

Apple Inc. | 20172018 Proxy Statement | 3234


The chart below shows target dollar values for the main elements of our named executive officers’ 20162017 compensation.

 

LOGOLOGO

 

  

Tim Cook has not received an equity award since 2011

LOGOLOGO

Cash Compensation Elements and Awards

Base Salary. Base salary is a customary, fixed element of compensation intended to attract and retain executives. The Compensation Committee considers market data provided by its independent compensation consultant, internal pay equity among the executive officers, and Apple’s financial results and market capitalization relative to the peer companies when setting base salaries. Taking these factors into consideration and in recognition of his individual performance and remarkable leadership,For 2017, Mr. Cook’s annual base salary was increased to $3 million atand the beginning of 2016. Theannual base salary for each of our other named executive officers other than Mr. Cook, remained unchanged atwas $1 million for 2016.million.

Annual Cash Incentive. The Compensation Committee approves, on anOur annual basis, a performance-based cash incentive opportunity forprogram provides our executive officers based on the achievement ofwith accountability for Apple’s annual financial performance goals. For 2016, each of our named executive officers had a threshold annual cash incentive opportunity of 100% of base salary, a target annual cash incentive opportunity of 200% of base salary, and a maximum annual cash incentive opportunity of 400% of base salary.

results through variable, at-risk compensation. Net sales and operating income, as determined in accordance with generally accepted accounting principles, were chosenare used as the performance measures for the 2016 annual cash incentive opportunityprogram because they reflect commonly recognized measures of overall company performance and profitability and are drivers of shareholder value creation.

The annual cash incentive program provides payout opportunities based on the achievement of financial goals that require our executive officers to meet high standards of performance at threshold, target, and maximum levels. The Compensation Committee established the performance goals under the annual cash incentive program in the first quarter of 2017, taking into consideration Apple’s 2016 financial results, 2017 expectations, macroeconomic factors, and alignment between payout opportunities and performance levels.

For the 2017 annual cash incentive program, the Compensation Committee established threshold goals of $215.6 billion for net sales and $52.3 billion for operating income, representing the minimum level of performance expected for an executive officer to receive an annual cash incentive payout. At the threshold performance level, the total payout opportunity was 100% of base salary. The target goals under the 2017 annual cash incentive plan were $225.2 billion for net sales and $57.9 billion for operating income, representing financial results that would be challenging to achieve. At the target performance level, the total payout opportunity was 200% of base salary. The Compensation Committee also set maximum goals of $234.8 billion for net sales and $62.9 billion for operating income. Maximum goals represent exceptional financial performance, the achievement of which would result in the highest total payout opportunity under the annual cash incentive program of 400% of base salary.

Payouts of the annual cash incentive are determined based on an equal weighting for the net sales and operating income measures.measures and are linearly interpolated for achievement between the threshold, target, and maximum goals. There is no payout for a particular performance measure unless the threshold performance goal is achieved with respect to that measure. Payoutsmeasure, and the payouts are calculated based oncapped at 400% of base salary for performance at or exceeding the

Apple Inc. | 2018 Proxy Statement | 35


maximum performance level achieved for each performance measure for 2016 and are linearly interpolated for achievement between the threshold, target, and maximum goals. The Compensation Committee may, in its discretion, reduce (but not increase) the actual payout of any individual’s annual cash incentive based on Apple’s performance and the Compensation Committee’s subjective assessment of the named executive officer’s overall performance.

The Compensation Committee established performance goals in the first quarter of 2016, taking into consideration Apple’s 2015 financial results, macroeconomic factors, the payout opportunities based on attainment of performance goals at threshold, target, and maximum levels, and pay-for-performance alignment.

2016 Goals and Results

LOGO

Apple Inc. |For 2017, Proxy Statement | 33


As shown in the table above, our 2016we achieved net sales of $215.6$229.2 billion and operating income of $60.0$61.3 billion, were 96.4% and 99.5% ofwhich exceeded the respective target goals setestablished by the Compensation Committee. This performance resulted in a combined payout at 89.5% of target for each named executive officer. Overall, our 2016 performance with respect to net sales and operating income was 7.7% and 15.7% below our record-breaking 2015 levels; however,Committee under the 2016 payouts to our named executive officers were significantly less than the2017 annual cash incentive payouts for 2015, reflecting strong pay-for-performance alignment.program and resulted in an annual cash incentive payout of 155.5% of target. The Compensation Committee determined that no downward adjustments to the payouts would be made based on Apple’s 20162017 performance and the individual contributions of our named executive officers.

Long-Term Equity Elements and Awards

Our executive compensation program emphasizes long-term shareholder value creation through the use of equity awards in the form ofperformance-based and time-based RSUs granted to deliver long-term compensation incentives. The Compensation Committee has discretion to approve awards with different vesting conditions as it deems necessary to meet the objectiveseach of our executive compensation program.officers.

Performance-Based RSUs.The number of performance-based RSUs granted to our named executive officers that vest depends on Apple’s total shareholder return relative to the other companies in the S&P 500 for the performance period (“Relative TSR”). The Compensation Committee chose Relative TSR as a straightforward and objective metric for Apple’s shareholders to evaluate our performance against the performance of other companies and to align the interests of our named executive officers with the interests of shareholders.

We measure Relative TSR for a specified period of time based on the change in each company’s stock price during that period, taking into account any dividends paid during that period, which are assumed to be reinvested in the stock. A 20-trading-day averaging period is used to determine the beginning and ending stock price values used to calculate the total shareholder return of Apple and the other companies in the S&P 500. This averaging period mitigates the impact on the long-term Relative TSR results of one-day or short-term stock price fluctuations at the beginning or end of the performance period. The change in value from the beginning to the end of the period is divided by the beginning value to determine total shareholder return. Apple’s total shareholder return is compared to the total shareholder return of other companies, ranked by percentile, to determine the number of performance-based RSUs that vest for each performance period. An averaging period is used to determine the beginning and ending stock price values used to calculate Relative TSR for the performance period. This mitigates the impact on the long-term Relative TSR results of one-day or short-term stock price fluctuations at the beginning or end of the performance period. The beginning stock price value is calculated using each company’s average closing stock price for the 20 consecutive trading days immediately prior to the beginning of the performance period. The ending stock price value is calculated using each company’s average closing price for the 20 consecutive trading days ending on the last day of the performance period.

Time-Based RSUs. Equity awards with time-based vesting align the interests of our executivesexecutive officers with the interests of our shareholders and promote the stability and retention of a stronghigh-performing executive team over the longer term. Vesting schedules for time-based awards generally require continuous service over multiple years, as described below.

Apple Inc. | 2017 Proxy Statement | 34


Mr. Cook’s Long-Term Equity Award

Mr. Cook last received an equity award when he was promoted to Chief Executive Officer in 2011 (the “2011 RSU Award”). At Mr. Cook’s request, the 2011 RSU Award was modified in 2013 to put a portion of the award at risk based on Apple’s Relative TSR performance. The performance condition requires Apple to outperform two-thirds of the comparative companies in the S&P 500 for each performance period in order for 100% of the performance-based RSUs allocated to that period to vest. The 2011 RSU Award only has downside risk to Mr. Cook. It does not contain an upside vesting opportunity, and there is no interpolation for results between the Relative TSR percentile levels set forth below.

 

Apple Inc. | 2018 Proxy Statement | 36


Relative TSR Percentile v.
S&P 500 Companies
 Performance-Based
RSUs Vesting
Top Third 100%
Middle Third 50%
Bottom Third 0%

For the three-year performance period from August 25, 20132014 through August 24, 2016,2017, 280,000 performance-based RSUs were subject to the Relative TSR performance condition. Apple’s Relative TSR for this performance period was at the 78th81st percentile of the companies that were included in the S&P 500 for the entire performance period. As a result, all of the 280,000 performance-based RSUs vested on August 24, 2016.2017. Apple’s total shareholder return during this 3-year performance period was 70.57%.

Other Named Executive Officers’ Long-Term Equity Awards

In October 2015,2016, the Compensation Committee awarded RSUs with a grant date fair value of $20 million (the “Annual RSU Awards”) to each of our named executive officers, other than Mr. Cook. The performance-based component of the Annual RSU Awards were allocated between 60% time-based and 40% performance-based RSUs as a percentagewas increased to 50% of the grant date fair value reported in the Summary Compensation Table.to place a greater emphasis on performance-based compensation for our executive officers. The value and relative mix of the Annual RSU Awards was a subjective determination by the Compensation Committee based on its own business judgment after taking into consideration factors such as market compensation data provided by its independent compensation consultant, its subjective assessment of the appropriate relationship between time- and performance-based awards, historical equity grants, shareholder feedback, and, with respect to the value of the awards, financial results and market capitalization compared to peer companies.

The Annual RSU Awards granted as performance-based RSUs in October 20152016 have a three-year performance-period (fiscal years 20162017 through 2018)2019) and will vest on October 1, 2018,2019, subject to continued employment through that date, with zero to 200% of the target number of shares vesting depending on Apple’s Relative TSR percentile ranking for the performance period, as follows:

 

Relative TSR Percentile v.
S&P 500 Companies
 

Performance-Based RSUs Vesting

as a Percentage of Target

85th or above 200%
55th 100%
25th 25%
below 25th 0%

This vesting schedule requires Relative TSR performance at the 25th percentile to vest in the threshold number of shares, Relative TSR performance above the median at the 55th percentile to vest in the target number of shares, and Relative TSR performance that is significantly above the median at the 85th percentile in order to vest in the maximum 200% of the target number of shares.

Apple Inc. | 2017 Proxy Statement | 35


No RSUs vest if Apple’s Relative TSR performance is below the 25th percentile. In addition, if Apple’s total shareholder return for the performance period is negative, the number of RSUs that vests is capped at 100% of the target number of shares regardless of our percentile ranking. If Apple’s Relative TSR percentile ranking is above the 25th percentile and between the levels shown in the table above, the portion of the RSUs that vests is linearly interpolated between the two nearest vesting percentages.

Apple Inc. | 2018 Proxy Statement | 37


The Annual RSU Awards granted as time-based RSUs in October 2016 vest in three equal annual installments commencing on April 1, 2019 (approximately two and one-half years following the grant date), subject to continued employment through each applicable vesting date. This schedule means that, to receive the full benefit of the time-based RSU award, the recipient must perform approximately four and one-half years of continuous service following the grant date. The April vesting dates for the time-based RSUs were selected to balance the October vesting of the performance-based RSUs and provide regular vesting intervals.

Performance-Based RSU Payout Results.During 2017, Mr. Riccio and Mr. Sewell vested in annual performance-based RSUs that were granted on March 3, 2014. For the three-year performance period from the beginning of 2014 through the end of 2016, each of Mr. Riccio and Mr. Sewell vested in 87,578 performance-based RSUs based on Apple’s Relative TSR at the 83rd percentile of the companies that were included in the S&P 500 for the period. Apple’s total shareholder return during this 3-year performance period was 69.27%.

During 2017, Mr. Maestri vested in performance-based RSUs that were granted on May 29, 2014 in connection with his promotion to Chief Financial Officer. For the 16-month28-month performance period from May 29, 2014 through the end of 2015, Apple’s Relative TSR was at the 85th percentile of the companies that were included in the S&P 500 for the period. As a result, Mr. Maestri vested in 15,918 performance-based RSUs on October 1, 2015. At the beginning of 2017, for the 28-month period from May 29, 2014 through the end of 2016, Mr. Maestri vested in 10,694 performance-based RSUs based on Apple’s Relative TSR at the 67th percentile of the companies that were included in the S&P 500 for the period. Apple’s total shareholder return during this 28-month performance period was 33.62%.

During 2016,2017, Ms. Ahrendts vested in performance-based RSUs that were granted on May 1, 2014 in connection with her hiring. For the two-yearthree-year performance period from May 1, 2014 through April 30, 2016,2017, Ms. Ahrendts vested in 80,458 performance-based RSUs based on Apple’s Relative TSR was at the 81st94th percentile of the companies that were included in the S&P 500 for the period. As a result, Ms. Ahrendts vested in 75,124 performance-based RSUs on May 1, 2016.

During 2016, Mr. Cue, Mr. Riccio, and Mr. Sewell vested in annual performance-based RSUs that were granted on March 3, 2014. For the two-yearApple’s total shareholder return during this 3-year performance period from the beginning of 2014 through the end of 2015, Apple’s Relative TSR was at the 92nd percentile of the companies that were included in the S&P 500 for the period. As a result, each of Mr. Cue, Mr. Riccio, and Mr. Sewell vested in 92,764 performance-based RSUs on October 1, 2015. At the beginning of 2017, for the three-year period from the beginning of 2014 through the end of 2016, each of Mr. Cue, Mr. Riccio, and Mr. Sewell vested in 87,578 performance-based RSUs based on Apple’s Relative TSR at the 83rd percentile of the companies that were included in the S&P 500 for the period.

The Annual RSU Awards granted as time-based RSUs in October 2015 vest in three equal annual installments commencing on April 1, 2018 (approximately two and one-half years following the grant date), subject to continued employment through each applicable vesting date. This schedule means that, to receive the full benefit of the time-based RSU award, the recipient must generally perform four and one-half years of continuous service following the grant date. The April vesting dates for the time-based RSUs were selected to balance the October vesting of the performance-based RSUs and provide regular vesting intervals.

In October 2016, the Compensation Committee took into consideration a number of factors, including shareholder feedback, and increased the performance-based component of the 2017 Annual RSU Awards to 50% of the grant date fair value, placing an even greater emphasis on performance-based compensation for our executive officers.95.96%.

Dividend Equivalents

At Mr. Cook’s request, none of his RSUs participate in dividend equivalents. All other unvested RSUs granted to Apple employees have dividend equivalents. Dividend equivalentsequivalent rights, which entitle RSU holders of RSUs to the same dividend value per share as holders of common stock.our shareholders. Dividend equivalents are subject to the same vesting and other terms and conditions as the corresponding unvested RSUs. Dividend equivalents are accumulated and paid when the underlying RSUs vest.

Other Benefits

Our executive officers are eligible to participate in our health and welfare programs, Employee Stock Purchase Plan, 401(k) Plan,plan, matching gifts program, vacation cash-out, and other benefit programs on the same basis as other employees.

Apple Inc. | 2017 Proxy Statement | 36


Security.Security and Private Aircraft. The personal safety and security of our employees is of the utmost importance to Apple and its shareholders. Accordingly, weWe provide risk-based, business-related and personal security services to our employees, including our named executive officers, as appropriate. Although not requested by Mr. Cook, given the profile of the company and Mr. Cook’s role as CEO, Apple also provides risk-based personal security services for him, as determined to be appropriate by our security team. We do not consider thesethe security measures provided to our executive officers to be a personal benefit, for Mr. Cook, but rather a reasonable and necessary expenseexpenses for the benefit of Apple. We also offer risk-based personal security assistance to members of our executive team based onHowever, in accordance with SEC disclosure rules, the highly visible nature of their roles. The aggregate incremental cost of these services is reported in the Summary Compensation TableTable.

As an additional security measure for Mr. Cook, the Board also requires that he use private aircraft for all business and personal travel. This policy was implemented in accordance with SEC disclosure rules.

Relocation Assistance. Relocation assistance, including a gross-up for taxable relocation benefits, is provided to employees when necessary2017 in the interests of security and efficiency based on business needs. Ms. Ahrendts was provided relocation assistance to move closer to Apple’s headquarters in connection with her hiring. Someour global profile and the highly visible nature of these relocation expenses were incurred in 2016 and are reported in the Summary Compensation Table.

Severance. We generally do not enter into severance arrangements with our executive officers. An exception to this practice was made in connection with hiring Ms. Ahrendts in May 2014 in recognition of the risk she assumed by leaving her priorMr. Cook’s role as Chief Executive OfficerCEO. Mr. Cook recognizes imputed taxable income and is not provided a tax reimbursement for personal use of Burberry. Ms. Ahrendts has a limited cash severance arrangement until May 2017 and equity acceleration for a portion of her outstanding equity awards, in each case, in the event of a termination by private aircraft.

Apple other than for “Cause,” or if she resigns for “Good Reason.” Details of the arrangement with Ms. Ahrendts are described under “Executive Compensation—Executive Compensation Tables” in the section entitled “Potential Payments Upon Termination or Change in Control.”Inc. | 2018 Proxy Statement | 38

Chartered Aircraft.


From time to time, other members of the executive team, including each of the named executive officers other than Mr. Cook, may request charteredprivate aircraft services to facilitate travel that is directly and integrally related to the performance of their job duties and when the use of a chartered planeprivate aircraft will increase efficiency or security associated with a particular trip. Occasionally, spouses or other family members may accompany an executive on these flights. When this occurs, we require the executive to pay the greater of the incremental cost, if any, to accommodate these guests on the flight or the imputed income amount determined using the IRS Standard Industry Fare Level (SIFL) rate. Accordingly, there is no incremental cost to Apple forwhen family accompanimentmembers accompany an executive on charteredprivate business flights.

Relocation Assistance. Relocation assistance, including a gross-up for taxable relocation benefits, is provided to employees when necessary based on business needs. Ms. Ahrendts was provided relocation assistance to move closer to Apple’s headquarters in connection with her hiring. Some of these relocation expenses were incurred in 2017 and are reported in the Summary Compensation Table.

Tax Assistance.In 2017, Ms. Ahrendts incurred fees for personal tax services related to tax assistance for relocation benefits that were provided to her for 2014 and 2015. These fees were paid by Apple and are reported in the Summary Compensation Table.

Severance. We generally do not enter into severance arrangements with our executive officers. An exception to this practice was made in connection with hiring Ms. Ahrendts in May 2014. We offered her a limited cash severance arrangement and an accelerated vesting provision for certain RSUs. Her limited cash severance arrangement expired in May 2017, and she has 13,132 unvested RSUs remaining from the RSUs she was awarded upon hire that have an accelerated vesting provision if Apple terminates her employment other than for “Cause” or if she resigns for “Good Reason” prior to the date the awards are scheduled to vest in June 2018. Details of this arrangement are described under “Executive Compensation—Executive Compensation Tables” in the section entitled “Potential Payments Upon Termination or Change of Control.”

Governance and Other Considerations

Tax Deductibility of Compensation Expense. Section 162(m) of the Internal Revenue Code generally places a $1 million limit on the amount of compensation a company can deduct in any one year for compensation paid to the chiefcertain executive officer and the three most highly-compensated executive officers employed by the company at the end of the year (other than the chief financial officer). However, the $1 million deduction limit generally does not apply to compensation that is performance-based and provided under a shareholder-approved plan.officers. While the Compensation Committee considers the deductibility of awards as one factor in determining executive compensation, the Compensation Committee also looks at other factors in making its decisions, as noted above, and retains the flexibility to award compensation that it determines to be consistent with the goals of our executive compensation program even if the awards are not deductible by Apple for tax purposes.

In general, the 2016The 2017 annual cash incentive opportunities forand performance-based RSU awards granted to our executive officers have beenwere designed in a manner intended to be exempt from the deduction limitation of Section 162(m) because they are paid based on the achievement of pre-determined performance goals established by the Compensation Committee pursuant to our shareholder-approved equity incentive plan.

As a result of In addition, the modificationportion of Mr. Cook’s 2011 RSU Award we intend that the tranches of the award subject to performance criteria with measurement periods that begin after the June 21, 2013 modification be exempt from the deduction limitation of Section 162(m). In addition, the performance-based RSU awards granted to our other named executive officerswas designed in 2016 are alsoa manner intended to be exempt from the deduction limitation of Section 162(m).

Apple Inc. | 2017 Proxy Statement | 37


Base salary and RSU awards with only time-based vesting requirements, which represent a portion of the equity awards granted to our executive officers, are not exempt from Section 162(m), and therefore will not be deductible to the extent the $1 million limit of Section 162(m) is exceeded.

Apple Inc. | 2018 Proxy Statement | 39


The exemption from Section 162(m)’s deduction limit for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to our covered executive officers in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017.

Despite the Compensation Committee’s efforts to structure the executive team annual cash incentives and performance-based RSUs in a manner intended to be exempt from Section 162(m) and therefore not subject to its deduction limits, because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and the regulations issued thereunder, including the uncertain scope of the transition relief under the legislation repealing Section 162(m)’s exemption from the deduction limit, no assurance can be given that compensation we intendintended to satisfy the requirements for exemption from Section 162(m) in fact will. Further, the Compensation Committee reserves the right to modify compensation that was initially intended to be exempt from Section 162(m) if it determines that such modifications are consistent with Apple’s business needs.

Recoupment of RSUs.The named executive officers’ RSUs are granted pursuant to the terms of our standard RSU agreements. These terms require an employee to deliver or otherwise repay to Apple any shares or other amount that may be paid in respect of RSUs in the event the employee commits a felony while employed by Apple, or engages in a breach of confidentiality, commits an act of theft, embezzlement or fraud, or materially breaches any agreement with Apple while employed by Apple or at any time thereafter.

Prohibition on Hedging, Pledging, and Short Sales. We prohibit transactions in derivatives of Apple stock, including hedging transactions, for all directors, officers, employees, consultants, and contractors of Apple. In addition, we prohibit pledging of Apple stock as collateral by directors and executive officers of Apple and prohibit short sales of Apple stock by directors and executive officers of Apple.officers.

Stock Ownership Guidelines. Under our stock ownership guidelines, Mr. Cook is expected to own shares of Apple stock that have a value equal to ten times his base salary. Although Mr. Cook was required to satisfyAs of the stock ownership guidelines within five yearsend of its implementation in 2012,2017, he already ownsowned shares with a value significantly in excess of the guidelines.over 46 times his base salary. All other executive officers are expected to own shares that have a value equal to three times their base salary by the later of February 6, 2018, or within five years after anof the officer first becomesbecoming subject to the guidelines. Each executive officer currently satisfies the guidelines or has time remaining to satisfy the guidelines. Shares may be owned directly by the individual, owned jointly with or separately by the individual’s spouse, or held in trust for the benefit of the individual, the individual’s spouse, or the individual’s children.

Risk Considerations. The Compensation Committee considers, in establishing and reviewing the executive compensation program, whether the program encourages unnecessary or excessive risk-taking and has concluded that it does not. See the section entitled “Board Oversight of Risk Management” above for an additional discussion of risk considerations.

 

Apple Inc. | 20172018 Proxy Statement | 3840


Executive Compensation Tables

Summary Compensation Table—2017, 2016, 2015, and 20142015

The following table, footnotes, and related narrative show information regarding the total compensation of each named executive officer for 2017, 2016, 2015, and 2014,2015, except in the case of Mr. Sewell,Srouji, who was not a named executive officer in 2014.2015 and 2016.

 

Name and Principal Position

(a)

 

Year

(b)

   

Salary

($)(c)

   

Bonus

($)(d)

   

Stock

Awards(1)

($)(e)

  

Non-Equity

Incentive Plan

Compensation(2)

($)(f)

  

All Other

Compensation

($)(g)

  

Total

($)(h)

 

Tim Cook

 

Chief Executive Officer

  2016     3,000,000              5,370,000    377,719(3)   8,747,719  
 

 

 

 

2015

 

  

  

 

 

 

2,000,000

 

  

  

 

 

 

 

  

  

 

 

 

 

  

 

 

 

 

8,000,000

 

  

 

 

 

 

281,327

 

  

 

 

 

 

10,281,327

 

  

 

 

 

 

 

2014

 

 

  

 

  

 

 

 

1,748,462

 

  

  

 

 

 

 

  

  

 

 

 

 

  

 

 

 

 

6,700,000

 

  

 

 

 

 

774,176

 

  

 

 

 

 

9,222,638

 

  

Luca Maestri

 

Senior Vice President,

Chief Financial Officer

  2016     1,000,000          20,000,083    1,790,000    13,486(4)   22,803,569  
 

 

 

 

2015

 

  

  

 

 

 

1,000,000

 

  

  

 

 

 

 

  

  

 

 

 

20,000,105

 

  

 

 

 

 

4,000,000

 

  

 

 

 

 

337,872

 

  

 

 

 

 

25,337,977

 

  

 

 

 

 

 

2014

 

 

  

 

  

 

 

 

717,211

 

  

  

 

 

 

 

  

  

 

 

 

11,335,043

 

  

 

 

 

 

1,608,255

 

  

 

 

 

 

342,292

 

  

 

 

 

 

14,002,801

 

  

Angela Ahrendts

 

Senior Vice President,
Retail

  2016     1,000,000          20,000,083    1,790,000    112,809(5)   22,902,892  
 

 

 

 

2015

 

  

  

 

 

 

1,000,000

 

  

  

 

 

 

 

  

  

 

 

 

20,000,105

 

  

 

 

 

 

4,000,000

 

  

 

 

 

 

779,124

 

  

 

 

 

 

25,779,229

 

  

 

 

 

 

 

2014

 

 

  

 

  

 

 

 

411,538

 

  

  

 

 

 

500,000

 

  

  

 

 

 

70,001,196

 

  

 

 

 

 

1,648,352

 

  

 

 

 

 

790,038

 

  

 

 

 

 

73,351,124

 

  

Eddy Cue

 

Senior Vice President,
Internet Software and
Services

  2016     1,000,000          20,000,083    1,790,000    17,461(6)   22,807,544  
 

 

 

 

2015

 

  

  

 

 

 

1,000,000

 

  

  

 

 

 

 

  

  

 

 

 

20,000,105

 

  

 

 

 

 

4,000,000

 

  

 

 

 

 

52,136

 

  

 

 

 

 

25,052,241

 

  

 

 

 

 

 

2014

 

 

  

 

  

 

 

 

947,596

 

  

  

 

 

 

 

  

  

 

 

 

20,000,900

 

  

 

 

 

 

3,437,500

 

  

 

 

 

 

59,743

 

  

 

 

 

 

24,445,739

 

  

Dan Riccio

 

Senior Vice President,
Hardware Engineering

  2016     1,000,000          20,000,083    1,790,000    17,461(7)   22,807,544  
 

 

 

 

2015

 

  

  

 

 

 

1,000,000

 

  

  

 

 

 

 

  

  

 

 

 

20,000,105

 

  

 

 

 

 

4,000,000

 

  

 

 

 

 

17,521

 

  

 

 

 

 

25,017,626

 

  

 

 

 

 

 

2014

 

 

  

 

  

 

 

 

947,596

 

  

  

 

 

 

 

  

  

 

 

 

20,000,900

 

  

 

 

 

 

3,437,500

 

  

 

 

 

 

17,239

 

  

 

 

 

 

24,403,235

 

  

Bruce Sewell

 

Senior Vice President,
General Counsel and
Secretary

  2016     1,000,000          20,000,083    1,790,000    17,461(8)   22,807,544  
 

 

 

 

2015

 

  

  

 

 

 

1,000,000

 

  

  

 

 

 

 

  

  

 

 

 

20,000,105

 

  

 

 

 

 

4,000,000

 

  

 

 

 

 

17,521

 

  

 

 

 

 

25,017,626

 

  

          
 

Name and Principal Position

(a)

 Year
(b)
  Salary(1)
($)(c)
  Bonus
($)(d)
  Stock
Awards(2)
($)(e)
  Non-Equity
Incentive Plan
Compensation(3)
($)(f)
  All Other
Compensation
($)(g)
  

Total

($)(h)

 
 

Tim Cook

 

Chief Executive Officer

  2017   3,057,692         9,327,000   440,374(4)   12,825,066 
  2016   3,000,000         5,370,000   377,719   8,747,719 
  

 

2015

 

 

 

  2,000,000         8,000,000   281,327   10,281,327 
 

Luca Maestri

 

Senior Vice President, Chief Financial Officer

  2017   1,019,231      20,000,113   3,109,000   13,271(5)   24,141,615 
  2016   1,000,000      20,000,083   1,790,000   13,486   22,803,569 
  

 

2015

 

 

 

  1,000,000      20,000,105   4,000,000   337,872   25,337,977 
 

Angela Ahrendts

 

Senior Vice President, Retail

  2017   1,019,231      20,000,113   3,109,000   87,728(6)   24,216,072 
  2016   1,000,000      20,000,083   1,790,000   112,809   22,902,892 
  

 

2015

 

 

 

  1,000,000      20,000,105   4,000,000   779,124   25,779,229 
 

Johny Srouji

 

Senior Vice President, Hardware Technologies

 

  2017   1,019,231      20,000,113   3,109,000   34,048(7)   24,162,392 
 

Dan Riccio

 

Senior Vice President, Hardware Engineering

  2017   1,019,231      20,000,113   3,109,000   17,702(8)   24,146,046 
  2016   1,000,000      20,000,083   1,790,000   17,461   22,807,544 
  

 

2015

 

 

 

  1,000,000      20,000,105   4,000,000   17,521   25,017,626 
 

Bruce Sewell

 

Former Senior Vice President, General Counsel and Secretary

  2017   1,019,231      20,000,113   3,109,000   17,702(9)   24,146,046 
  2016   1,000,000      20,000,083   1,790,000   17,461   22,807,544 
  

 

2015

 

 

 

  1,000,000      20,000,105   4,000,000   17,521   25,017,626 

 

 (1)

For 2017, Mr. Cook’s annual base salary was $3 million and the annual base salary for each of our other named executive officers was $1 million. Because 2017 was a 53-week fiscal year, the 2017 salary amounts reflect an extra week of pay.

(2)

The grant date fair value for time-based RSUs is measured based on the closing fair market valueprice of Apple’s common stock on the date of grant. The grant date fair value for performance-based RSUs is calculated based on a Monte-Carlo valuation of each award on the date of grant, determined under FASB ASC 718. Assuming the highest level of performance is achieved under the applicable performance conditions, the maximum possible value of the performance-based RSUs granted to each of the named executive officers in 20162017 (other than Mr. Cook), using the grant date fair value, is $16,000,122. See Note 1—

 

 

Apple Inc. | 20172018 Proxy Statement | 3941


 

$20,000,068. See Note 1—Summary of Significant Accounting Policies found in Part II, Item 8, “Financial Statements and Supplementary Data” in the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended September 30, 2017, and also see footnote 1 to the table entitled “Grants of Plan-Based Awards—2016.2017.

 

 

 (2)(3)

As described under “Executive Compensation—Compensation Discussion and Analysis,” the named executive officers’ annual cash incentives are based on the performance of Apple relative to pre-determined objectives for the year and the performance of the individual executive. The threshold, target, and maximum amounts for each named executive officer’s 20162017 annual cash incentive opportunity are shown in the table entitled “Grants ofPlan-Based Awards—2016.2017.” In 2016,2017, Apple was belowabove its target performance goals for both net sales and operating income, resulting in a payout of each named executive officer’s annual cash incentive at 89.5%155.5% of target. The Compensation Committee determined that no downward adjustments would be made based on Apple’s or an individual’s performance and approved the payout for each named executive officer for 2016.2017.

 

 

 (3)(4)

This amount represents: (i) Apple’s contributions to Mr. Cook’s account under its 401(k) plan in the amount of $15,900;$16,200; (ii) term life insurance premiums paid by Apple in the amount of $2,925;$3,003; (iii) vacation cash-out in the amount of $138,462; and$103,846; (iv) security expenses in the amount of $220,432,$224,216, which represents the incremental cost for personal security services provided to Mr. Cook as determined by allocating both direct costs and a percentage of fixed costs incurred by Apple and used to provide personal security services.services; and (v) personal air travel expenses in the amount of $93,109, which represents the incremental cost to Apple for Mr. Cook’s personal use of private aircraft based on hourly flight charges and other variable costs incurred by Apple for such use, including variable fuel charges, departure fees, and landing fees. For security reasons, the Board requires that Mr. Cook use private aircraft for all business and personal travel.

 

 

 (4)(5)

This amount represents: (i) Apple’s contributions to Mr. Maestri’s account under its 401(k) plan in the amount of $11,925;$11,769; and (ii) term life insurance premiums paid by Apple in the amount of $1,561.$1,502.

 

 

 (5)(6)

This amount represents: (i) Apple’s contributions to Ms. Ahrendts’ account under its 401(k) plan in the amount of $7,950;$12,150; (ii) term life insurance premiums paid by Apple in the amount of $1,561;$1,502; (iii) relocation expenses in the amount of $49,253$23,765 and associated tax gross up for taxable relocation amounts in the amount of $53,742;$28,774; (iv) fees for tax services paid by Apple in the amount of $21,000; and (iv)(v) personal security expenses in the amount of $303.$537.

 

 

 (6)(7)

This amount represents: (i) Apple’s contributions to Mr. Cue’sSrouji’s account under its 401(k) plan in the amount of $15,900; and$16,200; (ii) term life insurance premiums paid by Apple in the amount of $1,561.$1,502; and (iii) vacation cash-out in the amount of $16,346.

 

 

 (7)(8)

This amount represents: (i) Apple’s contributions to Mr. Riccio’s account under its 401(k) plan in the amount of $15,900;$16,200; and (ii) term life insurance premiums paid by Apple in the amount of $1,561.$1,502.

 

 

 (8)(9)

This amount represents: (i) Apple’s contributions to Mr. Sewell’s account under its 401(k) plan in the amount of $15,900;$16,200; and (ii) term life insurance premiums paid by Apple in the amount of $1,561.$1,502.

 

The amounts in the salary, bonus, and non-equity incentive plan compensation columns of the “Summary Compensation Table—2017, 2016, 2015, and 2014”2015” reflect actual amounts paid for the relevant years, while the amounts in the stock awards column reflect accounting values. The tables entitled “Outstanding Equity Awards at 20162017 Year-End” and “Option Exercises and Stock Vested—2016”2017” provide further information on the named executive officers’ potential realizable value and actual value realized with respect to their equity awards. The “Summary Compensation Table—2017, 2016, 2015, and 2014”2015” should be read in conjunction with the Compensation Discussion and Analysis and the subsequent tables and narrative descriptions.

 

Apple Inc. | 20172018 Proxy Statement | 4042


Grants of Plan-Based Awards—20162017

The following table shows information regarding the incentive awards granted to the named executive officers for 2016.2017.

 

    

Estimated Future Payouts Under

Non-Equity Incentive Plan Awards

     

Estimated Future Payouts

Under Equity Incentive Plan

Awards

    

All Other

Stock

Awards:

Number

of Shares

of Stock

or Units

(#)(i)

  

Grant Date

Fair Value
of Stock
and Option

Awards(1)

($)(j)

  

Grant Date

(b)

  Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
 Estimated Future Payouts Under
Equity Incentive Plan Awards
 All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)(i)
  Grant Date
Fair Value of
Stock and
Option
Awards(1)
($)(j)
 

Name

(a)

 Award Type 

Grant Date

(b)

 

Threshold

($)(c)

 

Target

($)(d)

 

Maximum

($)(e)

   

Threshold

(#)(f)

 

Target

(#)(g)

 

Maximum

(#)(h)

    Award Type Threshold
($)(c)
 

Target

($)(d)

 Maximum
($)(e)
 Threshold
(#)(f)
 Target
(#)(g)
 Maximum
(#)(h)
 
    

Tim Cook

 Cash Incentive      3,000,000    6,000,000    12,000,000                         Cash Incentive

 

     3,000,000   6,000,000   12,000,000                
Luca Maestri Cash Incentive      1,000,000    2,000,000    4,000,000                         Cash Incentive     1,000,000   2,000,000   4,000,000                
 Time-based RSUs  10/5/2015                              108,323    12,000,022  
 Performance-based RSUs  10/5/2015                 16,316    65,264    130,528         8,000,061   Time-based RSUs  10/14/2016                     85,013   10,000,079 
Angela Ahrendts Cash Incentive      1,000,000    2,000,000    4,000,000                        
 Performance-based RSUs

 

  10/14/2016            16,164   64,654   129,308      10,000,034 
Angela Ahrendts Time-based RSUs  10/5/2015                              108,323    12,000,022   Cash Incentive     1,000,000   2,000,000   4,000,000                
 Performance-based RSUs  10/5/2015                 16,316    65,264    130,528         8,000,061  
 Time-based RSUs  10/14/2016                     85,013   10,000,079 
Eddy Cue Cash Incentive      1,000,000    2,000,000    4,000,000                        
 Performance-based RSUs

 

  10/14/2016            16,164   64,654   129,308      10,000,034 
Johny Srouji Cash Incentive     1,000,000   2,000,000   4,000,000                
 Time-based RSUs  10/14/2016                     85,013   10,000,079 
 Time-based RSUs  10/5/2015                              108,323    12,000,022  
 Performance-based RSUs  10/5/2015                 16,316    65,264    130,528         8,000,061   Performance-based RSUs

 

  10/14/2016            16,164   64,654   129,308      10,000,034 
Dan Riccio Cash Incentive      1,000,000    2,000,000    4,000,000                         Cash Incentive     1,000,000   2,000,000   4,000,000                
 Time-based RSUs  10/5/2015                              108,323    12,000,022  
 Performance-based RSUs  10/5/2015                 16,316    65,264    130,528         8,000,061   Time-based RSUs  10/14/2016                     85,013   10,000,079 
 Performance-based RSUs

 

  10/14/2016            16,164   64,654   129,308      10,000,034 
Bruce Sewell Cash Incentive      1,000,000    2,000,000    4,000,000                         Cash Incentive     1,000,000   2,000,000   4,000,000                
 Time-based RSUs  10/5/2015                              108,323    12,000,022  
 Performance-based RSUs  10/5/2015                 16,316    65,264    130,528         8,000,061   Time-based RSUs  10/14/2016                     85,013   10,000,079 
 Performance-based RSUs

 

  10/14/2016            16,164   64,654   129,308      10,000,034 

 

 (1)

The grant date fair value for time-based RSUs is measured based on the closing fair market valueprice of Apple’s common stock on the date of grant. The grant date fair value for performance-based RSUs is calculated based on a Monte-Carlo valuation of each award on the date of grant, determined under FASB ASC 718, incorporating the following assumptions:

 

 

     

Assumptions

     

Assumptions

Grant Date  

Performance

Period End Date

  

Expected Term

(years)

  Expected
Volatility
  Risk-Free
Interest Rate
  Performance
Period End Date
  Expected Term
(years)
  Expected
Volatility
  Risk-Free
Interest Rate
10/5/2015  9/29/2018  2.98  26.91%  0.89%
10/14/2016  9/28/2019  2.95  24.21%  0.99%

 

   

Apple used its historical stock prices as the basis for the volatility assumptions. The risk-free interest rates were based on U.S. Treasury rates in effect at the time of grant. The expected term was based on the time remaining in the performance period on the grant date. See Note 1—Summary of Significant Accounting Policies found in Part II, Item 8, “Financial Statements and Supplementary Data” in the Notes to Consolidated Financial Statements in the Annual Report.Report on Form 10-K for the year ended September 30, 2017.

 

 

Apple Inc. | 20172018 Proxy Statement | 4143


Description of Plan-Based Awards

Non-Equity Incentive Plan Awards. Each of the “Non-Equity Incentive Plan Awards” shown in the table entitled “Grants of Plan-Based Awards—2016”2017” was granted under Apple’s 2014 Employee Stock Plan (the “2014 Plan”), which provides flexibility to grant cash incentive awards, as well as equity awards. The material terms of the 20162017 non-equity incentive awards are described under “Executive Compensation—Compensation Discussion and Analysis” in the section entitled “Annual Cash Incentive.”

All Other Stock Awards. Each of the time-based and performance-based RSUs shown in the table entitled “Grants of Plan-Based Awards—2016”2017” was granted under, and is subject to, the terms of the 2014 Plan. The Compensation Committee administers the 2014 Plan.

Time-Based RSUs.The time-based RSUs granted on October 5, 201514, 2016 are scheduled to vest in three annual installments commencing on April 1, 2018.2019. Vesting is generally contingent on each officer’s continued employment with Apple through the applicable vesting date.

Performance-Based RSUs. The performance-based RSUs granted on October 5, 201514, 2016 are scheduled to vest on October 1, 2018,2019, subject to eachthe officer’s continued employment with Apple through the vesting date and satisfaction of performance conditions for the performance period beginning on September 27, 201525, 2016 and ending on September 29, 2018.28, 2019. As described under “Executive Compensation—Compensation Discussion and Analysis” in the section entitled “Other Named Executive Officers’ Long-Term Equity Awards,” in each case, between 0% and 200% of the target number of performance-based RSUs vest depending on Apple’s Relative TSR percentile compared to the other companies in the S&P 500 over the performance period, with 100% of the target RSUs vesting if Apple’s Relative TSR is at the 55th percentile. If Apple’s total shareholder return for the performance period is negative, the number of RSUs that vest is capped at 100% of target.

Dividend Equivalents. RSUs granted under the 2014 Plan have dividend equivalents, which entitle holders of RSUs to the same dividend value per share as holders of common stock. Dividend equivalents are subject to the same vesting and other terms and conditions as the corresponding unvested RSUs. Dividend equivalents are accumulated and paid when the underlying RSUs vest. At Mr. Cook’s request, none of his RSUs participate in dividend equivalents.

 

Apple Inc. | 20172018 Proxy Statement | 4244


Outstanding Equity Awards at 20162017 Year-End

The following table shows information regarding the outstanding equity awards held by each of the named executive officers as of September 24, 2016.30, 2017.

 

Name

(a)

  

Grant Date

(b)

   

Number of Shares

or Units of Stock

That Have Not

Vested

(#)(c)

   

Market Value of

Shares or Units of

Stock That Have

Not Vested(1)

($)(d)

   

Equity Incentive

Plan Awards:

Number of

Unearned Shares,

Units or Other

Rights That Have

Not Vested

(#)(e)

   

Equity Incentive

Plan Awards:

Market or Payout

Value of Unearned

Shares, Units or

Other Rights That

Have Not Vested(1)

($)(f)

   

Grant Date

(b)

   

Number of��Shares
or Units of Stock
That Have Not
Vested

(#)(c)

 Market Value of
Shares or Units of
Stock That Have
Not Vested(1)
($)(d)
   

Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or Other
Rights That Have
Not Vested

(#)(e)

 

Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units or
Other Rights That

Have Not Vested(1)
($)(f)

 
Tim Cook   8/24/2011     2,100,000(2)     236,691,000     1,400,000(2)     157,794,000     8/24/2011    1,820,000(2)   280,498,400    1,120,000(2)   172,614,400 
Luca Maestri   3/4/2013     33,328(3)     3,756,399               10/7/2013    12,558(3)   1,935,439        
   10/7/2013     37,674(4)     4,246,237               5/29/2014    9,550(4)   1,471,846        
   5/29/2014     19,100(5)     2,152,761     7,749(5)(6)     873,390     10/17/2014    81,908(5)   12,623,661    68,576(5)(6)   10,568,933 
   10/17/2014     122,863(7)     13,847,889     68,576(7)(6)     7,729,201     10/5/2015    108,323(7)   16,694,741    65,264(7)(6)   10,058,488 
   10/5/15     108,323(8)     12,209,085     65,264(8)(6)     7,355,905     10/14/2016    85,013(8)   13,102,204    64,654(8)(6)   9,964,474 
Angela Ahrendts   5/1/2014     26,271(9)     2,961,004               5/1/2014    13,132(9)   2,023,904        
   5/1/2014     78,110(10)     8,803,778     40,229(10)(6)     4,534,211     10/17/2014    81,908(5)   12,623,661    68,576(5)(6)   10,568,933 
   10/17/2014     122,863(7)     13,847,889     68,576(7)(6)     7,729,201     10/5/2015    108,323(7)   16,694,741    65,264(7)(6)   10,058,488 
   10/5/15     108,323(8)     12,209,085     65,264(8)(6)     7,355,905     10/14/2016    85,013(8)   13,102,204    64,654(8)(6)   9,964,474 
Eddy Cue   3/3/2014     106,110(11)     11,959,658     44,912(11)(6)     5,062,032  
Johny Srouji   10/7/2013    13,448(3)   2,072,606        
   10/10/2014    27,921(10)   4,303,185        
   10/17/2014     122,863(7)     13,847,889     68,576(7)(6)     7,729,201     10/5/2015    56,418(11)   8,695,142        
   10/5/15     108,323(8)     12,209,085     65,264(8)(6)     7,355,905     10/14/2016    85,013(8)   13,102,204    64,654(8)(6)   9,964,474 
Dan Riccio   3/3/2014     106,110(11)     11,959,658     44,912(11)(6)     5,062,032     3/3/2014    53,055(12)   8,176,837        
   10/17/2014     122,863(7)     13,847,889     68,576(7)(6)     7,729,201     10/17/2014    81,908(5)   12,623,661    68,576(5)(6)   10,568,933 
   10/5/15     108,323(8)     12,209,085     65,264(8)(6)     7,355,905     10/5/2015    108,323(7)   16,694,741    65,264(7)(6)   10,058,488 
   10/14/2016    85,013(8)   13,102,204    64,654(8)(6)   9,964,474 
Bruce Sewell   3/3/2014     106,110(11)     11,959,658     44,912(11)(6)     5,062,032     3/3/2014    53,055(12)   8,176,837        
   10/17/2014     122,863(7)     13,847,889     68,576(7)(6)     7,729,201     10/17/2014    81,908(5)   12,623,661    68,576(5)(6)   10,568,933 
   10/5/15     108,323(8)     12,209,085     65,264(8)(6)     7,355,905     10/5/2015    108,323(7)   16,694,741    65,264(7)(6)   10,058,488 
   10/14/2016    85,013(8)   13,102,204    64,654(8)(6)   9,964,474 

 

Apple Inc. | 2018 Proxy Statement | 45


 (1)

The dollar amounts shown in Columns (d) and (f) are determined by multiplying the number of shares or units shown in Column (c) or (e), as applicable, by $112.71,$154.12, the closing price of Apple’s common stock on September 23, 2016,29, 2017, the last trading day of Apple’s fiscal year.

 

 

 (2)

700,000 time-based RSUs subject to this award are scheduled to vest on August 24, 2021, provided that the officer continues to be employed with Apple through the vesting date. The remaining 2,800,0002,240,000 time- and performance-based RSUs subject to this award are scheduled to vest in fivefour annual installments commencing on August 24, 2017, assuming2018, provided that the officer continues to be employed with Apple through the applicable vesting date and, with respect to a portion of each installment, satisfaction ofsatisfies the applicable performance conditions.

 

 

Apple Inc. | 2017 Proxy Statement | 43


 (3)

The RSUs subject to this award vested in their entirety on October 15, 2017.

(4)

The RSUs subject to this award are scheduled to vest in their entirety on March 4, 2017, assuming that the officer continues to be employed with Apple through the vesting date.

(4)

12,558 RSUs subject to this award vested on October 15, 2016, and the remaining RSUs subject to this award are scheduled to vest in two semi-annual installments commencing on April 15, 2017, assumingMay 29, 2018, provided that the officer continues to be employed with Apple through the applicable vesting date.

 

 

 (5)

The time-based RSUs subject to this award are scheduled to vest in two annual installments commencing on May 29, 2017, assumingApril 1, 2018, provided that the officer continues to be employed with Apple through the applicable vesting date. 10,694125,494 performance-based RSUs subject to this award vested on October 1, 2016 (138%2017 (183% of the target number of performance-based RSUs) upon satisfaction of the performance condition above target.

 

 

 (6)

The target number of performance-based RSUs is shown. As described under “Executive Compensation—Compensation Discussion and Analysis,” in each case, between 0% and 200% of the target number of performance-based RSUs vest depending on Apple’s Relative TSR compared to the other companies in the S&P 500 over the relevant performance period.

 

 

 (7)

The time-based RSUs subject to this award are scheduled to vest in three annual installments commencing on April 1, 2017, assuming2018, provided that the officer continues to be employed with Apple through the applicable vesting date. 68,57665,264 performance-based RSUs are scheduled to vest on October 1, 2017, assuming2018, provided that the officer continues to be employed with Apple through the vesting date and satisfaction ofsatisfies the applicable performance conditions.

 

 

 (8)

The time-based RSUs subject to this award are scheduled to vest in three annual installments commencing on April 1, 2018, assuming2019, provided that the officer continues to be employed with Apple through the applicable vesting date. 65,26464,654 performance-based RSUs are scheduled to vest on October 1, 2018, assuming2019, provided that the officer continues to be employed with Apple through the vesting date and satisfaction ofsatisfies the applicable performance conditions.

 

 

 (9)

13,139The RSUs subject to this award are scheduled to vest on June 14, 2017, and 13,132 RSUs subject to this award are scheduled to vestin their entirety on June 14, 2018, in each case, assumingprovided that the officer continues to be employed with Apple through the applicable vesting date.

 

 

 (10)

78,1109,307 RSUs subject to this award vested on October 15, 2017, and the remaining RSUs subject to this award are scheduled to vest in two semi-annual installments commencing on May 1, 2017, assumingApril 15, 2018, provided that the officer continues to be employed with Apple through the vesting date. 40,229 performance-based

(11)

11,284 RSUs subject to this award vested on October 15, 2017, and the remaining RSUs subject to this award are scheduled to vest in four semi-annual installments commencing on May 1, 2017, assumingApril 15, 2018, provided that the officer continues to be employed with Apple through the vesting date and satisfaction of applicable performance conditions.date.

 

 

 (11)(12)

The time-based RSUs subject to this award are scheduled to vest in two annual installments commencingtheir entirety on April 1, 2017, assuming2018, provided that the officer continues to be employed with Apple through the applicable vesting date. 87,578 performance-based RSUs subject to this award vested on October 1, 2016 (195% of the target number of performance-based RSUs) upon satisfaction of the performance condition above target.

 

 

Apple Inc. | 20172018 Proxy Statement | 4446


Stock Vested—20162017

The following table shows information regarding the vesting during 20162017 of RSUs previously granted to the named executive officers. No options were exercised by any named executive officer during 2016.2017.

 

 Stock Awards 
  Stock Awards 

Name

(a)

  

Number of Shares

Acquired on Vesting

(#)(b)

   

Value Realized on

Vesting(1)

($)(c)

  Number of Shares
Acquired on Vesting
(#)(b)
 

Value Realized on
Vesting(1)

($)(c)

 
Tim Cook   1,260,000     136,117,800    560,000   89,191,200 
Luca Maestri   117,243     13,114,923    119,643   17,224,661 
Angela Ahrendts   218,916     21,669,865    212,662   32,330,541 
Eddy Cue   670,820     80,284,181  
Johny Srouji  76,780   10,221,154 
Dan Riccio   338,320     38,919,456    181,588   24,400,942 
Bruce Sewell   670,820     75,674,681    181,588   24,400,942 

 

 (1)

The dollar amounts shown in Column (c) are determined by multiplying the number of shares that vested by the sum of the per share closing price of Apple’s common stock on the vesting date, andplus any dividend equivalents attributable to each such share.vested shares.

 

 

Apple Inc. | 20172018 Proxy Statement | 4547


Potential Payments Upon Termination or Change inof Control

We generally do not enter into severance arrangements with our named executive officers, and none of the equity awards granted to the named executive officers under Apple’s equity incentive plans provide for acceleration in connection with a change inof control or a termination of employment, other than as noted below or in connection with death or disability.

As described under “Executive Compensation—Compensation Discussion and Analysis” in the section entitled “Other Benefits,” Ms. Ahrendts was provided a limited cash severance arrangement when she joined Apple. Within the first three years of her start date, if we terminate Ms. Ahrendts’ employment other than for “Cause” or if she resigns for “Good Reason,” we will pay her as severance the amount of her final base salary for the remainder of the three-year period in a single lump sum. Under this arrangement, the severance value declines to zero by May 1, 2017. In addition, the vesting of the RSUs awarded to Ms. Ahrendts to compensate her for her unvested equity at Burberry (the “Make Whole RSUs”), where she previously served as Chief Executive Officer, (the “Make Whole RSUs”), iswould be accelerated if Apple terminatesterminated her employment other than for “Cause” or if she resignsresigned for “Good Reason.” Had Ms. Ahrendts’ employment terminated on September 23, 2016, the last business day of Apple’s fiscal year, the estimated amount that she would have been entitled to under the cash severance arrangement would have been $597,260, and the estimated amount she would have been entitled to under the Make Whole RSUs would have been $2,961,004. “Cause” and “Good Reason” are defined in Ms. Ahrendts’her offer letter. “Cause” generally means an act of fraud or material dishonesty; gross misconduct; failure to follow the lawful direction of the CEO or Board; failure to perform material duties for Apple; or material breach of an Apple policy. “Good Reason” generally means a material change in duties or responsibilities; a change in the reporting structure such that Ms. Ahrendts no longer reports to the CEO; a material change in primary work location; or a breach by Apple of any of its material commitments in connection with Ms. Ahrendts’her employment.

Had Apple terminated her employment other than for Cause or if she resigned for Good Reason on September 29, 2017, the last business day of Apple’s fiscal year, the estimated amount she would have been entitled to under the Make Whole RSUs would have been $2,023,904.

 

Apple Inc. | 20172018 Proxy Statement | 4648


Equity Acceleration upon Death or Disability

Time-Based RSUs. Time-based RSUs provide for partial accelerated vesting of the RSUs scheduled to vest on the next applicable vesting date following termination of employment due to disability and for full accelerated vesting upon death.

Performance-Based RSUs. Performance-based RSUs provide for a partial waiver of the service vesting condition upon the death or disability of the award recipient, with the number of shares that vest determined at the end of the performance period, based on actual performance results and the recipient’s dates of employment during the performance period.

The following table shows the estimated amounts that the named executive officers would have become entitled to under the terms of all outstanding RSUs had their employment terminated due to either death or disability on September 23, 2016,29, 2017, the last business day of Apple’s fiscal year. The estimated values for performance-based RSUs are shown at the maximum potential payout amounts.

 

Name    

Estimated Total Value of Equity

Acceleration upon Death(1)

($)

     

Estimated Total Value of Equity
Acceleration upon  Disability
(1)

($)

  

Estimated Total Value of Equity
Acceleration upon Death(1)

($)

 

Estimated Total Value of Equity
Acceleration upon Disability(1)

($)

 
Tim Cook     270,871,096       38,070,282    327,918,966   75,368,841 
Luca Maestri     53,042,453       24,038,225    87,092,133   52,795,810 
Angela Ahrendts     60,163,584       31,472,351    85,708,752   51,126,690 
Eddy Cue     63,216,785       33,290,589  
Johny Srouji  34,882,750   13,197,758 
Dan Riccio     63,216,785       33,290,589    91,861,685   54,588,225 
Bruce Sewell     63,216,785       33,290,589    91,861,685   54,588,225 

 

 (1)

The dollar amounts are determined by multiplying the number of shares subject to the accelerated RSUs by $112.71 (the$154.12, the closing price of Apple’s common stock on September 23, 2016).29, 2017.

 

Apple Inc. | 2018 Proxy Statement | 49


Apple Inc. | 2018 Proxy Statement | 50


Proposals

This Proxy Statement contains six proposals requiring shareholder action.

 

Apple Inc. | 20172018 Proxy Statement | 4751


Proposals

Overview of Proposals

This Proxy Statement contains 9 proposals requiring shareholder action:

Proposal No. 1 requests the election to our Board of the eight nominees named in this Proxy Statement.

Proposal No. 2 requests the ratification of the appointment of Ernst & Young LLP as Apple’s independent registered public accounting firm for 2017.

Proposal No. 3 requests that shareholders vote on an advisory resolution approving our executive compensation.

Proposal No. 4 requests that shareholders hold an advisory vote on the frequency of advisory votes on executive compensation.

Proposals No. 5 through No. 9 are shareholder proposals.

Each proposal is discussed in more detail in the pages that follow.

Apple Inc. | 2017 Proxy Statement | 48


Proposal No. 1 – Election of Directors

The Board has nominated directors Bell, Cook, Gore, Iger, Jung, Levinson, Sugar, and Wagner to be elected to serve until the next annual meeting of shareholders and until their successors are duly elected and qualified.

At the Annual Meeting, proxies cannot be voted for a greater number of individuals than the eight nominees named in this Proxy Statement. Holders of proxies solicited by this Proxy Statement will vote the proxies received by them as directed on the proxy card or, if no direction is made, for the election of the Board’s eight nominees.

The term of any incumbent director who does not receive the affirmative vote of (1)(i) a majority of the shares present or represented by proxy and voting at the Annual Meeting and (ii) a majority of the shares required to constitute a quorum, and has not earlier resigned, will end on the date that is the earlier of (a) 90 days after the date on which the voting results for the Annual Meeting are determined by the inspector of election, or (b) the date on which the Board selects a person to fill the office held by that director in accordance with Apple’s bylaws.

Each of the directors nominated by the Board has consented to serving as a nominee, being named in this Proxy Statement, and serving on the Board if elected. Each director elected at the Annual Meeting will be elected to serve a one-year term. If any nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxy holders may vote for any nominee designated by the present Board to fill the vacancy.

There are no family relationships among Apple’s executive officers and directors.

The Board recommends that shareholders vote FOR the election of directors Bell, Cook, Gore, Iger, Jung, Levinson, Sugar, and Wagner.

 

Vote Required

Apple has implemented majority voting in uncontested elections of directors. Accordingly, Apple’s bylaws provide that in an uncontested election of directors the affirmative vote of (i) a majority of the shares present or represented by proxy and voting at the Annual Meeting and (ii) a majority of the shares required to constitute a quorum is required to elect a director.

 

Apple Inc. | 20172018 Proxy Statement | 4952


Proposal No. 2 – Ratification of Appointment of Independent Registered Public Accounting Firm

The Audit Committee has re-appointed Ernst & Young LLP as Apple’s independent registered public accounting firm and as auditors of Apple’s consolidated financial statements for 2017.2018. Ernst & Young has served as Apple’s independent registered public accounting firm since 2009. The Audit Committee reviews the performance of the independent registered public accounting firm annually.

At the Annual Meeting, our shareholders are being asked to ratify the appointment of Ernst & Young as Apple’s independent registered public accounting firm for 2017.2018. In the event of a negative vote on this proposal, the Audit Committee will reconsider its selection. Even if this appointment is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in the best interests of Apple and its shareholders. Representatives of Ernst & Young are expected to be present at the Annual Meeting, will have an opportunity to make a statement if they desire to do so, and will be available to respond to questions.

Fees Paid to Auditors

The following table shows the fees billed by Apple’s independent registered public accounting firm for the years ended September 24, 2016,30, 2017 and September 26, 2015.24, 2016.

 

Ernst & Young  

2016

($)

     

2015

($)

  

2017

($)

     

2016

($)

 
Audit Fees(1)   13,537,500       12,414,100    14,977,900      13,537,500 
Audit-Related Fees(2)   653,000       636,800    678,600      653,000 
Tax Fees(3)   1,863,700       2,381,100    1,399,600      1,863,700 
All Other Fees(4)   62,200       50,000    84,500      62,200 
 

 

     

 

 
  

 

     

 

 
Total         16,116,400           15,482,000   17,140,600      16,116,400 

 

 (1)

Audit fees relate to professional services rendered in connection with the audit of Apple’s annual financial statements and internal control over financial reporting, quarterly review of financial statements, included in Apple’s Quarterly Reports on Form 10-Q, and audit services provided in connection with other statutory and regulatory filings.

 

 

 (2)

Audit-related fees relate to professional services that are reasonably related to the performance of the audit or review of Apple’s financial statements.

 

 

 (3)

Tax fees relate to professional services rendered in connection with tax compliance and preparation relating to tax returns and tax audits, as well as for tax consulting and planning services.

 

 

 (4)

All other fees relate to professional services not included in the categories above, including services related to other regulatory reporting requirements.

 

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Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services Performed by the Independent Registered Public Accounting Firm

Apple maintains an auditor independence policy that, among other things, prohibits Apple’s independent registered public accounting firm from performing non-financial consulting services, such as information technology consulting and internal audit services. This policy mandates that the Audit Committee approve in

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advance the audit and permissible non-audit services to be performed by the independent registered public accounting firm and the related budget, and that the Audit Committee be provided with quarterly reporting on actual spending. This policy also mandates that Apple may not enter into engagements with Apple’s independent registered public accounting firm for non-audit services without the express pre-approval of the Audit Committee. In accordance with this policy, the Audit Committee pre-approved all services performed by Apple’s independent registered public accounting firm in 2016.2017.

The Board recommends a vote FOR Proposal No. 2.

 

Vote Required

Approval of Proposal No. 2 requires the affirmative vote of (i) a majority of the shares present or represented by proxy and voting at the Annual Meeting and (ii) a majority of the shares required to constitute a quorum.

 

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Proposal No. 3 – Advisory Vote to Approve Executive Compensation

In accordance with the requirements of Section 14A of the Exchange Act and the related rules of the SEC, our shareholders have the opportunity to cast an annual advisory vote to approve the compensation of our named executive officers as disclosed pursuant to the SEC’s compensation disclosure rules, including the Compensation Discussion and Analysis, the compensation tables, and the narrative disclosures that accompany the compensation tables (a “say-on-pay proposal”)“say-on-pay” vote).

Our executive compensation program is designed to bereward performance in a simple and effective and link pay to performance.way. It reflects the unparalleled size, scope, and success of Apple’s business and the importance of our executive officers operating as well asa high-performing team, while focusing on key measures of profitability and the responsibilitiescreation of shareholder value. 2017 was another year of outstanding financial performance with net sales of $229.2 billion and operating income of $61.3 billion. Year-over-year our stock price increased 36.7%. We believe the compensation paid to our named executive officers. We believeofficers for 2017 appropriately relects and rewards their contributions to our compensation program appropriately rewards performance and is aligned with the long-term interests of our shareholders.

We encourage shareholders to read the Compensation Discussion and Analysis, beginning on page 2830 of this Proxy Statement, which describes the details of our executive compensation program and the decisions made by the Compensation Committee in 2016.

We had another year of strong financial results in 2016 with net sales of $215.6 billion and operating income of $60.0 billion. These two financial measures are used to evaluate executive performance under our annual cash incentive program. For 2016, these measures declined from our record-breaking 2015 levels, and were below the target performance goals set by the Compensation Committee. The annual cash incentives paid to our named executive officers for 2016 reflected these results with below-target payouts. While the annual cash incentives are intended to reward the achievement of short-term financial goals, our executive compensation program emphasizes and rewards results over the long-term through equity incentives that have a substantial performance-based component and multi-year vesting schedules. For 2017, we placed an even greater emphasis on long-term performance by increasing the performance-based component of our equity incentives to 50%. We have also implemented robust stock ownership guidelines that apply to all executive officers.2017.

We value the feedback provided by our shareholders. At the 2017 annual meeting of shareholders, whoapproximately 95% of votes cast supported our executive compensation program at the 2016 annual meeting of shareholders with approximately 95% of votes cast.program. We have discussions with many of our shareholders on an ongoing basis regarding various corporate governance topics, including executive compensation, and take into account the views of shareholders regarding the design and effectiveness of our executive compensation program.

Shareholders are being asked to approve the following resolution at the Annual Meeting:

 

RESOLVED, that the compensation paid to the named executive officers, as disclosed in this Proxy Statement pursuant to the SEC’s executive compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables, and the narrative disclosures that accompany the compensation tables), is hereby approved.

As an advisory vote, this proposal is not binding on Apple, the Board, or the Compensation Committee. However, the Compensation Committee and the Board value the opinions expressed by shareholders in their votes on this proposal and will consider the outcome of the vote when making future compensation decisions regarding named executive officers.

It is expected that the next say-on-pay vote will occur at the 20182019 annual meeting of shareholders.

The Board recommends a vote FOR Proposal No. 3.

 

Vote Required

Approval of Proposal No. 3 requires the affirmative vote of (i) a majority of the shares present or represented by proxy and voting at the Annual Meeting and (ii) a majority of the shares required to constitute a quorum.

 

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Proposal No. 4 – Advisory Vote on Frequency of Say-on-Pay Votes

As described in Proposal No. 3 above, in accordance with the requirements of Section 14AApproval of the Exchange ActAmended and Restated Apple Inc.Non-Employee Director Stock Plan

At the related rules of the SEC, ourAnnual Meeting, shareholders have the opportunity to cast an advisory voteare being asked to approve the compensationamended and restated Apple Inc. Non-Employee Director Stock Plan (the Apple Inc. 1997 Director Stock Plan, as proposed to be amended, has been renamed the “Apple Inc. Non-Employee Director Stock Plan” and is referred to herein as the “Non-Employee Director Stock Plan”). The amended and restated version of our named executive officers. This Proposal No. 4 affords shareholders the opportunity to cast an advisory vote on how often we should include a say-on-pay proposal in our proxy materials for future annual shareholder meetings or any special shareholder meeting for which we must include executive compensation information in the proxy statement for that meeting (a “say-on-pay frequency proposal”). Under this Proposal No. 4, shareholders may vote to have the say-on-pay vote every year, every two years, or every three years.

Our shareholders voted on a similar proposal in 2011 with the majority voting to hold the say-on-pay vote every year. We continue to believe that say-on-pay votes should be conducted every year so that our shareholders may annually express their views on our executive compensation program.

As an advisory vote, this proposal is not binding on Apple,Non-Employee Director Stock Plan was adopted by the Board on November 13, 2017, subject to shareholder approval.

The shares subject to the Non-Employee Director Stock Plan have been restated to reflect our 7-for-1 stock split in June 2014. We are not asking shareholders to increase the maximum number of shares that may be issued or transferred pursuant to awards under the Compensation Committee. However, the Compensation Committee and the Board value the opinions expressedNon-Employee Director Stock Plan.

Summary of Proposal

The Non-Employee Director Stock Plan was last approved by shareholders in their votes on this proposal and will consider the outcome of the vote when making future decisions regarding the frequency of conducting a say-on-pay vote.

It is expected that the next vote on a say-on-pay frequency proposal will occur at the 20232010 annual meeting of shareholders.

Shareholders may cast their advisory vote We are asking shareholders to conduct advisory votes on executive compensation every “1 Year,” “2 Years,” or “3 Years,” or “Abstain.”

The Board recommends a vote on Proposal No. 4 to hold say-on-pay votes every 1 YEAR (as opposed to 2 years or 3 years).

Vote Required

A plurality ofapprove the votes cast for Proposal No. 4 will determine the shareholders’ preferred frequency for holding an advisory vote on executive compensation. This means that the option for holding an advisory vote every 1 year, 2 years, or 3 years receiving the greatest number of votes will be considered the preferred frequency of the shareholders.

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Proposal No. 5 – Shareholder Proposal

Apple has been advised that the National Center for Public Policy Research, 20 F Street, NW, Suite 700, Washington, DC 20001,amended and restated Non-Employee Director Stock Plan, which has indicated it is a beneficial owner of at least $2,000 in market value of Apple’s common stock, intends to submitincludes the following proposal at the Annual Meeting:

Charitable Giving – Recipients, Intents and Benefits

Whereas, in addition to providing benefits to society at-large, charitable contributions should enhance the public image of our company. Increased disclosure about these contributions would provide shareholders with better insight into our corporate giving strategy.

Resolved: The proponent requests that the company provide an annual report, omitting proprietary information and at reasonable cost, disclosing: the company’s standards for choosing recipients of company assets in the form of charitable contributions; the business rationale and purpose for each of the charitable contributions, if any; personnel participating in the decision to contribute; the benefits to society at-large produced by company contributions; and a follow-up report confirming the contribution was used for the purpose stated. The report should be published on the company’s website.

Supporting Statement

Absent a system of accountability and transparency, some donated assets may be misused and potentially harm the company’s reputation and shareholder value. Current disclosure is insufficient to allow the company’s Board and shareholders to evaluate the use of corporate assets by outside organizations.

For example, the company has donated to the Center for American Progress (CAP) – an openly left-wing organization that, as reported by the Washington Post, made statements the head of the Anti-Defamation League called “anti-Semitic and borderline anti-Semitic.”

Many support CAP’s leftist policy work, many others do not. Most Americans would acknowledge that donating to an extremely ideological organization in this highly polarized political climate is controversial.

Also, while education advocates would likely applaud the company’s donations of iPads and other equipment to schools through its ConnectED program, certain labor unions and their political allies would likely oppose the company’s ConnectED donations to charter schools.

Furthermore, according to public reports, the company donated to the Clinton Foundation. Public reports indicate that the FBI is investigating or has investigated that organization for possible public corruption. Media reports also strongly imply that individuals and corporations may have sought preferential treatment from government actors in exchange for donations to the Clinton Foundation. The Clinton Foundation has many supporters who would support the company’s donation, but it also has many detractors that would disapprove of this type of giving.

Fuller disclosure would provide enhanced feedback opportunities from which our company could make more fruitful decisions. Corporate philanthropy should be transparent to better serve the interests of the shareholders.

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Apple’s Statement in Opposition to Proposal No. 5

The Board recommends a vote AGAINST Proposal No. 5.

Apple already provides detailed information about our core values and our most significant charitable contributions on our website atapple.com/diversity/creating-opportunities andapple.com/product-red. Apple’s largest charitable contributions, which are made only following extensive internal vetting and approval from one or more of our executive officers, focus on some of the most important issues facing our communities today. For example:principal amendments:

 

  

Apple supportsAnnual Compensation Limit.The Non-Employee Director Stock Plan does not currently limit the advancementamount of education. Apple has joined President Obama’s ConnectED initiative and pledged $100 millionannual compensation paid to bring technology and services into 114 underserved schools acrossa Non-Employee Director for service on the United States. Under this program, we are donating an iPad to every student, a Mac and iPad to every teacher, and an Apple TV to every classroom, as well as services and professional development for teachers. There are now more than 50,000 students learning, creating, and exploring on iPad through our ConnectED commitment, and 96% of those students are eligible for a free or reduced-price lunch program.

Apple supports health in the fightBoard. The proposed amendments provide for an AIDS-free generation. When our customers buy (PRODUCT)RED Apple products, Apple contributes to the Global Fund to provide counseling, testing, and medical care to those most affected by the AIDS epidemic. So far, (PRODUCT)RED has raised over $360annual limit of $1.5 million for all compensation paid to a Non-Employee Director, including the Global Fund, including nearly $120 million through Apple.value of annual equity awards, cash retainers, and other compensation.

 

 

  

Apple supports inclusion and diversity. Apple has launched a multiyear, $40 million partnership withExtension of Plan Term.The Non-Employee Director Stock Plan is currently scheduled to expire on November 9, 2019. The proposed amendments provide for the Thurgood Marshall College Fund. The TMCF in turn creates opportunities for students from public and private historically black colleges and universities who are pursuing careers in the tech industry. Apple does not just give moneyterm to the TMCF; we work collaboratively with the fund to advance its goals. For example, Apple hired 33 students from these institutions as summer interns in 2016, and as part of the TMCF partnership, also hosted them for a weeklong immersion at Apple’s campus several months ahead of time to provide them with a foundation of Apple culture and values to help pave the way for a successful experience.be extended until November 12, 2027.

 

Apple publicly discloses detailed information about

Accelerated Vesting Upon Death or Change of Control. The proposed amendments provide that any unvested awards will automatically vest in full upon a Non-Employee Director’s death and on a pro-rated basis, based on service performed from the date of grant, upon the occurrence of a change of control.

Description of Non-Employee Director Stock Plan

The following is a summary of the costprincipal features of the Non-Employee Director Stock Plan, and impactwhere indicated, the effect of these initiatives on our website.

Apple also supports many other organizations that share our core values, such as American Red Cross, The Conservation Fund, Grace Hopper Celebrationthe proposed amendments. This summary does not purport to be a complete description of Women in Computing, Mercy Corps, National Center for Women & Information Technology, National Society of Black Engineers, and World Wildlife Fund. In September 2011, Apple implemented a matching gifts program where Apple matches employee contributions of money, Apple products, or volunteer time to eligible nonprofit organizations. In certain cases, Apple matches cash contributions on a 2-for-1 basis, such as in cases of natural disasters or other major humanitarian crises. Apple has contributed to more than 11,000 different charitable organizations through this matching gifts program.

Apple believes in leaving the world better than we found it. We actively support our communities through philanthropic activities. The requested report would do nothing to advance these philanthropic activities, and would provide immaterial incremental additional information. Apple believes it is better to focus our efforts on actively supporting our communities than to divert time and resources to the preparation of a report that would have limited value to shareholders.

For all of the reasonsprovisions of the Non-Employee Director Stock Plan. It is qualified in its entirety by reference to the full text of the Non-Employee Director Stock Plan, as amended and restated. A copy of the Non-Employee Director Stock Plan, as amended and restated, is included as Annex A to this Proxy Statement. The Non-Employee Director Stock Plan is also available on the SEC’s website at www.sec.gov and any shareholder who desires to obtain a copy of the Non-Employee Director Stock Plan may do so by written request to Apple’s Secretary at 1 Infinite Loop, MS: 301-4GC, Cupertino, California 95014.

Purpose

The Non-Employee Director Stock Plan provides for the grant of equity-based awards to Non-Employee Directors. The purposes of the Non-Employee Director Stock Plan are to retain the services of qualified individuals who are not employees of Apple to serve as members of the Board and to secure for Apple the benefits of the incentives inherent in increased ownership of Apple’s common stock by such individuals by granting such individuals awards in respect of Apple’s common stock.

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Eligibility

Only directors who are not employees of Apple or any of its subsidiaries may participate in the Non-Employee Director Stock Plan. All seven of Apple’s Non-Employee Directors currently participate in the Non-Employee Director Stock Plan.

Shares Reserve

A cumulative total of 11,200,000 shares of Apple’s common stock may be delivered pursuant to awards granted under the Non-Employee Director Stock Plan. The number of shares subject to the Non-Employee Director Stock Plan has been restated to reflect our 7-for-1 stock split in June 2014. As of December 15, 2017, 1,103,009 shares remained available for future award grants under the Non-Employee Director Stock Plan and 405,538 shares were subject to awards then outstanding under the Non-Employee Director Stock Plan. If an award lapses, expires or is otherwise terminated without the issuance of shares, the shares underlying the lapsed, expired, or terminated award will be available for future award grants under the Non-Employee Director Stock Plan. Shares that are exchanged by a director or withheld by Apple to pay the exercise price of an option granted under the plan, as well as any shares exchanged or withheld to satisfy the tax withholding obligations related to an award, will not be available for subsequent awards under the Non-Employee Director Stock Plan. Authorized and unissued shares of Apple’s common stock will be issued under the Non-Employee Director Stock Plan.

Annual Compensation Limit

The Non-Employee Director Stock Plan does not currently provide for a limit on compensation to Non-Employee Directors for services performed as a Non-Employee Director. If shareholders approve this proposal, aNon-Employee Director’s compensation for services performed as a Non-Employee Director, including the grant date value of equity awards granted under the Non-Employee Director Stock Plan, cash retainers, and other compensation, may not exceed $1.5 million in the aggregate in a fiscal year.

RSUs

RSUs may be granted under the Non-Employee Director Stock Plan. An RSU is a right, subject to vesting, to receive one share of Apple’s common stock on the payment date specified in the applicable award. Unless earlier forfeited under the terms of the Non-Employee Director Stock Plan, RSUs granted under the Non-Employee Director Stock Plan generally settle upon vesting. RSUs granted under the plan do not carry any shareholder rights but do have dividend equivalent rights, which are credited to a Non-Employee Director and subject to the same vesting, payment, and other terms and conditions as the underlying RSUs, except they are paid in cash.

The Non-Employee Director Stock Plan provides that each Non-Employee Director serving on the Board immediately following Apple’s annual meeting of shareholders each year automatically receives a grant of RSUs on the date of the annual meeting (each, an “Annual Director Award”). The number of RSUs subject to each Annual Director Award granted under the Non-Employee Director Stock Plan is determined by dividing $250,000 (or such other amount, as determined by the Board and subject to the limitations of the plan) by the per-share closing price of Apple’s common stock on the date of grant, rounded to the nearest whole share. All Annual Director Awards are scheduled to vest on the February 1 that occurs in the year following the year in which the award is granted.

A Non-Employee Director who is newly elected or appointed to the Board other than in connection with an annual meeting of shareholders generally also would receive a grant of RSUs upon his or her election or appointment (each, an “Initial Director Award”), except that a Non-Employee Director who joined the Board after February 1 of a particular year and prior to the annual meeting for that year would not receive an Initial Director Award. The

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number of RSUs subject to each Initial Director Award granted under the Non-Employee Director Stock Plan is determined in the same manner as described above for Annual Director Awards, but the grant date value of the award is pro-rated based on the portion of the year that has passed since the last annual meeting. Initial Director Awards vest on the vesting date established for the Annual Director Awards made at the last annual meeting prior to the date on which the Non-Employee Director joined the Board.

Stock Options

The Non-Employee Director Stock Plan also permits the grant of stock options; however, stock options may not be granted under the Non-Employee Director Stock Plan unless the Board determines that the grant of stock options is in the best interests of Apple and its shareholders. If stock options are granted under theNon-Employee Director Stock Plan, the options would be required to have a per share exercise price not less than the fair market value of a share of Apple’s common stock on the date of grant, would be immediately vested unless otherwise specified at the time of grant, and would expire ten years from the date of grant.

No Repricing

No adjustment may be made to a stock option under the Non-Employee Director Stock Plan (by amendment, substitution, cancellation and regrant, exchange, or other means) that would constitute a repricing of theper-share exercise price of the option except for an adjustment to reflect a stock split or similar event provided in theNon-Employee Director Stock Plan or any repricing that might be approved by shareholders.

Termination of Service

If a Non-Employee Director ceases to serve as a member of the Board for any reason other than death, aNon-Employee Director’s options and RSUs granted under the Non-Employee Director Stock Plan, to the extent then outstanding and unvested, generally would terminate on the date the director ceased to be a member of the Board. As amended, the Non-Employee Director Stock Plan provides that upon the death of aNon-Employee Director, all unvested options and RSUs would become fully vested. In general, if a Non-Employee Director ceases to be a member of the Board, the director’s options would be exercisable by the director for a period of 90 days, to the extent vested at the time of termination of service. If a Non-Employee Director’s service on the Board terminates by reason of the director’s death, the director’s vested options would remain outstanding and the director’s beneficiary may exercise the options at any time through the third anniversary of the director’s death.

Adjustments; Corporate Transactions; Change of Control

As is customary in incentive plans of this nature, the share limit and the number and kind of shares available under the Non-Employee Director Stock Plan and any outstanding awards, as well as the exercise prices of awards, are subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, stock dividends, or other similar events. Upon a change of control, as amended, the Non-Employee Director Stock Plan provides for vesting of outstanding awards, pro-rated based on the portion of the vesting period that has elapsed as of the date of the change of control.

Administration

The Board administers the Non-Employee Director Stock Plan and, subject to the provisions of the plan, has the full authority, in its sole discretion, to take any actions it deems necessary or advisable for the administration of the Non-Employee Director Stock Plan.

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Amendment and Termination

The Board has the authority to amend or terminate the Non-Employee Director Stock Plan at any time, including the authority to prospectively change the value and relative mixture of stock options and RSUs for the initial and annual award grants to Non-Employee Directors subject to the annual compensation limit described above, the methodology for determining the number of shares of Apple’s common stock subject to these grants, and the vesting and other terms and conditions of these grants without shareholder approval. However, the Board may not, without shareholder approval, increase the number of shares available for issuance.

Term

If shareholders approve this proposal, unless earlier terminated by the Board, the Non-Employee Director Stock Plan will expire on November 12, 2027. No further awards would be granted under the Non-Employee Director Stock Plan after that date.

Federal Income Tax Consequences

The following is a brief summary of the U.S. federal income tax consequences applicable to awards granted under the Non-Employee Director Stock Plan based on the federal income tax laws in effect on the date of this Proxy Statement. This summary is not exhaustive and does not describe, among other things, the income tax laws of any state, municipality, or non-U.S. taxing jurisdiction, or the gift, estate, excise (including the rules applicable to deferred compensation under Section 409A of the Internal Revenue Code), or other tax laws other than federal income tax law. The following is not intended or written to be used, and cannot be used, for the purposes of avoiding taxpayer penalties. Because individual circumstances may vary, we advise all participants to consult their own tax advisor concerning the tax implications of awards granted under the Non-Employee Director Stock Plan.

RSUs.The grant of RSUs has no immediate federal income tax effect. The director will not recognize taxable income and Apple will not receive a deduction. When the director’s RSUs vest, the director will generally recognize ordinary income and Apple will generally have a corresponding tax deduction, in each case measured by the value of the shares issued to the director. When the director sells shares obtained from vesting of RSUs, any gain or loss will be taxed as a capital gain or loss (long-term or short-term, depending on how long the shares have been held).

Stock Options. The grant of a stock option has no immediate federal income tax effect. The director will not recognize taxable income and Apple will not receive a tax deduction. When the director exercises the option, the director will recognize ordinary income and Apple will receive a tax deduction, in each case measured by the difference between the exercise price and the fair market value of the shares on the date of exercise. When the director sells shares obtained from exercising a stock option, any gain or loss will be taxed as a capital gain or loss (long-term or short-term, depending on how long the shares have been held).

New Plan Benefits

None of Apple’s employees, including its executive officers and the named executive officers, are eligible to receive grants under the Non-Employee Director Stock Plan. If shareholders approve this proposal, the number of RSUs that will be granted to the Non-Employee Directors under the Non-Employee Director Stock Plan will be determined based on the closing price of Apple’s common stock at the time of grant as described above. Assuming, for illustrative purposes only, the price of Apple’s common stock used for the Annual Director Awards formula was $154.12, which is the closing price of Apple’s common stock on September 29, 2017, the last trading day of Apple’s fiscal year, a total of 11,354 RSUs would be allocated to Apple’s seven Non-Employee Directors as a group on the date of the Annual Meeting. The actual number of RSUs is not determinable and may vary depending on the price of Apple’s common stock on the grant date.

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Aggregate Past Grants Under the Non-Employee Director Stock Plan

Since the inception of the Non-Employee Director Stock Plan, Dr. Levinson, Mr. Gore, and Ms. Jung have been granted 947,394; 695,779; and 219,590 shares subject to stock options, respectively, and 1,862,763 shares subject to stock options as a group, all adjusted for stock splits. No stock options have been granted under the Non-Employee Director Stock Plan to any of our current executive officers, including our named executive officers, any of our other nominees for the Board, any of our non-executive officer employees, or an associate of any of our directors, executive officers, or director nominees. Further, no other person received 5% or more of the total stock options granted under the Non-Employee Director Stock Plan since its inception.

The Board recommends a vote AGAINSTFOR Proposal No. 5.4.

 

Vote Required

Approval of Proposal No. 54 requires the affirmative vote of (i) a majority of the shares present or represented by proxy and voting at the Annual Meeting and (ii) a majority of the shares required to constitute a quorum.

 

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Proposal No. 65 – Shareholder Proposal

Apple has been advised that Mr. Antonio Avian Maldonado, II is a beneficial owner of at least $2,000 in market value of Apple’s common stock, and Zevin Asset Management, 11 Beacon Street, Suite 1125, Boston, MA 02108, is a beneficial owner of at least $2,000 in market value of Apple’s common stock. Mr. Maldonado’s address will be supplied promptly upon oral or written request. Apple has been advised that Mr. Maldonado and Zevin Asset Management intend to submit jointly the following proposal at the Annual Meeting:

RESOLVED:

Shareholders request that the Board of Directors adopt an accelerated recruitment policy requiring Apple Inc. (the “Company”) to increase the diversity of senior management and its board of directors, two bodies that presently fail to adequately represent diversity and inclusion (particularly Hispanic, African American, Native American and other people of color).

Stockholder Supporting Statement

The tech industry is characterized by the persistent and pervasive underrepresentation of minorities and women in senior positions as detailed in a 2014 U.S. Equal Employment Opportunity Commission report. According to a USA Today analysis of 2014 Computing Research Association data, “[t]op universities turn out black and Hispanic computer science and computer engineering graduates at twice the rate that leading technology companies hire them.”1 The Company is at an advantageous position to be a leader in promoting diversity in senior management and its board of directors, based on its size, breadth and position as one of the largest companies in the world.

Shareholders are concerned that low levels of diversity at the Company’s senior management and board level, as well as painstakingly slow improvements, are a business risk.

According to the Company’s website, “Diversity is critical to innovation and it is essential to Apple’s future.”2 Further, the Company has stated in multiple Proxy Statements that it is “committed to actively seeking out highly qualified women and individuals from minority groups to include in the pool from which board nominees are chosen.”3

Shareholders believe that companies with comprehensive diversity programs, and strong commitment to implementation, enhance their long-term value, reducing the Company’s potential legal and reputational risks associated with workplace discrimination and building a reputation as a fair employer. Equally, shareholders believe the varied perspectives of a diverse senior management and board of directors would provide a competitive advantage in terms of creativity, innovation, productivity and morale, while eliminating the limitations of “groupthink”, as it would recognize the uniqueness of experience, strength, culture and thought contributed by each; strengthening its reputation and business. This is confirmed by McKinsey & Company, which found companies with highly diverse executive teams had higher returns on equity and earnings performance than those with low diversity, and a May 2014 study found gender diverse teams were better at driving “radical innovation”.4 “Diversity helps companies react more effectively to market shifts and new customer needs.”5

1http://www.usatoday.com/story/tech/2014/10/12/silicon-valley-diversity-tech-hiring-computer-science-graduates-african-american-hispanic/14684211/

2https://www.apple.com/diversity/

3 http://investor.apple.com/secfiling.cfm?filingid=1193125-14-8074&cik=320193

4Diversity Matters, McKinsey & Company, November 2011.

5Diversity wins!, McKinsey & Company, November 2011.

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Therefore, shareholders ask the Company to assist investors in evaluating the company’s effectiveness in meeting its commitment to equal opportunity and diversity in senior management and board of directors, in a meaningful way that would not cause the company to breach the assurances of confidentiality and privacy that it has made to its employees. Currently shareholders have insufficient information to determine if the company has been successful in expanding diversity.

We urge shareholders to vote FOR the proposal.

Apple’s Statement in Opposition to Proposal No. 6

The Board recommends a vote AGAINST Proposal No. 6.

Our ongoing efforts to increase diversity are much broader than the “accelerated recruitment policy” requested by this proposal, which is focused only on Apple’s senior management and Board. At Apple, we take a holistic view of inclusion and diversity that includes the varied perspectives of our employees as well as app developers, suppliers, and anyone who aspires to a future in tech. We also support diversity by creating opportunities beyond Apple. Here are just a few examples:

Apple has joined President Obama’s ConnectED initiative and pledged $100 million to bring technology and services into 114 underserved schools across the United States. Under this program, we are donating an iPad to every student, a Mac and iPad to every teacher, and an Apple TV to every classroom, as well as services and professional development for teachers. There are now more than 50,000 students learning, creating, and exploring on iPad through our ConnectED commitment, 92% of whom are of Alaskan Native, Asian, Black, Hispanic, or Native American heritage.

Apple has been working with the National Center for Women & Information Technology for more than a decade, and in 2015, we became the first-ever lifetime partner with the NCWIT, expanding a joint commitment to help double the talent pool of women available for technology jobs by 2019. This commitment includes a new initiative targeted towards giving Latinas the inspiration to explore tech studies and careers.

Apple launched a multiyear, $40 million partnership with the Thurgood Marshall College Fund. The TMCF in turn creates opportunities for students from public and private historically black colleges and universities who are pursuing careers in the tech industry. Apple does not just give money to the TMCF; we work collaboratively with the fund to advance its goals. For example, Apple hired 33 students from these institutions as summer interns in 2016, and as part of the TMCF partnership, also hosted them for a weeklong immersion at Apple’s campus several months ahead of time to provide them with a foundation of Apple culture and values to help pave the way for a successful experience.

Apple publicly discloses information about our inclusion and diversity initiatives and detailed statistics about our progress to date atapple.com/diversity. As disclosed on this dedicated website, our hiring trends over the last three years show steady progress in attracting more women and under-represented minorities (defined as groups whose representation in tech has been historically low — Black, Hispanic, Native American, Native Hawaiian, and Other Pacific Islander). In addition, Apple is cultivating diverse leadership and tech talent through on-campus training, events, and programs.

The examples above are evidence of the high level of support from our senior management of our holistic view of inclusion and diversity.

Our Board shares this commitment to increase diversity. Pursuant to its charter, the Nominating Committee of the Board actively seeks out highly qualified women and individuals from minority groups to include in the pool from which Board nominees are chosen. Our current eight-person Board includes two women and members of diverse ethnic groups.

The “accelerated recruiting policy” called for by this proposal is not necessary or appropriate because we have already demonstrated our commitment to a holistic view of inclusion and diversity and made detailed information about our inclusion and diversity initiatives, and the progress we have made with respect to these initiatives, available on our website

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atapple.com/diversity. A substantially similar proposal was presented by Mr. Maldonado at the 2016 annual meeting of shareholders and received the support of less than 5% of votes cast. We believe that the low level of support for this proposal last year reflects the positive recognition by our shareholders of Apple’s significant commitment to inclusion and diversity.

For all of the reasons above, the Board recommends a vote AGAINST Proposal No. 6.

Vote Required

Approval of Proposal No. 6 requires the affirmative vote of (i) a majority of the shares present or represented by proxy and voting at the Annual Meeting and (ii) a majority of the shares required to constitute a quorum.

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Proposal No. 7 — Shareholder Proposal

Apple has been advised that Mr. James McRitchie, 9295 Yorkship Court, Elk Grove, CA 95758, who has indicated he is a beneficial owner of at least $2,000 in market value of Apple’s common stock, intends to submit the following proposal at the Annual Meeting:

 

Proposal 75 – Shareholder Proxy Access Amendments

RESOLVED: Shareholders of Apple, Inc. (the “Company”) ask the board of directors (the “Board”) to amend its “Proxy Access for Director Nominations” bylaw, and any other associated documents, to include essential elementsthe following changes for substantial implementationthe purpose of (1) decreasing the amount of Company common stock the average member of a nominating group would be required to better facilitate meaningful proxy access by more shareholders as follows:

  1. Thehold for three years to satisfy the aggregate ownership requirements to form a nominating group and (2) increasing the potential number of “Shareholder Nominees” eligible to appear in proxy materials shall be 25% of the directors then serving or 2, whichever is greater. Current bylaws restrict Shareholder Nominees to 20% of directors. Under the current 8-member board, shareholder nominees are currently limited to nominating one. Any shareholder nominee elected under the current bylaws could be easily isolated.nominees:

 2. No limitation shall be placed on the number of shareholders that can aggregate their shares to achieve the 3% “Ownership Requirements” for “Eligible Shareholders.”

1.

No limitation shall be placed on the number of shareholders that can aggregate their shares to achieve the 3% “Ownership Requirements” for “Eligible Shareholders” under our Company’s current proxy access provisions. Out of thousands of shareholders, current bylaws restrict the number of shareholders participating in a nominating group to 20.

2.

The number of “Shareholder Nominees” eligible to appear in proxy materials shall be 25% of the directors then serving or 2, whichever is greater. Current proxy access bylaws restrict Shareholder Nominees to 20% of directors. With an 8-member board, shareholder nominees are limited under the current bylaw to making one director nomination. Therefore, any shareholder nominee elected under the current bylaws could be easily isolated and ineffective.

Supporting Statement:

Under current provisions, even if the 20 largest public pension funds were able to aggregate their shares, they would not meet the 3% criteriaownership requirement at most of companies examined by the Council of Institutional Investors.Investors (CII). Allowing an unlimited number of eligible shareholders to aggregate their shares willwould facilitate greater participation by individuals and institutional investors in meeting the Ownership Requirements.stock ownership requirements, which are 3% of the outstanding common stock entitled to vote.

  3. No limitation shall be imposed on the re-nomination of “Shareholder Nominees” based on the number or percentage of votes received in any election. Such limitations do not facilitate the shareholders’ traditional state law rights and add unnecessary complexity.

Supporting Statement:

The SEC’s universal proxy access Rule 14a-11 (https://www.sec.gov/rules/final/2010/33-9136.pdf) was vacated after a court decision regarding the SEC’s cost-benefit analysis. Therefore, proxy access rights must be established on a company-by-company basis. Subsequently, a cost-benefit analysis by CFA Institute,Proxy Access in the United States: Revisiting the Proposed SEC Rule (http://www.cfapubs.org/doi/pdf/10.2469/ccb.v2014.n9.1) a cost-benefit analysis by CFA Institute,, found proxy access would “benefit both the markets and corporate boardrooms, with little cost or disruption,” raising US market capitalization by up to $140.3 billion. Public Versus Private Provision of Governance: The Case of Proxy Access (http://ssrn.com/abstract=2635695) found a 0.5 percent average increase in shareholder value for proxy access targeted firms.

Proxy Access: Best Practices 2017

(http://www.cii.org/files/publications/misc/08_05_15_Best%20Practices%20-%20Proxy%20Access.pdf)Proxy_Access_2017_FINAL.pdf) by the Council of Institutional Investors,CII, notes that “while proxy access has gained broad acceptance, some adopting companies have included, or are considering including, provisions that could significantly impair shareholders’ ability to use it.” The report “highlights the most troublesome provisions” in recently implementedbest practices CII recommends for implementing proxy access bylaws.access.”

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Although the Company’s board adopted a proxy access bylaw, in 2015, it contains troublesome provisions as outlined above, that significantly impair the ability of (1) shareholders to participate as Eligible Shareholders,because of the large average amount of common shares each is required to hold for three years given the current aggregate limit of 20 and (2) the ability of Shareholder Nomineesshareholder nominees to effectively serve if elected, and the ability of Shareholder Nominees to run again if they receive less than 25% of the vote.elected. Adoption of all the requested amendments would largely remedy these issues and would better ensure meaningful proxy accesscome closer to meeting best practices as described by more shareholders.CII.

Increase shareholder value

Vote for Shareholder Proxy Access Amendments – Proposal 75

Apple Inc. | 2017 Proxy Statement | 59


Apple’s Statement in Opposition to Proposal No. 75

The Board recommends a vote AGAINST Proposal No. 7.5.

The proponent has submitted a proxy access proposal to Apple every year for the last four years and, in each case, has failed to receive majority support. As described below, we continue to believe that the changes advocated by the proponent are unnecessary to achieve an effective mechanism for proxy access.

Our current corporate governance framework reflects our commitment to robust, balanced governance practices combined with responsiveness and accountability to shareholders. Our existing proxy access bylaws which Apple proactively adopted in 2015 and further enhanced in 2016, establishes a prudent andestablish an effective mechanism for proxy access, making adoption of this proposal unnecessary and unwarranted.

In 2015, afterAfter careful consideration of the varying viewpoints and feedback offered by many of our shareholders, the Board amended Apple’s bylaws to adopt proxy access.access in December 2015. The bylaws permit a shareholder, or a group of up to 20 shareholders, owning at least 3% of Apple’s outstanding shares of common stock continuously for at least three years, to nominate and include in Apple’s annual proxy materials director nominees constituting up to 20% of the Board, provided that the shareholder(s) and nominee(s) satisfy the procedural and eligibility requirements specified in the bylaws. The Board currently consists of eight directors, and shareholders may nominate one proxy access candidate.

But we did not stop there. After initially amending our bylaws to provide for proxy access, weWe continued to closely monitor proxy access developments and reach out to many of our largest shareholders, governance experts, and advisors to discuss evolving market practice and trendspractices and the preferences of our shareholders. As a result of these engagements, in December 2016, the Board adopted enhancements to Apple’s bylaws to streamline ourthe “secondary” elements of the proxy access framework andprovisions in our bylaws in December 2016 to make it easier for shareholders to nominate proxy access candidates. TheseThe enhancements included eliminating the following changes:

Apple no longer requires shareholders who nominate a proxy access candidate to recall loaned shares and hold them through the annual meeting. Ownership of loaned shares is deemed to continue if the shareholder(s) has the power to recall the loaned shares on five business days’ notice.

Apple increased the availability of proxy access by limiting the circumstances under which the maximum number of proxy access candidates is reduced. For example, Apple no longer reduces the number of proxy access candidates when an incumbent director was nominated through proxy access in the last two years and is subsequently supported by the Board for re-election.

Shareholders may now re-nominate a proxy access candidate regardless of the level of support received at the annual meeting. This change renders moot the amendment requested in point 3 of the proposal.

Apple has extended the deadline by which nominating shareholders and proxy access candidates must provide certain information to Apple to ten business days from five business days.

Apple has narrowed the scoperequirement that a nominating shareholder’s loaned shares be recalled at the time the shareholder provides notice to Apple and eliminating the prohibition on re-nomination of a nominating shareholder’s indemnification obligations to legal and regulatory violations arising out of a nominating shareholder’s actions or communications with Apple shareholders or out of information provided by a nominating shareholder to Apple.

Apple has limited the discretion of the Board to unilaterally interpret the proxy access provisions.

We believe our proxy access framework strikescandidate if the right balance between promoting shareholder nomination rights and protectingcandidate receives a low level of support at the interestsannual meeting.

Number of our shareholders. Our framework is a reasonable, usable one that reinforces the Board’s accountability and provides broad discretion toNominees. Apple’s bylaws permit eligible shareholders to nominate director candidates constituting up to 20% of their choosing, while mitigating the riskBoard. This fully accomplishes the essential objective of misuseproxy access. We believe that increasing the potential level of Board representation to the greater of two directors and 25% of the Board could have unintended effects that could be destructive of shareholder value, including promoting the use of proxy access including utilization by shareholders pursuing objectives that are not broadly supported by other shareholders. Implementationto lay the groundwork for effecting a change of control, encouraging the pursuit of special interests at the expense of a holistic, long-term strategic view, or otherwise disrupting the effective functioning of the changes requested byBoard.

Group Size Limit. Apple’s bylaws permit groups of up to 20 shareholders to aggregate their shares to reach the proposal beyond those Apple has already made would make Apple an outlier among public companies that have adopted proxy access.

Beyond mererequired 3% ownership threshold (with a group of investment funds under common management and investment control counting as a single shareholder). The 20-shareholder limit was carefully calibrated to provide reasonable and effective proxy access Apple’s bylaws also keep directors accountable to shareholders by providing for an automatic termination of service of any incumbent director who failswhile minimizing the administrative burden and expense to be elected by an affirmative vote of a majority of the shares represented and votingApple in an uncontested election. Some companies merely require a director to submit a resignation letter

 

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under similar circumstances,reviewing and giveverifying the board of directors discretion as to whether to accept the resignation – potentially allowing the director to remain on the board indefinitely. Apple believes that our process, which results in automatic terminationrequired information provided by each member of the director’s term, fosters greater accountabilitynominating shareholder group. We also question whether allowing an unlimited number of shareholders to aggregate their shares is workable for the nominating shareholder group, given the broad solicitation that would be required and responsiveness tothe practical difficulties of coordinating a larger number of shareholders. A 20-shareholder limit is widely embraced by companies adopting proxy access, and widely endorsed among institutional shareholders’ voting policies.

TheOur Board has also shown an ongoing commitment to boardBoard refreshment and to having highly qualified, directors who bring diverse perspectives toindependent voices in the Board’s decision-making processes.boardroom. Through the Board’sour robust director nomination and annual self-evaluationevaluation process, two new directors have been added to the Board since 2014.

We are committed to ensuring effective, balanced corporate governance while also continually engaging with shareholders. This is evidenced by Apple’s proactive adoption of proxy access in 2015 and shareholder-favorable enhancements in 2016, and by the other actions Apple has taken to ensure that shareholders are given a voice, many of which are described in this Proxy Statement. The Board believes that these objectives are being achieved through Apple’s current governance processes and that changing our proxy access framework again as outlined by the proponentproposal is therefore unnecessary, unwarranted, and unwarranted.possibly detrimental to shareholder value.

For all of the reasons above, the Board recommends a vote AGAINST Proposal No. 7.5.

 

Vote Required

Approval of Proposal No. 75 requires the affirmative vote of (i) a majority of the shares present or represented by proxy and voting at the Annual Meeting and (ii) a majority of the shares required to constitute a quorum.

 

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Proposal No. 86 – Shareholder Proposal

Apple has been advised that Mr. Jing Zhao, 262 Altadena Circle, Bay Point,1745 Copperleaf Court, Concord, CA 94565,94519, who has indicated he is a beneficial owner of at least $2,000 in market value of Apple’s common stock, intends to submit the following proposal at the Annual Meeting:

 

Shareholder Proposal on Executive Compensation ReformHuman Rights Committee

Resolved: shareholders recommend that Apple Inc. engage multipleestablish a Human Rights Committee to review, assess, disclose, and make recommendations to enhance Apple’s policy and practice on human rights. The board of directors is recommended, in its discretion and consistent with applicable laws to: (1) adopt Apple Human Rights Principles, (2) designate the members of the committee, including outside independent human rights experts or resources fromas advisors, (3) provide the general publiccommittee with sufficient funds for operating expenses, (4) adopt a charter to reform its executive compensation principles and practices.

Supporting Statement

According to Apple Notice of 2016 Annual Meeting of Shareholders, “Since 2014,specify the Compensation Committee has engaged the services of Pay Governance LLC,… on matters for which the Compensation Committee is responsible.” (p.26). However, any single consulting firm cannot represent the general public, such as independent scholars, think tanks, unions and academic societies, to advise fair, just and ethical compensation principles. The failure of our executive compensation principles and practices is clearly shown in the same $1,000,000 salary, the same $20,000,105 stock award and the same $4,000,000 non-equity incentive plan compensation each in 2015 to our five of six named executive officers (p.35). What is use of the Compensation Committee when it could not differentiate the contribution of the tremendously different functions of the CFO,committee, (5) empower the Retailcommittee to solicit public input and Online Stores SVP, the Internet Software and Services SVP, the Hardware Engineering SVPto issue periodic reports to shareholders and the Secretarypublic on the committee’s activities, findings and recommendations, and (6) adopt any other measures.

Supporting Statement

There have been too many negative reports on Apple’s human rights policy and practice, mostly related to Apple’s operation in China for many years. For example, recently, the New York Times reported “Apple Removes Apps From China Store That Help Internet Users Evade Censorship” on July 29, 2017; the Wall Street Journal reported “Get Used to Apple Bowing Down to Chinese Censors” on August 7, 2017. Furthermore, Apple is building its first China-based data center, and “the new agreement goes one step further with a Chinese partner responsible for running its data center, managing the sales of our company?

As Professor Thomas Piketty (Capitalits services in the Twenty- First Century, trans. Arthur Goldhammer. Cambridge: The Belknap Press of Harvard University Press, 2014) stated, “there is absolutely no doubt thatcountry and handling legal requests for data from the increase of inequality ingovernment.” (New York Times, July 12, 2017)

On human rights policy and practice, we have the United States contributedbest case (see my proposal to Google 2010 shareholders meeting) and the nation’s financial instability.” (p.297) “Let me return nowworst case (see my proposals to Yahoo 2011 and 2013 shareholder meetings, to Verizon 2017 shareholders meeting and to Yahoo/Altaba 2017 shareholders meetinghttp://cpri.tripod.com/cpr2017/altaba-statement.pdf on the cause of rising inequality in the United States. The increase was largely the result of an unprecedented increase in wage inequality and in particular the emergence of extremely high remunerations at the summitabuses of the wage hierarchy, particularly among top managers of large firms.” (p.298) “Because it is objectively difficult to measure individual contributions to a firm’s output, top managers found it relatively easy to persuade boards and stockholders that they were worth the money, especially since the members of compensation committees were often chosenso-called “Yahoo Human Rights Fund” against human rights) here in a rather incestuous manner.” (p.510)

For the purpose of this proposal, the Board and the Compensation Committee have the flexibility to select multiple independent experts or sources.Silicon Valley. Apple should not fail as Yahoo.

Apple’s Statement in Opposition to Proposal No. 86

The Board recommends a vote AGAINST Proposal No. 8.6.

We are committed to the highest standards of social responsibility and human rights wherever we do business. These standards apply throughout our company, around the world, with no exceptions.

The Board does not believe that establishing a separate human rights committee is an effective way for Apple to review, assess, and “enhance Apple’s policy and practice on human rights.”

Our executive compensation program is designed to attract, motivate, and retain a talented, entrepreneurial, and creative team of executives who will provide leadership for Apple’s success in dynamic and competitive markets. Internal pay equity among our executive officers does not demonstrate a failure of compensation principles and practices; rather, it is a hallmark of the team-based approach of our executive compensation program. Our executive officers are expected to operate as a high-performing team, and we believe that generally awarding the same base salary, annual cash incentive, and long-term equity awards to each of our executive officers, other than the CEO, successfully supports this goal.

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Apple’s CompensationAudit Committee, is responsible for Apple’s compensation and incentive plans and programs, approves all compensation for Apple’s executive officers, and acts as the administrative committee for Apple’s employee equity plans. The Compensation Committee consistsconsisting entirely of independent directors, who have various resourcesalready assists the Board in monitoring our significant business risks, including operational and tools at their disposalreputational exposures. Its charter gives it the power to assist in the performance of their duties without the addition of multiple outside independent experts or resources from the general public whose priorities and interests may differ from those of Apple or our shareholders.

Under the terms of its charter, the Compensation Committee has the right, in its sole discretion, at any time to retain or obtain advice, reports, or opinions from expert advisors to facilitate its work at any time. In addition, our Supplier Responsibility team is already dedicated to partnering with our suppliers to make lasting change to improve lives worldwide.

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From an implementation perspective, our existing framework reflects our unwavering commitment to social responsibility and human rights. This is most evident in our practices, policies, and disclosures, which are publicly available atapple.com/supplier-responsibility:

Supplier Code of Conduct

Supplier Responsibility Standards

Top 200 Supplier List, representing 97% of procurement expenditures for materials, manufacturing, and assembly of our products worldwide in 2016

Conflict Minerals Report

Commitment to Responsible Sourcing

Smelter and Refiner List

Statement on Efforts to Combat Human Trafficking and Slavery in Our Business and Supply Chains

As an additional measure of transparency to shareholders, we publish a Supplier Responsibility report annually. As noted in our most recent report, which is available online atapple.com/supplier-responsibility, we conducted 705 supplier assessments in 2016, covering areas such internalas safe working conditions, fair treatment of workers, and external counsel, compensation consultants,environmentally safe manufacturing. Since 2008, we have trained more than 11.7 million workers on their employment rights, including more than 2.4 million workers in 2016. We do this because we believe that it drives accountability and other expertsimprovement throughout our supply chain. We are committed to the highest standards of social responsibility and advisors as it deems necessary or appropriatehuman rights wherever we do business.

We also partner with educational institutions to assist itoffer free college-level courses to workers who make our products. In 2016, more than 689,000 workers attended these classes, and many have gone on to earn associate’s degrees. We recently expanded this educational program to offer more opportunities for participants to work toward a bachelor’s degree. We believe everyone in the full performance of its functions. For many years, the Compensation Committee has retained an independent compensation consultant, and has engaged the services of Pay Governance since 2014. Pay Governance worksApple’s supply chain should be treated with the Compensation Committeedignity and respect they deserve, and we are aware of no other company doing as much to develop effective executive pay programs basedsafeguard and empower workers.

The proponent focuses on its knowledge of Apple’s industryhuman rights in China, and business needs. Pay Governance provides advicein particular, access to the Compensation Committee oninternet in China. We do not have the option to ignore laws, either in China or in any other country where we provide products and services. If it becomes illegal for us to offer or make available a particular product or service in a country, like a VPN app in China, we can no longer offer or make available that product or service in that country. We would rather not have been required to remove the apps, but we must follow applicable law wherever we do business. We believe in engaging with governments even when we disagree, and we are hopeful that over time the restrictions we are seeing in some countries are lessened, because innovation requires freedom to collaborate and communicate.

We continue to offer a wide range of external market factors,Apple products, services, and third-party apps that enhance our customers’ lives and help them communicate and express themselves in countries around the world, including evolving compensation trends, appropriate peer companies,in China.

Accordingly, the Board does not believe that establishing a separate human rights committee is necessary to properly exercise its oversight of this important area, nor does it add to Apple’s existing commitment to social responsibility and market survey data. Pay Governance also provides general observations about our compensation programs and management recommendations regarding the amount and form of compensation for our executive officers.

Each year, the Compensation Committee conducts a review of Apple’s executive compensation program and takes into account numerous factors, including the advice of its independent compensation consultant, management recommendations, pay practices and program designs at peer companies, shareholder feedback, and the Compensation Committee’s own business judgment, which is informed by the significant experience of its members. Shareholders also have an opportunity each year to cast an advisory vote on the compensation of our named executive officers, the results of which the Compensation Committee considers each year when reviewing our executive compensation program. We believe the alignment of our executive compensation program with the interests of shareholders is reflected by the fact that approximately 95% of votes cast on our say-on-pay proposal at the 2016 annual meeting of shareholders voted to approve the compensation paid to our named executive officers.

Apple believes this Proposal No. 8 is unnecessary, not consistent with market practice, and would provide no benefit to Apple or our shareholders. The Compensation Committee already has extensive knowledge and resources at its disposal to establish appropriate executive compensation principles and practices for Apple that are aligned with the interests of our shareholders.human rights.

For all of the reasons above, the Board recommends a vote AGAINST Proposal No. 8.6.

 

Vote Required

Approval of Proposal No. 86 requires the affirmative vote of (i) a majority of the shares present or represented by proxy and voting at the Annual Meeting and (ii) a majority of the shares required to constitute a quorum.

 

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Proposal No. 9 – Shareholder Proposal

Apple has been advised that Mr. Kenneth Steiner, 14 Stoner Ave., 2M, Great Neck, NY 11021, who has indicated he is a beneficial owner of at least $2,000 in market value of Apple’s common stock, intends to submit the following proposal at the Annual Meeting:

Proposal 9 – Executives To Retain Significant Stock

Resolved: Shareholders urge that our executive pay committee adopt a policy requiring senior executives to retain a significant percentage of stock acquired through equity pay programs until reaching normal retirement age and to report to shareholders regarding the policy before our Company’s next annual meeting. For the purpose of this policy, normal retirement age would be an age of at least 60 and be determined by our executive pay committee. Shareholders recommend a share retention percentage requirement of 75% of net after-tax shares.

This single unified policy shall prohibit hedging transactions for shares subject to this policy which are not sales but reduce the risk of loss to the executive. Otherwise our directors might be able to avoid the impact of this proposal. This policy shall supplement any other share ownership requirements that have been established for senior executives, and should be implemented without violating current company contractual obligations or the terms of any current pay or benefit plan.

Requiring senior executives to hold a significant portion of stock obtained through executive pay plans would focus our executives on our company’s long-term success. A Conference Board Task Force report stated that hold-to-retirement requirements give executives “an ever-growing incentive to focus on long-term stock price performance.”

Please vote to protect shareholder value:

Executives To Retain Significant Stock – Proposal 9

Apple’s Statement in Opposition to Proposal No. 9

The Board recommends a vote AGAINST Proposal No. 9.

Apple believes that our long-term success depends largely on our ability to attract and retain a high-performing executive team. Experienced personnel in the technology industry are in high demand, and competition for executive talent is intense. A policy that would require senior executives to hold 75% of the net after-tax shares from their equity awards until reaching normal retirement age is excessive, not consistent with current practice among our peer groups, and would put Apple at a competitive disadvantage for recruiting and retaining talented executives.

The Board believes that the Compensation Committee is the governing body best suited to formulate Apple’s executive compensation policies. As described in the Compensation Discussion and Analysis, our executive compensation program emphasizes long-term shareholder value creation by using both time-based and performance-based RSUs to deliver long-term compensation incentives. The Compensation Committee believes this is the most effective way to attract and retain a talented executive team and align executives’ interests with those of shareholders. As a result, Apple’s executive compensation program is weighted considerably toward long-term equity awards rather than cash compensation and our executives hold significant unvested RSUs at any particular time. The Compensation Committee believes that this practice creates a substantial retention incentive, encourages our executives to focus on Apple’s long-term success, and aligns with the long-term interests of our shareholders.

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Apple already has robust stock ownership guidelines for the CEO, the executive officers, and the Non-Employee Directors. Under the guidelines, Mr. Cook is expected to own shares of Apple common stock that have a value equal to ten times his base salary. This stock ownership requirement is among the highest of any CEO in the Fortune 100. Within five years after first becoming subject to the guidelines, each executive officer is expected to own shares of Apple common stock that have a value equal to three times the executive officer’s base salary and each Non-Employee Director is expected to own shares of Apple common stock that have a value equal to five times the annual cash retainer for serving as a director.

In addition to stock ownership guidelines, Apple maintains other significant governance policies relating to Apple stock held by executives. These include an anti-hedging policy for all employees and a prohibition against short sales of Apple common stock by executive officers and directors. Moreover, RSUs granted to executives are subject to the recoupment provisions of Apple’s standard forms of RSU agreement, which provide that Apple may recover any shares or other amounts obtained from RSUs in the event the executive commits a felony while employed by Apple, or engages in a breach of confidentiality, commits an act of theft, embezzlement or fraud, or materially breaches any agreement with Apple while employed by Apple or at any time thereafter.

Apple believes this Proposal No. 9 is unnecessary and would provide no benefit to Apple or our shareholders. Apple’s current executive compensation program and governance practices already create a substantial retention incentive and encourage Apple’s executives to focus on Apple’s long-term business objectives, stock price performance, and shareholders’ interests.

For all of the reasons above, the Board recommends a vote AGAINST Proposal No. 9.

Vote Required

Approval of Proposal No. 9 requires the affirmative vote of (i) a majority of the shares present or represented by proxy and voting at the Annual Meeting and (ii) a majority of the shares required to constitute a quorum.

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Other Matters

Apple knows of no other matters to be submitted to the shareholders at the Annual Meeting, other than the proposals referred to in this Proxy Statement. If any other matters properly come before the shareholders at the Annual Meeting, it is the intention of the persons named on the proxy to vote the shares represented thereby on such matters in accordance with their best judgment.

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Other Information

This section includes the Audit and Finance Committee Report, information about stock ownership and our equity compensation plans, and other general information.

 

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Audit and Finance Committee Report

The Audit and Finance Committee consists of four members: Ron Sugar, who serves as the Chair of the Committee, James Bell, Art Levinson, and Sue Wagner. Each member is an independent director under NASDAQ,Nasdaq, NYSE, and SEC audit committee structure and membership requirements.rules. The Audit and Finance Committee has certainthe duties and powers as described in its written charter adopted by the Board. A copy of the charter is available on Apple’s website atinvestor.apple.com/corporate-governance.cfm.

The Audit and Finance Committee assists the Board’s oversight and monitoring of:

 

  

Apple’s financial statements and other financial information provided by Apple to its shareholders and others;

 
  

compliance with legal, regulatory, and public disclosure requirements;

 
  

the independent auditors, including their qualifications and independence;

 
  

Apple’s system of internal controls, including the internal audit function;

 
  

treasury and finance matters;

 
  

enterprise risk management, privacy, and data security; and

 
  

the auditing, accounting, and financial reporting process generally.

 

The Audit and Finance Committee does not itself prepare financial statements or perform audits, and its members are not auditors or certifiers of Apple’s financial statements.

The Audit and Finance Committee is responsible for the appointment, compensation, retention, and oversight of the work performed by Apple’s independent registered public accounting firm, Ernst & Young LLP. In fulfilling its oversight responsibility, the Audit and Finance Committee carefully reviews the policies and procedures for the engagement of the independent registered public accounting firm, including the scope of the audit, audit fees, auditor independence matters, performance of the independent auditors, and the extent to which the independent registered public accounting firm may be retained to perform non-audit services.

Apple maintains an auditor independence policy that, among other things, prohibits Apple’s independent registered public accounting firm from performing non-financial consulting services, such as information technology consulting and internal audit services. This policy mandates that the Audit and Finance Committee approve in advance the audit and permissible non-audit services to be performed by the independent registered public accounting firm and the related budget, and that the Audit and Finance Committee be provided with quarterly reporting on actual spending. This policy also mandates that Apple may not enter into engagements with Apple’s independent registered public accounting firm for non-audit services without the express pre-approval of the Audit and Finance Committee.

The Audit and Finance Committee has reviewed and discussed the audited financial statements for the year ended September 24, 201630, 2017 with Apple’s management and Ernst & Young, Apple’s independent registered public accounting firm.Young. The Audit and Finance Committee has also discussed with Ernst & Young the matters required to be discussed by Auditing Standard No. 1301, “Communications with Audit Committees” issued by the Public Company Accounting Oversight Board (“PCAOB”).

The Audit and Finance Committee also has received and reviewed the written disclosures and the letter from Ernst & Young required by applicable requirements of the PCAOB regarding Ernst & Young’s communications with the Audit and Finance Committee concerning independence, and has discussed with Ernst & Young its independence.

Based on the reviews and discussions referred to above, the Audit and Finance Committee recommended to the Board that the financial statements referred to above be included in Apple’s Annual Report on Form 10-K for the year ended September 24, 201630, 2017 for filing with the SEC.

Members of the Audit and Finance Committee

Ron Sugar (Chair) | James Bell | Art Levinson | Sue Wagner

 

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Security Ownership of

Certain Beneficial Owners and Management

The following table shows certain information as of December 30, 201615, 2017 (the “Table Date”), unless otherwise indicated, with respect toregarding the beneficial ownership of Apple’s common stock by: (i) each person that Apple believes beneficially holds more than 5% of the outstanding shares of Apple’s common stock based solely on Apple’s review of filings with the SEC filings;pursuant to Section 13(d) or 13(g) of the Exchange Act; (ii) each director and nominee; (iii) each named executive officer listed in the table entitled “Summary Compensation Table—2017, 2016, 2015, and 2014”2015” under the section entitled “Executive Compensation”; and (iv) all directors and executive officers as a group. As of the Table Date, 5,257,816,0005,087,056,000 shares of Apple’s common stock were issued and outstanding. Unless otherwise indicated, all persons named as beneficial owners of Apple’s common stock have sole voting power and sole investment power with respect to the shares indicated as beneficially owned. In addition, unless otherwise indicated, the address for each person named below is c/o Apple Inc., 1 Infinite Loop, Cupertino, California 95014.

 

Name of Beneficial Owner 

Shares of Common Stock


Beneficially Owned
(1)

     

Percent of


Common Stock


Outstanding

The Vanguard Group  322,968,066337,545,664(2)(2)     6.14%6.64
BlackRock, Inc.  315,425,945322,683,504(3)(3)     6.00%6.34
Angela Ahrendts  95,04277,739(4)(4)      *
James Bell  4,1185,934(5)(5)      *
Tim Cook  1,039,809901,474(6)(6)      *
Eddy Cue1,464(7)        *
Al Gore  721,353112,064(8)(7)      *
Bob Iger  47,22549,050(9)(8)      *
Andrea Jung  128,77330,598(10)(9)      *
Art Levinson  1,397,2571,326,502(11)(10)      *
Luca Maestri  4,43263,208(12)(11)      *
Dan Riccio  10,94215,641(13)(12)      *
Bruce Sewell  235,793113,865(14)(13)*
Johny Srouji 78,468(14)    *
Ron Sugar  19,93921,764(15)(15)      *
Sue Wagner  10,03411,859(16)(16)      *
All current executive officers and directors as a group (17 persons)  4,399,1473,276,057(17)(17)      *

 

Apple Inc. | 2018 Proxy Statement | 69


 (1)

Represents shares of Apple’s common stock held, options held that were exercisable at the Table Date or within 60 days thereafter, and RSUs held that will vest within 60 days after the Table Date. Does not include RSUs that vest more than 60 days after the Table Date. RSUs are awards granted by Apple and payable, subject to vesting requirements, in shares of Apple’s common stock.

 

 

Apple Inc. | 2017 Proxy Statement | 68


 (2)

Represents shares of Apple’s common stock beneficially owned as of December 31, 2015,2016, based on a Schedule 13G/A filed on February 10, 2016,9, 2017, by The Vanguard Group. In such filing, The Vanguard Group lists its address as 100 Vanguard Blvd., Malvern, PA 19355, and indicates that it has sole voting power with respect to 10,477,4378,398,869 shares of Apple’s common stock, shared voting power with respect to 571,100987,676 shares of Apple’s common stock, sole dispositive power with respect to 311,845,773328,237,227 shares of Apple’s common stock, and shared dispositive power with respect to 11,122,2939,308,437 shares of Apple’s common stock.

 

 

 (3)

Represents shares of Apple’s common stock beneficially owned as of December 31, 2015,2016, based on a Schedule 13G/A filed on January 25, 2016,19, 2017, by BlackRock, Inc. In such filing, BlackRock, Inc. lists its address as 55 East 52nd52nd Street, New York, NY 10055, and indicates that it has sole voting power with respect to 264,930,614274,625,463 shares of Apple’s common stock, shared voting power with respect to 44,79425,855 shares of Apple’s common stock, sole dispositive power with respect to 315,381,151322,657,649 shares of Apple’s common stock, and shared dispositive power with respect to 44,79425,855 shares of AppleApple’s common stock.

 

 

 (4)

Excludes 659,303546,878 unvested RSUs held by Ms. Ahrendts that are not scheduled to vest within 60 days after the Table Date.

 

 

 (5)

Includes 2,5801,825 unvested RSUs held by Mr. Bell that are scheduled to vest on February 1, 2017.2018.

 

 

 (6)

Represents 1,039,809901,474 shares of Apple’s common stock held in the name of Mr. Cook’s trust and excludes 3,500,0002,940,000 unvested RSUs held by Mr. Cook that are not scheduled to vest within 60 days after the Table Date.

 

 

 (7)

Represents 1,464 shares of Apple’s common stock held in the name of Mr. Cue’s trust and excludes 620,803 unvested RSUs held by Mr. Cue that are not scheduled to vest within 60 days after the Table Date.

(8)

Includes 275,779102,889 shares of Apple’s common stock that Mr. Gore has the right to acquire by exercise of stock options and 2,5801,825 unvested RSUs held by Mr. Gore that are scheduled to vest on February 1, 2017.2018.

 

 

 (9)(8)

Includes 525 shares of Apple’s common stock held by Mr. Iger’s spouse and 2,5801,825 unvested RSUs held by Mr. Iger that are scheduled to vest on February 1, 2017.2018.

 

 

 (10)(9)

Includes 109,5909,590 shares of Apple’s common stock that Ms. Jung has the right to acquire by exercise of stock options and 2,5801,825 unvested RSUs held by Ms. Jung that are scheduled to vest on February 1, 2017.2018.

 

 

 (11)(10)

Includes 14,000 shares of Apple’s common stock held by Dr. Levinson’s spouse, 247,394177,394 shares of Apple’s common stock that Dr. Levinson has the right to acquire by exercise of stock options, and 2,5801,825 unvested RSUs held by Dr. Levinson that are scheduled to vest on February 1, 2017.2018.

 

 

 (12)(11)

Excludes 592,237543,296 unvested RSUs held by Mr. Maestri that are not scheduled to vest within 60 days after the Table Date.

 

 

 (13)(12)

Excludes 620,803586,801 unvested RSUs held by Mr. Riccio that are not scheduled to vest within 60 days after the Table Date.

 

 

 (14)(13)

Excludes 620,803523,102 unvested RSUs held by Mr. Sewell that are not scheduled to vest within 60 days after the Table Date.

 

 

 (14)

Includes 91 shares of Apple’s common stock held in the name of Mr. Srouji’s trust and 1,425 shares of Apple’s common stock held by or on behalf of Mr. Srouji’s children. Excludes 341,999 unvested RSUs held by Mr. Srouji that are not scheduled to vest within 60 days after the Table Date.

Apple Inc. | 2018 Proxy Statement | 70


(15)

Includes 2,5801,825 unvested RSUs held by Dr. Sugar that are scheduled to vest on February 1, 2017.2018.

 

 

 (16)

Includes 1,800 shares of Apple’s common stock held by Ms. Wagner’s spouse and 2,5801,825 unvested RSUs held by Ms. Wagner that are scheduled to vest on February 1, 2017.2018.

 

 

 (17)

Includes 632,763289,873 shares of Apple’s common stock that executive officers and directors have the right to acquire by exercise of stock options and 18,06012,775 unvested RSUs held by directors that are scheduled to vest within 60 days after the Table Date. As of the Table Date, no executive officer held any stock options or any unvested RSUs scheduled to vest within 60 days after the Table Date. Excludes 8,704,8037,368,087 unvested RSUs held by executive officers that are not scheduled to vest within 60 days after the Table Date.

 

 

 *

Represents less than 1% of the issued and outstanding shares of Apple’s common stock as of the Table Date.

 

Apple Inc. | 2017 Proxy Statement | 69


Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires Apple’s officers and directors, and persons who own more than 10% of a registered class of Apple’s equity securities, to file reports of securities ownership and changes in such ownership with the SEC. Officers, directors, and greater than 10% shareholders also are required by SEC rules to furnish Apple with copies of all Section 16(a) forms they file.

Based solely upon a review of the copies of such forms furnished to Apple, and on written representations from the reporting persons, Apple believes that all Section 16(a) filing requirements applicable to Apple’s directors and officers were timely met during 2016, except that one Form 4 was filed for Chris Kondo on August 5, 2016 with respect to the disposition of 9,829 shares of Apple’s common stock on August 2, 2016.

2017.

 

Apple Inc. | 20172018 Proxy Statement | 7071


Equity Compensation Plan Information

The following table shows information, as of September 24, 2016, concerning30, 2017, regarding shares of Apple’s common stock authorized for issuance under Apple’s equity compensation plans. As of September 24, 2016,30, 2017, other than as described below, no equity securities were authorized for issuance under equity compensation plans not approved by shareholders.

 

 
 

Number of Securities
to
be Issued Upon
Exercise of
of Outstanding
Options, Warrants
Warrants and Rights

(a)

   

Weighted-Average
Exercise Price of
Outstanding
Options, Warrants
Warrants and
Rights
(1)(2)

($)(b)

     

Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans

(Excluding  (Excluding
Securities
Reflected in
Column (a))

(c)

 
Equity compensation plans approved by shareholders(3)(2)  100,011,34898,160,487(4)(3)    17.4118.10      434,520,714370,533,132(5)(4) 

 

 (1)

The weighted-average exercise price is calculated based solely on the exercise prices of the outstanding stock options and does not reflect the shares that will be issued upon the vesting of outstanding awards of RSUs, which have no exercise price.

 

 

 (2)

The weighted-average remaining contractual term of Apple’s outstanding stock options as of September 24, 2016 was 3.7 years.

(3)

This table does not include equity awards that have been assumed by Apple in connection with the acquisition of other companies. As of September 24, 2016,30, 2017, an additional 142,900114,737 shares of Apple’s common stock were subject to outstanding stock options assumed in connection with acquisitions of other companies (with a weighted-average exercise price of $5.95$5.86 per share). Shares issued in respect of these assumed awards do not count against the share limits of the 2014 Plan.

 

 

 (4)(3)

This number includes the following: 76,308,44290,331,616 shares subject to outstanding awards granted under the 2014 Plan, of which 263,214183,801 shares were subject to outstanding stock options and 76,045,22890,147,815 shares were subject to outstanding RSU awards; 23,052,0837,423,333 shares subject to outstanding awards granted under the Apple Inc. 2003 Employee Stock Plan, of which 26,73112,922 shares were subject to outstanding stock options and 23,025,3527,410,411 shares were subject to outstanding RSU awards; and 650,823405,538 shares subject to outstanding awards granted under the Non-Employee Director Stock Plan, of which 632,763392,763 shares were subject to outstanding stock options and 18,06012,775 shares were subject to outstanding RSU awards.

 

 

 (5)(4)

This number includes 386,365,390327,946,339 shares available for issuance under the 2014 Plan, 47,026,76541,483,784 shares reserved for issuance under the Apple Inc. Employee Stock Purchase Plan, and 1,128,5591,103,009 shares available for issuance under the Non-Employee Director Stock Plan. Shares issued in respect of awards other than stock options and stock appreciation rights granted under the 2014 Plan and the Non-Employee Director Stock Plan count against the shares available for grant under the applicable plan as two shares for every share granted.

 

Dated: January 6, 2017

 

Apple Inc. | 20172018 Proxy Statement | 7172


Directions to the 2017 Annual Meeting of ShareholdersGeneral Information

 

LOGO
2018 Annual Meeting of Shareholders
 

When:

February 13, 2018

Take Interstate 280 (south from San Francisco, north from San Jose)9:00 a.m. Pacific Time

Where:

Steve Jobs Theater

Apple Park

Cupertino, California 95014

Record Date:

December 15, 2017

 

Exit at De Anza Boulevard

Turn south onto De Anza Boulevard toward Cupertino

Turn left onto Mariani Avenue

Continue on Mariani, which leads into the Apple parking lot

Proceed to Town Hall (Building 4)

About the Meeting and These Materials

AttendanceYou are invited to attend Apple’s 2018 Annual Meeting of Shareholders and vote on the proposals described in this Proxy Statement because you were an Apple shareholder on the Record Date, December 15, 2017.

Apple is soliciting proxies for use at the Annual Meeting, is limited to shareholders. Admission to the Annual Meeting will be on a first-come, first-served basis. In the interest of saving time and money, Apple has opted to provide the Annual Report onForm 10-K for the year ended September 24, 2016 in lieu of producing a glossy annual report.

including any postponements or adjournments.

LOGOLOGO           


LOGO


LOGO

Apple Inc.
C123456789
IMPORTANT ANNUAL MEETING INFORMATION
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Electronic Voting Instructions You can vote by Internet or telephone! Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Eastern Time, on February 28, 2017.
Vote by Internet
Log on to the Internet and go to
www.investorvote.com/AAPL
Follow the steps outlined on the secured website.
Vote by telephone
Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada any time on a touch tone telephone. There is NO CHARGE to you for the call.
Follow the instructions provided by the recorded message.
Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. X
Apple Inc. Annual Shareholder Meeting Proxy Card
1234 5678 9012 345
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
A Proposals—The Board of Directors recommends a vote FOR all the listed nominees, FOR Proposals 2 and 3, and 1 YEAR for Proposal 4.
1. The election to Apple’s Board of Directors of the eight nominees named in the Proxy Statement
For Against Abstain For Against Abstain For Against Abstain
01 - JAMES BELL
04 - BOB IGER
07 - RON SUGAR
02 - TIM COOK
05 - ANDREA JUNG
08 - SUE WAGNER
03 - AL GORE
06 - ART LEVINSON
For Against Abstain
2. Ratification of the appointment of Ernst & Young LLP as Apple’s independent registered public accounting firm for 2017
For Against Abstain
3. Advisory vote to approve executive compensation
1 Year 2 Years 3 Years Abstain
4. Advisory vote on the frequency of shareholder votes on executive compensation
B Shareholder Proposals—The Board of Directors recommends a vote AGAINST Proposals 5, 6, 7, 8 and 9.
For Against Abstain
For Against Abstain
5. A shareholder proposal entitled “Charitable Giving - Recipients, Intents and Benefits”
6. A shareholder proposal regarding diversity among our senior management and board of directors
7. A shareholder proposal entitled “Shareholder Proxy Access Amendments”
8. A shareholder proposal entitled “Executive Compensation Reform”
9. A shareholder proposal entitled “Executives to Retain Significant Stock”
IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A - D ON BOTH SIDES OF THIS CARD.
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1 U P X 2 9 9 1 6 8 1
MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE
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LOGO

Apple Inc.
2017 Annual Meeting of Shareholders
February 28, 2017
9:00 a.m. Pacific Time
1 Infinite Loop, Town Hall (Building 4), Cupertino, California 95014
Upon arrival, please present your photo identification at the registration desk.
Directions to the 2017 Annual Meeting of Shareholders
Take Interstate 280 (south from San Francisco, north from San Jose) Exit at De Anza Boulevard
Turn south onto De Anza Boulevard toward Cupertino
Turn left onto Mariani Avenue
Continue on Mariani, which leads into the Apple parking lot
Proceed to Town Hall (Building 4) for meeting registration
Attendance at the 2017 Annual Meeting of Shareholders is limited to shareholders. Admission to the meeting will be on a first-come, first- served basis. In the interest of saving time and money, Apple has opted to provide the Annual Report on Form 10-K for the year ended September 24, 201630, 2017 (the “Annual Report”) in lieu of producing a glossy annual report.

Attending the Annual Meeting – Advance Registration Required

We are pleased to welcome shareholders to Steve Jobs Theater at Apple Park for the 2018 Annual Meeting. To make sure we can accommodate as many attendees as possible, we are establishing a registration process. Shareholders will need to register in advance at
proxyvote.com beginning at 8:00 a.m. Pacific Time on January 22, 2018 and registration will be on a first-come, first-served basis. Only shareholders as of the Record Date who have registered in advance and have a valid confirmation of registration will be admitted to the meeting.

Your proxy materials will include a unique control number to be used atproxyvote.com to vote your shares and register for the meeting. If you have any questions aboutproxyvote.com or your control number, please contact the bank, broker, or other organization that holds your shares. The availability of online voting may depend on the voting procedures of the organization that holds your shares.

The use of mobile phones, recording or photographic equipment, tablets, or computers is not permitted at the Annual Meeting. Attendees are welcome to visit the Apple Park Visitor Center after the Annual Meeting, but we are not able to accommodate tours of the campus.

Even if you successfully register and plan on attending the Annual Meeting in person, we encourage you to vote your shares in advance using one of the methods described in this Proxy Statement to ensure that your vote will be represented at the Annual Meeting.

Apple Inc. | 2018 Proxy Statement | 73


Proxy Materials

These materials were first sent or made available to shareholders on December 27, 2017, and include:

The Notice of 2018 Annual Meeting of Shareholders

This Proxy Statement for the Annual Meeting

Apple’s Annual Report on Form 10-K for the year ended September 30, 2017

If you requested printed versions by mail, these printed proxy materials also include the proxy card or voting instruction form for the Annual Meeting.

Proxy Materials are Available on the Internet

Apple uses the internet as the primary means of furnishing proxy materials to shareholders. We are sending a Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”) to our shareholders with instructions on how to access the proxy materials online or request a printed copy of the materials.

Shareholders may follow the instructions in the Notice of Internet Availability to elect to receive future proxy materials in print by mail or electronically by email. We encourage shareholders to take advantage of the availability of the proxy materials online to help reduce the environmental impact of our annual meetings and reduce Apple’s printing and mailing costs.

Apple’s proxy materials are also available atinvestor.apple.com. IF YOU HAVE NOT VOTED VIA

Eliminating Duplicate Mailings

Apple has adopted a procedure called “householding.” Under this procedure, Apple may deliver a single copy of the Notice of Internet Availability and, if you requested printed versions by mail, this Proxy Statement and the Annual Report to multiple shareholders who share the same address, unless Apple has received contrary instructions from one or more of the shareholders. This procedure reduces the environmental impact of our annual meetings and reduces Apple’s printing and mailing costs. Shareholders who participate in householding will continue to receive separate proxy cards. Upon written or oral request, Apple will deliver promptly a separate copy of the Notice of Internet Availability and, if you requested printed versions by mail, this Proxy Statement and the Annual Report to any shareholder that elects not to participate in householding.

To receive, free of charge, a separate copy of the Notice of Internet Availability and, if you requested printed versions by mail, this Proxy Statement or the Annual Report, or separate copies of any future notice, proxy statement, or annual report, you may write or call Apple at the following email address, physical address, or phone number:

investor_relations@apple.com

Apple Investor Relations

1 Infinite Loop MS: 301-4IR

Cupertino, California 95014

(408) 974-3123

If you are receiving more than one copy of the proxy materials at a single address and would like to participate in householding, please contact the bank, broker, or other organization that holds your shares to request information about eliminating duplicate mailings.

Apple Inc. | 2018 Proxy Statement | 74


Quorum for the Annual Meeting

Holders of a majority of the shares entitled to vote at the Annual Meeting must be present at the Annual Meeting in person or by proxy for the transaction of business. This is called a quorum. Your shares will be counted for purposes of determining if there is a quorum if:

You are entitled to vote and you are present in person at the Annual Meeting; or

You have properly voted by proxy online, by phone or by submitting a proxy card or voting instruction form by mail.

Broker non-votes and abstentions are counted for purposes of determining whether a quorum is present. If a quorum is not present, we may propose to adjourn the Annual Meeting to solicit additional proxies and reconvene the Annual Meeting at a later date.

Inspector of Election

A representative of Broadridge Investor Communication Solutions, Inc. will serve as the inspector of election.

Proxy Solicitation Costs

Apple is paying the costs of the solicitation of proxies. Apple has retained Georgeson LLC to assist in the distribution of proxy materials and the solicitation of proxies from brokerage firms, fiduciaries, custodians, and other similar organizations representing beneficial owners of shares for the Annual Meeting. We have agreed to pay Georgeson a fee of approximately $15,000 plus out-of-pocket expenses. You may contact Georgeson at (866) 828-4304.

Apple must also pay brokerage firms, fiduciaries, custodians, and other similar organizations representing beneficial owners certain fees associated with:

Forwarding the Notice of Internet Availability to beneficial owners;

Forwarding printed proxy materials by mail to beneficial owners who specifically request them; and

Obtaining beneficial owners’ voting instructions.

In addition to solicitations by mail, the proxy solicitor and Apple’s directors, officers, and employees, without additional compensation, may solicit proxies on Apple’s behalf in person, by phone, or by electronic communication.

Apple’s Fiscal Year

Apple’s fiscal year is the 52- or 53-week period that ends on the last Saturday of September. Apple’s fiscal year 2017 included 53 weeks and ended on September 30, 2017. Information presented in this Proxy Statement is based on Apple’s fiscal calendar, other than references to particular years on the Apple Values page of the Proxy Statement Summary, in the opposition statements to shareholder proposals, and in the biographies of our directors and executive officers, each of which refers to the calendar year.

Apple Inc. | 2018 Proxy Statement | 75


Voting

Each share of Apple’s common stock has one vote on each matter. Only “shareholders of record” as of the close of business on the Record Date are entitled to vote at the Annual Meeting. As of the Record Date, there were 5,087,056,000 shares of Apple’s common stock issued and outstanding, held by 25,000 shareholders of record. In addition to shareholders of record of Apple’s common stock, “beneficial owners of shares held in street name” as of the Record Date can vote using the methods described below.

Shareholder of Record. If your shares are registered directly in your name with Apple’s transfer agent, Computershare Trust Company, N.A., you are the shareholder of record with respect to those shares.

Beneficial Owner of Shares Held in Street Name. If your shares are held in an account at a bank, broker, or other organization, then you are the “beneficial owner of shares held in street name.” As a beneficial owner, you have the right to instruct the person or organization holding your shares how to vote your shares. Most individual shareholders are beneficial owners of shares held in street name.

Voting Procedures

There are four ways to vote:

In Person.You may vote in person at the Annual Meeting by requesting a ballot from an usher. Only eligible shareholders who have registered in advance and have a valid confirmation of registration will be admitted to the Annual Meeting.

If you are a beneficial owner of shares held in street name and wish to vote in person at the Annual Meeting, in addition to registering to attend the meeting in person, you must also obtain a “legal proxy” from the organization that holds your shares. A legal proxy is a written document that authorizes you to vote your shares held in street name at the Annual Meeting. Please contact the organization that holds your shares for instructions regarding obtaining a legal proxy. You must bring a copy of the legal proxy to the Annual Meeting. In order for your vote to be counted, you must hand both the copy of the legal proxy and your completed ballot to an usher to be provided to the inspector of election.

Online.You may vote by proxy by visitingproxyvote.com and entering the control number found in your Notice of Internet Availability. The availability of online voting may depend on the voting procedures of the organization that holds your shares.

Phone. If you request printed copies of the proxy materials by mail, you will receive a proxy card or voting instruction form and you may vote by proxy by calling the toll free number found on the card or form. The availability of phone voting may depend on the voting procedures of the organization that holds your shares.

Mail. If you request printed copies of the proxy materials by mail, you will receive a proxy card or voting instruction form and you may vote by proxy by filling out the card or form and returning it in the envelope provided.

All shares represented by valid proxies received prior to the taking of the vote at the Annual Meeting will be voted and, where a shareholder specifies by means of the proxy a choice with respect to any matter to be acted upon, the shares will be voted in accordance with the shareholder’s instructions. Even if you plan on attending the Annual Meeting in person, we encourage you to vote your shares in advance online, by phone, or by mail to ensure that your vote will be represented at the Annual Meeting.

Apple Inc. | 2018 Proxy Statement | 76


Changing your Vote

You may revoke your proxy and change your vote at any time before the taking of the vote at the Annual Meeting.

In Person. You may revoke your proxy and change your vote by attending the Annual Meeting and voting in person. However, your attendance at the Annual Meeting will not automatically revoke your proxy unless you properly vote at the Annual Meeting or specifically request that your prior proxy be revoked by delivering a written notice of revocation prior to the Annual Meeting to Apple’s Secretary at 1 Infinite Loop, MS: 301-4GC, Cupertino, California 95014. Only eligible shareholders who have registered in advance and have a valid confirmation of registration will be admitted to the Annual Meeting.

Online. You may change your vote using the online voting method described above, in which case only your latest internet proxy submitted prior to the Annual Meeting will be counted.

Phone. You may change your vote using the phone voting method described above, in which case only your latest telephone proxy submitted prior to the Annual Meeting will be counted.

Mail.You may revoke your proxy and change your vote by signing and returning a new proxy card or voting instruction form dated as of a later date, in which case only your latest proxy card or voting instruction form received prior to the Annual Meeting will be counted.

Uninstructed Shares

Shareholders of Record. If you are a shareholder of record and you:

Indicate when voting online or by phone that you wish to vote as recommended by the Board; or

Sign and return a proxy card without giving specific voting instructions,

then the persons named as proxy holders, Luca Maestri and Kate Adams, will vote your shares in the manner recommended by the Board on all matters presented in this Proxy Statement and as they may determine in their best judgment with respect to any other matters properly presented for a vote at the Annual Meeting.

Beneficial Owners of Shares Held in Street Name. If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions, then the organization that holds your shares may generally vote your shares in their discretion on “routine” matters, but cannot vote on “non-routine” matters.

Routine and Non-Routine Proposals

The following proposal is considered a routine matter:

The ratification of the appointment of Ernst & Young LLP as Apple’s independent registered public accounting firm for 2018 (Proposal No. 2).

A broker or other nominee may generally vote in their discretion on routine matters, and therefore no brokernon-votes are expected in connection with Proposal No. 2.

The following proposals are considered non-routine matters:

Election of directors (Proposal No. 1);

Advisory vote to approve executive compensation (Proposal No. 3);

Apple Inc. | 2018 Proxy Statement | 77


Approval of the amended and restated Apple Inc. Non-Employee Director Stock Plan (Proposal No. 4); and

Each of shareholder proposals No. 5 and No. 6.

If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, that organization will inform the inspector of election that it does not have the authority to vote on the matter with respect to your shares. This is generally referred to as a “broker non-vote.” Therefore, broker non-votes may exist in connection with Proposal No. 1 and Proposals No. 3 through No. 6.

Vote Required to Approve a Proposal

With respect to the election of directors (Proposal No. 1), Apple’s bylaws provide that, in an uncontested election of directors, the affirmative vote of (i) a majority of the shares present or represented by proxy and voting at the Annual Meeting and (ii) a majority of the shares required to constitute a quorum is required to elect a director. An “uncontested election of directors” means an election of directors in which the number of candidates for election does not exceed the number of directors to be elected by the shareholders at that election.

Approval of Proposals No. 2 through No. 6 requires, in each case, the affirmative vote of both (i) a majority of the shares present or represented by proxy and voting at the Annual Meeting and (ii) a majority of the shares required to constitute a quorum.

Broker Non-Votes and Abstentions

Broker non-votes and abstentions are counted for purposes of determining whether a quorum is present. Only “FOR” and “AGAINST” votes are counted for purposes of determining the votes received in connection with each proposal. Broker non-votes and abstentions will have no effect on determining whether the affirmative vote constitutes a majority of the shares present or represented by proxy and voting at the Annual Meeting.

In addition, for each proposal, the affirmative vote equal to a majority of the shares necessary to constitute a quorum is also required for approval. Therefore, broker non-votes and abstentions could prevent the election of a director or the approval of a proposal because they do not count as affirmative votes.

Confidentiality of Votes

Proxy instructions, ballots, and voting tabulations that identify individual shareholders are handled in a manner that protects your voting privacy. Apple will not disclose the proxy instructions or ballots of individual shareholders, except:

To allow for the tabulation and certification of votes;

To facilitate a successful proxy solicitation;

To assert claims for Apple;

To defend claims against Apple; and

As necessary to meet applicable legal requirements.

If you write comments on your proxy card or ballot, the proxy card or ballot may be forwarded to Apple’s management and the Board to review your comments.

Apple Inc. | 2018 Proxy Statement | 78


Tabulation and Reporting of Voting Results

Preliminary voting results will be announced at the Annual Meeting. Final voting results will be tallied by the inspector of election after the taking of the vote at the Annual Meeting. Apple will publish the final voting results in a Current Report on Form 8-K filed with the SEC within four business days following the Annual Meeting.

Director Nominations and Other Matters for the 2019 Annual Meeting of Shareholders

Proposals and director nominations must be sent either by mail to Apple’s Secretary at 1 Infinite Loop, MS: 301-4GC, Cupertino, California 95014, or by email toshareholderproposal@apple.com.

Matters for Inclusion in the Proxy Materials for the 2019 Annual Meeting of Shareholders

Matters for inclusion in the proxy materials for the 2019 annual meeting of shareholders must be received on or before August 29, 2018. All proposals must comply with Rule 14a-8 under the Exchange Act.

Matters for Consideration at the 2019 Annual Meeting of Shareholders, but not for Inclusion in the Proxy Materials

Matters for consideration at the 2019 annual meeting of shareholders, but not for inclusion in the proxy materials, must be received no earlier than the close of business on October 16, 2018 and no later than the close of business on November 15, 2018. The proposal must be submitted by a shareholder of record and must set forth the information required by Apple’s bylaws. If you are a beneficial owner of shares held in street name, you can contact the organization that holds your shares for information about how to register your shares directly in your name as a shareholder of record.

Nominations of Individuals for Election as Directors at the 2019 Annual Meeting of Shareholders Using Proxy Access

A shareholder, or group of up to 20 shareholders, that has owned continuously for at least three years shares of Apple stock representing an aggregate of at least 3% of our outstanding shares, may nominate and include in Apple’s proxy materials director nominees constituting up to 20% of Apple’s Board, provided that the shareholder(s) and nominee(s) satisfy the requirements in Apple’s bylaws. Notice of proxy access director nominees must be received no earlier than the close of business on July 30, 2018 and no later than the close of business on August 29, 2018.

Nominations of Individuals for Election as Directors at the 2019 Annual Meeting of Shareholders, but not Included in the Proxy Materials

Director nominations that a shareholder intends to present at the 2019 annual meeting of shareholders, but does not intend to have included in Apple’s proxy materials, must be received no earlier than the close of business on October 16, 2018 and no later than the close of business on November 15, 2018. Notice of director nominations must be submitted by a shareholder of record and must set forth the information required by Apple’s bylaws. If you are a beneficial owner of shares held in street name, you can contact the organization that holds your shares for information about how to register your shares directly in your name as a shareholder of record.

Apple Inc. | 2018 Proxy Statement | 79


Apple Inc.

1 Infinite Loop

Cupertino, CA 95014 USA

Phone: (408) 996-1010

Dated: December 27, 2017

Apple Inc. | 2018 Proxy Statement | 80


ANNEX A

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APPLE INC.
NON-EMPLOYEE DIRECTOR STOCK PLAN

(as amended and restated as of                 , 2018)

On November 13, 2017, the Board adopted this amended and restated Non-Employee Director Stock Plan (formerly known as the 1997 Director Stock Option Plan and the 1997 Director Stock Plan, and, as renamed, the “Plan”), subject to approval by the Company’s shareholders at the Annual Meeting on February 13, 2018. For the terms and conditions of the Plan applicable to an Award, refer to the version of the Plan in effect as of the date such Award was granted.

1.

PURPOSES. The purposes of the Plan are to retain the services of qualified individuals who are not employees of the Company to serve as members of the Board and to secure for the Company the benefits of the incentives inherent in increased Common Stock ownership by such individuals by granting such individuals Awards in respect of Shares.

2.

ADMINISTRATION. The Administrator shall be responsible for administering the Plan. Subject to the provisions of the Plan, the Administrator shall have the full authority, in its sole discretion, to take any actions it deems necessary or advisable for the administration of the Plan, including but not limited to:

(a)

determining the Fair Market Value for purposes of any Award;

(b)

approving any forms of Award Agreements to be used under the Plan;

(c)

amending any outstanding Awards;

(d)

construing and interpreting the Plan and any agreements defining the rights and obligations of the Company and Non-Employee Directors under the Plan;

(e)

correcting any defect, supplying any omission or reconciling any inconsistency in the Plan or any Award Agreement;

(f)

adopting such rules or guidelines as it deems appropriate to implement the Plan;

(g)

authorizing any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously authorized by the Administrator or the Plan;

(h)

adjusting the number of shares subject to any Award, adjusting the price of any or all outstanding Options or otherwise changing previously imposed terms and conditions, in such circumstances as the Administrator may deem appropriate;

(i)

determining whether, and the extent to which, adjustments are required pursuant to Section 7 hereof; and

(j)

making all other decisions relating to the operation of the Plan.

Each interpretation, determination, or other action made or taken by the Administrator pursuant to the Plan shall be final and binding on all persons, and the Administrator’s determinations under the Plan need not be the same for all persons. The Administrator shall not be liable for any action or determination made in good faith, and shall be entitled to indemnification and reimbursement in the manner provided in the Company’s Articles of Incorporation and Bylaws as such documents may be amended from time to time.

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3.

SHARES AVAILABLE; LIMITS.

(a)

SHARE LIMIT. Subject to the provisions of Section 7, the maximum number of Shares that may be issued under the Plan shall not exceed 11,200,000 Shares (the “Share Limit”). The stock issuable under the Plan shall be authorized and unissued Shares.

(b)

SHARE COUNT. Shares issued pursuant to Restricted Stock Unit Awards shall count against the Share Limit as two (2) Shares for every one (1) Share issued in connection with the Award. Shares issued pursuant to the exercise of Options shall count against the Share Limit as one (1) Share for every one (1) Share to which such exercise relates. If Awards are settled in cash, the shares that would have been delivered had there been no cash settlement shall not be counted against the Share Limit. Except as provided in the next sentence, if Awards are forfeited or are terminated for any reason before settlement or exercise, then the Shares underlying such Awards shall again become available for Awards under the Plan, provided that any one (1) Share subject to a Restricted Stock Unit Award that is forfeited or terminated shall be credited as two (2) Shares when determining the number of Shares that shall again become available for Awards under the Plan. Shares that are exchanged by a Non-Employee Director or withheld by the Company as full or partial payment in connection with any Award under the Plan, as well as any Shares exchanged by a Non-Employee Director or withheld by the Company or one of its Subsidiaries to satisfy the tax withholding obligations related to any Award, shall not be available for subsequent Awards under the Plan.

(c)

LIMIT ON COMPENSATION. In no event shall the compensation payable by the Company to a Non-Employee Director for services performed as a Non-Employee Director, including the grant date value (determined under U.S. generally accepted accounting principles) of Awards, cash retainers, and other compensation, exceed $1,500,000 in the aggregate in any fiscal year.

4.

RESTRICTED STOCK UNITS. Unless otherwise determined by the Administrator, each Non-Employee Director shall receive grants of Restricted Stock Units under the Plan subject to the following provisions of this Section 4 and the terms of any Award Agreement approved by the Administrator:

(a)

ANNUAL GRANTS. On the date of each Annual Meeting immediately following which a Non-Employee Director is serving on the Board, such Non-Employee Director shall be automatically granted an Award of a number of Restricted Stock Units determined by dividing (i) $250,000 (or such other amount as determined by the Board and subject to the limitations of the Plan) by (ii) the Fair Market Value of the Shares on the date of grant, such number to be rounded to the nearest whole number of Restricted Stock Units (each, an “Annual RSU Award”).

(b)

INITIAL GRANTS. Each Non-Employee Director who first becomes a Non-Employee Director at any time other than on the date of an Annual Meeting shall be automatically granted, on the date he or she first becomes a Non-Employee Director, an Award of a number of Restricted Stock Units determined by multiplying (i) the quotient obtained by dividing (A) the dollar amount applied under Section 4(a) with respect to Awards granted at the immediately preceding Annual Meeting by (B) the Fair Market Value of the Shares on the date of grant, by (ii) a fraction (A) the numerator of which shall be the number of days remaining in the 365-day period following the most recent Annual Meeting, and (B) the denominator of which shall be 365 (but in no event shall such fraction be greater than one (1)), such number to be rounded to the nearest whole number of Restricted Stock Units (each, an “Initial RSU Award”); provided, however, that a Non-Employee Director shall not be eligible to receive an Initial RSU Award if either (x) he or she was an employee of the

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Company or any of its Subsidiaries immediately prior to first becoming a Non-Employee Director, or (y) he or she first becomes a Non-Employee Director at any time on or after the February 1 following the last preceding Annual Meeting.

(c)

VESTING; TERMINATION OF SERVICE. Except as otherwise provided in an Award Agreement at the time of grant, each Annual RSU Award shall fully vest on the February 1 that occurs in the fiscal year of the Company following the fiscal year in which the Award was granted. Each Initial RSU Award shall fully vest on the Vesting Date established for the Annual RSU Awards granted in connection with the last Annual Meeting to occur prior to the grant date of such Initial RSU Award. If the Non-Employee Director ceases to serve as a member of the Board for any reason other than the Non-Employee Director’s death, the Non-Employee Director’s Restricted Stock Units shall terminate to the extent such Restricted Stock Units have not become vested prior to the first date the Non-Employee Director is no longer a member of the Board, and the Non-Employee Director shall have no rights with respect to, or in respect of, such terminated Restricted Stock Units. If the Non-Employee Director ceases to serve as a member of the Board due to his or her death, the Non-Employee Director’s unvested Restricted Stock Units shall fully vest as of the date of the Non-Employee Director’s death.

(d)

SETTLEMENT OF RESTRICTED STOCK UNITS. On or as soon as administratively practical following the applicable Vesting Date (and in all events not later than two and one-half months after the applicable Vesting Date), the Company shall deliver to the Non-Employee Director a number of Shares (as evidenced by an appropriate entry on the books of the Company or a duly authorized transfer agent of the Company) equal to the number of Restricted Stock Units that vested on the applicable Vesting Date. Upon settlement of any Restricted Stock Units in accordance with the foregoing provision of this Section 4(d) and settlement of any Dividend Equivalent Right in accordance with Section 4(f), the Non-Employee Director shall have no further rights with respect to any Restricted Stock Units that are so paid.

(e)

SHAREHOLDER RIGHTS. A Non-Employee Director shall have no rights as a shareholder of the Company, no dividend rights (except as expressly set forth in Section 4(f) with respect to Dividend Equivalent Rights) and no voting rights with respect to the Restricted Stock Units or any Shares underlying or issuable in respect of such Restricted Stock Units until such Shares have been issued to the Non-Employee Director pursuant to Section 4(d). Except for any Dividend Equivalent Rights awarded pursuant to Section 4(f) or as provided in Section 7, no adjustment shall be made in respect of any Restricted Stock Units for dividends or distributions or other rights in respect of any share for which the record date is prior to the date upon which the Non-Employee Director shall become the holder of record of Shares related thereto.

(f)

DIVIDEND EQUIVALENT RIGHTS DISTRIBUTIONS. As of any date that the Company pays an ordinary cash dividend on its Common Stock, the Company shall credit the Non-Employee Directors with a dollar amount equal to (i) the per Share cash dividend paid by the Company on its Common Stock on such date, multiplied by (ii) the total number of Restricted Stock Units (including as such total number may be adjusted pursuant to Section 7) subject to the Award that are outstanding immediately prior to the record date for that dividend (a “Dividend Equivalent Right”). Any Dividend Equivalent Rights credited pursuant to the foregoing provisions of this Section 4(f) shall be subject to the same vesting, settlement and other terms, conditions and restrictions as the Restricted Stock Units to which they relate; provided, however, that the amount of any vested Dividend Equivalent Rights shall be paid in cash. No crediting of Dividend Equivalent Rights shall be made pursuant to this Section 4(f) with respect to any Restricted Stock Units which, immediately

Apple Inc. | 2018 Proxy Statement | A-4


prior to the record date for that dividend, have either been paid pursuant to Section 4(d) or terminated pursuant to Section 4(c).

5.

OPTIONS.

(a)

NO ADDITIONAL GRANTS. No Options shall be granted under the Plan unless and until the Board determines that the grant of Options is in the best interests of the Company and its shareholders.

(b)

EXERCISE PRICE. The per share exercise price of each Option shall not be less than 100% of the Fair Market Value of a Share as of the date of grant of the Option determined in accordance with the provisions of the Plan.

(c)

VESTING. Except as otherwise provided in an Award Agreement at the time of grant, Options shall be fully vested and immediately exercisable on their date of grant.

(d)

TERM OF OPTIONS.

i.

TEN-YEAR TERM. Each Option shall expire ten (10) years from its date of grant, subject to earlier termination as provided herein.

ii.

TERMINATION OF SERVICE. Upon cessation of a Non-Employee Director’s service as a member of the Board for any reason other than death, any of the Non-Employee Director’s Options (or any portion thereof) that is not then vested shall terminate, and the Non-Employee Director shall have no rights with respect to, or in respect of, such terminated Options. If the Non-Employee Director ceases to serve as a member of the Board due to his or her death, the Non-Employee Director’s Options shall fully vest as of the date of the Non-Employee Director’s death.

iii.

EXERCISE FOLLOWING TERMINATIONS OF SERVICE. If a Non-Employee Director ceases to be a member of the Board for any reason other than death, any Options granted to such Non-Employee Director that are exercisable at the time of the Non-Employee Director’s termination may be exercised by such Non-Employee Director at any time within ninety (90) days after the date of such Non-Employee Director’s termination of service, subject to the earlier expiration of such Options as provided for in Section 5(d)(i) above. At the end of such ninety-day period, any unexercised portion of the Option shall expire. If a Non-Employee Director ceases to be a member of the Board by reason of his or her death, all of the Options granted to the Non-Employee Director may be exercised by his or her Beneficiary at any time within three (3) years after the date of the Non-Employee Director’s death, subject to the earlier expiration of such Options as provided for in Section 5(d)(i) above. At the end of such three-year period, any unexercised portion of the Option shall expire.

(e)

TIME AND MANNER OF EXERCISE OF OPTIONS.

i.

NOTICE OF EXERCISE. Subject to the other terms and conditions hereof, a Non-Employee Director may exercise any Option, to the extent such Option is vested, by giving written notice of exercise to the Company; provided, however, that in no event shall an Option be exercisable for a fractional share. The date of exercise of an Option shall be the later of (A) the date on which the Company receives such written notice and (B) the date on which the Non-Employee Director pays the applicable consideration pursuant to Section 5(e)(ii).

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ii.

METHOD OF EXERCISE. The consideration to be paid for the Shares to be issued upon exercise of an Option may consist of (A) cash, (B) check, (C) other Shares that have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which the Option shall be exercised, (D) delivery of a properly executed exercise notice together with irrevocable instructions to a broker to sell Shares and promptly deliver to the Company the amount of proceeds required to pay the exercise price, or (E) any combination of the foregoing methods of payment. Without limiting the generality of the foregoing, any vested and exercisable Options may also be Net Exercised, to the extent permitted by the Administrator.

iii.

SHAREHOLDER RIGHTS. A Non-Employee Director shall have no rights as a shareholder with respect to any Shares issuable upon exercise of an Option until such Shares shall have been issued to the Non-Employee Director pursuant to Section 5(e), and, except as provided in Section 7, no adjustment shall be made to an Option or Share issued upon the exercise thereof for dividends, distributions or other rights in respect of any Share for which the record date is prior to the date upon which the Non-Employee Director shall become the holder of record thereof.

(f)

ISSUANCE OF SHARES. Subject to the foregoing conditions, as soon as is reasonably practicable after its receipt of a proper notice of exercise and, if applicable, payment of the exercise price of the Option for the number of Shares with respect to which the Option is exercised, the Company shall deliver to the Non-Employee Director (or following the Non-Employee Director’s death, the Beneficiary entitled to exercise the Option), at the principal office of the Company or at such other location as may be acceptable to the Company and the Non-Employee Director (or such Beneficiary), the appropriate number of Shares to be issued in connection with such exercise. Delivery of such Shares shall be evidenced by an appropriate entry on the books of the Company or a duly authorized transfer agent of the Company, or in such other manner that the Administrator shall specify from time to time. Shares sold in connection with a “cashless exercise” shall be delivered to the broker referred to therein in accordance with procedures established by the Company from time to time.

6.

RESTRICTIONS ON TRANSFER. An Award may not be transferred, pledged, assigned, or otherwise disposed of, except by will or by the laws of descent and distribution; provided, however, that, with the approval of the Administrator, an Award may be transferred to a Non-Employee Director’s family members or to one or more trusts established in whole or in part for the benefit of one or more of such family members. An Option shall be exercisable, during the Non-Employee Director’s lifetime, only by the Non-Employee Director or by the individual or entity to whom the Option has been transferred in accordance with the previous sentence. No assignment or transfer of an Award, or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise, except by will or the laws of descent and distribution, shall vest in the assignee or transferee any interest or right in the Award, but immediately upon any attempt to assign or transfer the Award the same shall terminate and be of no force or effect.

7.

ADJUSTMENTS.

(a)

Upon (or, as may be necessary to effect the adjustment, immediately prior to) any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend) or reverse stock split; any merger, combination, consolidation or other reorganization; any spin-off, split-up, split-off or extraordinary dividend distribution in respect of the Common Stock; or any exchange of

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Common Stock or other securities of the Company, or any similar, unusual or extraordinary corporate transaction in respect of the Common Stock, the Administrator shall equitably and proportionately adjust (1) the number and type of Shares (or other securities) that thereafter may be made the subject of Awards (including the Share Limit, maximums and number of Shares set forth elsewhere in the Plan), (2) the number, amount and type of Shares (or other securities or property) subject to any outstanding Awards, (3) the exercise price of any outstanding Options, and/or (4) the securities, cash or other property deliverable upon exercise or settlement of any outstanding Awards, in each case to the extent necessary to preserve (but not increase) the level of incentives intended by the Plan and the then-outstanding Awards. Any good faith determination by the Administrator as to whether an adjustment is required in the circumstances pursuant to this Section 7(a), and the extent and nature of any such adjustment, shall be conclusive and binding on all persons.

(b)

It is intended that, unless otherwise determined by the Administrator, any adjustments contemplated by Section 7(a) be made in a manner that satisfies applicable legal, tax (including, without limitation and as applicable in the circumstances, Code Section 409A) and accounting (so as to not trigger any charge to earnings with respect to such adjustment) requirements.

(c)

Any adjustment under this Section 7 need not be the same for all persons or Awards.

8.

CHANGE OF CONTROL. Upon the occurrence of any Change of Control, any then outstanding Award automatically shall become vested or exercisable, as the case may be, with respect to a prorated portion of the number of Shares subject to such Award, determined as follows:

(a)

CLIFF-VESTING AWARDS. If the Award has one scheduled Vesting Date, the portion of the Award with respect to the following number of Shares shall vest upon the Change of Control: (i) the number of Shares subject to such Award, multiplied by (ii) a fraction (A) the numerator of which is the number of days elapsed from and including the date the Award was granted to the date of the Change of Control, and (B) the denominator is the number of days from and including the date of grant to and including the scheduled Vesting Date.

(b)

INSTALLMENT-VESTING AWARDS. If the Award has multiple scheduled Vesting Dates, the portion of the Award with respect to the following number of Shares shall vest upon the Change of Control: (i) the number of Shares subject to the portion of such Award that is scheduled to vest on the first Vesting Date that is scheduled to occur following the Change of Control, multiplied by (ii) a fraction (A) the numerator of which is the number of days elapsed following and excluding the most recent Vesting Date prior to the Change of Control, and (B) the denominator is the number of days from and excluding such most recent Vesting Date to and including the first Vesting Date that is scheduled to occur following the Change of Control.

9.

DESIGNATION OF BENEFICIARY.

(a)

BENEFICIARY DESIGNATIONS. Each Non-Employee Director may designate a Beneficiary to exercise an Option or receive settlement of an Award upon the Non-Employee Director’s death by executing a Beneficiary Designation Form and delivering it to the Administrator.

(b)

CHANGE OF BENEFICIARY DESIGNATION. A Non-Employee Director may change an earlier Beneficiary designation by executing a later Beneficiary Designation Form and delivering it to the Administrator. The execution of a Beneficiary Designation Form and its receipt by the Administrator shall revoke and rescind any prior Beneficiary Designation Form.

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10.

TERMINATION AND AMENDMENT OF THE PLAN.

(a)

TERMINATION. Unless earlier terminated by the Board, the Plan shall terminate on November 12, 2027. Following such date, no further grants of Awards shall be made pursuant to the Plan.

(b)

GENERAL POWER OF BOARD. Notwithstanding anything herein to the contrary, the Board may at any time and from time to time terminate, modify, suspend or amend the Plan in whole or in part (including amend the Plan at any time and from time to time, without shareholder approval, to prospectively change the value and relative mixture of Restricted Stock Units and Options subject to Awards granted to Non-Employee Directors on the date of each Annual Meeting or upon becoming a Non-Employee Director and the methodology for determining the number of Shares to be subject to such Awards, each within the Share Limit and the individual limit set forth in Section 3, and the other terms and conditions applicable to such Awards) or, subject to Sections 10(c) and 10(d), amend the terms of any outstanding Award; provided, however, that no such termination, modification, suspension or amendment shall be effective without shareholder approval if such approval is required to comply with any applicable law or stock exchange rule; and provided further that the Board may not, without shareholder approval, increase the maximum number of Shares issuable under the Plan except as provided in Section 7. For avoidance of doubt, the Board may, without shareholder approval, provide on a prospective basis for grants under the Plan to consist of Options only, Restricted Stock Units only, or a combination of Options and Restricted Stock Units on such terms and conditions, subject to the Share Limit and the other express limits of the Plan, as may be established by the Board.

(c)

WHEN NON-EMPLOYEE DIRECTORS’ CONSENTS REQUIRED. The Board may not alter, amend, suspend or terminate the Plan, or amend the terms of any outstanding Award, without the consent of any Non-Employee Director to the extent that such action would adversely affect his or her rights with respect to Awards that have previously been granted, except to the extent such action is necessary to comply with applicable law or stock exchange listing rules or accounting rules.

(d)

NO REPRICING. In no case (except due to an adjustment contemplated by Section 7 or any repricing that may be approved by shareholders) shall any action be taken with respect to the Plan or any Option hereunder that would constitute a repricing (by amendment, substitution, cancellation and regrant, exchange or other means, including any action that is treated as a repricing under U.S. generally accepted accounting principles) of the per Share exercise price of any Option.

11.

MISCELLANEOUS.

(a)

NO RIGHT TO NOMINATION. Nothing in the Plan shall be deemed to create any obligation on the part of the Board to nominate any of its members for reelection by the Company’s shareholders, nor confer upon any Non-Employee Director the right to remain a member of the Board for any period of time, or at any particular rate of compensation.

(b)

REGULATORY REQUIREMENTS. The Administrator may require each Non-Employee Director or any other person purchasing or acquiring Shares pursuant to the Plan to agree with the Company in writing that such Non-Employee Director is acquiring the Shares for investment and not with a view to the distribution thereof or provide such other assurances and representations to the Company as the Administrator may deem necessary or desirable to assure compliance with all applicable legal and accounting requirements. Shares delivered under the Plan shall be subject to such stock-transfer orders and other restrictions as the Administrator may deem advisable under the rules,

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regulations and other requirements of the Securities and Exchange Commission or any exchange upon which the Common Stock is then listed, and any applicable federal or state securities law. No Shares shall be issued hereunder unless the Company shall have determined that such issuance is in compliance with, or pursuant to an exemption from, all applicable federal and state securities laws.

(c)

EXPENSES. The costs and expenses of administering the Plan shall be borne by the Company.

(d)

APPLICABLE LAW. Except as to matters of federal law, the Plan and all actions taken thereunder shall be governed by and construed in accordance with the laws of the State of California without giving effect to conflicts of law principles.

(e)

SEVERABILITY. If a court of competent jurisdiction holds any provision invalid and unenforceable, the remaining provisions of the Plan shall continue in effect.

(f)

SECTION HEADINGS; INTERPRETATION. Captions and headings are given to the sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.

(g)

AUTHORITY OF THE COMPANY AND SHAREHOLDERS. The existence of the Plan shall not affect or restrict in any way the right or power of the Company or the shareholders of the Company to make or authorize (i) any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or business of the Company or any Subsidiary, (ii) any merger, amalgamation, consolidation or change in the ownership of the Company or any Subsidiary, (iii) any issue of bonds, debentures, capital, preferred or prior preference stock ahead of or affecting the capital stock (or the rights thereof) of the Company or any Subsidiary, (iv) any dissolution or liquidation of the Company or any Subsidiary, (v) any sale or transfer of all or any part of the assets or business of the Company or any Subsidiary, (vi) the payment at the discretion of the Board of any type or form of compensation to Non-Employee Directors that may be made at law and without contravention of any requirement of the principal exchange upon which the Shares are traded, or (vii) any other corporate act or proceeding by the Company or any Subsidiary, whether of a similar character or otherwise. No Non-Employee Director, beneficiary or other person shall have any claim under any Award or Award Agreement against any member of the Board or the Company, or any employees, officers or agents of the Company or any Subsidiary, as a result of any such action.

12.

DEFINITIONS. Capitalized words not otherwise defined in the Plan have the meanings set forth below:

“ADMINISTRATOR” means the Board. The Board may delegate ministerial, non-discretionary functions to individuals who are officers or employees of the Company or any of its Subsidiaries or to third parties.

“ANNUAL MEETING” means the first annual meeting of the Company’s shareholders at which members of the Board are elected following the applicable fiscal year of the Company or the applicable date, as the context may require. By way of example, the Annual Meeting following the Company’s 2016 fiscal year occurred on February 28, 2017.

“AWARD” means an award of Options or Restricted Stock Units under the Plan.

“AWARD AGREEMENT” means any agreement that evidences an Award granted under the Plan. Award Agreements shall consist of either (1) a written award agreement in a form approved by the Administrator,

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or (2) an electronic notice of award grant in a form approved by the Administrator and recorded by the Company (or its designee) in an electronic recordkeeping system used for the purpose of tracking award grants under the Plan generally, as the Administrator may provide and, in each case and if required by the Administrator, executed or otherwise electronically accepted by the recipient of the Award in such form and manner as the Administrator may require.

“BENEFICIARY” means an individual or entity designated by a Non-Employee Director on a Beneficiary Designation Form to exercise Options or receive settlement of Awards in the event of the Non-Employee Director’s death; provided, however, that, if no such individual or entity is designated or if no such designated individual is alive at the time of the Non-Employee Director’s death, Beneficiary shall mean the Non-Employee Director’s estate.

“BENEFICIARY DESIGNATION FORM” means a document, in a form approved by the Administrator to be used by Non-Employee Directors to name their respective Beneficiaries. No Beneficiary Designation Form shall be effective unless it is signed by the Non-Employee Director and received by the Administrator prior to the date of death of the Non-Employee Director.

“BOARD” means the Board of Directors of the Company.

“CHANGE OF CONTROL” means the occurrence of any one or more of the following events:

(i)

An acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (an “Acquirer”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (1) the then outstanding Shares (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, or (4) any acquisition by any entity pursuant to a transaction that complies with clauses (1), (2) and (3) of subsection (iii) of this definition;

(ii)

A change in the composition of the Board such that the individuals who, as of February 13, 2018, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that, for purposes of this subsection (ii), any individual who becomes a member of the Board subsequent to February 13, 2018 whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered members of the Incumbent Board; provided further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of an Acquirer other than the Board shall not be considered a member of the Incumbent Board;

(iii)

The consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any of its Subsidiaries or sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or securities of another entity by the Company or any of its Subsidiaries (a “Business Combination”), in each case, unless,

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following such Business Combination (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock (or, for a noncorporate entity, equivalent securities) and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors (or, for a noncorporate entity, equivalent securities), as the case may be, of the entity resulting from such Business Combination (including an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Acquirer (excluding any entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination) beneficially owns, directly or indirectly, 50% or more of, respectively, the then outstanding shares of common stock (or, for a noncorporate entity, equivalent securities) of the entity resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such entity except to the extent that such ownership existed prior to the Business Combination, and (3) at least a majority of the members of the board of directors (or, for a noncorporate entity, equivalent body or committee) of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

(iv)

The approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

“CODE” means the Internal Revenue Code of 1986, as amended, and the applicable rules and regulations promulgated thereunder.

“COMMON STOCK” means the common stock of the Company or any other class of securities of the Company or any successor in interest thereto to which any award under the Plan relates by reason of an adjustment under Section 7.

“COMPANY” means Apple Inc., a California corporation, or any successor to substantially all of its business.

“EXCHANGE ACT” means the Securities Exchange Act of 1934, as amended, and the applicable rules and regulations promulgated thereunder.

“FAIR MARKET VALUE” means, unless otherwise determined or provided by the Administrator in the circumstances, the last price (in regular trading) for a Share on the Nasdaq Stock Market (the “Market”) for the date in question or, if no sales of Shares were reported on the Market on that date, the last price (in regular trading) for a Share on the Market for the next preceding day on which sales of Shares were reported on the Market. The Administrator may, however, provide with respect to one or more Awards that the Fair Market Value shall equal the last price for a Share on the Market on the last trading day preceding the date in question or the average of the high and low trading prices of a Share on the Market for the date in question or the most recent trading day. If Shares are no longer listed or are no longer actively traded on the Market as of the applicable date, the Fair Market Value of a Share shall be the value as reasonably determined by the Administrator for purposes of the Award in the circumstances. The

Apple Inc. | 2018 Proxy Statement | A-11


Administrator also may adopt a different methodology for determining Fair Market Value with respect to one or more Awards if a different methodology is necessary or advisable to secure any intended favorable tax, legal or other treatment for the particular Awards (for example, and without limitation, the Administrator may provide that Fair Market Value for purposes of one or more Awards shall be based on an average of closing prices (or the average of high and low daily trading prices) for a specified period preceding the relevant date).

“NET EXERCISED” shall mean the exercise of an Option or any portion thereof by the delivery to the person exercising such Option of the greatest number of whole Shares having a Fair Market Value on the date of exercise not in excess of the difference between the aggregate Fair Market Value of the Shares subject to the Option (or the portion of such Option then being exercised) and the aggregate exercise price for all such Shares under the Option (or the portion thereof then being exercised), with any fractional share that would result from such equation to be payable in cash.

“NON-EMPLOYEE DIRECTOR” means a member of the Board who is not an employee of the Company or any of its Subsidiaries.

“OPTION” means an option to purchase Shares awarded to a Non-Employee Director under the Plan.

“RESTRICTED STOCK UNIT” means a bookkeeping entry representing the equivalent of one Share, subject to the terms and conditions hereof, and represents an unfunded and unsecured obligation of the Company.

“SHARE” means one share of Common Stock.

“SUBSIDIARY” means any corporation or other entity a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company. An entity that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.

“VESTING DATE” means, with respect to a particular Award, the date on which the Award vests in whole or in part.

“VOTING SECURITIES” means, with respect to any corporation, securities of such corporation that are entitled to vote generally in the election of directors of such corporation.

Apple Inc. | 2018 Proxy Statement | A-12


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APPLE INC. C/O PROXY SERVICES P.O. BOX 9163 FARMINGDALE, NY 11735 VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 8:59 p.m. PT the day before the meeting date. Follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 8:59 p.m. PT the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR TELEPHONE, FOLD ALONG THE PERFORATION,BLACK INK AS FOLLOWS: E35167-P99719 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THE BOTTOMTHIS PORTION IN THE ENCLOSED ENVELOPE.ONLY APPLE INC. The Board of Directors recommends a vote FOR all the listed nominees. 1. The election to Apple’s Board of Directors of the eight nominees named in the Proxy Statement For Against Abstain Nominees: 1a. James Bell 1b. Tim Cook 1c. Al Gore 1d. Bob Iger 1e. Andrea Jung 1f. Art Levinson 1g. Ron Sugar 1h. Sue Wagner For address changes and/or comments, please check this box and write them on the back where indicated. The Board of Directors recommends a vote FOR Proposals 2, 3 and 4. For Against Abstain 2. Ratification of the appointment of Ernst & Young LLP as Apple’s independent registered public accounting firm for 2018 3. Advisory vote to approve executive compensation 4. Approval of the amended and restated Apple Inc. Non-Employee Director Stock Plan The Board of Directors recommends a vote AGAINST For Against Abstain Proposals 5 and 6. 5. A shareholder proposal entitled “Shareholder Proxy Access Amendments” 6. A shareholder proposal entitled “Human Rights Committee” NOTE: Please sign your name(s) EXACTLY as your name(s) appear(s) on this proxy. All joint holders must sign. When signing as attorney, trustee, executor, administrator, guardian or corporate officer, please provide your FULL title. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date


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Apple Inc. 2018 Annual Meeting of Shareholders February 13, 2018 9:00 a.m. Pacific Time Apple Park, Cupertino, California 95014 Attending the Annual Meeting—Advance Registration Required We are pleased to welcome shareholders to Steve Jobs Theater at Apple Park for the 2018 Annual Meeting. To make sure we can accommodate as many attendees as possible, we are establishing a registration process. Shareholders will need to register in advance at proxyvote.com beginning at 8:00 a.m. Pacific Time on January 22, 2018 and registration will be on a first-come, first-served basis. Only shareholders as of the Record Date who have registered in advance and have a valid confirmation of registration will be admitted to the meeting. Your proxy materials include a unique control number to be used at proxyvote.com to vote the shares and register for the meeting. If you have any questions about proxyvote.com or the control number, please contact the bank, broker, or other organization that holds the shares. The availability of online voting may depend on the voting procedures of the organization that holds the shares. The use of mobile phones, recording or photographic equipment, tablets, or computers is not permitted at the Annual Meeting. Attendees are welcome to visit the Apple Park Visitor Center after the Annual Meeting, but we are not able to accommodate tours of the campus. Even if you successfully register and plan on attending the Annual Meeting in person, we encourage you to vote the shares in advance using one of the methods described in these proxy materials to ensure that your vote will be represented at the Annual Meeting. E35168-P99719 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF APPLE INC.
FOR THE 20172018 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON FEBRUARY 28, 2017
13, 2018 The undersigned shareholder of Apple Inc., a California corporation, hereby acknowledges receipt of the Notice of 20172018 Annual Meeting of Shareholders and Proxy Statement with respect to the 20172018 Annual Meeting of Shareholders of Apple Inc. to be held at 1 Infinite Loop, Town Hall (Building 4),Steve Jobs Theater at Apple Park, Cupertino, California 95014 on Tuesday, February 28, 201713, 2018 at 9:00 a.m. Pacific Time, and hereby appoints Luca Maestri and Bruce Sewell,Kate Adams, and each of them, proxies and attorneys-in-fact, each with power of substitution and revocation, and each with all powers that the undersigned would possess if personally present, to vote the Apple Inc. common stock of the undersigned at such meeting and any postponement(s) or adjournment(s) of such meeting, as set forth on the reverse side, and in their discretion upon any other business that may properly come before the meeting (and any such postponement(s) or adjournment(s)).
THIS PROXY WILL BE VOTED AS SPECIFIED OR, IF NO CHOICE IS SPECIFIED, FOR THE ELECTION OF THE NOMINEES, FOR PROPOSALS 2, AND 3 1 YEAR FOR PROPOSALAND 4, AGAINST PROPOSALS 5 6, 7, 8 AND 9,6 AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING AND ANY POSTPONEMENT(S) OR ADJOURNMENT(S) THEREOF.
Address Changes/Comments: (If you noted any Address Changes/Comments above, please mark the corresponding box on the reverse side.) PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE OR VOTE BY TELEPHONE OR THE INTERNET.
If you vote by telephone or the Internet, please DO NOT mail back this proxy card. THANK YOU FOR YOUR VOTE.
C Non-Voting Items
Change of Address — Please print new address below.
Consent
Until contrary notice to Apple Inc., I consent to access all future notices of annual meetings, proxy statements and annual reports issued by Apple Inc. over the Internet.
D Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below
NOTE: Please sign your name(s) EXACTLY as your name(s) appear(s) on this proxy. All joint holders must sign. When signing as attorney, trustee, executor, administrator, guardian or corporate officer, please provide your FULL title.
Date (mm/dd/yyyy) — Please print date below.
Signature 1 — Please keep signature within the box.
Signature 2 — Please keep signature within the box.
IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A - D ON BOTH SIDES OF THIS CARD.