Equity Research Company Update

EQUITY RESEARCH COMPANY UPDATE December 8, 2009

TECHNOLOGY/APPLIED TECHNOLOGY

Stock Rating:

Apple Inc.

OUTPERFORM 12-18 mo. Price Target AAPL - NASDAQ

$235.00 $189.87

3-5 Yr. EPS Gr. Rate 52-Wk Range Shares Outstanding Float Market Capitalization Avg. Daily Trading Volume Dividend/Div Yield Fiscal Year Ends Book Value 2010E ROE LT Debt Preferred Common Equity Convertible Available

11% $208.71-$78.20 914.0M 901.0M $170,846.1M 18,456,758 NA/NM Sep $30.44 20.8% $0.0M $0.0M $27,832M No

EPS Diluted

Q1

Q2

Q3

Q4

2007A

1.14

0.87

0.92

1.01

3.93

48.3x

2008A

1.76

1.16

1.19

1.26

5.36

35.4x

2009A

1.78

1.33

1.35

1.82

6.29

30.2x

2010E

2.17

1.91

2.10

2.21

8.39

22.6x

Year

Tablet Tidbits SUMMARY

Our recent checks have uncovered several tidbits about Apple's forthcoming tablet. First, it appears Apple will begin ramping production in earnest in February, implying that the tablet could launch in late March or April (barring production hiccups). Our checks also suggest that the tablet's display will be a 10.1" LTPS based LCD screen, not an OLED display as some have suggested. Finally, contacts in the US indicate Apple has been actively reaching out to book publishers with a very attractive proposal for distributing their books on a forthcoming ebook platform (presumably the tablet). We have not updated our model to reflect the tablet but believe it could easily contribute $0.50-$0.75 in incremental EPS in C2H10. KEY POINTS ■

Our checks into Apple's supply chain indicate that the manufacturing cogs for the tablet are creaking into action and should begin to hit a mass market stride in February. At this stage Apple appears to be sizing its supply chain to support production of as many as 1M units per month.

■

The February ramp schedule suggests a late March or April commercial release, since Apple will need to build at least 5-6 weeks of inventory before going live. Our checks also indicate that the device will have a 10.1" multi-touch display using LTPS LCD technology (as on the iPhone), not OLED.

■

Contacts in the US tell us Apple is approaching book publishers with a very attractive proposal for distributing their content. Apple will split revenue 30/70 (Apple/publisher); give the same deal to all comers; and not request exclusivity. We believe the typical Kindle/publisher split is 50/50, rising to 30/70 if Kindle is given ebook exclusivity.

■

As innovative as it is, we believe the Kindle has disgruntled the publishing industry (book, newspaper, and magazine) by demanding exclusivity, disallowing advertising, and demanding a wolfish cut of revenue. The tablet is set to change that. It should also make ebooks more relevant for education by simplifying functions such as scribbling marginalia.

■

We have not adjusted our model to show the impact of the tablet, but we believe it will be substantial. Conservatively assuming 1M-1.5M units per quarter at an ASP of $1,000 and a corporate average net income margin of 22%, the tablet could contribute $0.25-$0.38 of incremental EPS per quarter.

Mult.

Stock Price Performance

Company Description

1 Year Price History for AAPL 240 200

Apple, Inc. designs, manufacturers, and sells personal computers, portable digital music players, and mobile communication devices, as well as related software, services, peripherals, and network solutions worldwide.

160 120 80 Q1

2009

Yair Reiner 212 667-5505

Michael Suh 212-667-6035

[email protected]

[email protected]

Q2

Q3

40

Created by BlueMatrix

Oppenheimer & Co. Inc. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. See "Important Disclosures and Certifications" section at the end of this report for important disclosures, including potential conflicts of interest. See "Price Target Calculation" and "Key Risks to Price Target" sections at the end of this report, where applicable. Oppenheimer & Co Inc. 300 Madison Avenue 4th Floor New York, NY 10017 Tel: 800-221-5588 Fax: 212-667-8229

Apple Inc.

Apple Inc. - GAAP Model Quarterly Consolidated Statement of Income Statement FY

FY

1Q09A

2Q09A

3Q09A

4Q09A

FY

1Q10E

2Q10E

3Q10E

4Q10E

FY

2007A

2008A

Dec-08A

Mar-09A

Jun-09A

Sep-09A

2009A

Dec-09E

Mar-10E

Jun-10E

Sep-10E

2010E

$24,006

$32,479

$10,167

$8,163

$8,337

$9,870

$36,537

$12,411

$10,760

$11,355

$11,861

$46,387

COGS

15,852

21,334

6,635

5,192

5,314

6,256

23,397

7,943

6,725

7,029

7,318

29,015

Gross Profit

$8,154

$11,145

$3,532

$2,971

$3,023

$3,614

$13,140

$4,468

$4,035

$4,326

$4,543

$17,372

782 2,963

1,109 3,761

315 1,091

319 985

341 1,010

358 1,063

1,333 4,149

385 1,278

409 1,151

420 1,181

439 1,234

1,653 4,844

3,745

4,870

1,406

1,304

1,351

1,421

5,482

1,663

1,560

1,601

1,672

6,497

$4,409

$6,275

$2,126

$1,667

$1,672

$2,193

$7,658

$2,805

$2,475

$2,725

$2,870

$10,875

$599

$620

$158

$63

$60

$45

$326

$34

$39

$41

$44

$157

Income Before Taxes

$5,008

$6,895

$2,284

$1,730

$1,732

$2,238

$7,984

$2,839

$2,513

$2,766

$2,914

$11,032

Taxes on Income (benefit) Net Income

1,512 $3,496

2,061 $4,834

679 $1,605

525 $1,205

503 $1,229

573 $1,665

2,280 $5,704

852 $1,987

754 $1,759

830 $1,936

874 $2,040

3,310 $7,723

$3.93

$5.36

$1.78

$1.33

$1.35

$1.82

$6.29

$2.17

$1.91

$2.10

$2.21

$8.39

Stock Based Comp - Total

242

$516

$170

$181

$179

$180

$710

$211

$212

$212

$213

$847

Net Income, ex. Option

$3,738

$5,350

$1,775

$1,386

$1,408

$1,845

$6,414

$2,198

$1,971

$2,148

$2,252

$8,570

Diluted EPS ex. Options

$4.20

$5.93

$1.97

$1.53

$1.55

$2.02

$7.07

$2.40

$2.14

$2.33

$2.44

$9.31

889

902

901

903

909

914

907

917

919

922

924

921

Net Sales

Research and Development Sales, General & Administrative Total Operating Expenses Operating Income Other Income

Diluted EPS

Diluted Shares

Source: Company Data, Oppenheimer & Co. Inc. Estimates.

2

Apple Inc.

Apple Inc. - GAAP Model Margin and Growth Metrics

Gross Margin

FY

FY

1Q09A

2Q09A

3Q09A

4Q09A

FY

1Q10E

2Q10E

3Q10E

4Q10E

FY

2007A

2008A

Dec-08A

Mar-09A

Jun-09A

Sep-09A

2009A

Dec-09E

Mar-10E

Jun-10E

Sep-10E

2010E

34.0%

34.3%

34.7%

36.4%

36.3%

36.6%

36.0%

36.0%

37.5%

38.1%

38.3%

37.5%

3.3% 12.3%

3.4% 11.6%

3.1% 10.7%

3.9% 12.1%

4.1% 12.1%

3.6% 10.8%

3.6% 11.4%

3.1% 10.3%

3.8% 10.7%

3.7% 10.4%

3.7% 10.4%

3.6% 10.4%

Operating Margin

18.4%

19.3%

20.9%

20.4%

20.1%

22.2%

21.0%

22.6%

23.0%

24.0%

24.2%

23.4%

Effective Tax Rate Net Income Margin

30.2% 14.6%

29.9% 14.9%

29.7% 15.8%

30.3% 14.8%

29.0% 14.7%

25.6% 16.9%

28.6% 15.6%

30.0% 16.0%

30.0% 16.4%

30.0% 17.1%

30.0% 17.2%

30.0% 16.6%

2.4%

1.9%

28.8% 29.0% 47.4% 41.3% 41.8% -0.4%

-19.7% -15.9% -21.6% -24.9% -25.0% 0.2%

2.1% 1.8% 0.3% 2.0% 1.3% 0.7%

18.4% 19.6% 31.2% 35.5% 34.7% 0.3%

0.6%

25.7% 23.6% 27.9% 19.4% 19.0% 0.3%

-13.3% -9.7% -11.8% -11.5% -11.7% 0.3%

5.5% 7.2% 10.1% 10.1% 9.8% 0.3%

4.4% 5.0% 5.3% 5.3% 5.1% 0.3%

1.5%

24.3% 45.7% 79.7% 75.8% 73.4%

35.3% 36.7% 42.3% 38.3% 36.3%

5.8% 6.0% 0.0% 1.5% 1.4%

8.7% 20.1% 26.8% 15.3% 14.8%

11.7% 16.3% 20.1% 14.6% 13.9%

25.0% 31.9% 52.1% 46.6% 45.0%

12.5% 17.9% 22.0% 18.0% 17.3%

22.1% 26.5% 31.9% 23.8% 21.7%

31.8% 35.8% 48.5% 46.0% 43.4%

36.2% 43.1% 63.0% 57.5% 55.4%

20.2% 25.7% 30.9% 22.5% 21.2%

27.0% 32.2% 42.0% 35.4% 33.4%

Research and Development Sales, General & Administrative

Sequential Growth Rates Revenue Gross Profit Operating Profit Net Income EPS WA Shares Outstanding Year-on-Year Growth Rates Revenue Gross Profit Operating Profit Net Income EPS

Source: Company data, Oppenheimer & Co. Inc. estimates

3

Apple Inc.

Apple Inc. - GAAP Model Product Breakdown FY

FY

1Q09A

2Q09A

3Q09A

4Q09A

FY

1Q10E

2Q10E

3Q10E

4Q10E

FY

2007A

2008A

Dec-08A

Mar-09A

Jun-09A

Sep-09A

2009A

Dec-09E

Mar-10E

Jun-10E

Sep-10E

2010E

Revenue by Product Desktops

$4,020

$5,603

$1,043

$1,050

$1,129

$1,086

$4,308

$1,060

$954

$1,029

$1,049

$4,093

Laptops

6,294

8,673

2,511

1,895

2,200

2,866

9,472

2,919

2,481

2,647

2,696

10,744

iPods

8,305

9,153

3,371

1,665

1,492

1,563

8,091

3,001

1,544

1,513

1,468

7,526

Music

2,496

3,340

1,011

1,049

958

1,018

4,036

1,279

1,327

1,260

1,323

5,189

123

1,844

1,247

1,521

1,689

2,297

6,754

3,015

3,350

3,779

4,053

14,198

Peripherals and other HW

1,260

1,659

378

358

341

393

1,470

440

462

485

534

1,921

SW, Services, and Other

1,508

2,207

606

625

528

647

2,406

697

641

641

737

2,716

iPhone

Revenue Contribution by Product Desktops

17%

17%

10%

13%

14%

11%

12%

9%

9%

9%

9%

9%

Laptops

26%

27%

25%

23%

26%

29%

26%

24%

23%

23%

23%

23%

iPods

35%

28%

33%

20%

18%

16%

22%

24%

14%

13%

12%

16%

Music

10%

10%

10%

13%

11%

10%

11%

10%

12%

11%

11%

11%

iPhone

1%

6%

12%

19%

20%

23%

18%

24%

31%

33%

34%

31%

Peripherals and other HW

5%

5%

4%

4%

4%

4%

4%

4%

4%

4%

5%

4%

SW, Services, and Other

6%

7%

6%

8%

6%

7%

7%

6%

6%

6%

6%

6%

2,714 38%

3,712 38%

9% $4,020

2% $5,603

21%

39%

849 33% 4% -10% 1,330 4% -9% $1,129 8% -18%

787 26% -7% -16% 1,380 4% -5% $1,086 -4% -20%

826 26% 5% 14% 1,283 -7% -10% $1,060 -2% 2%

744 27% -10% -9% 1,283 0% 0% $954 -10% -9%

818 27% 10% -4% 1,258 -2% -5% $1,029 8% -9%

834 26% 2% 6% 1,258 0% -9% $1,049 2% -3%

3,223 26%

37% 1,509

818 37% 12% -4% 1,284 -10% -19% $1,050 1% -22%

3,182 31%

12% 1,481

728 29% -22% -25% 1,433 -2% -8% $1,043 -81% -31%

4,337 62%

6,003 62%

51% 1,451

38% 1,445

3% $6,294

0% $8,673

55%

38%

1,796 71% 7% 34% 1,398 4% -8% $2,511 11% 23%

1,398 63% -22% -2% 1,356 -3% -9% $1,895 -25% -12%

1,754 67% 25% 13% 1,254 -7% -13% $2,200 16% -2%

2,266 74% 29% 35% 1,265 1% -6% $2,866 30% 27%

2,379 74% 5% 32% 1,227 -3% -12% $2,919 2% 16%

2,022 73% -15% 45% 1,227 0% -9% $2,481 -15% 31%

2,225 73% 10% 27% 1,190 -3% -5% $2,647 7% 20%

2,336 74% 5% 3% 1,154 -3% -9% $2,696 2% -6%

2,524 -3% 9% $1,408 2% -8% $3,554 -2% 0%

2,216 -12% -3% $1,329 -6% -13% $2,945 -17% -16%

2,603 17% 4% $1,279 -4% -12% $3,329 13% -8%

3,053 17% 17% $1,294 1% -7% $3,952 19% 9%

3,206 5% 27% $1,241 -4% -12% $3,980 1% 12%

2,766 -14% 25% $1,242 0% -7% $3,436 -14% 17%

3,043 10% 17% $1,208 -3% -6% $3,676 7% 10%

3,170 4% 4% $1,182 -2% -9% $3,746 2% -5%

Computers Desktop Units % of total % QoQ Growth % YoY Growth ASP % QoQ Growth % YoY Growth Revenue % QoQ Growth % YoY Growth Laptop Units % of total % QoQ Growth % YoY Growth ASP % QoQ Growth % YoY Growth Revenue % QoQ Growth % YoY Growth Total PC Units % QoQ Growth % YoY Growth ASP % QoQ Growth % YoY Growth Revenue % QoQ Growth % YoY Growth

4

7,051

9,715

33% $1,463

38% $1,469

$10,314 40%

0% $14,276 38%

Source: Company data, Oppenheimer & Co. Inc. estimates

-14% 1,354 -10% $4,308 -23%

7,214 69% 20% 1,313 -9% $9,472 9%

10,396 7% $1,326 -10% $13,780 -3%

1% 1,270 -6% $4,093 -5%

8,962 74% 24% 1,199 -9% $10,744 13%

12,185 17% $1,218 -8% $14,837 8%

Apple Inc.

Apple Inc. - GAAP Model Product Breakdown, Cont. FY

FY

1Q09A

2Q09A

3Q09A

4Q09A

FY

1Q10E

2Q10E

3Q10E

4Q10E

FY

2007A

2008A

Dec-08A

Mar-09A

Jun-09A

Sep-09A

2009A

Dec-09E

Mar-10E

Jun-10E

Sep-10E

2010E

iPods Units % QoQ Growth % YoY Growth ASP % QoQ Growth % YoY Growth Revenue % QoQ Growth % YoY Growth iPhones Units % QoQ Growth % YoY Growth ASP % QoQ Growth % YoY Growth Revenue % QoQ Growth % YoY Growth Music Revenue % QoQ Growth % YoY Growth Peripherals and Other Hardware Revenue % QoQ Growth % YoY Growth

51,630

54,828

31% $161

6% $167

-17% $8,305

4% $9,153

8%

10%

1,389

11,627

$487

737% $549

$123

13% $1,844 1399%

$2,496

$3,340

32%

34%

1,260 15%

1,659 32%

Software, Services and Other Revenue 1,508 2,207 % QoQ Growth % YoY Growth 18% 46% Source: Company data, Oppenheimer & Co. Inc. estimates

22,727 106% 3% $148 -1% -18% $3,371 103% -16%

11,013 -52% 3% $151 2% -11% $1,665 -51% -8%

10,215 -7% -7% $146 -3% -4% $1,492 -10% -11%

10,177 0% -8% $154 5% 2% $1,563 5% -6%

54,132

4,363 -37% 88% $591 -7% 44% $1,247 55% 417%

3,793 -13% 123% $574 -3% 35% $1,521 22% 302%

5,208 37% 626% $565 -1% 20% $1,689 11% 303%

7,367 41% 7% $605 7% -5% $2,297 36% 185%

$1,011 22% 25%

$1,049 4% 19%

$958 -9% 17%

$1,018 6% 22%

$378 -12% -1%

$358 -5% -13%

$341 -5% -22%

$393 15% -8%

1,470

$606 10% -4%

$625 3% 18%

$528 -16% 5%

$647 23% 18%

2,406

-1% $149 -10% $8,091 -12%

20,731 78% $586 7% $6,754 266%

$4,036 21%

-11%

9%

20,354 100% -10% $147 -4% -1% $3,001 92% -11%

9,973 -51% -9% $155 5% 2% $1,544 -49% -7%

9,973 0% -2% $152 -2% 4% $1,513 -2% 1%

9,973 0% -2% $147 -3% -4% $1,468 -3% -6%

50,274

9,500 29% 118% $600 -1% 2% $3,015 31% 142%

5,500 -42% 45% $600 0% 5% $3,350 11% 120%

7,500 36% 44% $550 -8% -3% $3,779 13% 124%

8,500 13% 15% $550 0% -9% $4,053 7% 76%

$1,279 26% 26%

$1,327 4% 26%

$1,260 -5% 32%

$1,323 5% 30%

$5,189

$440 12% 16%

$462 5% 29%

$485 5% 42%

$534 10% 36%

1,921

$697 8% 15%

$641 -8% 3%

$641 0% 21%

$737 15% 14%

2,716

-7% $150 0% $7,526 -7%

31,000 50% $574 -2% $14,198 110%

29%

31%

13%

5

Apple Inc.

Apple Inc. - GAAP Model Balance Sheet FY

FY

1Q09A

2Q09A

3Q09A

4Q09A

FY

1Q10E

2Q10E

3Q10E

4Q10E

FY

2007A

2008A

Dec-08A

Mar-09A

Jun-09A

Sep-09A

2009A

Dec-09E

Mar-10E

Jun-10E

Sep-10E

2010E

Assets Cash & Cash Equivalents Short-Term Investments Accounts Receivable Inventories, net Deferred Tax Assets Other Current Assets Total Current Assets

$9,352 6,034 1,637 346 782 3,805 $21,956

$11,875 12,615 2,422 509 1,447 5,822 $34,690

$7,236 20,909 2,196 396 1,613 5,311 $37,661

$4,466 24,412 1,932 312 1,539 5,057 $37,718

$5,605 25,516 2,686 380 1,731 6,151 $42,069

$5,263 28,729 3,361 455 2,101 6,884 $46,793

$5,263 28,729 3,361 455 2,101 6,884 $46,793

$9,962 28,729 2,929 474 2,101 7,954 $52,148

$12,048 28,729 2,711 404 2,101 7,840 $53,834

$14,869 28,729 3,658 503 2,101 8,067 $57,927

$17,570 28,729 4,039 532 2,101 8,356 $61,328

$17,570 28,729 4,039 532 2,101 8,356 $61,328

Property & Equipment, Net Goodwill Acquired Intangible Assets, net Other assets Total Assets

$1,832 38 299 1,222 $25,347

$2,455 207 285 1,935 $39,572

$2,580 207 277 2,062 $42,787

$2,546 207 268 2,498 $43,237

$2,653 207 259 2,952 $48,140

$2,954 206 247 3,651 $53,851

$2,954 206 247 3,651 $53,851

$3,087 206 247 3,651 $59,340

$3,292 206 247 3,651 $61,230

$3,433 206 247 3,651 $65,464

$3,585 206 247 3,651 $69,016

$3,585 206 247 3,651 $69,016

$4,970 4,329 0 $9,299

$5,520 8,572 0 $14,092

$4,715 3,807 6,235 $14,757

$3,976 2,761 7,014 $13,751

$4,854 3,338 8,469 $16,661

$5,601 3,376 10,305 $19,282

$5,601 3,376 10,305 $19,282

$5,645 3,376 13,389 $22,409

$5,150 3,376 13,569 $22,095

$6,421 3,376 14,204 $24,000

$6,552 3,376 15,153 $25,081

$6,552 3,376 15,153 $25,081

Non-Current Liabilities Total Liabilities

$1,516 $10,815

$4,450 $18,542

5,121 $19,878

5,175 $18,926

5,591 $22,252

6,737 $26,019

$6,737 $26,019

6,737 $29,146

6,737 $28,832

6,737 $30,737

6,737 $31,818

$6,737 $31,818

Stockholder's Equity

$14,532

$21,030

22,909

24,311

25,888

27,832

$27,832

30,193

32,398

34,727

37,198

$37,198

$42,787

$43,237

$48,140

$53,851

$53,851

$59,340

$61,230

$65,464

Liabilities and Equity Accounts Payable Accrued Expenses Deferred Revenue Total Current Liabilities

Total Liabilities and Equity $25,347 $39,572 ==> Check Source: Company Data, Oppenheimer & Co. Inc. Estimates.

6

$69,016 1.455E-11

$69,016 1.455E-11

Apple Inc.

Apple Inc. - GAAP Model Cash Flow Statement

Cash Flow from Operations Net income Adjustments: D&A Stock-based comp Deferred income taxes Loss on PPE Changes in op. assets/liabilities: Accounts receivable Inventories Other current assets Other assets Accounts payable Deferred revenue Other liabilities Net cash from operations

FY

FY

1Q09A

2Q09A

3Q09A

4Q09A

FY

1Q10E

2Q10E

3Q10E

4Q10E

FY

2007A

2008A

Dec-08A $1,605 $1,605

Mar-09A $1,205 $1,205

Jun-09A $1,229 $1,229

Sep-09A $1,665 $1,665

2009A

Dec-09E $1,987 $1,987

Mar-10E $1,759 $1,759

Jun-10E $1,936 $1,936

Sep-10E $2,040 $2,040

2010E

176 211 -

184 212 -

196 212 -

204 213 -

$3,496 317 242 78 12

$4,834

$5,704

$7,723

473 516 (368) 22

158 170 (27) 7

172 181 (4) 1

176 179 (170) 10

197 180 (318) 8

703 710 (519) 26

(785) (163) (1,958) (492) 596 5,642 1,279 $9,596

226 113 660 (116) (767) 1,793 116 $3,938

264 84 199 (340) (760) 799 (960) $841

(754) (68) (1,157) (363) 879 1,662 644 $2,267

(675) (75) (752) (527) 740 2,654 16 $3,113

(939) 54 (1,050) (1,346) 92 6,908 (184) $10,159

432 (19) (1,070) $44 3,084 $4,845

218 70 114 (495) 181 $2,242

(947) (99) (227) 1,271 634 $2,977

(380) (30) (290) 131 950 $2,838

(678) (77) (1,472) 951 4,848 $12,901

Cash Flow from Investing Activities Purchase of investments ($11,736) Proceeds from investments 9,424 Purchase of PPE (735) Payment of Acquisition Intangibles (251) Other 49 Net CF from Investing ($3,249)

($23,003) 16,243 (1,091) (328) (10) ($8,189)

($13,120) 4,894 (339) (14) (60) ($8,639)

($10,417) 6,843 (100) (16) 5 ($3,685)

($11,220) 10,160 (246) (26) (7) ($1,339)

($12,068) 8,781 (459) (13) (12) ($3,771)

($46,825) 30,678 (1,144) (69) (74) ($17,434)

$0 (309) (211) ($520)

$0 (389) (212) ($600)

$0 (337) (212) ($549)

$0 (356) (213) ($568)

$0 (1,390) (847) ($2,238)

Cash Flow from Financing Activities Payment of long-term debt $0 Common stock issues 365 Tax benefit, stock option exercise 377 Stock Repurchase (3) Net Cash Flow from Financing Activities $739

$0 483 757 (124) $1,116

$0 77 19 (34) $62

$0 166 77 (35) $208

$0 187 146 (14) $319

$0 475 270 (82) $663

$0 187 187 $374

$0 223 223 $445

$0 197 197 $393

$0 216 216 $431

$0 822 822 $1,644

Net Change in Cash Equivalents

$2,960

$2,523

($4,639)

($339)

($6,612)

$4,699

$2,087

$2,821

$2,701

$12,307

Cash & Equivalents at Start of Period 6,392 Cash & Equivalents at End of Period 9,352

9,352 11,875

11,875 7,236

7,236 4,466

4,466 5,602

5,605 5,266

11,875 5,263

5,263 9,962

9,962 12,048

12,048 14,869

14,869 17,570

5,263 17,570

Free Cash Flow

$4,735

$8,505

$2,021 $2,234

$2,654 $2,858

$9,463

$4,536 $4,699

$1,853 $2,087

$2,640 $2,821

$2,482 $2,701

$11,511

$9,259

$741 $724

$9,015

Change in Cash and Near Equivalents $5,613

$3,599 $3,647 24,982 $28,629

28,629 $29,353

29,353 $31,587

31,587 $34,445

24,982 $34,445

34,445 $39,144

39,144 $41,230

41,230 $44,051

44,051 $46,752

34,445 $46,752

(385) (76) (1,540) 81 1,494 1,751 $5,470

Cash and Near Equivalent at Start 10,110 15,723 Cash and Near Equivalent at End$15,723 $24,982 Source: Company Data, Oppenheimer & Co. Inc. Estimates.

$0 45 28 1 $74

($2,770)

$1,136

760 847 -

$12,307

7

Apple Inc.

Apple Inc. - GAAP Model Consolidated Ratios

Profitability Ratios Annualized Return On Equity Annualized Return On Assets Annualized Return On Net Assets

FY

1Q09A

2Q09A

3Q09A

4Q09A

FY

1Q10E

2Q10E

3Q10E

4Q10E

FY

2008A

Dec-08A

Mar-09A

Jun-09A

Sep-09A

2009A

Dec-09E

Mar-10E

Jun-10E

Sep-10E

2010E

24.1% 13.8% 14.0%

23.0% 12.2% 12.4%

28.0% 15.0% 15.1%

19.8% 11.1% 11.2%

19.0% 10.2% 10.3%

23.9% 12.4% 12.5%

20.5% 10.6% 10.7%

26.3% 13.4% 13.5%

21.7% 11.5% 11.6%

22.3% 11.8% 11.9%

21.9% 11.8% 11.9%

20.8% 11.2% 11.3%

24.9 113.9 45.8 8.0

27.2 93.7 41.9 8.7

19.4 65.1 68.0 5.4

21.3 70.1 67.5 5.4

29.0 81.2 56.7 6.4

30.6 79.6 55.8 6.5

33.6 87.6 51.4 7.1

21.2 63.8 68.0 5.4

22.7 69.6 67.5 5.4

29.0 81.1 56.7 6.4

30.6 80.3 55.8 6.5

31.8 82.2 54.5 6.7

2.4 2.3 $12,657

2.5 2.4 $20,598

2.6 2.5 $22,904

2.7 2.7 $23,967

2.5 2.5 $25,408

2.4 2.4 $27,511

2.4 2.4 $27,511

2.3 2.3 $29,739

2.4 2.4 $31,739

2.4 2.4 $33,927

2.4 2.4 $36,247

2.4 2.4 $36,247

Cash Net Cash Per Share $17.30 $27.16 Source: Company Data, Oppenheimer & Co. Inc. Estimates.

$31.22

$31.98

$34.23

$37.18

$37.48

$42.19

$44.35

$47.30

$50.11

$50.29

Efficiency Ratios A/R Days Sales Outstanding A/P Days Sales Outstanding Inventory Turns Days of Inventory Liquidity Ratios Current Ratio Quick Ratio Net Working Capital

8

FY 2007A

Apple Inc.

Apple Inc. - Pro Forma Model Quarterly Consolidated Statement of Income Statement FY

FY

1Q09A

2Q09A

3Q09A

4Q09A

FY

1Q10E

2Q10E

3Q10E

4Q10E

FY

2007A

2008A

Dec-08A

Mar-09A

Jun-09A

Sep-09A

2009A

Dec-09E

Mar-10E

Jun-10E

Sep-10E

2010E

$24,622

$37,651

$11,799

$9,056

$9,742

$12,253

$42,850

$15,495

$10,941

$11,990

$12,810

$51,236

COGS

16,199

24,040

7,272

5,432

5,714

7,047

25,465

9,013

6,611

7,256

7,608

30,488

Gross Profit

$8,424

$13,611

$4,527

$3,624

$4,028

$5,206

$17,385

$6,482

$4,329

$4,734

$5,202

$20,748

782 2,963

1,109 3,761

315 1,091

319 985

341 1,010

358 1,063

1,333 4,149

385 1,278

409 1,151

420 1,181

439 1,234

1,653 4,844

3,745

4,870

1,406

1,304

1,351

1,421

5,482

1,663

1,560

1,601

1,672

6,497

$4,679

$8,741

$3,121

$2,320

$2,677

$3,785

$11,903

$4,819

$2,769

$3,133

$3,530

$14,251

$599

$620

$158

$63

$60

$45

$326

$34

$39

$41

$44

$157

Income Before Taxes

$5,278

$9,361

$3,279

$2,383

$2,737

$3,830

$12,229

$4,853

$2,808

$3,174

$3,574

$14,408

Taxes on Income (benefit) Net Income

1,587 $3,691

2,773 $6,588

975 $2,304

723 $1,660

795 $1,942

981 $2,849

3,474 $8,755

1,456 $3,397

842 $1,965

952 $2,222

1,072 $2,502

4,323 $10,086

$4.15

$7.31

$2.56

$1.84

$2.14

$9.65

$242

$516

$170

$181

$179

$710

$3.70 $2.17 $211

$2.14 $1.91 $212

$2.41 $2.10 $212

$2.71 $2.21 $213

$10.96

Stock Based Comp - Total

$3.12 $1.82 $180

Net Income, ex. Option

$3,933

$7,104

$2,474

$1,841

$2,121

$3,029

$9,465

$3,608

$2,177

$2,434

$2,714

$10,933

Diluted EPS ex. Options

$4.42

$7.88

$2.74

$2.04

$2.33

$3.31

$10.44

$3.93

$2.37

$2.64

$2.94

$11.88

889

902

901

903

909

914

907

917

919

922

924

921

Net Sales

Research and Development Sales, General & Administrative Total Operating Expenses Operating Income Other Income

Diluted EPS

Diluted Shares

$847

Source: Company Data, Oppenheimer & Co. Inc. Estimates.

9

Apple Inc.

Apple Inc. - Pro Forma Model Margin and Growth Metrics FY

FY

1Q09A

2Q09A

3Q09A

4Q09A

FY

1Q10E

2Q10E

3Q10E

4Q10E

FY

2007A

2008A

Dec-08A

Mar-09A

Jun-09A

Sep-09A

2009A

Dec-09E

Mar-10E

Jun-10E

Sep-10E

2010E

Pro Forma Gross Margin

34.2%

36.2%

38.4%

40.0%

41.3%

42.5%

40.6%

41.8%

39.6%

39.5%

40.6%

40.5%

Reported Gross Margin

34.0%

34.3%

34.7%

36.4%

36.3%

36.6%

36.0%

36.0%

37.5%

38.1%

38.3%

37.5%

3.2% 12.0%

2.9% 10.0%

2.7% 9.2%

3.5% 10.9%

3.5% 10.4%

2.9% 8.7%

3.1% 9.7%

2.5% 8.3%

3.7% 10.5%

3.5% 9.8%

3.4% 9.6%

3.2% 9.5%

Operating Margin

18.4%

19.3%

26.5%

25.6%

27.5%

22.2%

21.0%

22.6%

23.0%

24.0%

24.2%

23.4%

Effective Tax Rate Net Income Margin

30.2% 14.6%

29.9% 14.9%

29.7% 19.5%

30.3% 18.3%

29.0% 19.9%

25.6% 16.9%

28.6% 15.6%

30.0% 16.0%

30.0% 16.4%

30.0% 17.1%

30.0% 17.2%

30.0% 16.6%

2.4%

1.9%

1.0% -0.5% -4.1% -5.5% -1.9% 0.1%

-23.2% -19.9% -25.7% -28.0% -28.1% 0.1%

7.6% 11.1% 15.4% 17.0% 16.2% 0.1%

18.4% 19.6% 31.2% 35.5% 34.7% 0.3%

0.6%

25.7% 23.6% 27.9% 19.4% 19.0% 0.3%

-13.3% -9.7% -11.8% -11.5% -11.7% 0.3%

5.5% 7.2% 10.1% 10.1% 9.8% 0.3%

4.4% 5.0% 5.3% 5.3% 5.1% 0.3%

1.5%

27.5% 50.5% 90.7% 85.6% 83.1%

52.9% 61.6% 86.8% 78.5% 76.0%

13.3% 22.9% 26.0% 26.7% 26.4%

13.1% 33.6% 49.3% 36.8% 36.2%

29.0% 51.1% 83.7% 73.6% 72.5%

4.9% 14.4% 16.3% 16.9% 15.7%

13.8% 27.7% 36.2% 32.9% 32.1%

31.3% 43.2% 54.4% 47.4% 44.9%

20.8% 19.5% 19.4% 18.4% 16.3%

23.1% 17.5% 17.0% 14.4% 12.8%

4.5% -0.1% -6.7% -12.2% -13.1%

19.6% 19.3% 19.7% 15.2% 13.5%

Research and Development Sales, General & Administrative

Sequential Growth Rates Revenue Gross Profit Operating Profit Net Income EPS WA Shares Outstanding Year-on-Year Growth Rates Revenue Gross Profit Operating Profit Net Income EPS

Source: Company data, Oppenheimer & Co. Inc. estimates

10

Apple Inc.

Apple Inc. - Pro Forma Model Product Breakdown FY

FY

1Q09A

2Q09A

3Q09A

4Q09A

FY

1Q10E

2Q10E

3Q10E

4Q10E

FY

2007A

2008A

Dec-08A

Mar-09A

Jun-09A

Sep-09A

2009A

Dec-09E

Mar-10E

Jun-10E

Sep-10E

2010E

Revenue by Product Desktops

$4,020

$5,603

$1,043

$1,050

$1,129

$1,086

$4,308

$1,060

$954

$1,029

$1,049

$4,093

Laptops

6,294

8,673

2,511

1,895

2,200

2,866

9,472

2,919

2,481

2,647

2,696

10,744

iPods

8,305

9,153

3,371

1,665

1,492

1,563

8,091

3,001

1,544

1,513

1,468

7,526

Music

2,496

3,340

1,011

1,049

958

1,018

4,036

1,279

1,327

1,260

1,323

5,189

739

7,016

2,879

2,414

3,094

4,775

13,162

6,099

3,531

4,414

5,002

19,046

iPhone Peripherals and other HW

1,260

1,659

378

358

341

393

1,470

440

462

485

534

1,921

SW, Services, and Other

1,508

2,207

606

625

528

647

2,406

697

641

641

737

2,716

Revenue Contribution by Product Desktops

16%

15%

9%

12%

12%

9%

10%

7%

9%

9%

8%

8%

Laptops

26%

23%

21%

21%

23%

23%

22%

19%

23%

22%

21%

21%

iPods

34%

24%

29%

18%

15%

13%

19%

19%

14%

13%

11%

15%

Music

10%

9%

9%

12%

10%

8%

9%

8%

12%

11%

10%

10%

iPhone

3%

19%

24%

27%

32%

39%

31%

39%

32%

37%

39%

37%

Peripherals and other HW

5%

4%

3%

4%

4%

3%

3%

3%

4%

4%

4%

4%

SW, Services, and Other

6%

6%

5%

7%

5%

5%

6%

4%

6%

5%

6%

5%

Desktop Units % of total % QoQ Growth % YoY Growth ASP % QoQ Growth % YoY Growth Revenue % QoQ Growth % YoY Growth

2,714 38% 0% 12% 1,481 0% 9% $4,020 0% 21%

3,712 38%

818 37% 12% -4% 1,284 -10% -19% $1,050 1% -22%

849 33% 4% -10% 1,330 4% -9% $1,129 8% -18%

787 26% -7% -16% 1,380 4% -5% $1,086 -4% -20%

3,182 31%

826 26%

744 27%

818 27%

834 26%

3,223 26%

-14% 1,354

14% 1,283

-9% 1,283

-4% 1,258

6% 1,258

1% 1,270

-10% $4,308

-10% $1,060

0% $954

-5% $1,029

-9% $1,049

-6% $4,093

39%

728 29% -22% -25% 1,433 -2% -8% $1,043 -81% -31%

-23%

2%

-9%

-9%

-3%

-5%

Laptop Units % of total % QoQ Growth % YoY Growth ASP % QoQ Growth % YoY Growth Revenue % QoQ Growth % YoY Growth

0 4,337 62% 0% 51% 1,451 0% 3% $6,294 0% 55%

6,003 62% 0% 38% 1,445 0% 0% $8,673 0% 38%

1,796 71% 7% 34% 1,398 4% -8% $2,511 11% 23%

1,398 63% -22% -2% 1,356 -3% -9% $1,895 -25% -12%

1,754 67% 25% 13% 1,254 -7% -13% $2,200 16% -2%

2,266 74% 29% 35% 1,265 1% -6% $2,866 30% 27%

7,214 69%

2,379 74%

2,022 73%

2,225 73%

2,336 74%

8,962 74%

20% 1,313

32% 1,227

45% 1,227

27% 1,190

3% 1,154

24% 1,199

-9% $9,472 0% 9%

-12% $2,919 2% 16%

-9% $2,481 -15% 31%

-5% $2,647 7% 20%

-9% $2,696 2% -6%

-9% $10,744 0% 13%

Total PC Units % QoQ Growth % YoY Growth ASP % QoQ Growth % YoY Growth Revenue % QoQ Growth % YoY Growth

7,051 0% 33% $1,463 0% 0% $10,314 0% 40%

9,715

2,524 -3% 9% $1,408 2% -8% $3,554 -2% 0%

2,216 -12% -3% $1,329 -6% -13% $2,945 -17% -16%

2,603 17% 4% $1,279 -4% -12% $3,329 13% -8%

3,053 17% 17% $1,294 1% -7% $3,952 19% 9%

10,396

3,206

2,766

3,043

3,170

12,185

7% $1,326

27% $1,241

25% $1,242

17% $1,208

4% $1,182

17% $1,218

-10% $13,780

-12% $3,980

-7% $3,436

-6% $3,676

-9% $3,746

-8% $14,837

-3%

12%

17%

10%

-5%

8%

Computers

37% 1,509 2% $5,603

38% $1,469 0% $14,276 38%

Source: Company data, Oppenheimer & Co. Inc. estimates

11

Apple Inc.

Apple Inc. - Pro Forma Model Product Breakdown, Cont.

iPods Units % QoQ Growth % YoY Growth ASP % QoQ Growth % YoY Growth Revenue % QoQ Growth % YoY Growth iPhones Units % QoQ Growth % YoY Growth ASP % QoQ Growth % YoY Growth Revenue % QoQ Growth % YoY Growth Other iPhone Revenue Plug Total iPhone Revenue

Music Revenue % QoQ Growth % YoY Growth

12

FY

FY

1Q09A

2Q09A

3Q09A

4Q09A

FY

1Q10E

2Q10E

3Q10E

4Q10E

FY

2007A

2008A

Dec-08A

Mar-09A

Jun-09A

Sep-09A

2009A

Dec-09E

Mar-10E

Jun-10E

Sep-10E

2010E

22,727 106% 3% $148 -1% -18% $3,371 103% -16%

11,013 -52% 3% $151 2% -11% $1,665 -51% -8%

10,215 -7% -7% $146 -3% -4% $1,492 -10% -11%

10,177 0% -8% $154 5% 2% $1,563 5% -6%

54,132

20,354

9,973

9,973

9,973

50,274

-1% $149

-10% $147

-9% $155

-2% $152

-2% $147

-7% $150

-10% $8,091

-1% $3,001

2% $1,544

4% $1,513

-4% $1,468

0% $7,526

-12%

-11%

-7%

1%

-6%

-7%

4,363 -37% 88% $591 -7% 44% $2,579 55% 417% $201 $99 $2,879

3,793 -13% 123% $574 -3% 35% $2,176 22% 302% $195 $43 $2,414

5,208 37% 626% $565 -1% 20% $2,944 11% 303% $229 ($79) $3,094

7,367 41% 7% $605 7% -5% $4,457 36% 185% $318

9,500 29% 118% $600 -1% 2% $5,700 31% 142% $399

5,500 -42% 45% $600 0% 5% $3,300 11% 120% $231

7,500 36% 44% $550 -8% -3% $4,125 13% 124% $289

8,500 13% 15% $550 0% -9% $4,675 7% 76% $327

$6,099

$3,531

$4,414

$5,002

51,630 0% 31% $161 0% -17% $8,305 0% 8%

54,828

1,389 0% 0% $487 0% 0% $677

11,627 0% 737% $549 0% 13% $6,380 0% 1399%

6% $167 4% $9,153 10%

$4,775

20,731 78% $586 7% $12,156 266% $942 $13,162

$2,496 0% 32%

$3,340 0% 34%

$1,011 22% 25%

$1,049 4% 19%

$958 -9% 17%

$1,018 6% 22%

$4,036

Peripherals and Other Hardware Revenue 1,260 % QoQ Growth 0% % YoY Growth 15%

1,659 0% 32%

$378 -12% -1%

$358 -5% -13%

$341 -5% -22%

$393 15% -8%

1,470

Software, Services and Other Reported Revenue 1,508 2,207 % QoQ Growth 0% 0% % YoY Growth 18% 46% Source: Company data, Oppenheimer & Co. Inc. estimates

606 10% -4%

625 3% 18%

528 -16% 5%

647 23% 18%

31,000 50% $574 -2% $17,800 110% $1,246 $19,046

$1,279 26% 26%

$1,327 4% 26%

$1,260 -5% 32%

$1,323 5% 30%

$5,189

$462 5% 29%

$485 5% 42%

$534 10% 36%

1,921

-11%

$440 12% 16%

2,406 0% 9%

697 8% 15%

641 -8% 3%

641 0% 21%

737 15% 14%

2,716

21%

29%

31%

13%

Apple Inc.

Price Target Calculation Our price target of $235 is derived by applying our 18x multiple to our FY10E non-GAAP operating EPS of $10.96 and adding back $37 per share in cash. The 18x target is well below Apple's five-year average P/E of 29x and discounts the possibility of continued economic uncertainty and increased competition across Apple's product lines. We have shifted our valuation metric to pro forma earnings from free cash flows for several reasons: Apple investors are accustomed to valuing the company based on earnings rather than cash flows; Apple's pro forma earnings are a better measure of the Apple's fundamental performance than GAAP measures; and recent changes in FASB revenue recognition rules mean that Apple's GAAP numbers could strongly resemble our non-GAAP numbers starting in FY10.

Key Risks to Price Target Risks to our price target include further weakening of consumer demand; increased competition from Apple's traditional PC hardware and software rivals as well as from new competitors in the wireless handset market; the potential for large, unexpected increases in component costs, which could negatively impact margins; slower than anticipated acceptance of the iPhone or reduced subsidization by wireless service providers; Apple's potential inability to gain PC market share in line with our expectations; and a sudden change in leadership.

Important Disclosures and Certifications Analyst Certification - The author certifies that this research report accurately states his/her personal views about the subject securities, which are reflected in the ratings as well as in the substance of this report.The author certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. Potential Conflicts of Interest: Equity research analysts employed by Oppenheimer & Co. Inc. are compensated from revenues generated by the firm including the Oppenheimer & Co. Inc. Investment Banking Department. Research analysts do not receive compensation based upon revenues from specific investment banking transactions. Oppenheimer & Co. Inc. generally prohibits any research analyst and any member of his or her household from executing trades in the securities of a company that such research analyst covers. Additionally, Oppenheimer & Co. Inc. generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that such analyst covers. In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report, Oppenheimer & Co. Inc. may have a long position of less than 1% or a short position or deal as principal in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest.

Important Disclosure Footnotes for Companies Mentioned in this Report that Are Covered by Oppenheimer & Co. Inc: Stock Prices as of December 8, 2009

Amazon.Com, Inc. (AMZN - Nasdaq, 134.11, OUTPERFORM)

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Apple Inc.

Rating and Price Target History for: Amazon.Com, Inc. (AMZN) as of 12-07-2009 03/05/07 I:N:$36

04/25/07 N:$45

07/17/07 N:$76

07/25/07 N:UR

01/30/08 P:NA

01/31/08 P:$68

06/23/08 P:NA

09/18/08 NR:NA

09/22/08 P:$81

01/30/09 P:$57

03/09/09 P:$0

150

120

90

60

30

0 2007

2008

2009

10/19/09 O:$130

Created by BlueMatrix

Rating and Price Target History for: Apple Inc. (AAPL) as of 12-07-2009 05/21/08 I:O:$235

07/22/08 O:$213

10/10/08 O:$145

12/17/08 P:NA

01/06/09 O:$135

01/15/09 O:$120

04/22/09 O:$140

06/03/09 O:$160

07/22/09 O:$185

10/01/09 O:$210

10/20/09 O:$235

240

200

160

120

80

40 2007

2008

2009

Created by BlueMatrix

All price targets displayed in the chart above are for a 12- to- 18-month period. Prior to March 30, 2004, Oppenheimer & Co. Inc. used 6-, 12-, 12- to 18-, and 12- to 24-month price targets and ranges. For more information about target price histories, please write to Oppenheimer & Co. Inc., 300 Madison Avenue, New York, NY 10017, Attention: Equity Research Department, Business Manager.

Oppenheimer & Co. Inc. Rating System as of January 14th, 2008: Outperform(O) - Stock expected to outperform the S&P 500 within the next 12-18 months.

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Apple Inc.

Perform (P) - Stock expected to perform in line with the S&P 500 within the next 12-18 months. Underperform (U) - Stock expected to underperform the S&P 500 within the next 12-18 months. Not Rated (NR) - Oppenheimer & Co. Inc. does not maintain coverage of the stock or is restricted from doing so due to a potential conflict of interest. Oppenheimer & Co. Inc. Rating System prior to January 14th, 2008: Buy - anticipates appreciation of 10% or more within the next 12 months, and/or a total return of 10% including dividend payments, and/or the ability of the shares to perform better than the leading stock market averages or stocks within its particular industry sector. Neutral - anticipates that the shares will trade at or near their current price and generally in line with the leading market averages due to a perceived absence of strong dynamics that would cause volatility either to the upside or downside, and/or will perform less well than higher rated companies within its peer group. Our readers should be aware that when a rating change occurs to Neutral from Buy, aggressive trading accounts might decide to liquidate their positions to employ the funds elsewhere. Sell - anticipates that the shares will depreciate 10% or more in price within the next 12 months, due to fundamental weakness perceived in the company or for valuation reasons, or are expected to perform significantly worse than equities within the peer group.

Distribution of Ratings/IB Services Firmwide

IB Serv/Past 12 Mos. Rating

Percent

Count

Percent

OUTPERFORM [O]

Count 376

45.90

133

35.37

PERFORM [P]

400

48.80

107

26.75

UNDERPERFORM [U]

43

5.30

7

16.28

Although the investment recommendations within the three-tiered, relative stock rating system utilized by Oppenheimer & Co. Inc. do not correlate to buy, hold and sell recommendations, for the purposes of complying with FINRA rules, Oppenheimer & Co. Inc. has assigned buy ratings to securities rated Outperform, hold ratings to securities rated Perform, and sell ratings to securities rated Underperform.

Company Specific Disclosures Oppenheimer & Co. Inc. makes a market in the securities of AAPL and AMZN.

Additional Information Available Please log on to http://www.opco.com or write to Oppenheimer & Co. Inc., 300 Madison Avenue, New York, NY 10017, Attention: Equity Research Department, Business Manager.

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Apple Inc.

Other Disclosures This report is issued and approved for distribution by Oppenheimer & Co. Inc., a member of all Principal Exchanges and SIPC. This report is provided, for informational purposes only, to institutional and retail investor clients of Oppenheimer & Co. Inc. and does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where such offer or solicitation would be prohibited. The securities mentioned in this report may not be suitable for all types of investors. This report does not take into account the investment objectives, financial situation or specific needs of any particular client of Oppenheimer & Co. Inc. Recipients should consider this report as only a single factor in making an investment decision and should not rely solely on investment recommendations contained herein, if any, as a substitution for the exercise of independent judgment of the merits and risks of investments. The analyst writing the report is not a person or company with actual, implied or apparent authority to act on behalf of any issuer mentioned in the report. Before making an investment decision with respect to any security recommended in this report, the recipient should consider whether such recommendation is appropriate given the recipient's particular investment needs, objectives and financial circumstances. We recommend that investors independently evaluate particular investments and strategies, and encourage investors to seek the advice of a financial advisor.Oppenheimer & Co. Inc. will not treat non-client recipients as its clients solely by virtue of their receiving this report.Past performance is not a guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance of any security mentioned in this report. The price of the securities mentioned in this report and the income they produce may fluctuate and/or be adversely affected by exchange rates, and investors may realize losses on investments in such securities, including the loss of investment principal. Oppenheimer & Co. Inc. accepts no liability for any loss arising from the use of information contained in this report, except to the extent that liability may arise under specific statutes or regulations applicable to Oppenheimer & Co. Inc.All information, opinions and statistical data contained in this report were obtained or derived from public sources believed to be reliable, but Oppenheimer & Co. Inc. does not represent that any such information, opinion or statistical data is accurate or complete (with the exception of information contained in the Important Disclosures section of this report provided by Oppenheimer & Co. Inc. or individual research analysts), and they should not be relied upon as such. All estimates, opinions and recommendations expressed herein constitute judgments as of the date of this report and are subject to change without notice.Nothing in this report constitutes legal, accounting or tax advice. Since the levels and bases of taxation can change, any reference in this report to the impact of taxation should not be construed as offering tax advice on the tax consequences of investments. As with any investment having potential tax implications, clients should consult with their own independent tax adviser.This report may provide addresses of, or contain hyperlinks to, Internet web sites. Oppenheimer & Co. Inc. has not reviewed the linked Internet web site of any third party and takes no responsibility for the contents thereof. Each such address or hyperlink is provided solely for the recipient's convenience and information, and the content of linked third party web sites is not in any way incorporated into this document. Recipients who choose to access such third-party web sites or follow such hyperlinks do so at their own risk. This report or any portion hereof may not be reprinted, sold, or redistributed without the written consent of Oppenheimer & Co. Inc. Copyright © Oppenheimer & Co. Inc. 2009.

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