<table><tr><th>From:</th><th>Tazia Smith</th></tr><tr><td>Sent:</td><td>Tuesday, October 29, 2013 11:24 AM</td></tr><tr><td>To:</td><td>jeffrey epstein</td></tr><tr><td>Attachments:</td><td>Disclaimer.txt</td></tr></table>

Classification: Public

Good Morning Jeffrey - As=you likely saw, AAPL recouped immediate losses in the aftermarket yday (tr=ding back up to —527) after mgmt comments on the conference call suggestin= that lower gross margins were a result of deferrals. Will watch for any f=llow-through (the sell side has been broadly positive in response to earni=gs) and opportunity to sell OTM calls today. Fyi only, DB's summary of AAP=.'s earnings report and commentary below (reit 575 tgt).

Tazia

Source: bloomberg, streetaccount.com, db global markets research, 10/=8/13

Tazia Smith
Director
Markets Coverage Group
Deutsche Bank Securities, Inc.
Deutsche Asset & Wealth Managem=nt
345 Park Avenue - 26th Floor
New York, NY 10154
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From: EVS=EquityFocus
Sent: 10/29/2013 10:01AM GOT
Su=ject: DB: AAPL.OQ - Chris Whitmore

Classification: Public

Apple Inc (Buy, CP: $529.38, TP: $575.00, AAPL.OQ, Chris Whitmore)

Product cycles kicking into gear

AAPL reported revs of $37.56 and EPS of $8.26 which beat expectation (vs. DB at $36.9B/$8.02; Street at $36.8B/$=.93). Apple beat on iPhone units (33.8M vs. DB at 32.5M) and iPads (14.1M vs. DB at 12M) and Mac results were light (4.6M

vs. DB at 4.8M). iPhone mix and operating leverage translated into OM (26.8% vs. DB at 26.1%) and EPS upside. AAPL will defer - $900M in the Dec Q related to SW deferrals which impacts cash EPS but not cash flow. Consequently, we trim EPS est's b=t at —8x CY14 EV/FCF we believe AAPL represents an attractive value; maintain Buy and $575 PT.

Margin guidance was solid after a=justing for software deferrals Apple guided Dec Q revs to $55-58B w=ich beat expectation (vs. Street at $55.5B). GM's guidance of 36.5-37.5% =ncludes $900M of incremental software deferrals Q/Q related to including Mavericks, ilife and iWork for free. We estimate - $500M of this total is related to a change in accounting accrual per device ($5 incremental per iPhone, iPad & iPod touch unit; $20 incremental per Mac). The remaining -$400M is related to higher volume of unit shipments in the December quarter. When comparing guidance on a like for like basis (i.e. ex the accounting change) Apple guided 4Q GM's to —38% which was in line with Consensus on reve=ues of $57B +/- $1.5B which is above Consensus, suggesting improving iPhone 55 supply.

## Several catalysts ahead

We expect strong holiday demand for Apple's new product lineup and suspect its guidance will prove conser=ative. Furthermore, Apple remains very confident in its product pipeline heading into CY14. Specifically, we see multiple catalysts to support growth over the next 12-18 months including iPhone 6, expansion with China Mobile and further geographic expansion. In addition, Apple pointed to expanding into new product areas (Apple TV and/or wearables) which should alleviate innova=ion concerns.

Cutting estimates to reflect acco=nting changes; maintain Buy and $575 PT We adjust CY14 est's to $180B/=$43.90 (vs. prior to $184B/ $46.00) and introduce CY15 of $188B/ $48.35. Our $575 PT is unchanged and is based on —9x CY14E EV/FCF; the lower end of its historical 7-29x range. We view the multiple as appropriate given AAPC=;s growth/profit profile. Risks include product execution, ASP declines & phone / tablet comp'n.

Please click on below link for full report:
http://pu=l.db-gmresearch.com/p/558-2231/11731481/0900b8c0877292a9.pdf <http://pull.db-gmresearch.com/p/558-2231/11731481/0900b8c087=292a9.pdf>

Regards,

EVS Equity Focus
Telephone: +91-124-4622312 - 19

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## Several catalysts ahead (cont.)

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