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I met with Fred Anderson (Apple's CFO) for about 80 minutes Thursday afternoon. Nancy Paxton (Head of Investor Relations) was also there. My goal was to give a presentation explaining what we were trying to accomplish as shareholders and to argue for a series of actions that would benefit the company by improving investor confidence.

I began by giving them both a 2-page outline of my presentation along with a set of quotes from members of this board. I stuck mainly to the outline and eventually covered all the main topics, but we diverged from time to time when Mr. Anderson brought up his own issues or sought to present his own point of view with regards to an argument I was making. The tone of the meeting was very positive and it was mainly a sharing of ideas between me and Mr. Anderson.

He was a very good listener, but some of the issues I brought up put him on the defensive, which made it hard to convey some of my ideas. He did a good job of conveying his point of view and I believe his intentions are good. At times, however, he expressed opinions and attitudes that were downright disturbing and I tried to do a good job of letting him know when his statements were out of line. With hindsight, there were a few ideas that I should have been able to communicate more effectively.

Some things I believe I communicated well and were understood by Mr. Anderson and Ms. Paxton:

(on the topic of our proposal)
The goal of our proposal is to ensure that the Board is providing adequate oversight of the share repurchase program.
We don't seek to interfere with management's daily operations.
Shareholders have a responsibility as part owners to make sure the company is being run properly and the proposal is an effort along those lines.
We will follow through with this proposal and other efforts to bring about positve changes and hope that the company will work with us, rather than against us.

(on the topic of reaching out to investors)
The influence of sell side analysts has greatly diminished in recent years.
Individual investors are angry, but still looking for new ways to invest responsibly.
Institutional investors are feeling pressure to invest responsibly.
Apple has a unique opportunity to take advantage of the changing climate and appeal to these groups.
Apple has a history of reaching out to customers, developers and the open source community, and the results have always been good for the company.
Reaching out and opening up to shareholders requires an even bigger leap of faith and would likely generate even larger rewards.

(on issues of corporate governance)
Certain actions by the company have aroused suspicion among shareholders with regard to governance issues.
There is a need to communicate with shareholders to alleviate these concerns.
Human errors are often the result of bias.
The current Board of Directors is subject to a common bias.
There is a need for a diversification of viewpoints on the Board of Directors.

Because Mr. Anderson responded favorably to these points, I believe there is the potential for Apple to act favorably on all these issues. Although I believe I made an important step in communicating these concepts, we shareholders need to follow up and keep pressing on these points if we hope to see any change in behavior by Apple's management. Mr. Anderson gave me a good glimpse inside the corporation as to how things work, and it is clear to me that much more prodding is needed to bring about change.

Some things I learned about the way the company operates:

The company does seek to follow good corporate governace practices and is concerned about their public image in this regard. They currently are working to adopt the governance recommendations in a report from Institutional Shareholder Services. They responded to issues regarding Drexler and Ellison by asking them to resign from the board. If we present our case well, I believe we can get the company to respond.

The Board of Directors already does closely monitor the share repurchase program. The current policy of not repurchasing shares comes straight from the board, and not from managment. Mr. Anderson believes that the company showed great restraint in its use of the repurchase program when it was repurchasing shares, in light of constant pressure from institutional investors and other constiutancies to increase buyback activity and keep up with the market.

Top managers and directors are extremely busy people. They don't have time to respond to all shareholders. When they do look at issues we present, they don't have time to explore them thoroughly. To get their attention we need to be very clear and direct.

High power people have a great deal of self-confidence and it is difficult to get them to admit they've made mistakes or to consider a better way of doing things. No matter how great their accomplishments have been, they are still subject to the same basic flaws in human nature that lead us into folley. Here are some of the unfortunate points of view expressed by Mr. Anderson during the meeting.

At one point Mr. Anderson expressed the disturbing view that shareholders were only upset now because the stock market had fallen, and that shareholders need to blame themselves for not taking responsibility for their investments.

To address this I pointed to real issues underlying shareholder concerns.

At another point he expressed a concern that we might be trying to meddle and interfere with managment's ability to run the company effectively.

I pointed back to his statement blaiming shareholders for not taking responsibility for their investments and pointed out that or goal was to be responsible and supportive investors.

At another point he made a comment to the effect that if shareholders didn't like the actions of the Board of Directors shareholders were welcome to elect their own slate of directors.

I hope I was effective in communicating that our goal is to work cooperatively with management and the board for the benefit of all stakeholders in the company, and that we do not seek to create conflict or bring harm to anyone involved.

That's a summary of what went on at the meeting. By no means does it end here. I hope this is only just the beginning.

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