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Apple Official Response Over iPhone Flare - Apple have released an official on their website concerning camera flare in the iPhone 5.
They say that most small cameras will exhibit some sort of haze at the edge of the frame. Apple recommends that users tilt the camera slightly or shield it with their hand to eliminate flare on the lens.
Apple said the flare is due to light reflecting off the surfaces in the camera module and bouncing back off the sensor.
Take a look at the Apple website to see the response.