Activision Blizzard (ATVI)

Review of Fiscal Year 2005

As in prior years, for fiscal year 2005, the Compensation Committee reviewed the compensation for the Company's senior executives against the compensation provided to executives in comparable positions at peer companies. The Committee believes that this analysis assists the Compensation Committee and the Board in validating current compensation policies that promote the Company's executive retention goals, ensure the proper motivation of the senior leadership of the Company, and aid recruitment of talented individuals. As the Company pursues an aggressive business strategy, its reputation as a leader in the industry, combined with favorable notice of a healthy work environment and a highly motivated work force, are critical foundations for attracting the talent essential to achieving the Company's ambitious growth plans.

In evaluating the Company's performance and each individual executive's fiscal 2005 performance, the Compensation Committee determined that the Company and its executives generally met or exceeded the goals that were established for the year. For fiscal year 2005, Activision reported consolidated net revenues of $1,406 million, an increase of $458 million over the results reported for year ended March 31, 2004, or an amount that is 48% higher than the previous year. The consolidated operating income for fiscal year 2005 was $184.6 million, an increase of $74.8 million over fiscal year 2004, or a 68% year over year increase. At the same time, the Company generated significant positive cash flow from operations and financing activities. Its balance sheet indicates a healthy liquidity and cash and short-term investments balance of $841 million, which represents a $253 million increase from the year ended March 31, 2004.

These results were the key indices in the Compensation Committee's consideration of fiscal 2005 executive bonuses. In addition, in establishing bonus payments for the executive officers, these substantial financial results were also reviewed against the backdrop of the Company's other significant achievement during fiscal 2005. For example:

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The Company moved forward on a comprehensive succession plan for executive leadership, including documented objectives, procedures and processes.



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The Company strengthened and broadened its franchises and intellectual property base, both of which are the enablers for future streams of revenues.



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The Company has added to its studio strength and diversity through deliberate acquisitions and through the renewal of its relationships with key developers.



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The Company has expanded its operating margins, which is a key to future results.



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The Company has made significant improvements to its internal and external communications, which are intended to enhance collaborative understanding of its business strategies and to build stockholder value.

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The Company has continued to add asset value as evidenced by increased earnings per share (EPS), a strong balance sheet, improved capital reserves, expanded shareholder equity and improved business reputation.