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2011 TO OUR SHAREHOLDERS

ANNUAL REPORT

2010 Results: Another Record Yeari—In 2010, we delivered non-GAAP net revenues of $4.8 billion and grew non-GAAP earnings per diluted share by 14.5% year over year to $0.79. On a GAAP basis, our net revenues were $4.4 billion and earnings per diluted share were $0.33. Although we are firm believers that the use of Generally Accepted Accounting Principles (GAAP) is an appropriate lens through which to view our performance, we believe that the use of non-GAAP financial measures provides investors with an additional important perspective from which to view our results that is consistent with the way management assesses our business. Our strong performance this year enhanced our financial position. We ended the year with approximately $3.5 billion in cash and investments and no debt. We generated a record $1.4 billion in operating cash flow, a good measure of how we build shareholder value. We also delivered the most profitable year in our company’s history, as well as a record non-GAAP operating margin of 29%, an industry recordii, and a return on invested capital of 30%iii. These financial metrics are reflections of our continued migration to, and leadership in, online entertainment and a clear illustration that our strategy and continued superb execution should provide superior long-term returns for our shareholders. Our commitment to entertaining audiences with excellent games hasn’t changed in twenty years— but the way we reach our audiences, and the methods our audiences have available to determine how they best want to pay for our content, have changed greatly. We continue to heavily invest in our franchises, in new potential franchises, and in our systems and capabilities to bring our products and services to new markets around the world. Yet, we are generating more cash than we can find good uses for. As a result, in 2010, we became the first company in our industry to issue a dividend and we repurchased nearly $1 billion of our stock, bringing our two-year share buyback total to approximately $2.2 billion.We think buying our own shares represents a very good investment for our shareholders and, if our share price remains within our targets for repurchase, we plan to continue to buy the additional $1.5 billion worth of shares that our Board recently authorized us to repurchase. We are always on the lookout for ways to use our capital thoughtfully, and it is probably worth mentioning that the criteria haven’t changed much in twenty years.We like to invest our capital in proprietary products or services that have a history of profitability (which we measure in years, not days or months), are internationally appealing, serve to deepen our moats, and can reasonably be expected to generate a financial return that is greater than our weighted average cost of capital.

ANOTHER RECORD YEAR OPERATING MARGIN 2010

26% OPERATING MARGIN 2011

29%

EARNINGS PER SHARE 2010

BILLION IN OPERATING CASH FLOW 2010

$0.70

$1.2

OPERATING MARGIN 2011

OPERATING MARGIN 2011

$1.4

$0.79

FIRST

$$$$$$

EVER CASH DIVIDEND


2011 TO OUR SHAREHOLDERS

ANNUAL REPORT

2010 Results: Another Record Yeari—In 2010, we delivered non-GAAP net revenues of $4.8 billion and grew non-GAAP earnings per diluted share by 14.5% year over year to $0.79. On a GAAP basis, our net revenues were $4.4 billion and earnings per diluted share were $0.33. Although we are firm believers that the use of Generally Accepted Accounting Principles (GAAP) is an appropriate lens through which to view our performance, we believe that the use of non-GAAP financial measures provides investors with an additional important perspective from which to view our results that is consistent with the way management assesses our business. Our strong performance this year enhanced our financial position. We ended the year with approximately $3.5 billion in cash and investments and no debt. We generated a record $1.4 billion in operating cash flow, a good measure of how we build shareholder value. We also delivered the most profitable year in our company’s history, as well as a record non-GAAP operating margin of 29%, an industry recordii, and a return on invested capital of 30%iii. These financial metrics are reflections of our continued migration to, and leadership in, online entertainment and a clear illustration that our strategy and continued superb execution should provide superior long-term returns for our shareholders. Our commitment to entertaining audiences with excellent games hasn’t changed in twenty years— but the way we reach our audiences, and the methods our audiences have available to determine how they best want to pay for our content, have changed greatly. We continue to heavily invest in our franchises, in new potential franchises, and in our systems and capabilities to bring our products and services to new markets around the world. Yet, we are generating more cash than we can find good uses for. As a result, in 2010, we became the first company in our industry to issue a dividend and we repurchased nearly $1 billion of our stock, bringing our two-year share buyback total to approximately $2.2 billion.We think buying our own shares represents a very good investment for our shareholders and, if our share price remains within our targets for repurchase, we plan to continue to buy the additional $1.5 billion worth of shares that our Board recently authorized us to repurchase. We are always on the lookout for ways to use our capital thoughtfully, and it is probably worth mentioning that the criteria haven’t changed much in twenty years.We like to invest our capital in proprietary products or services that have a history of profitability (which we measure in years, not days or months), are internationally appealing, serve to deepen our moats, and can reasonably be expected to generate a financial return that is greater than our weighted average cost of capital.

ANOTHER RECORD YEAR OPERATING MARGIN 2010

26% OPERATING MARGIN 2011

29%

EARNINGS PER SHARE 2010

BILLION IN OPERATING CASH FLOW 2010

$0.70

$1.2

OPERATING MARGIN 2011

OPERATING MARGIN 2011

$1.4

$0.79

FIRST

$$$$$$

EVER CASH DIVIDEND


2011

ANNUAL REPORT

OPERATING MARGIN 2010

EARNINGS PER SHARE 2010

ANOTHER RECORD YEAR 26% OPERATING MARGIN 2011

29%

BILLION IN OPERATING CASH FLOW 2010

$0.70

$1.2

OPERATING MARGIN 2011

OPERATING MARGIN 2011

$1.4

$0.79

FIRST

$$$$$$

EVER CASH DIVIDEND


2011

ANNUAL REPORT

OPERATING MARGIN 2010

EARNINGS PER SHARE 2010

ANOTHER RECORD YEAR 26% OPERATING MARGIN 2011

29%

BILLION IN OPERATING CASH FLOW 2010

$0.70

$1.2

OPERATING MARGIN 2011

OPERATING MARGIN 2011

$1.4

$0.79

FIRST

$$$$$$

EVER CASH DIVIDEND


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