2010 Microsoft Annual Meeting of Shareholders

Meydenbauer Center, Bellevue, Washington

November 16, 2010

ANNOUNCER: Ladies and gentlemen, welcome to the 2010 Annual Shareholders
Meeting.

PETER KLEIN: (Applause.) Well, good morning and welcome everyone. I'd like to
call the 2010 Annual Shareholder Meeting to order. I am Peter Klein, ChieI Financial
OIIicer at the company. I will be serving as the Chair oI this meeting. Brad Smith,
Senior Vice President oI Legal and Corporate AIIairs, will be serving as Secretary.

I'd like to introduce: Bill Gates, Chairman oI the Board, and Steve Ballmer, ChieI
Executive OIIicer.

Welcome to all our shareholders. Welcome also to those attending the meeting online.
We are streaming live today on the MicrosoIt Investor Relations website. Thank you Ior
being with us today. We greatly appreciate your interest in the company. Let me now
introduce Mike Williams and JeII Schaberg, representing Deloitte & Touche LLP, our
independent public auditor.

Our board members in attendance are: Dr. Maria Klawe, member oI the Antitrust
Compliance Committee; Charles Noski, Chair oI the Audit Committee; Dr. Helmut
Panke, Chair oI the Antitrust Compliance Committee, member oI the Compensation and
Audit Committees; Steve Ballmer, ChieI Executive OIIicer oI the Company; and Bill
Gates, Chairman oI the Board.

BeIore we proceed with the meeting, let me review a Iew housekeeping items: Please
take time aIter the meeting to visit the product demo stations on the other side oI this
room. We have several oI our products on display, including Windows Phone 7, and our
Kinect gaming system. We also have representatives Irom our product support services
team to answer product questions you may have.

As in prior years, members oI the Investor Relations team are around and will be
available to answer your questions in the product Iair area.

Please be sure to visit our Investor Relations website. Our goal is to maintain the
Investor Relations website as the authoritative portal through which visitors can easily
Iind Iinancial and business perIormance inIormation about the company. You can sign
up Ior email alerts and RSS Ieeds to have inIormation, including quarterly earnings
announcements, pushed in real time. The web address is: www.microsoIt.com/investor.

II you parked in the Meydenbauer Center parking lot, your parking will be provided Iree
oI charge, you will not need to get a ticket validated at the reception table in the lobby.
And Iinally, as soon as the business portion oI the meeting is over, we will have some
time Ior Q&A.

American Stock TransIer & Trust Company has been appointed as inspectors oI election
Ior the meeting. The inspectors are located at the reception table in the lobby.

Most shareholders have already voted by proxy, and your proxy votes have been tallied.
II you are a shareholder oI record, or a beneIicial shareholder holding a legal proxy Irom
your bank or broker, and you want to vote your shares now or change your vote, then
ballots are available Irom the inspectors at the reception table in the lobby. Filling out a
ballot and giving it to the inspectors will have the eIIect oI revoking any earlier proxy
you gave. The polls are now open and will close in about 30 minutes, Iollowing Steve
Ballmer's remarks.

Now I'm going to ask Brad Smith to report on the notice oI the meeting and the proxies
received.

BRAD SMITH: Thanks, Peter. The notice oI the meeting and a Notice oI Internet
Availability oI Proxy Materials were mailed by American Stock TransIer & Trust
Company, the company's transIer agent, beginning on September 30, 2010, to all
shareholders oI record as oI September 3, 2010, and as a result, the meeting is being held
pursuant to proper notice. Proxies representing a majority oI the approximately 8.6 billion
shares oI the company's outstanding stock eligible to vote have been received, and
accordingly, a quorum is present and the meeting is duly constituted and should proceed.

PETER KLEIN: Thanks, Brad. As chair oI the meeting, I have adopted an agenda that
will govern the order oI business at this meeting and rules oI conduct oI the meeting.
Copies oI the agenda and the rules are available at the reception table outside the meeting
room. The rules oI conduct also govern the Q&A session that will Iollow adjournment oI
the meeting proper.

This year, there is, iI properly presented, one shareholder proposal Ior consideration. As
per the Rules oI Conduct oI the Meeting, the proponent oI the proposal or its
representative will be granted three minutes to introduce its proposal at the designated
time.

We now come to the part oI the meeting where shareholders consider the matters set Iorth
in the proxy statement. Voting on all matters is by actual count oI the votes cast by ballot
or proxy.

The Iirst item oI business to come beIore the meeting is the election oI the directors. The
Iollowing nine people have been properly nominated by the board: Steven A. Ballmer,
Dina Dublon, William H. Gates, III, Raymond V. Gilmartin, Reed Hastings, Dr. Maria
Klawe, David F. Marquardt, Charles H. Noski, Dr. Helmut Panke. The Board
recommends a vote Ior each oI the directors on the ballot.

The second item oI business to come beIore the meeting is ratiIication oI the company's
independent auditor, Deloitte & Touche LLP, Ior Iiscal year 2011. This proposal is
discussed in the Company's Proxy Statement. The board recommends approval oI this
proposal.

The third item oI business to come beIore the meeting is Shareholder Proposal No. 1.
The shareholder proposal and its supporting statement are set Iorth in the Company's
Proxy Statement. The secretary will read the resolution.

BRAD SMITH: Be it resolved, to amend Article 2 oI the corporate bylaws to add a new
Section 2.13 as Iollows: Establish a board committee on environmental sustainability.
The purpose oI the committee is to review the company's corporate policies, above and
beyond matters oI legal compliance, in order to assess and make recommendations to
enhance the company's policy responses to changing conditions and knowledge oI the
natural environment, including but not limited to: natural resource limitations, energy
use, waste disposal and climate change.

PETER KLEIN: The proposal has been submitted by Harrington Investments.
The chair recognizes John Harrington Ior a period oI three minutes.

1OHN HARRINGTON: My name is John Harrington, Harrington Investments. I have
a small advisory Iirm in the Napa Valley, CaliIornia. And I have submitted this proposal
to create a standing committee on environmental sustainability.

I think it's extremely important that the directors recognize that sustainability,
environmental sustainability is a criteria Ior just about any publicly traded company on
the globe, or in the globe, or whatever you want to say. But it's an environmental
responsibility that we all partake oI and we have to participate in this Iamily oI nations
and human beings, and it's very important that we make sure that in the bylaws, Iiduciary
duty is clearly established by a board committee on sustainability.

We have had quite a bit oI luck this year in working with other companies in the United
States, especially some technology companies, including Intel, not an insigniIicant player
in the technology sector, which not only did they amend their committee charter to
include environmental sustainability, but they provided us with an outside legal opinion
clearly stating that sustainability or environmental sustainability was a Iiduciary duty oI
the boards oI directors.

We also, enlightened to me, actually had a dialogue with another company called
Monsanto. And they amended their charter and also provided us with a legal opinion, an
inside legal opinion oI legal counsel, indicating speciIically that this is also a Iiduciary
duty.

UnIortunately, when we dialogue and have terriIic dialogue with your legal counsel, we
were inIormed that they would not Ieel comIortable in providing a legal opinion stating
that anything in the committee charter on environmental sustainability was not
necessarily a Iiduciary duty under Washington State law. So, that led us to Ieel very
strongly that we need to make sure in the bylaws, or at least in the Articles oI
Incorporation, or some other document related to MicrosoIt that we ensure that
environmental sustainability is a clear requirement and a Iiduciary duty oI our board oI
directors.

So, thank you Ior the opportunity to speak to you this morning, and I hope that we
continue dialoguing over the next Iew years because, again, I think environmental
sustainability is something we have to -- it's an urgent matter, and we need to approach it
in a comprehensive Iashion. Thank you very much.

PETER KLEIN: Thank you, Mr. Harrington. The board recommends a vote against
this proposal Ior the reasons set Iorth in the company's proxy statement.

The discussion oI matters Ior shareholder consideration is closed. The polls will remain
open Ior another ten minutes or so.

BeIore I introduce our next speaker, let me remind you that we may make Iorward-
looking statements during this meeting. Actual results may diIIer Irom these statements.
You should reIer to our SEC Iilings Ior the risk Iactors related to our business.

At this time, I would like to introduce Steve Ballmer, MicrosoIt's ChieI Executive
OIIicer. (Applause.)

STEVE BALLMER: Thanks, and welcome. It's really great to be here, and I really
want to thank all oI you Ior taking the time and joining us here today.

A year ago, when we gathered here, I spoke about the company's response to economic
uncertainty as we looked back at one oI the most challenging years that we've ever Iaced.
I shared my strong belieI in MicrosoIt's opportunity to build on our strengths and create
technology breakthroughs that drive innovation and progress.

Today, it's great to be able to take a Iew moments to reIlect on some oI the remarkable
things that we've achieved in the past year and to look Iorward to our prospects Ior
continued growth and success.

Our perIormance in Fiscal Year 2010 oIIered a lot to be proud oI. We reported record
revenue oI more than $62 billion. We saw record earnings per share which were up 30
percent Irom the prior year. Our operating income great Iaster than revenue, a clear sign
that we are maintaining a consistent, disciplined approach to controlling costs, while
prioritizing investments in high-growth opportunities.

Our Iinancial perIormance in Fiscal Year 2010 was strong because oI the incredible
lineup oI products in the market. At the top oI that list was Windows 7. Quite simply,
Windows 7 is the best operating system we've ever built. It's Iaster, it's simpler, it's more
secure, and it's easier to use. It gives people the power to work and play the way they
want to, better than any other operating system in the history oI this industry.

We released Windows 7 to the market just over a year ago and since then, we've shipped
over 240 million copies to consumers and businesses around the world. That makes it the
bestselling operating system in the history oI this industry in any one-year period.

With IDC reporting that 88 percent oI businesses have plans to migrate to Windows 7,
and that the Windows PC market now includes over 1.2 billion machines, we still see
plenty oI room to grow and Windows 7 is just the beginning.

This past June, we launched OIIice 2010. We built OIIice 2010 to deliver the best
productivity experience across the PC, the phone, and the browser. Customers have
responded Iavorably, and in our Iirst three months oI availability, OIIice 2010 has already
become the Iastest-selling OIIice release ever.

Today, not only are companies adopting Windows and OIIice at the highest rate that
we've ever seen, but they're investing in the entire line oI OIIice productivity, Irom
SharePoint to Exchange and Irom Lync to our Iast-growing Dynamics business
applications.

In 2010, we also oIIicially launched our Windows Azure service, revolutionary operating
system Ior the cloud. Today, we have nearly 20,000 subscribed applications Ior Azure
and that number grew 40 percent between the last quarter oI Fiscal Year '10 and the Iirst
quarter oI Fiscal Year '11.

Large customers include Siemens, NASA, and the Associated Press. They're all
deploying solutions that are just really a start Ior Windows Azure, a key component oI
our overall cloud computing strategy.

II you've been Iollowing the company closely, you know that the cloud is a huge Iocus
Ior the company and the entire computing industry. OI course it raises a question, what is
cloud computing? Simply put, the cloud is the buzzword, really, Ior the next major
technology breakthrough.

Like the microprocessor, like the Internet and other key breakthroughs, the cloud brings
sweeping change. We believe that in the coming years, the cloud will transIorm
computing into a limitless platIorm Ior connecting people to the inIormation and people
they need, no matter where they are and what they are doing.

What does that mean at a practical level? It means the cloud includes capabilities like our
Bing search engine that lets you tap into data around the globe instantly so you can make
smart decisions, whether it's about your next vacation or a key Iact your child needs in
their research paper. The cloud means a research program running on Windows Azure
that allows oceanographers to share and analyze vast amounts oI data collected Irom
sensor networks on the ocean Iloor, hundreds oI miles away, a project we're doing with
the University oI Washington.

The cloud means a workspace that uses SharePoint to help a real estate agent, a tenant, a
landlord, and a lawyer work together on a deal over the internet privately and securely.
The cloud is a photo that you take on your Windows Phone 7 that is immediately updated
to your PC, where you can edit it and share it with Iriends through social programs like
Windows Live and Facebook.

The cloud is key to the most exciting business opportunities in Iront oI MicrosoIt.
Today, over a billion people use our products and services in the cloud. For these
customers, the cloud provides huge opportunities Ior delivering new products and new
scenarios.

For the billions oI people we don't reach today, the cloud helps us deliver the incredible
beneIits oI the inIormation age Ior the Iirst time. And Ior MicrosoIt and its shareholders,
cloud computing will expand our reach and increase the possibilities Ior revenue and
proIitability. It will enable us to improve customer satisIaction levels, sell to more
customers, and give us opportunities in some places to build market share.

With Windows PCs, Windows Phones and Xboxes, we are bringing the power oI the
cloud to our customers through smarter devices and new Iorm Iactors - Ior big screens,
little screens, medium-sized screens like the PC. With Bing, with Windows Live,
Hotmail, and Messenger, with OIIice on the Web and Xbox Live, we're taking advantage
oI cloud computing to transIorm social and proIessional interactions. With our recently
launched OIIice 365 service, MicrosoIt Dynamics, SQL Azure and Windows Azure,
we're using the cloud to revolutionize how soItware is written and deployed by our
business customers in addition to consumers.

Together, these technologies, products, and services enable us to do something that we
think maybe no other company can, to deliver cloud solutions that span the complete
range oI all our customers' needs. And with our unique position in the industry, we're not
just riding the cloud computing wave, we're leading it. I've said many times over the past
year, when it comes to the cloud, we are deIinitely all in.

From the great products we released last year to the great work we are doing to bring the
cloud to our customers, we have momentum across the company. A Iew weeks ago, we
announced record revenue oI more than $16 billion Ior the Iirst quarter oI Fiscal Year
2011 and we beat Wall Street earnings expectations by 7 cents a share.

As strong as our perIormance was with business customers, I was also particularly
pleased by our momentum with consumers. Xbox has been the number-one-selling video
game console in the U.S. Ior Iive consecutive months. Bing use is at an all-time high
with almost double the number oI search queries compared to last year, and it's
continuing to grow.

Consumers are continuing to buy Windows 7 and OIIice 2010 in huge numbers. And we
continue to roll out the next wave oI great new products. During this past quarter, we
introduced OIIice 365, our version oI OIIice Ior the cloud Ior business customers.

We released a beta version oI Internet Explorer 9 to really rave reviews. Already, more
than 10 million people have downloaded it, a rate that is Iaster than any other browser
that we've done. By the way, iI you're not one oI those 10 million, I encourage you to
give it a try. I know you'll love the Iast, clean, secure browsing experience.

In the last two weeks, we oIIicially launched the new Windows Phone and Kinect Ior
Xbox 360. Kinect is a revolutionary new way to play games with your body and your
voice. No controllers, headsets, wands, or wires. With Kinect you can play a soccer
game by using real kicking motion, a ping pong game by waving your hand. And iI you
want to show oII your beach volleyball jump serve, all you have to do is do it, Kinect
Iigures out the rest.

The New York Times says it's a home system that leaves hand controls in the dust. We
believe it's not just the Iuture oI video gaming, it's a big part oI the Iuture oI Iamily
entertainment. We have a demonstration today in the other room, and iI you haven't
experienced it yet, please do give it a try. You will be amazed. Kinect, we think, is
going to be the giIt Ior this holiday season.

Yesterday, we announced that we have sold one million Kinect units in the Iirst ten days
since launch, and we expect to sell Iive million units by the end oI this calendar year. But
Kinect is much more than just the Iuture oI entertainment, it is the most advanced
example oI new innovations that are enabling people to interact with technology and each
other in entirely diIIerent ways.

We're also oII to a great start with Windows Phone 7. Created Ior the way real people
want to use their phones, Windows Phone 7 marks the beginning, we think, oI a new era
in smart phones. The response has been really Iantastic. According to CNET, the phone
is something Iresh, Iun, and Iunctional. Computerworld says it delivers a beautiIul
interIace on top oI a lot oI cloud-based power. And I have to admit, I'm a little
competitive, so my Iavorite quote is Irom the writer at Techland who said, and I quote,
"This is the Iirst phone I've ever reviewed where I turned oII my iPhone and still haven't
turned it back on." Bravo. (Applause.)

We know, though, we still have a lot oI work to do, but Windows Phone 7 clearly puts us
back in the smart phone game, and we're excited to have a great, competitive, Iun-to-use
product in the marketplace.

In a moment, we'll give you a demonstration so you can see Ior yourselI why we think
this is a product that really stands out in the market.

For more than 30 years, MicrosoIt has played a central role in delivering innovation that
makes inIormation technology aIIordable and accessible. I'm as excited about the Iuture
Ior MicrosoIt as I've ever been. The opportunity to transIorm people`s lives all around
the world has really never been better.

I also believe that the opportunities Ior growth and Ior success have never been more
exciting. With your continued support, we're going to work very hard every day to
achieve our mission, to have a positive impact as we help people and businesses around
the world be what's next and realize their Iull potential.

Thanks, and I'd like to invite on stage Aaron Woodman who is Irom our Windows Phone
team. He's going to do a live demonstration Ior you oI Windows Phone 7, which I hope
you'll get as charged up about as we are. Thanks again Ior all your support. (Applause.)

AARON WOODMAN: Good morning. I'm super excited to be the one to get to show
you the phone. And I love the quotes that Steve mentioned a little bit earlier. I think the
sentiment in those quotes is that the phone is really diIIerent.

It's diIIerent because we asked two basic questions and it landed us in a very diIIerent
spot than our competition and where we were beIore. First question: Can we simpliIy
the everyday tasks that people use their phones Ior? Can we just make the things people
want to do on their phones easier and Iaster?

Second, we've seen this explosive growth oI all the things that phones are capable oI
doing, primarily through applications. And we asked customers: Can we organize? Is
there a cost Ior all oI that? Can we help organize the phone?

The result was two simple things that Windows Phone 7 is really about: A smart design,
and a technology we call Windows Phone hubs, and that's what I'm going to show today.

I'm going to start with smart design, and I'm actually going to start right on the lock
screen. There are two big beneIits oI smart design. The Iirst is can you make
inIormation much more glanceable? Do I have to work to Iind what I'm looking Ior?
Second, can you simpliIy everyday tasks? And a lot oI times, those go hand in hand. Let
me give you a quick example.

You'll notice that on my lock screen, the screen you use just not to pocket dial people on
a regular basis, we bring inIormation up to the top. Not just time and date, but we give
you the next calendar appointment and where that appointment is. One oI the most
common tasks people have with taking the phone out oI the pocket is to open the calendar
appointment just to see where they're going. We can simpliIy that by making that
inIormation glanceable.

In Iact, at the very bottom, you'll see some icons that actually tell you what you've
missed. In this case, a couple oI text messages and some new e-mails. So, we brought
that inIormation up so that you don't have to unlock the phone just to see what you
missed.

That idea oI making inIormation much more glanceable continues on our home screen
that we call start. And it's Iilled with these live tiles, which is slightly diIIerent than what
you've seen on the marketplace today. What you primarily see is icons or gadgets and
widgets, and they both have beneIits and costs.

The beneIits oI icons is they're super simple. The cost, though, is all the inIormation you
care about is one layer below. It's buried inside the application.

Widgets oIIer the unique advantage oI being super dynamic, oI bringing inIormation up
to the surIace, but at the cost oI being really chaotic, it's really hard to understand what's
going on.

Tiles oIIer you the beneIits oI both with some oI those reduced costs. In this case, they're
really uniIorm. They're single-wide and double-wide. They're simple in the sense that
they actually have exactly what you expect underneath them -- applications, phone
Iunctionality -- but they're dynamic in the sense they actually bring inIormation Irom
inside the application and surIace them right on the home screen.

A couple oI my Iavorite examples is, obviously, the calendar. I can scroll down and you
see the icon on the right, the woman laughing is actually my wiIe. And you'll see her
status message and her latest image Irom her social networking show up.

You'll see my alarm actually tells me that it's on and what time it's set. We see a common
task where people use their phones to set their alarm and wake up the next day. That
means the night beIore, you go to the home screen, Iind the application, make sure that
it's on, and set Ior the appropriate time. In this case, we can surIace that inIormation. We
can reduce the number oI steps you're going to take on a regular basis.

My last Iavorite example is probably weather. On pretty much every other phone out
there, it's going to have either a cloud or a sunshine. In Seattle, it would always be
cloudy, so sunshine would be a lie. In this case, we actually surIace the weather oI the
day. You didn't have to go into the application to Iind that inIormation, we surIaced it.
We made it glanceable, and in a lot oI cases, we reduced the number oI steps you have to
do on the phone.

That's one oI the key beneIits oI smart design, making inIormation much more
glanceable. The other is just reducing steps, and I think the best example oI that is
actually taking a picture. The third most common task that people do on a smart phone is
to take a picture, and phones have kind oI really approached it in the space where it's a
phone with a camera. So, you go to the phone, you unlock it, you Iind the application
called camera, you wait Ior that to load and take a picture.

We approached it much more like the idea oI taking a picture, even in the oII state, I can
actually press and hold the camera button, it actually turns on the phone in the
appropriate state, much like a digital camera would, I can take a picture and I'm done. I
didn't have to go through all the same steps that you would have normally gone through
on pretty much every other phone out there on the market. That's smart design. That's
about making inIormation glanceable and about reducing steps.

Let me give you an example oI hubs. There are actually six hubs that are available. The
Iirst is people, pictures, music, games, OIIice, and marketplace. And I'm going to show
you a couple oI those.

Let's start with people. A hub is essentially a way to organize all the inIormation you
care about, inIormation, applications, and services. People is a great place to start
because it's why we actually buy phones in the Iirst place, to stay in touch with people,
and communications with those people have really evolved. It's not just about calling
people anymore. It's about text messaging, it's about e-mail, it's about social networking.
In most cases, those are all separate applications or services.

With the people hub, we actually bring those together. Your contacts are aggregated to a
single contact so I can see people as they are, whole. I can scroll over and see what's new
with my community, what's happening with my Iriends and Iamily without having to load
an application. In Iact, right here I can actually comment on something that's happening
within my community. I didn't have to go load an application. That's how a people hub
brings things together.

The other one I love is actually pictures. II you think about pictures today, it's not just
pictures I've taken on the phone, but the pictures I've taken on my digital camera or
shared on my social networking or other people have shared on their social networking
sites.

Again, in most phones today, those are separate applications. There's a lot oI steps to see
what's going on with pictures. With Windows Phone, we have a single destination called
the pictures hub. And you can see kind oI some oI your photos. You'll know it's
customized because it's a picture in the background in case -- no, that's me and my
daughter on a beach. I have a very emotional connection to my pictures hub.

II I scroll over to the Iar right, it actually shows me just the pictures that my Iriends and
Iamily are actually sharing. It becomes a way Ior me to see the visual communication
that's happening within my community.

Lastly, iI I go to all, it shows not just pictures I've taken on my camera roll, pictures I've
taken and put onto my PC have also come over, but my Iavorite are actually pictures I've
posted on social networking sites show up on my phone. A great example, I took a
regular camera, took a bunch oI pictures on a recent RV trip, plugged it into a regular
laptop, shared them up on the Windows Live and Facebook so my parents could actually
see those pictures. A minute later, they showed up on my phone. It didn't Iorce me to go
into another application called Windows Live or Facebook it said these are pictures. And
iI you had a place that aggregated pictures together, to organize the inIormation you
cared about, this is what we would do, and that's what ended up being called the pictures
hub.

The last one I want to show is actually the games hub. There's been a lot oI discussion
around Xbox Live coming. First and Ioremost, it's just a great place to actually play
games. You know, games represent about 40 percent oI the applications in an online
marketplace. That means a lot oI games show up on the phone, and we organize those
Ior you in the games hub.

We show you your collection. We program a Ieed to tell you what's going on with actual
games. We show your Xbox Live service, in this case, my actual avatar, gamer ID, really
pathetic gamer score, and my recent achievements. This isn't a mobile game platIorm, it's
the Xbox Live community that people participate in every day. This is the phone in which
they can participate along with all oI their Iriends and Iamily.

I have to tell you a story Ior me. I'm a huge Xbox Live gamer, so I actually really
enjoyed this. This is one oI the reasons why I would go buy a phone. My wiIe will not
touch my Xbox. I gave her a phone, gave her a game called Bejeweled, and the last
screen she saw on Bejeweled was a leader board. It showed me to her. She was instantly
a Ian oI Xbox Live because she wanted to compete not because it was part oI the console,
but because the community was important to her, that experience became important to
her. It was an on ramp Ior her to really start to understand the value oI Xbox Live.

Those are the hubs that I have Ior you today. That's Windows Phone 7, smart design,
really making inIormation much more glanceable, reducing steps on tasks, and Windows
Phone hubs that really organize all oI the inIormation that you care about into a single
destination. Thank you. (Applause.)

PETER KLEIN: Thanks, Aaron. Please be advised that the polls are now closed. At
this point, the voting tabulation has been completed and we will report the preliminary
results oI the matters voted upon today.

Proposal No. 1 is the election oI directors. As provided by the majority vote standard in
our bylaws, a director or candidate must receive a majority oI votes cast in order to be
elected. Brad, please report the vote.

BRAD SMITH: The Iollowing nine persons have received a majority oI votes cast, each
with votes in excess oI 94 percent oI the votes cast: Steven A. Ballmer, Dina Dublon,
William H. Gates, III, Raymond V. Gilmartin, Reed Hastings, Dr. Maria Klawe, David F.
Marquardt, Charles H. Noski, and Dr. Helmut Panke.

The nine nominees are elected directors to serve until the next annual shareholder
meeting and until their successors are elected and qualiIied.

PETER KLEIN: Proposal No. 2 is the ratiIication oI the company's independent
auditors Ior the current Iiscal year. The proposal requires the aIIirmative vote oI a
majority oI the shares voting on this matter. Brad, please report the vote.

BRAD SMITH: The proposal has received aIIirmative votes representing more than 98
percent oI the votes cast.

PETER KLEIN: Thanks, Brad. The proposal is approved.

The next item is shareholder proposal No. 1. The proposal requires the aIIirmative vote
oI a majority oI the shares voting on this matter. Brad, please report the vote.

BRAD SMITH: The Shareholder Proposal received more than 3 percent oI the votes
cast.

PETER KLEIN: Thank you, Brad. Shareholder Proposal No. 1 is not approved.

We expect to post details oI Iinal voting results on these matters on our Investor
Relations website by tomorrow. We will also report the results in a Iorm 8-K Iiled with
the Securities and Exchange Commission within Iour days.

We have completed the business oI the meeting, and our shareholder meeting is now
adjourned.

We will now proceed with the Q & A session. I'd like to welcome to the state Bill
KoeIoed, General Manager, Investor Relations, who will moderate the Q & A.

BILL KOEFOED: An Investor Relations team member is in each aisle with a
microphone. We'll take as many oI your questions as time allows. In order to maximize
the opportunity to address as many questions as possible, please limit your time to one
minute and one question oI interest to all shareholders so we can take as many as
possible.

As a new Ieature to our annual meeting, we solicited questions via e-mail at our Investor
Relations website so those who cannot attend in person can ask questions. We will be
addressing several oI the questions submitted electronically, alternating with live
questions.

QUESTION: Whenever the stock price might go up, big sellers step in and knock it
down. Those $67 options have been a ceiling on the stock price and MicrosoIt gives a 10
percent discount to its employees. Now Bill is promising to sell his stock to us to give
the money to charity. So, my question is Ior Bill: Why don't you just erase those shares
Irom the corporate books, take a load oII us?

(OII-mike comments.)

STEVE BALLMER: I want to take Iinancial -- sort oI general purpose Iinancial about
the company, and I'll let Bill talk about his personal inclinations. The shares don't just --
there's no way to just, quote, take them oII the books. They're a real economic asset, they
can be given away, they can be sold. Obviously, people who own them -- the company
can buy stock, it buys in the open market, it doesn't buy uniquely Irom any one individual
or institution, but those shares have to trade and it's the company's responsibility iI it
wants to buy stock, which Peter can remind me exactly how much we bought, about $4
billion in the last quarter? So the company just retired those through its own
reacquisition oI shares.

Both Bill and I -- Bill has had a regular program oI selling, which he's welcome to talk
about. I sold some shares this last quarter, but we both retain very substantial interests in
the company and certainly iI you look at the amount oI shares sold by insiders, it's really
a very small percentage oI all oI the shares that sell and it's not a material Iactor in the
stock price, I would say.

BILL GATES: Yeah, I don't know anything about options with $67 or some ceiling
price at $67. I mean, iI the stock hit $67, that wouldn't be a terrible thing. (Laughter.) I
think the thrust oI the question is 'are the current grantees oI the Foundation more
deserving than sort oI turning the money over to MicrosoIt shareholders? I guess I've
made the decision that that wealth is going to go to the Foundation and the causes oI the
Foundation as opposed to being some reduction in shares outstanding Ior MicrosoIt.

BILL KOEFOED: The next question comes Irom the Web: Why does there seem to be
such a disconnect between the company's Iinancial perIormance and its stock price?
What is Wall Street overlooking?

PETER KLEIN: I think one oI the unique things about MicrosoIt is we've created
multiple successIul businesses, and a lot oI companies only do one or two. In Iact, over
the course oI the last ten years, we've created more than a handIul oI billion-dollar
businesses, which I do think sometimes get overlooked. And that's driven our Iinancial
perIormance over the last ten years where we've more than doubled our revenue and
tripled our proIits.

II I think about where we are now, we're in eight core business areas. We're very Iocused
on those both internally, and as we talk about the company, externally. And I think being
successIul across all oI those eight businesses is going to be the key to |growing| our
earnings and our stock price.

I think it's Iair to say we Iace tough competition in all those businesses. We Ieel very
well positioned in those, and I think as we compete successIully in things like phones and
with Kinect, as you saw today, that will drive our earnings, and ultimately over time, our
earnings are what will drive the stock price.

BILL KOEFOED: The next question will come Irom the Web. II you are in the
audience and you want to ask a question, please, again, see the Investor Relations
representatives at the Iront. Let's go ahead, you can ask your question.

QUESTION: Good morning. I've been a MicrosoIt stockholder Ior 25 years and have
been a very proud stockholder. As I look at the audience, most oI the people here are
retired. And I would like to know why MicrosoIt did not increase their dividend more
than what they did this last quarter.

PETER KLEIN: I'll go with that as well. I think our 23 increase in our dividend
combined with our aggressive share repurchase program which Steve also reIerenced
reIlects a strong ongoing commitment to returning cash to shareholders. We've returned
about $170 billion in the Iorm oI buybacks and dividends over the last 10 years, which
against any benchmark is a very strong perIormance both in our industry and generally.

I think our 23 increase in the dividend this year, iI you go back over the last two years,
that's more than our operating income increase, and so we remain committed as our
operating income grows to grow our dividend and return cash back to shareholders
aggressively both in the Iorm oI share repurchase and our dividend.

BILL KOEFOED: Okay, the next question comes Irom the Web: A number oI
executives and talent have leIt the company recently, most notably Ray Ozzie, Stephen
Elop, Robbie Bach, et cetera. Will it impede your ability to compete in the cloud, the
enterprise, consumer, et cetera?

STEVE BALLMER: Well, we have, I would say, at least as strong or stronger a
leadership team as the company has ever had in its history. So, I encourage people to
take a look at the Iolks that we have and the great work that we're shipping and
understand that keeping our talent base vibrant and active and having great people is
really on our mind.

That doesn't mean people aren't going to retire, pursue other interests at some point in
their lives, and we are Iortunate we continue to hire oII college campuses over 1,000
students a year, the best and the brightest. When we go up against our top competitors,
over halI the time in all cases people will choose MicrosoIt over other companies because
it is a great place to work. So, Ior everybody who's chosen to do something else in liIe,
we've had somebody ready and rearing to go.

I'll make a special sort oI Iootnote to that about Bill. I can't tell you Bill is selI-
reproducible, but we're lucky Bill keeps giving us generously his time not only as
Chairman oI the Board, but also as advisor on some oI our key projects, and we're really
Iortunate to have that. (Applause.)

BILL KOEFOED: All right, we'll take the next question here in the audience.

QUESTION: Yes, notwithstanding the glowing words Irom management about how
well MicrosoIt is doing, I'm very disappointed also with the price oI the stock. It's been
wallowing in the 20s Ior almost ten years now, and the dividend has been a pittance, even
though you want to say it's increased. I might ask the same question: What are you
going to do Ior the individual stockholder to increase the price oI the stock, which has
been wallowing in the 20s Ior a long, long time, and Ior the stock dividend, which is
really a pittance, even though you think you've increased it substantially. Thank you.
(Applause.)

STEVE BALLMER: Let me say a couple things. I understand the Irustration. I do
understand the Irustration. We're all shareholders, all oI us are shareholders, so I do
understand the Irustration. So, let's talk about what we can do and what we can't do. I
mean, ultimately, the stock market gets it right as long as we get it right. So, we optimize
every day on getting it right.

Let me try to explain what I think that is. Number one, we're trying to ship wonderIully
easy to use and exciting products. We're trying to not only ship wonderIul products, but
we're trying to participate in important areas oI growth and change and new opportunity
in our industry. We're trying, with that as a Ioundation, to deliver great growth in
revenue and earnings and proIit, and we're trying to return that to shareholders, partly in
the Iorm oI dividends, and partly by repurchasing stock, which helps EPS and should
ultimately then also be able to help the share price.

That doesn't mean I'm not as Irustrated as some others with what's happened, and I do
think we've got to prove to investors that Windows 7 has been a great product. People
are saying, "Where do you go next? You've got new competition, comes in new Iorm
Iactors, are you going to get it done this time? How about phones? How about search?
How about some oI these areas where we want to see whether the company's really going
to perIorm?"

I don't think there's probably, as Peter said, as much appreciation Ior the incredible
growth and success we've had with enterprises since people relate better to the consumer
market. But it's great products with great earnings, and particularly in some high-
visibility categories.

You say why isn't the dividend larger, our dividend -- I won't engage in a discussion oI
the adjective oI a "pittance" or not, that's not where I'll go. I'll merely point out that iI
you look at the dividends we pay out as a percentage oI earnings or stock price, we're
absolutely at the top oI the rank Ior all tech companies. We pay out more, we pay out a
higher percentage, and we have a higher dividend yield than basically most, not all, but
most. We're in the upper echelons oI technology companies.

So, I think we'll continue to be solid in our dividend policy, but really work very, very
hard on product and product driving Iurther increases in revenue and proIit.

BILL KOEFOED: Let's take the next one Irom the audience. Number two.

QUESTION: Hi. I was wondering iI you would remind us how much you spend on
research and development, and what excites you the most as you look Iorward. I know
you've got a lot oI new products, but what else is out there, and what can we look Iorward
to?

STEVE BALLMER: Yeah, we spend just about $9 billion in R&D. And, we're in more
areas than anybody else in the business, so we're spending Irom about $400 million a
year in pure research, and iI you want to get excited, you can look at some oI the stuII
that our researchers are working on that are more like Iive and 10 years out. But I'm
excited Irom a user perspective, I'm excited about some oI the things we're doing to
change the soItware and hardware in terms oI how we interact with computers. Kinect is
just a good example oI that. There's a lot more coming.

What you'll be able to do with these phones in the next Iew years, the way that they'll be
able to sense where you are, what you're doing, what you're interested in, will really be
quite remarkable. The list goes on.

The improvements we can make to help take cost and complexity out oI the back-end oI
computing that most people don't look at, the world spends about $2 trillion a year on the
back-end oI computing, and the ability to improve the agility and eIIiciency oI that I
think is really quite remarkable.

The new kinds oI applications that people will write that know about you, subject to your
privacy |controls|, and know about your interests in the world, and can bring that
inIormation together Ior you, I think all oI that is going to be quite amazing over the
course oI the next several years.

BILL KOEFOED: Okay, the next question comes Irom the Web. What can we expect
to see Irom MicrosoIt in terms oI tablets and slates?

STEVE BALLMER: I've already remarked publicly that you'll see interesting new Iorm
Iactors based on Windows over the course oI the next month, as we're ready with our
partners to unveil them.

I think what you'll see Irom us to start is really new Iorm Iactors oI PCs as opposed to
something that is trying to be something else. I mean, Brad sits here and carries a
machine on which he takes notes, and yet iI you look at the number oI people who really
take notes, Ior example, on an electronic device it's still relatively small. We see real
opportunity in taking the core Windows in new directions, and you'll see that in the
course oI the next Iew months. We'll get some improvements Irom our partners like Intel
next year, you'll see more advances, you'll see changes in our soItware; all oI that
happening at a pretty rapid clip over the next 12, 18 months, et cetera.

BILL KOEFOED: We'll take the next question Irom the audience. Paddle number one.

QUESTION: Mr. Ballmer, you mentioned that you had had some growth in search.
And so my question has to do with what is your market share growth compared to your
competition or percentage oI the market? In other words, how are you doing against
Google? Are they growing their business Iaster, are we growing our business Iaster?

STEVE BALLMER: Yeah, let me break the world into two pieces, the U.S. and
everything else, and I'm going to give you numbers in the U.S. The story is not as good
outside the U.S., but we've made a very conscious decision that we needed to work to
achieve critical mass in the U.S. Even while we're in some other markets, we're extra
Iocused on the U.S. And we've grown by almost 4 points oI market share over the course
oI the last year, Irom 8-something to 12-something. Depends on whose scorekeeping you
believe, but it's up. II you want to say that in a very positive way, you could say we're up
50 percent, or you could say we're up Irom 8-something to 12-something, and still Ieel
like it's good progress.

In the U.S. we've just completed the integration with Yahoo!, which means while we
don't get most oI the economics Ior the next tranche, we've picked up another roughly 18
percentage points oI market share in the U.S., which is helpIul Ior us. Having market
share actually helps improve the product itselI: more relevant ads, more relevant results.
So, Irom a market data perspective we're now up to 30 percent, Irom a market economics
perspective we're really still more like 12 percent, and I don't want to have shareholders
get the two conIused, but they're actually both important.

BILL KOEFOED: Great, let's take the next question Irom paddle number two.

QUESTION: I'm another Irustrated shareholder Ior more years than I'd care to admit.
And every year I come to the meetings, and I hear how exciting the products are, and
what great things the company does, and I go to the room out there and I see those great
things.

But I sit here and I hear both Steve and Peter saying things that suggest to me maybe we
have the model wrong.

I'm a shareholder oI another very large soItware company that's up 12 percent this year.
MicrosoIt is down 12 percent.

Is it time to consider breaking this company up, taking these great core businesses that we
have, and getting shareholder value by divesting them into maybe not eight, maybe Iour,
maybe six, I don't know what the right number is, but is it time to break up MicrosoIt?

STEVE BALLMER: I obviously don't think it is time. I don't think it would be useIul.
I think it creates economic dissynergies, in Iact. It's not -- you know, how do I say this --
it's not in my natural genetic makeup to think that way, but when you get enough people
telling you to think that way, you at least go through the proper discipline kind oI look.

And in almost all cases the market goes the other way. All oI the people we compete
with in devices will be in phone, PC, and TV, which in our case means Xbox, Windows,
and Windows Phones. It's Apple, it's Google, it's us. I mean, divesting something only
means creating a harder time competing Ior all relevant parties.

The operating systems that are popular on clients also tend to be popular on servers.
They're all based around Linux technology. We happen to build our server technology on
our Windows technology. It creates dyssynergy, in Iact, to split our server and enterprise
business Irom our client business. Our OIIice business doesn't Iit neatly. It's not a
consumer business only or an enterprise business only.

Bing. Bing is a super important area Ior us, not just because oI search itselI, but a lot oI
the most interesting stuII that's going to happen relates to this notion oI understanding
users and understanding the world, and being able to connect. Search is the Iirst place
you do that. Statistically you type anything you want to, and we take a guess at what you
meant. It turns out there are a lot oI things you want to be able to do that way.

Almost anything in computing, iI you stop and think about it, you want to be able to
express intent and have the system be smart enough to take at least a chance, maybe it
only works 50, 60, 80 percent oI the time, but at least it sort oI helps automate things that
you would otherwise do manually. That general technology base is essential to the
company, absolutely essential. And we build it through search, we build it by being
disciplined and getting aIter that as a market. And yes, it's expensive, but I would never
think about not doing that. I think it is Iundamental to who we are, where we're going,
and the rest oI our businesses.

BILL GATES: Yeah, I agree with what Steve is saying there in that the MicrosoIt
brand, the scale oI MicrosoIt Research on a worldwide basis, the intellectual property we
build up, the way we hire and train people, there's a lot oI synergy across the company,
and it's been a real strength. II you look at the evolution oI OIIice and how it uses the
cloud, iI you look at the evolution oI some oI the gaming assets and how those connect to
the communications things we're doing, you know, I don't think there's a line where you'd
Iind net simplicity by trying to create a new company.

BILL KOEFOED: All right, let's take the next question Irom paddle number one.

QUESTION: Since 2007, our economy, as we all know, has been very weak, and I have
seen industries Ialter, I have seen companies have diIIicult times. But I have also seen
with MicrosoIt new products. I have also seen with MicrosoIt increasing revenue. And I
have also seen with MicrosoIt increasing earnings, and now increasing dividends.

MicrosoIt has been good to me, it has been good to my Iamily, and each oI you, I
congratulate you and say thank you. (Applause.)

BILL KOEFOED: Right, and we'll take -- this will be the Iinal question. We'll take this
Irom the audience. Go ahead.

QUESTION: Thank you. I represent perhaps not a micro shareholder but a miniscule
shareholder, and a miniscule part oI your business model. I'm an individual user, I'm an
older user, and I'm something oI an occasional user in that I don't live on the Web and I
don't live on my PC.

And, I guess it's an admonition, my request is that the company consider making its
products more accessible to me through the mechanism oI both your help Iunctions and
your manuals and the language that you choose. I always observed that you have a huge
number oI techno bright people, but they don't seem to be articulate bright. And so I go
to the Iunction, and I say, I want to do this, and I can't Iigure out how to do it without an
hour's search through your manuals. I don't do it all the time.

And I would just like to ask that you think about devoting a tiny bit more resource to the
idea oI how do you index, what do you call things. I don't speak your language. So,
what you think is intuitive is not intuitive to me. And that's what I would like you to kind
oI I hope make a leap oI Iaith. I know it's not where you're going Ior the Iuture, because
I'm too old, I'm going to be dead -- but you've got to have the young people doing that,
but we've got to be able -- make it useIul to me. Thank you. (Applause.)

STEVE BALLMER: Admonition taken. Good perspective and good insight, thank
you, sir. Thanks.

BILL KOEFOED: Okay, so this concludes our Q&A session.

Ladies and gentlemen, thank you very much Ior attending and Ior your continued support
and interest in MicrosoIt.

One additional thing I'd like to state is that our store here in Bellevue is opening up this
Thursday, November 18th, and we hope you get a chance to go visit it. It's going to be a
really exciting opening, and thanks, and have a great day. (Applause.)

END