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					Microsoft Annual Shareholders Meeting
Steve Ballmer, Chris Liddell, Brad Smith, Bill Gates
Seattle, Washington
November 19, 2008

CHRIS LIDDELL: Good morning and welcome everyone. I would like to call the
2008 Annual Shareholder Meeting to order. I'm Chris Liddell, Chief Financial Officer of
the company, and I'll be serving as chair of this meeting.

Brad Smith, our Senior Vice President of Legal and Corporate Affairs will be serving as
secretary.

I would also like to introduce Bill Gates, the Chairman of the Board; and Steve Ballmer,
Chief Executive Officer.

Welcome to all our shareholders, and welcome also to those attending the meeting online.
We are streaming live today on the Microsoft Investor Relations Web site, and thank you
for being with us today. We greatly appreciate your interest in the company.

Let me also introduce Tom Murphy representing Deloitte and Touche, LLP, our
independent public auditor, and Robert Jaffe representing K&L Gates, LLP, our primary
law firm.

Our board members in attendance today are Dina Dublon, Chair of the Compensation
Committee, and member of the Audit Committee; Dr. Helmut Panke, member of the
Compensation and Antitrust Compliance Committees; John Shirley, Chairman of the
Finance Committee; Steve Ballmer, Chief Executive Officer of the company; and Bill
Gates, Chairman of the Board.

At this time, I would in particular like to recognize John Shirley, who is retiring from the
board of directors following this meeting. John has made a significant contribution to
Microsoft and to the Puget Sound community over the last 25 years through his service as
President and Chief Operating Officer from 1983 to 1990, and as a director since 1983.
Bill Gates will provide a few thoughts on John's service and contributions to Microsoft a
bit later in the meeting. (Applause.) Thank you.

Before we proceed with the meeting, let me review a few housekeeping items. Please
take the time after the meeting to visit the product demo stations on the other side of this
room. We have on display Windows and Windows Live applications, Office Live, a
mobile devices bar, Xbox 360 games, Zune, and the Surface computing device. You can
also take a look at some of the Microsoft logoed merchandise from our company store,
and pick up a coupon to visit the actual store at the Microsoft campus in Redmond. We
also have representatives from our Product Support Services team to answer any product
questions that you may have.
As in prior years, members of the Investor Relations team will be available to answer
your questions at the Microsoft kiosk in the product fair area after the meeting. Please be
sure to visit our Investor Relations Web site, it's a good resource for financial information
about the company, and the Web address is www.microsoft.com/msft. We also
encourage you to visit the Investor Central portion of the Web site, your source for
insight into Microsoft business strategies and financial results.

If you parked here in the Meydenbauer center parking lot, your parking is provided free
of charge, and you will not need to validate your ticket. And, finally, as soon as the
business portion of the meeting is over, we'll have some time for questions and answers.

American Stock Transfer and Trust Company has been appointed as inspectors of
election for 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.
For those of you who have not yet voted, or who want to change your vote, ballots are
available from the inspectors at the reception table in the lobby. Filling out a ballot and
giving it to the inspectors will have the effect of revoking any earlier proxy that you gave.
The polls are now open, and will close in about 30 minutes, following Steve Ballmer's
remarks.

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

BRAD SMITH: Thanks, Chris.

The notice of the meeting and a notice of Internet availability of proxy materials were
mailed by American Stock Transfer and Trust Company, the company's transfer agent,
beginning on September 29th, 2008. They were sent to all shareholders of record as of
September 5th, 2008, and as a result the meeting is being held pursuant to proper notice.
Proxies representing more than 86.61 percent out of the approximately 9 billion shares of
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.

CHRIS LIDDELL: Thank you. As chair of the meeting, I've adopted an agenda that
will govern the order of the business of this meeting, and rules of conduct of the meeting.
Copies of the agenda and the rules are available at the reception table outside the meeting
room. The rules of conduct also govern the question and answer session that will follow
adjournment of the meeting proper. This year there are three shareholder proposals for
consideration. As per the rules of conduct of the meeting, the proponent of each
proposal, or their representative, will be granted three minutes to introduce their proposal
at the designated time.

We now come to the part of the meeting where shareholders consider the matters set forth
in the proxy statement. Voting on all matters is by actual count of the votes cast by ballot
or by proxy. The first item of business to come before the meeting is the election of
directors. The following nine people have been properly nominated by the board.
William H. Gates III; Steven A. Ballmer; Dr. James I. Cash, Jr.; Dina Dublon; Raymond
V. Gilmartin; Reed Hastings; David F. Marquardt; Charles H. Noski; and Dr. Helmut
Panke. The board recommends a vote for each of the directors on the ballot.

The second item of business to come before the meeting is approval of the material terms
of the performance criteria under the Executive Officer Incentive Plan. This proposal is
discussed in the company's proxy statement, and the board recommends approval of the
proposal.

The third item of business to come before the meeting is approval of the amendments to
the 1999 Stock Option Plan for Non-Employee Directors. This proposal is discussed in
the company's proxy statement, and the board recommends approval of this proposal.

The fourth item of business to come before the meeting is ratification of the company's
independent auditor, Deloitte and Touche, LLP, for the fiscal year 2009. This proposal is
discussed in the company's proxy statement. The board recommends approval of the
proposal.

The fifth item of business to come before the meeting is Shareholder Proposal Number 1,
the shareholder proposal and its supporting statements are set forth in the company's
proxy statement, and the secretary will read the resolution.

BRAD SMITH: Be it resolved that shareholders request that management institute
policies to help protect freedom of access to the Internet. The proposal includes a
number of specific proposed standards outlined in the proxy.

CHRIS LIDDELL: The proposal has been submitted by Mr. William C. Thompson on
behalf of the board of trustees of the New York City Pension Funds, and the chair
recognizes Mr. Thompson's representative Patrick Doherty for a period of three minutes.

PATRICK DOHERTY: Mr. Chairman, fellow shareholders, my name is Patrick
Doherty, and I am here today on behalf of the New York City Pension Funds to introduce
our fund's resolution against political censorship on the Internet. The provision of full
and uncensored information through the Internet has become a major industry in the
United States, and one of its major exports. However, some authoritarian foreign
governments have sought to block, restrict, and monitor the information its citizens seek
to obtain on the Internet. Unfortunately, some major technology companies in the United
States, including Microsoft, have cooperated with these governments in restricting and
censoring access to information and freedom of expression in violation of internationally
recognized human rights norms.

We believe that political censorship of the Internet degrades the quality of that service,
and ultimately threatens the integrity and viability of the industry itself. Our resolution
therefore requests that management institute policies to protect freedom of access to the
Internet, which would include commitments that data that can identify individual users
should not be hosted in Internet restricting countries where political speech can be treated
as a crime by the legal system, that the company will not engage in pro-active censorship,
and that the company will use all legal means to resist government demands for
censorship.

Recently, Microsoft along with several other companies and stakeholders announced a
new initiative to protect freedom of expression and privacy rights on the Internet which
includes a set of principles designed to protect these rights. However, these new
principles have been criticized by some major international human rights organizations,
including Amnesty International, which while saying that they represented a degree of
progress in responding to these concerns, they contain many loopholes that will enable
participant companies to circumvent or ignore their commitments under the principles.
Companies will still be able to comply with government requests to take down content, or
hand over personal information that may violate international law, and standards on
human rights.

Also under this plan, companies retain discretion as to whether or not to challenge
government requests for information, and the companies are not required to disclose their
agreements with governments that might have implications for censorship of information,
and suppression of dissent.

Finally, Amnesty International noted in its statement that while initiatives such as this can
make a valuable contribution to protecting human rights "they can only do so if the
commitments of participants are clear, and there is a robust framework for compliance.
Without clarity, and the ability to hold companies to account, voluntary initiatives can
become little more than public relations tools for some of their participants."

The New York City Pension Funds agree with that assessment, and therefore, on their
behalf, I submit Proposal Number 5 found in your proxy materials.

Thank you.

CHRIS LIDDELL: Thank you, Mr. Doherty. The board recommends a vote against
this proposal for the reasons set forth in the company's proxy statement.

The sixth item to come before the meeting is Shareholder Proposal Number 2. The
shareholder proposal and its supporting statement are set forth in the company's proxy
statement, and the secretary will read the resolution.

BRAD SMITH: Resolved, to amend the corporate bylaws by inserting the following
new Article 7 regarding human rights. The proposed bylaw amendment would create a
board committee on human rights.

CHRIS LIDDELL: The proposal has been submitted by Mr. John C. Harrington, and
the chair recognizes Mr. Harrington's representative Larry Dohrs for a period of three
minutes.
LARRY DOHRS: Thank you. Good morning ladies and gentlemen, members of the
board of directors. My name is Larry Dohrs of Newground Social Investment in Seattle,
and I'm here today to present John Harrington's binding bylaw amendment to authorize
the board to create a board committee on human rights, Item Number 6.

The laws of the corporation are the bylaws. This proposal is an attempt to change the
laws that govern our corporation. It is not an advisory vote. Our company has a
compelling business interest in promoting and protecting human rights, particularly the
right to free expression, and to be recognized as doing so. Worldwide Microsoft per
capita revenues correlate closely with the level of freedom of expression afforded to
populations by their own governments. More freedom, more revenue.

However, Microsoft is still engaged with the authoritarian government of China, among
others, as it monitors and restricts information flows within the country. Chinese security
forces use Microsoft technology to maintain what is known as the Great Firewall of
China, an Internet censorship regimen which violates basic human rights. As Mr.
Doherty mentioned, since 2006, Microsoft has been involved in a multi-stakeholder
initiative on human rights in the context of the Internet to develop a set of principles, and
an implementation and governance framework to guide companies in protecting rights to
freedom of expression and privacy on the Internet.

Also involved in this initiative was Amnesty International, for whom I work as a national
volunteer leader on issues of business and human rights. And I am sorry to report that
last month Amnesty felt it necessary to withdraw from this initiative, noting the
weaknesses again, and the loopholes that Mr. Dohtery pointed out. And this is after two
years of intensive work, and Amnesty was involved in that in good faith from the
beginning, and very much regretted feeling necessary to withdraw from this. And this is
unfortunate. Our companies should be a vocal leader in the struggle for human ideas to
be expressed and shared, and it is not. Despite a clear moral and business imperative, our
company is seen as uncommitted to free expression, constantly fending off consideration
of all sorts of accountability mechanisms for those involved in the suppression of free
expression.

This perception of Microsoft as a laggard is real, and it has very real consequences for
our brand, and our business. And to some extent this is reflected in an effective ad
campaign by a competitor.

Human rights are good for our business. This is a fiduciary issue by definition within the
purview of the board of directors. The board is charged with supervising management,
setting strategic directives, and representing long-term shareowner interests.
Implementation of this proposal would be a significant step towards the board doing just
that.

I urge you to support Proposal Number 6 on your proxy.

CHRIS LIDDELL: Thank you, Mr. Dohrs.
The board recommends a vote against this proposal for the reasons set forth in the
company's proxy statement.

Final item of business to come before the meeting is Shareholder Proposal Number 3.
The shareholder proposal and its supporting statement are set forth in the company's
proxy statement, and the secretary will read the resolution.

BRAD SMITH: Resolved, to list the recipients of corporate charitable contributions of
$5,000 or more on the company's Web site.

CHRIS LIDDELL: This proposal has been submitted by Mr. Thomas Strobhar. The
company recognizes Mr. Strobhar's representative, Ken Hutcherson for a period of three
minutes.

KEN HUTCHERSON: Thank you. Appreciate the opportunity to speak towards this.

We believe that there is an opportunity to correct a process that this company is, should I
say, not being very open-minded to who we support, why we support because we are
supporting the issue that we believe, especially as an African-American, that there are
problems in where you are sending your charitable gifts towards the homosexual
community. I do not believe our company would ever support a group of people that is
very prejudicial in their views, that is very intolerant in their views, that is very hateful in
their views.

And I think that you gentlemen, and the rest of the stockholders, if you watch television,
have seen the example of many of the homosexual groups and activists that this company
is putting millions of dollars in supporting. And I don't think this company and the
stockholders, and myself, is pretty excited about a group of individuals that would run
around and call the African-American community, especially, 70 percent of the
traditional Black church that voted, and helped pass Proposition 8, have been called the
N-word on national television. This company is saying that we will continue to support
groups like that.

They have attacked groups, you've seen it on television if you have a television, if you
watch the news at all, what has taken place towards the African-American church, what
has happened to evangelical churches, that have stood and just voted, and exercised their
freedom in voting. And they have been attacked by these groups. One old lady was
taken, and a cross was taken out of her hand, stomped, and she was pushed around. One
woman had her bible taken out of her hand, and was hit across the head and knocked
down. And if it was a white supremacy group that was doing exactly the same thing, this
company would be the first to stand up and deny that we're going to support any group
that was doing such things.

And yet, still, I'm asking this company to make sure we vote down putting this kind of
money, millions of dollars, in a group that is not good for the family; millions of dollars
in a group that has proven intolerance; millions of dollars in a group that has proven that
they do not like anyone that does not think the way they do; and I think this company has
a right and a responsibility not to put millions of dollars in an intolerant, hateful group
such as this. That is why we have this resolution, that is why we would like for the
stockholders to vote it down, and the board not to support this group.

Thank you.

CHRIS LIDDELL: Thank you, Mr. Hutcherson.

The board recommends a vote against this proposal for the reasons set forth in the
company's proxy statement.

The discussion of matters for shareholder consideration is now closed. The polls will
remain open for another 10 minutes or so. Before I introduce our next speaker, let me
remind you that we may make forward-looking statements during this meeting. You
should refer to our SEC filings for risk factors related to our business.

At this time, I would like to introduce Steve Ballmer, Microsoft's Chief Executive
Officer. Among other things, Steve will talk to you today about the growth opportunities
ahead for Microsoft.

Thank you.

STEVE BALLMER: Thanks, and welcome. I'm really glad to be here today, and I
want to thank you all for taking the time. It's a pleasure to have the chance to share my
thoughts with you about where we are today as a company, and where we're headed.
And while the current economic uncertainty makes this a very, very challenging time for
all businesses, I remain extremely excited about the opportunities for innovation and
growth that lie ahead for Microsoft. And I am optimistic that we're in an excellent
position to continue to thrive in the years ahead.

I am excited about our opportunities because a dramatic transformation has taken shape
in the world of information technology during the last decade. It's a transformation that
has changed and will change the way people experience the world and share their
experiences with others. It's a transformation that will enable us to connect seamlessly to
the people and information we care about no matter where they are in the world.

Microsoft is playing an essential role in making that transformation possible. Through
our platform, our products, our services, we're delivering a new generation of experiences
that span the PC, the phone, the television, and the Internet, that will create incredible
new opportunities for our customers, for our partners, and of course for Microsoft itself.

This new generation of experiences will enable us to build on our strong business results.
We're coming off a really fantastic year in Fiscal Year '08 that saw us achieve excellent
growth for a company of our size. Revenue jumped 18 percent last year to pass $60
billion, 18 percent. Just do the math, very few companies are ever close to 18 percent of
$60 billion in revenue. Operating profit grew 21 percent to $22-1/2 billion, which makes
us amongst the one or two -- two or three top operating income companies in the United
States. We returned $16-1/2 billion to our shareholders through both stock buyback and
dividends.

There are many reasons for these outstanding numbers-- the strength of our Windows and
Office businesses, growth across all five of our business groups, and particularly
continued investment in research and development that has consistently yielded new
innovations that distinguish our products and services from those of competitors. We
carried over the strong momentum of Fiscal Year '08 with a record start to our current
financial year. Revenue grew over 9 percent compared with last year, reaching $15
billion in the first quarter for the first time ever. During the quarter, the Microsoft
Business Division revenue jumped 20 percent; our Server and Tools Division revenue
grew 17 percent; and our Online Services Business revenue was up 15 percent.
Commercial and retail licensing grew over 20 percent. We increased the dividend 18
percent and announced a new $40 billion share repurchase authorization.

Now, given the current economic environment, those were solid numbers, and I'm
confident that Microsoft will continue to be a leader in our industry through these
difficult economic times. With the breadth and range of our products, we're in a unique
position to offer solutions that will help our customers save money, and provide the tools
that they need to continue to innovate, and build strategic advantage, to be entertained, to
be informed in the world at large.

Our strong financial position allows us to reinforce our competitive advantage by
continuing to invest in R&D, to continue to make carefully targeted acquisitions, and to
continue to take a long-term view of the investment required for future growth. None of
that means the current economic realities will have no impact on the company. They
certainly will, they certainly will. Our industry and our company will not be immune.
And so we're looking at every aspect of our business for opportunities to reduce costs, to
utilize resources more efficiently, and specifically that points to much, much slower
growth, particularly in headcount for the remainder of this financial year, and I suspect
into next financial year.

While we will take steps to reduce costs, we are going to continue to invest in research
and development and other long-term business builders. We're taking that long-term
approach, that's what we've always done at Microsoft, and I think it's the single most
important reason for the success that we've had over the years. One of the most obvious
examples of the benefit of that long-term approach is the success we've achieved in
enterprise software.

Twenty years ago, we made a commitment to expand into the enterprise software market.
For well over a decade, people, customers, analysts said, this company could never be an
enterprise software company. And yet today our Server and Tools Business is a $13
billion business, $13 billion, and it's only because we took a long-term view that we
became a leader in promoting technologies for the back office of business. Now we're
starting to see the long-term value to Microsoft of other investments we made in
innovations in other critical areas, and I'm going to pick some examples.

Last month at our Professional Developers Conference in Los Angeles, we made a series
of announcements about a new set of platform technologies that position Microsoft to be
a leader in the transformation of software to a world of software plus Internet services.
Those announcements included news about our new Windows Azure platform, and the
Azure Services platform on top of it. The new version of Windows, Windows 7, next up
on our agenda there, and new versions or new forms of our Office applications that can
be delivered as Web applications across the Internet.

Windows Azure and the Azure Services platform are designed to provide infrastructure
services that developers need to build cloud-based or Internet-based business and
consumer applications that are global in scale, and that flow seamlessly to PCs, phones,
and other devices. Windows Azure is the result of a multi-year investment, and is vital to
the future of this company. It represents our belief that the key to delivering value today
and in the future lies in combining the best aspects of software running on PCs, phones,
and TVs with the best aspects of services running in the Internet. That's what we mean
by software plus services.

Our software plus services approach lets us deliver technology that enables people to tap
into the wealth of information that can be accessed over the Web through a browser, of
the power of the interactive experiences that really depend on the sophisticated software
that runs on powerful PCs, smart phones, and the like. The richness of those experiences
will only increase as we get more and more powerful processors that expand the
computing capabilities of our devices, as we get new programming languages that open
the door to a new generation of applications that use more natural interaction techniques,
voice recognition, touch, visual recognition and gestures, and natural language.

Today our experiences tend to be limited by the boundaries between devices. Our goal is
to make the combination of a PC, a mobile device, and the Internet something that is
significantly more than the sum of the parts. We're not there yet, but with Windows Live,
the Azure Services platform, Live Mesh, our Microsoft Online Solution for Businesses,
and in the year ahead Windows 7 and the next version of Microsoft Office, we'll take
further steps that eliminate the boundary between devices, and bridge the gaps that limit
our experiences.

As developers begin to combine the capabilities we're delivering today with the amazing
ongoing hardware and software innovations that we are seeing from companies across the
industry, it will bring us significantly closer to the time when information,
communication, and computing flow along with us as seamlessly as possible as we move
through our day-to-day activities.

While this is a time of unusual economic uncertainty, I also believe it is a period of great
opportunity for innovation in our industry, and at our company. As I look ahead, not just
to the rest of this year, but to where the company can be five years from now, ten years
from now, I'm confident that the investments we're making will produce innovations that
transform people's lives and create value for shareholders. In the process, we'll create
those new opportunities for growth and progress for our customers, for our partners, for
our industry, and of course for Microsoft.

I want to thank you all, not just for your time today, but I want to thank you all for your
incredible support of the company. We appreciate it. And we'll continue to do our best
for you. Thank you. (Applause.)

CHRIS LIDDELL: Thank you.

Before moving to the remarks by our chairman please be advised that the polls are now
closed.

I'll now turn the meeting over to Microsoft's Chairman of the Board, Bill Gates, who will
share with you some thoughts on the future of technology and of Microsoft.

BILL GATES: Good morning. It's great to be here today. During the last year I made
the transition from being full-time at Microsoft to being part-time, with my full-time
focus on my foundation work. So that's been a change for me personally. For a while I
was worried that my habit of driving to Microsoft every morning would be so hard to
break, that I'd find myself there accidentally. I do get there for some good meetings, but I
haven't driven in accidentally yet.

One thing that has not changed at all is the importance and the opportunity that exists in
doing great software. Software has transformed the world in dramatic ways since our
first shareholder meeting back in 1986. But, I believe that we're really just at the
beginning of what the full potential of software can be. Together advances in hardware
and software will be a catalyst for changes over the next 10 years. And so 10 years from
now what we'll see in terms of software and hardware will be far more advanced
compared to today than even the advances that have taken place during the last 22 years.

Digital technology is constantly becoming smaller, more affordable, and more powerful.
Digital technology is connecting up in new ways. And so we see computing being used
in very different ways, not just for communication, but in areas like medicine, areas like
education, and the platform we have out there today is just giving us a glimpse of what
we can do with the improvements that are taking place. Clearly, what we do in the office,
what we do in the home, the way we shop, the way we operate in public spaces, all of
these will be very different, because of new displays, and new techniques of interaction.

The convergence of these advances, both making them happen, and taking advantage of
them is why Microsoft takes a long-term view. It's why we fund the research that we do.
It's why we work with the partners that we do. This ability to work across your devices,
and have your profile and your interests there automatically, this ability to have your
information and search it, and not worry about where you put it, or even how large it is,
all of those things will work across the pervasive Microsoft platform, including elements
that run up in the Internet itself.

This type of change will also be important for businesses. Businesses are more
distributed. They need to delve into more complex information. They need to move that
information across boundaries, whether it's between applications, or between office
modules. And increasingly we'll give people new ways to do that, and break down those
boundaries.

So both at home and in the office we're really talking about transformational experiences.
The new generation of Windows will be a foundation of that. The work we're doing on
the mobile platform, the work we're doing in the cloud, all of those will create a means
for people writing applications of how they should develop for those new things.

The way that this will all be applied is very exciting to me, because the PC and software
has always been about empowerment. As we move from the 1 billion people who use a
PC today to rich software out onto phones and lower cost PCs, the chance to reach out to
a much higher fraction of the entire population of the world is very, very clear. It will
require new business models, new types of devices, new ways of interacting, but those
are exactly the things that our research groups are very good at exploring and making
sure that we're at the forefront of, and using software in these exciting ways.

Now we've come here this far and we have a bright future because of great people who
have been involved in the company. So, as Chris noted, this is a milestone where we get
to thank Jon Shirley for his incredible contributions to Microsoft. Jon is retiring from his
position on the board, where he's been for a long time, and before that he served as
president of Microsoft. So overall it's 25 years of incredible service.

I remember when I was excited about hiring Jon, I was very shy about going down and
saying it to him, because we were such a small company compared to the company he
worked for at the time. But, when I finally did talk to him, he was very enthusiastic. He
saw the potential, came on, and really made a huge difference. The company he joined
was about $100 million in sales in 1983, and it was over $1 billion in sales when he
retired, and then joined the board.

So Jon has been a mentor to me, and Steve, and other key people at the company, and has
also been a fantastic board member. So let's have a special round of applause to thank
Jon for the work he's done. (Applause.)

So looking forward, the promise of software is very strong. And the long-term approach,
the coordinated things the company is doing, I'm very enthused about those, and I look
forward to further get-togethers. Thank you. (Applause.)

CHRIS LIDDELL: Thank you, Bill.
At this point the voting tabulation has been completed, and we will report the preliminary
results of the matters voted upon today. Proposal Number 1 is the election of directors,
the nine nominees receiving the largest number of votes cast by shares and total of vote
will be elected. As provided by the majority vote standard in our bylaws, a director or
candidate must receive a majority of votes cast in order to be elected.

Brad, please report the vote.

BRAD SMITH: The following nine persons have received a majority of votes cast, each
with votes in excess of 98 percent of the votes cast: William H. Gates III; Steven A.
Ballmer: Dr. James I. Cash; Jr., Dina Dublon; Raymond V. Gilmartin; Reed Hastings;
David F. Marquardt; Charles H. Noski; Dr. Helmut Panke. The nine nominees are
elected directors to serve until the next annual shareholder meeting, and until their
successors are elected and qualified.

CHRIS LIDDELL: Proposal Number 2 is the approval of material terms of the
performance criteria under the executive officer incentive plan. The proposal requires the
affirmative vote of a majority of the shares voting on this matter.

Brad, please report the vote.

BRAD SMITH: The proposal has received affirmative votes representing more than 97
percent of the votes cast.

CHRIS LIDDELL: Thank you.

The proposal is approved.

Proposal Number 3 is the approval of amendments to the 1999 stock option plan for non-
employee directors. The proposal requires the affirmative vote of a majority of the shares
voting on this matter.

Please report the vote.

BRAD SMITH: The proposal has received affirmative votes representing more than 90
percent of the votes cast.

CHRIS LIDDELL: Thank you.

The proposal is approved.

Proposal Number 4 is the ratification of the company's independent auditors for the
current fiscal year. The proposal requires the affirmative vote of a majority of the shares
voting on this matter.

Please report the vote.
BRAD SMITH: The proposal has received affirmative votes representing more than 99
percent of the votes cast.

CHRIS LIDDELL: Thank you.

The proposal is approved.

The next item is Shareholder Proposal Number 1, the proposal requires the affirmative
vote of a majority of the shares voting on this matter.

Please report the vote.

BRAD SMITH: The shareholder proposal received 5.9 percent of the votes cast.

CHRIS LIDDELL: Thank you, Brad.

The Shareholder Proposal Number 1 is not approved.

The next item is Shareholder Proposal Number 2. The proposal requires affirmative vote
of a majority of the shares voting on this matter.

Please report the vote.

BRAD SMITH: The shareholder proposal received 4.2 percent of the votes cast.

CHRIS LIDDELL: Thank you.

Shareholder Proposal Number 2 is not approved.

The next item is Shareholder Proposal Number 3. The proposal requires the affirmative
vote of a majority of the shares voting on this matter.

Please report the vote.

BRAD SMITH: The shareholder proposal received 4.5 percent of the votes cast.

CHRIS LIDDELL: Thank you.

Shareholder Proposal Number 3 is not approved.

We expect to post details of final voting results on these matters on the Investor Relations
Web site by tomorrow, and we'll also report the results in January in our Form 10-Q for
the second quarter of Fiscal Year 2009.
We've now completed the business of the meeting, and our shareholder meeting is
adjourned. We will now proceed to the question and answer session. An Investor
Relations team member is in each aisle with a microphone. We'll take as many of your
questions as time allows. We've got about 20 minutes left. In order to maximize the
opportunity to address as many questions as possible, please limit your time to one
minute, and one question of interest to all shareholders, so we can take as many as
possible.

For the first question I will go to -- if you can stand and just move to one of the paddles
that would be great -- paddle number one.

QUESTION: Can you tell us what's happening with Yahoo, or not?

STEVE BALLMER: Yes, let me be as clear, as I think I've tried to be publicly. We are
done with all acquisition discussions with Yahoo. I've said that a bunch of times.
Somehow, some people have gotten confused, nonetheless. But, we did our best. We
thought we had something that made sense. It didn't make sense to them. We've moved
on. With that said, I've also been clear that if they were interested it would still be, I
think, an interesting possibility to look at a search collaboration with Yahoo, as we had
proposed last summer. There's no active discussion on that front, but we'd be very open
to it. But acquisition discussions are finished.

CHRIS LIDDELL: Thank you. At the back, number four.

QUESTION: Thank you. My name is Doug Kilgore. I'm the executive director of the
Worker Owner Council here in Seattle. We're a council of building trades unions, and I
represent our ownership interest, as held through our pension funds. With collective
ownership throughout North America of more than 10,848,000 shares, building trades
funds are long-term owners of this company.

We believe executive pay should reward superior performance, and the superior long-
term equity grants should measure and reward superior long-term performance. We're
concerned that executive compensation at most companies, including ours, are designed
to measure only short-term performance, and to reward short-term performance. We
believe that current practice acts against the long-term interests of the company, and our
holdings.

Here at Microsoft equity grants are contingent on performance, but they only measure
performance in the current year. In 2004 when we amended the plan, originally that
reform called for a performance measure period of two-and-a-half years, but in the last
two years we've backslid and we're now only measuring the current fiscal year, or the
current year. We don't think that works effectively, and what we'd like to see is a three
year minimum measuring period, and we'd like to see four-year vesting of those equity
grants.
I think that we can look to the financial industry to see the worst case result of the current
design practice. At Lehman Brothers, Richard Fuld was paid more than $45 million for
the company's short-term performance in 2007. In 2008 he led the company into
bankruptcy.

So our request today is really simply that the compensation committee consider this
reform, consider implementing a longer vesting period, and a longer measurement period,
and that you report back to us the results of that consideration. And we hope that it is
viewed as a constructive suggestion for the future of our company. So my request is will
you consider that, and can you let me know who I might speak with in the future to hear
the results of that consideration?

STEVE BALLMER: Well, we appreciate the input, and I think actually the issue you
point to at all companies should be a good tension point, and certainly is at ours. As I
said in my remarks, most of the important things that we have done come as a result of
long-term investment, and so understanding how to have enough short-term
accountability in the business, and enough long-term accountability in the business is
probably an issue that we will be discussing and deliberating internally with the board,
with the compensation committee for a long time. So I appreciate your remarks.

I'd give you just a couple of things to think about, and then Brad can help me understand
how we maybe should get more input from you. First of all, I, of course, am not on a
really short-term compensation plan, which gives me, I think, an opportunity to balance
short-term and long-term interests. And in the way that we recognize and
compensate -- at least the way I prepare my recommendations for the compensation
committee, I get a chance, particularly with the compensation plan approved by the
board, the amount available for paying executives is funded through a short-term
formula. And yet, the specific payouts that I make to given individuals have a subjective
element, where I get a chance to consider both what I think we've done for our long-term
success, and our short-term success. So we're trying to get some of the balance that you
had talked about, precisely for the reasons in some senses that you highlight.

I would think probably the best thing, Brad, for this gentleman to get his input in would
be, what?

BRAD SMITH: First of all, we appreciate the opportunity to have a dialogue; we do
with a number of shareholder groups, particularly those that have a long-term interest as
your does. We'll have somebody actually, I think, meet up with you before you leave the
room, and then we'll be able to use that as an opportunity to continue the conversation. It
sounds like you're based here in Seattle, so I'm sure we can find a way.

CHRIS LIDDELL: Thank you.

Number two at the front here.
QUESTION: You put the transcripts of these meetings on your Web site for a couple of
years. I'd like, for historical purposes, you just leave them on in perpetuity.

CHRIS LIDDELL: Okay. Thank you, we'll consider that.

STEVE BALLMER: It's good input to Chris. Bill does remark, perpetuity is a long
time. But something closer to perpetuity than two years, we got the input. We'll work
with that.

CHRIS LIDDELL: Number two, again, here in the front. Thank you.

QUESTION: Thanks. We've just wrapped up the most expensive election in U.S.
history, and companies have been important underwriters of this spending directly
through contributions where allowed by law, and indirectly through trade associations
and groups known as 501(c)(4) organizations. Political spending by companies is
recognized as posing serious legal and reputational risks. It's also attracting increasing,
and sometimes unwanted attention from the media. A growing number of companies
have adopted political disclosure, this includes their payments to trade associations and
(c)(4) groups that are used for political purposes.

Microsoft discloses its political contributions made with corporate funds; however it does
not yet disclose its payments to trade associations and other tax-exempt organizations
used for political purposes. It sounds like our management is willing to take that step.
What is the company's timetable for disclosing these payments to join eBay, Hewlett
Packard, Etna, First Energy, and American Electric Power in doing this?

BRAD SMITH: I appreciate the question. We are working now on a code of conduct,
or a set of principles that we would be able to put in place. I would say either towards the
end of 2008 or early in 2009. We already disclose, as you noted, we're required to
disclose by law all the direct contributions to political campaigns made by the political
action committee. What this would do would address contributions to trade associations,
as you mentioned.

We actually follow what I would describe as quite a conservative approach as a company.
We don't get involved in what some people describe as soft money donations and the
like. There are trade associations to which we belong that may from time to time get
involved in political activities. There's a limit on what they can do in some cases to
preserve their tax-exempt status, and this would make that information available. What
we're really trying to do is just sort out, in practice, how to make this work. Some groups
have asked us to disclose information that, in fact, we don't have. And we think we
obviously need to focus on disclosing information we do have.

I would add one other note, about one of the resolutions that was offered before, we also
disclose quite a bit of information about our approach to charitable giving. The thing that
we do not disclose is the contributions on a line-by-line basis. But, I think everybody
hopefully is well aware, or should be well aware of the general approach that we follow
as a company.

We're, I think, one of the most generous companies in the country in matching charitable
donations by our employees, and a very large part of the company's charitable
contributions consist in those matches. We'll match up to $12,000 per employee here in
the United States. The basic ground rule is that groups need to be 501(c)(3) charities, or
an entity of, say, a state government, like a public university in order to be eligible for a
match. We have some other guidelines, as well, but we basically seek to honor the
diversity of our employees, and the diversity of their choices.

When it comes to the company's own contributions, the lion's share, I'll say roughly 90
percent of the company's own direct philanthropy, falls into one of three categories. It
either goes to a university, especially computer science departments with whom we
collaborate closely, or second it's in our sort of signature citizenship program which is
called Unlimited Potential, and operates around the world to provide access to technology
skills to people who otherwise wouldn't have it, or third, we do more here in Puget Sound
where we feel we have a special responsibility as a company, because our headquarters is
here, to support arts and culture, and the social safety net.

But, we don't get involved through our charitable giving in the kinds of, I'll say, political
aspects, and we indeed wouldn't be permitted to the way the law works in that area.

CHRIS LIDDELL: Thank you.

At the back, number four, thank you.

QUESTION: Along the lines of what the company supports, it would be really great if
the company would consider increasing the dividend, or a special dividend, and that
would help the stock price not to go down. I'm just hoping the company will consider
that.

STEVE BALLMER: Yes, I'll just remind you we raised the dividend in our September
meeting. I think we raised it a year ago September, as well. We've had a track record, I
think, over the last several years of fairly consistent increases in the dividend. That's no
prediction of future behavior, just a match off of past pattern. I think our dividend is
certainly solid. We're paying out almost 25 percent of earnings in dividends, which is not
insignificant, and particularly in these economic times I'm sure you'd share our view that
having, let me call it a financial cushion, not taking too much financial risk, is a smart
thing on behalf of all shareholders.

And today we have, what Chris, something like $20 --

CHRIS LIDDELL: Twenty-five.
STEVE BALLMER: $25 billion, which is maybe $2.50 of cash, $2.75 of cash owned
by our shareholders that we are trying to manage very prudently, which also supports the
stock price.

CHRIS LIDDELL: Thank you.

Number two at the front here.

QUESTION: Good morning. I'm Karen Robbins and I wanted to thank Bill Gates and
Microsoft for their invention of their company. 20 years ago I started my dream to be a
children's writer on an IBM Selectric II Correctable Typewriter. And Bill Gates and
Microsoft have totally changed my career. And I've just wanted to thank you. Also, I
wanted to say that I love Microsoft. I believe in the company. It is my only individual
stock still left in my portfolio. I'm still hanging on to Microsoft and the dream. And I
believe in you, and I'm still holding my stocks, and I remember I sat in this very same
room several years ago, and I believe it was Mr. Steve Ballmer who said the best is yet to
come.

So, Mr. Ballmer, what year do you predict the best is yet to come? (Applause.)

STEVE BALLMER: For Microsoft every year is better than the last one. If we could
get this economic thing headed the other direction, I'm not going to pretend we've got
much control over that. You'd better call D.C. and see what they think.

CHRIS LIDDELL: Thank you.

Number three at the back. Thank you.

QUESTION: This last week there was a rather pessimistic article in the Financial Times
regarding software piracy in China and I'd like to have you address that issue. It almost
sounded as though Microsoft could do very little about solving that problem.

BRAD SMITH: I think the software piracy situation in China is a good example of the
kind of long-term approach that we sometimes need to take as a company. We started
investing in China well over a decade ago, back in the early 1990s. We started to see
some significant progress in a reduction in the piracy rate in China finally about two to
three years ago. And that was very encouraging to see.

We have not seen the same level of progress over the last year that we saw, say, two or
three years ago. There are a number of things that we're focused on. There are a number
of things that our entire industry is focused on. And, indeed, it's a matter of
intergovernmental discussion, as well. We think that the entire industry would benefit if
the piracy rate would fall further. We think that would be good for the creation of jobs,
and opportunities for software developers in China as well. I don't think anybody has any
impression that this is a situation that is going to disappear as a significant issue in the
next year. I do think that if we stick with it, we are optimistic about the long-term
direction, the long-term commitment of the Chinese government, especially in Beijing,
and in particular the growth in just great software talent in China. So I think from a long-
term perspective, we do remain optimistic, even if on a short-term perspective sometimes
it's a little bit more challenging.

STEVE BALLMER: To our shareholders, maybe it will take some patience, but I will
point out China looks like a bigger net opportunity than anything for the company, since
we're not participating as fully as we'd like to in the market because of piracy. It's just an
upside that hopefully we can realize over time.

CHRIS LIDDELL: Thank you. We have time for perhaps one more question. At the
back, Number 4, thank you.

QUESTION: Yes, hi. I was a Microsoft employee for about 15 years starting in the
mid-'80s, and back then, even though we still had thousands of employees, it really felt
like a small company. Our small product teams really felt like we owned our products,
we could design our own features, and of course we had product reviews with Bill, but
we really felt like we could do our own thing. There wasn't very much overhead.

I left many years ago, and by then it was starting to feel like there was a lot of overhead,
we really had to coordinate with five or ten other teams across Microsoft. We had to
comply with five or ten other standards. And since I've left, it seems like it has just
gotten worse. And I keep on reading the press how people are leaving Microsoft to start
their own small companies to do the same things that Microsoft could be doing, but there
was just too much overhead. And I'm wondering for Mr. Ballmer, what processes is
Microsoft developing to try to make it so that we can start small companies in Microsoft?
For example, is there a fund, a VC fund within Microsoft that a couple of smart guys can
get together and say, we've got this idea, we'll prototype it a little bit, and then we'll go to
our Microsoft VC guys, we'll pitch this product, we'll build our own team from within
Microsoft, we'll make our product, and kind of have this small company within
Microsoft?

STEVE BALLMER: Well, let me first point out that Microsoft needs to do lots of
things. We need to have innovations that come from small teams very quickly. We need
innovations that come from bigger teams quickly. We need innovations that we need to
work on for four, five, six years. There's not one innovation model. All small, little
teams, wouldn't work for our shareholders. We need to support a diversity of approaches.
That's number one.

Number two, it is also important to say that for products we put in the market, the
products have to -- we have to do our best job to make sure that they meet certain
customer tests, whether that's privacy, security - some things that maybe a startup,
frankly, would get a little bit more slack from the marketplace on, Microsoft would not.
So there's a, you could call it an overhead, I would call it part of the brand promise, in
some senses, from Microsoft.
With those two things said, Microsoft is sort of an interesting mix of things. If you take,
for example, the Windows Azure product I talked about, that started out with two guys
with an idea working on something and now we've got sort of our first system in market.
It's got all of the additional kind of, let's say, constraints of being a Microsoft product.
It's got to honor our brand promise, but it comes exactly to market out of the kind of
process that you chatted about.

The last thing I would say is, frankly, the last two years have been the best two recruiting
years for software developers in the history of Microsoft. The amount of incredible talent
that we've been able to recruit, not just in Seattle, but in development labs in Cambridge,
Massachusetts, in Europe, in Asia, we are in the middle of sort of the best of times, so to
speak, from a recruiting perspective, and literally there's nobody in the industry at this
stage we can't recruit from.

So I don't -- I agree, we have to be on our toes, on our feet. We can get slow. We can get
to places we don't want to be. But I think we've got a good track record, we're moving
forward. And certainly the issue or at least the potential issue that you raise is very much
on my mind. Thank you.

CHRIS LIDDELL: Thank you. That concludes our question and answer session, and
ladies and gentlemen thank you very much for attending, and for your continued support
and interest in Microsoft. Have a great day. Thank you.

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