Innovation Drives Growth 2011 ANNUAL REPORT Generating Another Record Year RECORD REVENUE FROM $ (1) 1.6B DIGITAL CHANNELS RECORD OPERATING % (2) 30.3 MARGIN $ RECORD DIVIDEND 0.165 INCREASED 10% IN 2011 RECORD EARNINGS $ (2) 0.93 PER SHARE RECORD ONLINE MONTHLY 50M ACTIVE USERS IN DEC. 2011 (1)Represents Non-GAAP revenues from subscriptions and memberships, licensing royalties, value-added services, downloadable content, digitally distributed products, and wireless devices. For a full reconciliation see tables at the end of the annual report. (2) Non-GAAP—for a full reconciliation see tables at the end of the annual report. ACTIVISION BLIZZARD, INC. Consistently Providing Innovative Entertainment Experiences BEST SELLING VIDEO GAME EVER IN A SINGLE YEAR 2011. ACTIVISION PUBLISHING’S LARGEST NEW IP LAUNCH EVER. #1 SUBSCRIPTION BASED MMORPG AS OF 12/31/11. ONE OF THE FASTEST GROWING PREMIUM ONLINE SERVICES EVER CREATED. PAGE ONE ACTIVISION BLIZZARD, INC. Innovation Drove Record Earnings Per Share $0.92 $0.93 16% $0.79 CAGR 2009–2011 $0.69 220% CAGR 2009–2011 $0.33 $0.09 2009 2010 2011 2009 2010 2011 — GAAP EARNINGS PER SHARE — — NON-GAAP EARNINGS PER SHARE(1) — DILUTED DILUTED (1)Non-GAAP—for a full reconciliation see tables at the end of the annual report. PAGE THREE acTIVision BLIZZard, inc. Innovation Expanded Operating Margins to a New Record 27.9% 30.3% 28.5% 450 BASIS poInt 25.8% IncreaSE 2,850 BASIS poInt IncreaSE 10.5% (0.6%) 2009 2010 2011 2009 2010 2011 — GAAP OpeRATING MARGINs — — NON-GAAP OpeRATING MARGINS(1) — (1)Non-GAAP—for a full reconciliation see tables at the end of the annual report. PAGE FIVE acTIVision BLIZZard, inc. Innovation Delivered Record Digital Revenues 34% 35% 32% 32% 29% 27% $1.64 $1.56 BIllIon BIllIon 2009 2010 2011 2009 2010 2011 — GAAP DIGITAL ReVENUES — — NON-GAAP DIGITAL ReVENUES(1) — AS Percentage OF Total AS Percentage OF Total (1)Non-GAAP—for a full reconciliation see tables at the end of the annual report. PAGE SEVEN Innovation Creates Shareholder Value ACTIVISION BLIZZARD, INC. Innovation Creates Shareholder Value $ FREE CASH FLOW(1) 3.3B 2009–2011 CAPITAL RETURNED TO SHAREHOLDERS(2) $ 96% PAYOUT RATIO(3) 3.1B 2009–2011 $ CASH AND INVESTMENTS(4) 3.5B AS OF DECemBER 31, 2011 (1) Free Cash Flow is a non-GAAP metric defined as Operating Cash Flow less Capital Expenditures. For a full reconciliation see tables at the end of the annual report. (2) Dividends and share repurchases. (3) Defined as dividends and share repurchases as a percentage of free cash flow. (4) Includes short- and long-term investments. PAGE NINE Innovation Drives our Growth, Makes us Stronger than Ever Innovation Drives our Growth Makes us Stronger than Ever 2011 ANNUAL REPORT Dear Shareholders In 2011, we achieved record financial results and released some of for industry success. Our record earnings per share performance the very best games in our long history as game makers. in 2011 can be partially attributed to a lower tax rate and the impact of ongoing share repurchases. We would rather derive our Creating great games that are commercially successful has allowed overperformance from improvement in operating profit, as we us to create incremental book value resulting in long-term capital have for most years, but the results were, nevertheless, very good appreciation for our investors. Over the past 20 years, we have and thoughtful non-operating activities and capital management doubled our revenues every four to five years and we have steadily can also create great value for our shareholders. increased our operating margins. Our balance sheet has never been stronger and it allows us the Based on the metric of growth in per-share book value, our 20-year ability to make investments in our future growth which we will results reflect an outperformance of the S&P 500 Index by an continue to do with rigor and discipline. Our investment track average of over 200 basis points per year, despite the fact that we record, both internally and as reflected by our merger and now have a high payout ratio with regard to share repurchases and acquisition successes, is unmatched in our industry. dividends. In that same period, our shareholders have been rewarded for our performance. The company’s shares have We will always prefer to invest our capital in ideas that help expand appreciated at a double-digit compound average annual growth and grow our business. But, when we can’t, we have other ways to rate and have significantly outperformed the S&P 500. return capital to our shareholders. We are the only Western independent interactive entertainment publisher to offer a cash As our company continues to grow, it will be hard to continue at these dividend, which, as we announced in February 2012, was increased rates, but we intend to try as hard as we have for the last 20 years. by 9% to $0.18 per share. We also continued to invest in ourselves In 2011, we once again set operating margin and earnings per share and spent approximately $692 million to repurchase shares of our records, as we have each year since our merger with Vivendi Games stock in 2011. From 2008 to 2011, we have returned $3.1 billion to in 2008, and most years since 1991 when we acquired control of shareholders in the form of dividends and share repurchases. the company. On a GAAP basis, our net revenues were a record In 2011, we continued to invest in building our world-class $4.8 billion and earnings per diluted share were $0.92. On a non entertainment brands by delivering great gaming experiences to GAAP basis, our net revenues were $4.5 billion and our earnings our audiences. A few notable accomplishments this year: per diluted share were a record $0.93, which grew more than 17% year over year. • Activision® Publishing’s Call of Duty®: Modern Warfare® 3 was the biggest entertainment launch of all time, the third consecutive As measured by one of the most reliable benchmarks—operating year a Call of Duty title has set the record. The game generated $1 margin—2011 was the best year in Activision Blizzard’s history. billion in sales in just 16 days, to become the best-selling video As the #1 Western third-party interactive entertainment digital game in a single year, surpassing prior records set by Call of Duty: publisher, we delivered industry record GAAP and non-GAAP Black Ops in 2010 and Call of Duty: Modern Warfare 2 in 2009. operating margins of 28% and 30%, respectively. • Activision Publishing’s innovative new online service, Call of Duty With better than expected net revenues, record earnings, record Elite, which launched with Call of Duty: Modern Warfare 3 is one operating margins, and the generation of nearly $1 billion in of the fastest growing premium online services ever created. As of operating cash flow, Activision Blizzard continues to raise the bar PAGE TWELVE ACTIVISION BLIZZARD, INC. January 2012, more than seven million gamers had registered for And lastly, we manage our finances to grow our business and the service, which includes more than 1.5 million users who deliver value directly to our shareholders. We maintain a lean purchased premium annual memberships. structure, optimizing our costs and driving operational efficiencies throughout our organization. We make material investments, but • Skylanders Spyro’s Adventure™, Activision Publishing’s new do not overpay for acquisitions in the interest of buying growth at intellectual property, became the best-selling children’s video any cost and have developed a culture of prudent risk taking with game of the year and the best-selling new intellectual property serious financial accountability. launch in Activision’s history, including interactive toy and accessory pack sales. Delivering Compelling Entertainment As gaming continues to enjoy broader appeal, the Internet will • Blizzard Entertainment’s World of Warcraft® maintained its continue to transform interactive entertainment over the next few leadership position as the largest subscription-based massively years and provides tremendous opportunities for publishers and multiplayer online role playing game (MMORPG) in the world service providers like Activision Blizzard. Today, we have some ending the year with approximately 10.2 million subscribers. of the largest online player communities in the world with Our continued success is the result of our extraordinarily talented approximately 50 million monthly average users across all of our employees around the world. They have unyielding respect for our franchises. Through high-margin online offerings like subscription players, believe in teamwork, excellence, growing brands into and membership-based services, digital downloads, virtual item broad businesses, and building a company with enduring value. sales and value-added services, we expect to deliver more value and Dear Shareholders More than any other asset, it is their commitment, imagination, choice to consumers than ever before, which in the future should and intellectual and entrepreneurial talents, that will continue to result in broader adoption of our games and services. drive our future accomplishments. Over the past three years, our company has evolved from a Active Vision traditional video game publisher to become a leading digital Over the past 20 years, technological advances have transformed entertainment provider. In 2011, revenues from digital channels interactive entertainment from a niche to a mainstream activity. were a record $1.6 billion and accounted for more than 34% of our The Internet continues to evolve both the delivery and capability company’s total net revenues. of games, allowing consumers to play with and against friends, Today, Activision Publishing’s Call of Duty is one of the largest anytime, anywhere.