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UNITEDSTATESSECURITIESANDEXCHANGECOMMISSION
Washington,D.C.20549

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November16,2015
DearShareholder,
Firstandforemost,thankyouforyourcontinuedinvestmentinMicrosoft.
AswelookaheadtoourannualshareholdersmeetingonDecember2,2015,IwouldliketoupdateyouaboutdevelopmentsatMicrosoftover
thepastyear,andaskforyoursupportontheproposalsthatwillbepresentedatourannualmeeting.Theaccompanyingpresentationprovides
additionaldetailonthesetopics.
2015Developments
MicrosoftcontinuedtomakeprogressonitsstrategictransformationasourCEOSatyaNadellaworkedtorefinetheCompanysstrategic
focus,prioritizingtalentandinvestmentsinareaswherewehavedifferentiationandpotentialforgrowth.Throughoutthistransformation,theBoard
andmanagementteamhaveremainedfocusedonandcommittedtoexecutingonourstrategicgoalsandcreatingvalueforourshareholders.Infiscal
2015weincreased:

Totalrevenue8%

CommercialCloudrevenue106%

Quarterlydividend11%

Totalcashreturnedtoshareholdersbynearly50%to$23.3billion
TheBoardandleadershipteamwerealsoresponsibleforthreeimportantdevelopmentsoverthepast12months:

EvolutionofExecutiveCompensation.Lastyearinourproxystatementwesaidwewerecommittedtodevelopingperformancemetrics
andlongtermincentivesaspartoftheannualincentiveawardstructureforourexecutiveofficers.TheCompensationCommitteefollowed
throughbyworkingwithmanagementtoimplementanewprogramforourcurrentfiscalyearthatexplicitlytiesexecutiveincentivesto
specificperformancemeasuresaimedatdrivinglongtermperformanceandvaluecreation.Theseperformancemeasuresalignwiththe
evolutionofMicrosoftsbusinessandkeylongtermobjectivesandprovidegreateraccountabilityandtransparency.Aspartofthis
process,weengagedawiderangeofshareholderswhoprovidedimportantinputthatwasconsideredinconstructingthechangesforthe
newprogram.

AdoptedProxyAccess.TheBoardsdecisiontoadoptproxyaccessgrewoutofanopenandconstructivedialoguewithourshareholders
andMicrosoftscommitmenttomaintainstronggovernancepractices.TheProxyAccessforDirectorNominationsbylawpermitseligible
shareholderstonominatecandidatesforelectiontotheMicrosoftBoard.

NominatedTwoNewIndependentDirectors.Microsofthasaregularpracticeofaddingnewdirectorswhocanprovidenewanddiverse
perspectivesandcomplementaryskills.WehavenominatedforelectionattheupcomingmeetingSandraPeterson,GroupWorldwide
ChairmanatJohnson&Johnson,andPadmasreeWarrior,formerlyChiefTechnologyandStrategyOfficeratCiscoSystems.Weare
excitedaboutthenewexperienceandinsightstheywillbringtotheBoard.

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AnnualShareholdersMeetingItems
AttheDecember2annualmeeting,ourshareholderswillvoteonthreemanagementproposals.

Electionofelevendirectors.Ourdirectornomineesrepresentanengaged,skilledgroupofindividualswiththeexperienceandexpertise
tohelpguideMicrosoftthroughitsnextchapterofinnovation.Thesenomineesincludetwonewindependentdirectorsasdescribedabove.
Theaveragedirectortenureoftheslateofdirectorsissixyears.ThereismoreinformationaboutallofourBoardnomineesinourproxy
statementandonpage5ofthepresentation.

Advisoryvoteonnamedexecutiveofficercompensation.Ourexecutivecompensationprogramremainsheavilyweightedtoward
equitycompensationtoalignourexecutiveswiththelongtermperformanceofourcompanyandwithourshareholdersinterests.Withthe
changestakingeffectin2016,overhalfofSatyaNadellaspayopportunitywillbetiedtospecificlongtermperformancemetrics.More
informationaboutourexecutivecompensationprogramcanbefoundinourproxystatementandonpages6through11ofthepresentation.

Ratificationofauditors.TheAuditCommitteehasselectedDeloitte&ToucheLLPastheindependentauditorforfiscal2016.

TheMicrosoftBoardofDirectorsencouragesyoutovoteFOReachofthesemanagementproposals.
ThisyearwepartneredwithiiWisdomtodeliveraninteractiveversionofourproxystatementthatisavailableonourInvestorRelationswebsite.
Ourinteractiveproxystatementimprovesourshareholdersabilitytoefficientlyaccessandconsumetheproxycontenttheyfindmostimportantusing
aninteractive,easilynavigableframework.
Asweapproachourannualshareholdersmeeting,theBoardandIinviteyoutowriteusatAskBoard@microsoft.comaboutcorporate
governanceortheboardofdirectors.Wesincerelyvaluecontinuedfeedbackfromourshareholdersandappreciatetheimportanceofthoughtfully
consideringadiversityofperspectivesasweworktodeliverlongtermvalue.Thisletterandtheaccompanyingpresentationispartofourongoing
commitmenttotransparencyandfindingmethodstocommunicatewithyou.
IappreciatetheopportunitytoserveMicrosoftonyourbehalf.
Sincerely,
JohnW.Thompson
ChairmanoftheBoard
MicrosoftCorporation

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ShareholderUpdate
November2015

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Agenda
ContinuingOurStrategicTransformation
MissionandStrategy
BusinessMomentumandPerformance
NewDirectorNominees
ExecutiveCompensation
FiscalYear2015ExecutivePay
EvolutionofExecutivePayforFiscalYear2016andBeyond
BestPracticesinCorporateGovernance
ProxyAccess
GovernanceandCompensationBestPractices
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ContinuingOurStrategicTransformation
Ourmissionistoempowereverypersonandeveryorganizationontheplanettoachievemore.Thismissionisatthecoreofwhatourcustomersdeeplycareaboutwehaveuniquecapabilityinharmonizingtheneeds
ofbothindividualsandorganizations.
BusinessStrategy
Buildbestinclassplatformsandproductivityservicesforthemobilefirstandcloudfirstworld.
ThetransformationwearedrivingacrossourbusinessesisdesignedtoenableMicrosoftandourcustomerstothriveinthisworld.
Wewillrealizeourmissionandstrategybyinvestinginthreeinterconnectedambitions:
Reinventproductivityandbusinessprocesses
Buildtheintelligentcloudplatform
Createmorepersonalcomputing
Microsoft|
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BusinessMomentumandSolidFinancialPerformance
CommercialCloudrevenuegrew106%,reachinganannualizedrevenuerunrateofover$8billion.
CompleteddevelopmentandtestingforWindows10releasedonJuly29,2015,nowwithover110millionactiveWindows10devices.
IncreasedAzurerevenueandcomputeusageover100%inthefourthquarteryearoveryear.
Bingsearchadvertisingrevenuegrew22%.
Office365consumersubscribersgrewtoover15million,withusersgrowingatnearly1millionpermonthatfiscalyearend.
TotalCashReturnedtoShareholders
$4.61
010%
20%
30%
40%
50%
60%
70%
8.67%
35.05%
57.17%
1Year
2Year
3Year
(inbillions)
$25
$25
$15
$10
$0
$4.61
$7.70$9.27
$6.41
$13.21
$10.06
48%
FY13
FY14
FY15
Dividend
Buyback
TSR(%)
$93.6billion8%
3YearRevenueandEPS
*FY14andFY15EPSisnonGAAPadjustedforimpairment,integrationandrestructuringexpenses
Microsoft|4

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AccomplishedDirectorNominees
EvolvingBoardComposition
SandraPeterson
(NominatedforelectioninDecember2015)
GroupWorldwideChairman,
Johnson&Johnson
ResponsibleforJohnson&JohnsonsConsumerGroupofCompanies,andJohnson&JohnsonSupplyChain,InformationTechnology,WellnessandPrevention,andGlobalStrategicDesign.Shebringsextensive
operatingexperiencewithglobalcompanies,productandmarketingexperience,andexpertisewithstrategydevelopment.Ms.Petersonhassignificantinformationtechnologyexperience,financialknowledgeand
understandingofhowtorunhighlyregulatedbusinesses.
PadmasreeWarrior
(NominatedforelectioninDecember2015)
FormerChiefTechnologyandStrategyOfficer,CiscoSystems,Inc.
ShewasresponsibleforCiscosworldwidebusinessandtechnologystrategy,mergersandacquisitions,equityinvestments,andinnovationchargedwithaligningtechnologydevelopmentandcorporatestrategy.She
haswiderangingexperienceasatechnicalleaderaddressingsilicon,hardwareandsoftwaredevelopmentchallenges.Ms.Warriorbringssignificantexperienceindrivingtechnologyandoperationalinnovationacrossa
globalcompany,andinforginggrowththroughstrategicpartnershipsandnewbusinessmodels.
Microsoft|
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CompensationPhilosophy
Fivecoretenetsinformthedesignofourexecutivecompensationprogram
CompetitivePayOpportunity
Wepaycompetitivelytoattract,motivate,andretaintheexecutiveswhodriveoursuccessandindustryleadership
EquityIncentives
Atleast70%ofannualtargetpayopportunityisinequitytoincentivizealongtermfocusandstrongalignmentwithshareholders
SustainableLongterm
Performance
Largemajorityoftotalpayissubjecttomultiyearvestingorperformancerequirements
ExplicitPayandPerformanceLink
Weexplicitlytiepaytoperformancebydeliveringalargemajorityofpaythroughperformancebasedincentives
CompensationGovernance
Wediscourageunnecessaryandexcessiverisktakingthroughourvestingandstockholdingrequirementsandclawbackprovisions
Ourexecutivecompensationphilosophyandstructurecreatestrongalignmentwithourlongtermstrategicgoalsandtheinterestsofourshareholders
Microsoft|6

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CompensatingaGlobalTechnologyLeader
FY2015Opportunity
Alignedtobusinessperformanceandshareholderinterests
AnnualBaseSalary
AnnualCashIncentiveAward
LongtermIncentivePlanAward
TotalAnnualTargetCompensation
$1,200,000
Targetof$3,600,000
Rangesfrom0%300%oftargetbasedonactualperformanceasevaluatedbyourBoard
$13,200,000annualequityawardwithfourequalvestingperiods
$18,000,000
FY2015Results:InlinewithMicrosoftperformanceandpeergroupCEOcompensation
46thpercentileofpeergroup
104%oftargettotalcompensation
120%oftargetbonus
13.33%ofmaximumbonus
TheannualcompensationforMr.NadellareflectsthedemandsandresponsibilitiesofleadingaglobalorganizationwiththescopeandstatureofMicrosoft,andthefiercecompetitionfortalentedexecutivesinthe
technologysector
Microsoft|7

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FY15PeerCompanyCEOPay
FY15CEOTotalCompensation:Rankv.Peers*
QUALCOMM,Inc.
OracleCorp.
TheWaltDisneyCo.
Yahoo!,Inc.
GeneralElectricCo.
ExxonMobilCorp.
TheBoeingCo.
JPMorganChase&Co.
ChevronCorp.
Merck&Co.,Inc.
Johnson&Johnson
TheCocaColaCo.
AT&T,Inc.
PfizerInc.
AmericanExpressCo.
GoldmanSachs
TheTravelersCos.,Inc.
CiscoSystems,Inc.
3MCo.
HP,Inc.
WalMartStores,Inc.Microsoftat
IBMCorp.
MicrosoftCorp.46th
AdobeSystems,Inc.
Procter&GambleCo.percentile
Verizon
Caterpillar,Inc.
SymantecCorp.
NIKE,Inc.
AccenturePlc
UnitedHealthGroup,
E.I.duPontde
IntelCorp.
EMCCorp.
TheHomeDepot,Inc.
UnitedTechnologies
*Basedonlastavailablesummarycompensationtabledatafrom
Apple,Inc.peerproxystatements,excludingallothercompensation
Visa,Inc.
McDonaldsCorp.
Amazon.com,Inc.
Facebook,Inc.
Alphabet,Inc.
Microsoftat46thpercentile
Microsoft|8

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ExecutiveCompensationProgramEvolution
CompensationProgramEvolutionwasInformedbyShareholderInput
TheCompensationCommitteemadechangestofurtherlinkpaywithobjectiveperformancemeasuresthatalignwithMicrosoftsstrategicgoalsandlongtermobjectives.
Key2016ProgramChangesInclude
Introducedperformancebasedstockawardslinkedtokeyfinancialmeasures(50%oftargetannualequityincentive)
AddedRelativeTSRmultipliertorewardsignificantoutperformance
90%ofannualtotaltargetcompensationisnowvariablebasedonperformance
Reducedmaximumcashbonustoincreaselongtermfocus(300%to200%)
56%ofCEOtotalequityisperformancebased
NochangeinCEOtotaltargetpayfor2016
2016compensationprogramreflectsasignificantincreaseinthepercentageofcompensationtieddirectlytoobjectiveperformancemeasures
2015
AnnualBaseSalary
9%
VariableAnnualCash
IncentiveAward
18%
TimeBasedStockAward
73%
2016
AnnualBaseSalary
9%
VariableAnnualCash
IncentiveAward
18%
PerformanceBased
StockAward
36.5%
VariableTimeBasedStockAward
36.5%
Note:graphicexcludesOtherCompensation
Microsoft|9

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LongTermIncentivePayTiedtoRigorousMetrics
PerformancebasedstockawardsfurtherenhancethelinkbetweenexecutivepayandMicrosoftslongtermperformance
Overall2016CompensationStructure
Microsoftspaymixtargetsahighproportionofequityandperformancebasedcompensation
NEOPayMix
9%
18.0%
36.5%
AtRisk
36.5%
StockAwards
PerformanceStockAwards
Bonus
Salary
Financial(50%)
3yrAggregationofAnnualRevenuePlan(25%)
3yrAggregationofAnnualOperatingIncomePlan(25%)
Strategic(50%)
FY18CommercialCloudAnnualizedRevenueRunRate(16.7%)
FY18CommercialSubscribers
(16.7%)
FY18Win10MonthlyActiveDevices(16.6%)
RelativeTSRmultiplieristriggeredonlyifMicrosoftsTSRispositiveandabovethe60thpercentileoftheS&P500
Microsoft|10

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PerformanceStockAwardPayoutOpportunity
PayoutCurveforEachMetric
PerformanceStockAwardPayoutOpportunity
Nopayoutearnedunlessthresholdperformanceisachievedforatleastonemetric
TSRMultiplier
Payoutopportunityrangesfrom0%to400%ofthetargetnumberofshares,includingtheTSRmultiplier,whichestablishesaccountabilityforunderperformanceandincentivizesoutperformance.
Microsoft|11

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ProxyAccess
MicrosoftsBoardiscommittedtostrongcorporategovernancepractices,establishmentofmeaningfulshareholderrightsandrobustengagementpractices
InAugust2015,weadoptedaProxyAccessforDirectorNominationsbylaw,whichpermitseligibleshareholderstonominatecandidatesforelectiontotheMicrosoftBoard.Proxyaccesscandidateswillbeincluded
intheCompanysproxystatementandballot.
Theproxyaccessbylawprovidesthat
holdersofatleast3percentofMicrosoftsoutstandingshares,whichcancompriseupto20shareholders,
holdingthesharescontinuouslyforatleast3years,
cannominatetwoindividualsor20percentoftheBoard,whicheverisgreater,forelectionatanannualshareholdersmeeting.
Microsoft|12

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LeaderinGovernanceandCompensationBestPractices
ProgressiveGovernancePracticesandShareholderRights
Directorsareelectedannually
RegularlyrefreshBoardaveragedirectortenureis6years
82%+ofourdirectornomineesareindependentandallarehighlyqualified
SeparatechairmanandCEOroleswithan
independentchairman
Proxyaccessbylaw
Majorityvotingfordirectorelections
(oneofthefirstadoptersinU.S.)
AnnuallyevaluatetheperformanceoftheBoard,itscommittees,andeachdirector
Simplemajorityvoteprovisionstoamendbylaws/charter
Shareholdersholding25%ofourshareshavetherighttocallaspecialmeeting
Robustshareholderoutreachpractices
Historyofresponsivenesstoourshareholdersfeedback
EffectiveCompensationGovernance
Aggressiveexecutivecompensationrecoverypolicytoensureaccountability(clawbackpolicy)
Executivestockownershiprequirements
(rangingfrom3x10xbasesalary)
Antihedgingandpledgingpolicy
IndependentcompensationconsultantadvisesourCompensationCommittee
Responsiblymanagetheuseofequitycompensation
Nostockoptions
Nospecialperquisitesorbenefits(notaxgrossups,clubmemberships,carallowances,orspecialmedicalbenefits)
Noemploymentcontracts
Nochangeincontrolprotection
Nospecialretirementprogram
Noguaranteedbonuses
Microsoft|13

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