Voting by the Internet or telephone is fast and convenient, your vote is immediately confirmed and tabulated, and helps Microsoft reduce postage and proxy tabulation costs.

If you prefer, you can vote by mail by returning the enclosed proxy card or voting instruction form in the addressed, prepaid envelope provided.

Please do not return the enclosed paper ballot if you are voting via the Internet or by telephone.

October 7, 2013

Dear Shareholder:

You are cordially invited to attend the Annual Meeting of Shareholders of Microsoft Corporation, which will be held at Meydenbauer Center, 11100 NE 6th Street, Bellevue, Washington 98004, on November 19, 2013 at 8:00 a.m. Pacific Time. Doors open at 7:00 a.m. As we did last year, we will be featuring a Microsoft Store at our product showcase. This will give you the opportunity to experience Microsoft’s latest consumer products including the latest devices running the new Windows, Microsoft Surface, Xbox, and the latest Windows 8 Phones. Driving directions to Meydenbauer Center can be found on the last page of this document. Parking will be validated only for Meydenbauer Center garage. Parking is limited, so plan ahead if you are driving to the meeting.

The attached Notice of Annual Meeting of Shareholders and Proxy Statement contain details of the business to be conducted at the Annual Meeting.

Whether or not you attend the Annual Meeting, it is important that your shares be represented and voted at the meeting. Therefore, I urge you to promptly vote and submit your proxy via the Internet, by phone, or by signing, dating, and returning the enclosed proxy card in the enclosed envelope. If you attend the Annual Meeting, you will be able to vote in person, even if you have previously submitted your proxy.

This year’s shareholder question and answer session will include both live questions and questions submitted in advance. You may submit a question in advance by email to ASM@microsoft.com or through the Shareholder Forum available on the Investor Relations website; we will respond to as many inquiries as time allows.

We will provide a live webcast of the Annual Meeting from the Microsoft Investor Relations website atwww.microsoft.com/investor. This year we are also offering a virtual shareholder meeting through which you can view the meeting, submit questions and vote online. A transcript along with video and audio of the entire Annual Meeting will be available on the Investor Relations website after the meeting. We hope this will allow those of you who are unable to attend the meeting in person to hear Microsoft executives discuss the year’s results and our plans for the future. In addition, we make available at our Investor Relations website free of charge a variety of information for investors. Our goal is to maintain the Investor Relations website as a portal through which investors can easily find or navigate to pertinent information about us.

On behalfBy order of the Board of Directors I would like to express our appreciation for your continued investment in Microsoft. I look forward to greeting as many of our shareholders as possible.

Sincerely,

StevenJohn A. BallmerSeethoff

Chief Executive OfficerSecretary

Redmond, Washington

October 18, 2016

The use of cameras at the Annual Meeting is prohibited and they will not be allowed into the meeting or any other relatedadjacent areas, except by credentialed media. We realize that many mobile phones have built-in cameras; while these phones may be brought into the venue, the camera function may not be used at any time.

2016 PROXY STATEMENT  v

Proxy Statement table of contents

vi

2016 PROXY STATEMENT  vii

Vote in advance of the meeting						Vote your shares at www.proxyvote.com. Have your Notice of Internet Availability or proxy card in hand for the12-digit control number needed to vote.
						Call toll-free number 1-800-690-6903
						Sign, date, and return the enclosed proxy card or voting instruction form.

Vote in person at the meeting						See Part 7 – “Informationabout the meeting” for details on admission requirements to attend the Annual Meeting.

Our director nominees

See Part 2 – “Board of Directors” for more information.

The following table provides summary information about each director nominee. Each director is elected annually by a majority of votes cast.

Name Occupation				Director since				Other public boards		Committee memberships
		Age				Independent				AC		CC		GN		RPP
William H. Gates III Co-Chair and Trustee, Bill & Melinda Gates Foundation		60		1981		No		1
Teri L. List-Stoll Former Executive Vice President and CFO, DICK’S Sporting Goods, Inc.		53		2014		Yes		1
G. Mason Morfit President, ValueAct Capital		41		2014		Yes		0
Satya Nadella CEO, Microsoft		49		2014		No		0
Charles H. Noski Former Vice Chairman, Bank of America Corporation		64		2003		Yes		2
Helmut Panke Former Chairman of the Board of Management, BMW Bayerische Motoren Werke AG		70		2003		Yes		1
Sandra E. Peterson Group Worldwide Chairman, Johnson & Johnson		57		2015		Yes		0
Charles W. Scharf CEO, Visa, Inc.		51		2014		Yes		1
John W. Stanton Chairman, Trilogy Partnerships		61		2014		Yes		2
John W. Thompson Independent Chairman, Microsoft; Former CEO, Virtual Instruments, Inc.		67		2012		Yes		0
Padmasree Warrior U.S. CEO and global Chief Development Officer, NextEV		55		2015		Yes		0

AC: Audit Committee CC: Compensation Committee GN: Governance and Nominating Committee RPP: Regulatory and Public Policy Committee		Chair		Member		Financial expert

2

Corporate governance highlights

See Part 1 – “Corporate governance at Microsoft” for more information.

Our directors

Independent Board and Board committees
		•  Independent Chairman of the Board; Chairman and CEO positions separate since 2000 •  9 of 11director nomineesare independent •  All committee members are independent •  Independent directors meet in executive session at least quarterly •  Our Board and committees conductannual evaluations •  We haverobust director orientation and continuing education programs for directors •  We are committed to Board refreshment. For balance between directors with deep knowledge of the Company and those with a fresh perspective,our average director tenure is 6.6 years •  All Audit Committee members are financially literate and 3 are audit committee financial experts •  Our Compensation Committee uses anindependent compensation consultant

Progressive shareholder rights
		•  Directors areelected by majority vote in uncontested elections •  All directorselected annually •  Our bylaws provide forproxy access by shareholders •  We have aconfidentialvoting policy •  If Proposal 4 is approved,15% of outstanding shares can call a special meeting

Vigorous shareholder engagement
		During fiscal year 2016, independent members of our Board and members of senior management conducted outreach to a cross-section ofshareholders owning 40% of our shares.

2016 PROXY STATEMENT  3

Executive compensation matters

See Part 3 – “Named executive officer compensation” for more information.

Our business performance

Executing on our three ambitions

We continued to advance our mission to empower every person and every organization on the planet to achieve more. We continued to cultivate a Microsoft culture in which people connect their individual energies and passions for technology to this mission. We achieved product development milestones, implemented organizational changes, and made strategic and tactical moves to support the three ambitions that support our strategy.

Our ambitions and achievements

*

Commercial cloud annualized revenue run rate is calculated by multiplying revenue for the last month of the quarter by twelve for Office 365 commercial, Azure, Dynamics Online, and other cloud properties.

In June 2016, we agreed to acquire LinkedIn for $26.2 billion. Our goal for this transaction is to create new experiences and new value for our customers by connecting the world’s leading professional cloud and professional network.

Financial results

We balanced investments in growth opportunities and innovation with ongoing financial discipline, with the following financial results.

		GAAP		non-GAAP*
Revenue		$85.3 billion (down 9%)		$92.0 billion (down 2%)
Operating income		$20.2 billion (up 11%)		$27.9 billion (down 1%)
Net income		$16.8 billion (up 38%)		$22.3 billion (up 3%)
Diluted earnings per share		$2.10 (up 42%)		$2.79 (up 6%)
Total cash returned to shareholders		Increased 12% to $26.1 billion
One-year total shareholder return		19.1%

*

See Annex A for a reconciliation of non-GAAP and GAAP financial measures. Percentages are year-over-year.

Revenue decreased $8.3 billion primarily due to the impact of the $6.6 billion net revenue deferral from Windows 10 and an unfavorable foreign currency impact of approximately $3.8 billion. Operating income increased $2.0 billion, mainly due to a decrease in impairment, integration, and restructuring expenses related to our phone business and lower sales and marketing expenses, offset in part by lower gross margin.

4

Strong long-term performance

Our total shareholder return (“TSR”), cash returned to shareholders, and annual revenue for the past three years have been strong, notwithstanding the impact of our business realignment on our fiscal year 2016 profitability.

Note about forward-looking statements
		This Proxy Statement includes estimates, projections and statements relating to our business plans, objectives and expected operating results that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may appear throughout this report, including this Proxy Summary and Part 3 – “Named executive officer compensation.” These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially. We describe risks and uncertainties that could cause actual results and events to differ materially in “Risk Factors,” “Quantitative and Qualitative Disclosures about Market Risk,” and “Management’s Discussion and Analysis” sections of our Forms 10-K and 10-Q. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise.

2016 PROXY STATEMENT  5

Executive compensation advisory vote

Our Board of Directors recommends that shareholders vote to approve, on an advisory basis, the compensation paid to the Company’s named executive officers as described in this Proxy Statement (the “say-on-pay” vote), for the following reasons.

Pay for performance
		The evolution of executive compensation for fiscal year 2016 and beyond. Executing on our commitment to transform our executive pay program to include significant performance attributes, we increased the portion of total pay that is performance based and the portion of incentive pay that is quantitatively determined using pre-established metrics. Our fiscal year 2016 Executive Officer Incentive Plan awards for Mr. Nadella and his senior leadership team include stronger, explicit ties to specific long-term performance objectives that directly connect with achieving our three strategic ambitions. We introduced a structured framework for Mr. Nadella’s cash incentive award. We reduced the maximum award levels for the annual cash incentive and in 2017 for performance stock awards. In 2017, we will apply pre-established financial metrics to formulaically determine 50% of the annual cash incentive for all executive officers. These compensation changes respond to feedback we received through the say-on-pay vote and extensive shareholder engagement we conducted over the last year.						Fiscal year 2016 executive compensation. At least 70% of target compensation for our Chief Executive Officer (“CEO”) and other named executive officers (collectively, the “Named Executives”) was equity-based, providing direct alignment with returns to shareholders and incentives to drive long-term business success. The annual cash incentive awards for our Named Executives ranged from 100% to 140% of target consistent with our business performance and returns to shareholders. Mr. Nadella’s cash incentive was determined based on his performance in four weighted categories as described in greater detail in Part 3 – “Named executive officer compensation”. There were no special awards.

Sound program design
		We designed our executive officer compensation programs to attract, motivate, and retain the key executives who drive our success and industry leadership while considering individual and Company performance and alignment with the interests of long- term shareholders. We achieve our objectives through compensation that:   provides a competitive total pay opportunity,   consists primarily of stock-based compensation,   a majority of pay is performance – based   enhances retention through multi-year vesting of stock awards, and   does not encourage unnecessary and excessive risk taking.

Best practices in executive compensation
		Our leading practices include:   a clawback policy,   an executive stock ownership policy,   a policy prohibiting pledging and hedging ownership of Microsoft stock,   executive-only perquisites or benefits limited to charitable giving match,   no employment contracts or change in control protections, and   no supplemental executive retirement programs.

6

1. Corporate governance at Microsoft

Corporate governance principles and practices

Our corporate governance cycle promotes effective shareholder engagement

Microsoft believes that effective corporate governance should include regular, constructive conversations with our shareholders. We actively engage with our shareholders as part of our annual corporate governance cycle described below.

We are transparent – Communicating governance policies and practices to all shareholders and other stakeholders is an important part of our commitment to transparency. With over 3.5 million Microsoft shareholders, using both direct dialogue and ‘one-to-many’ communications are necessary to reach all shareholders. To this end, during the past fiscal year Microsoft took the following steps to engage these communities.

We proactively engage with our shareholders – During fiscal year 2016, independent members of our Board and members of senior management conducted outreach to a cross-section of shareholders owning approximately 40% of our shares. Our CEO, Satya Nadella, remains committed to investing time with our shareholders to increase transparency and better understand their perspectives, including by participating in our quarterly earnings calls and other forums for communication.

Our director video series provides all stakeholders insight about our Board – We recently released two new installments of our director video series featuring interviews with members of our Board. The videos provide an informal opportunity for Microsoft’s directors to discuss their approach to serving as a director at Microsoft. The complete series can be viewed on Microsoft’s Investor Relations site atwww.microsoft.com/investor/CorporateGovernance/BoardOfDirectors/default.aspx.

Microsoft on the Issues blogs address our views on emerging governance topics – We make regular policy blog posts on Microsoft on the Issues. Blogs included a synopsis of our commitment to shareholder engagement, including the latest in the series of director interviews and other topics of importance including corporate social responsibility, privacy, cybersecurity, online safety, jobs, and education. We disseminated information posted on the Microsoft on the Issues blog via social media handles, including @MSFTIssues and @MSFTNews.

2016 PROXY STATEMENT  7

Investor Relations website delivers extensive content about governance and corporate social responsibility – Our Investor Relations website provides in-depth information about our corporate governance and corporate social responsibility initiatives to our shareholders and other stakeholders.

Our progressive corporate governance framework

Corporate governance at Microsoft is designed to promote the long-term interests of our shareholders, maintain internal checks and balances, strengthen management accountability, engender public trust, and foster responsible decision making and accountability.

Our corporate governance framework is designed to ensure our Board has the necessary authority and practices in place to review and evaluate our business operations and to make decisions independent of management. Our goal is to align the interests of directors, management, and shareholders, and comply with or exceed the requirements of the NASDAQ Stock Market (“NASDAQ”) and applicable law. This framework establishes the practices our Board follows with respect to:

  Our corporate governance documents

Amended and Restated Articles of Incorporation

Bylaws

Corporate Governance Guidelines

Director Independence Guidelines

Microsoft Finance Code of Professional Conduct

Microsoft Standards of Business Conduct

Audit Committee Charter and Responsibilities Calendar

Compensation Committee Charter

Governance and Nominating Committee Charter

Regulatory and Public Policy Committee Charter

Stock Ownership and Holding Requirements for Microsoft Corporation Executives

Executive Compensation Recovery Policy

Compensation Consultant Independence Standards

These documents are all available athttp://aka.ms/policiesandguidelines.

We have an independent Chairman of the Board

John Thompson serves as independent Chairman of the Board. The roles of chairman and chief executive officer have been separate since 2000. The independent directors annually appoint our Chairman. As Chairman, Mr. Thompson leads the activities of the Board, including:

8

Our Board believes its leadership structure effectively allocates authority, responsibility, and oversight between management and the independent members of our Board. It gives primary responsibility for the operational leadership and strategic direction of the Company to our CEO, while the Chairman facilitates our Board’s independent oversight of management, promotes communication between management and our Board, engages with shareholders, and leads our Board’s consideration of key governance matters. The Board believes its programs for overseeing risk would be effective under a variety of leadership frameworks and therefore do not materially affect how it structures its leadership.

Our Board is independent

We have independent Board committees with appropriate expertise

Shareholder rights

2016 PROXY STATEMENT  9

Our approach to risk oversight

Management periodically reports to the Board or relevant committee, which provides guidance on risk assessment and mitigation. Each committee charged with risk oversight reports to the Board on those matters.

Compensation accountability

Director orientation and continuing education

Annual Board and committee evaluations

Each year, our Board and its committees conduct evaluations to assess their effectiveness and adherence to the Corporate Governance Guidelines and committee charters, and to identify opportunities to improve Board and committee performance.

Corporate social responsibility

A key part of how Microsoft fulfills our mission to empower every person and every organization on the planet to achieve more is through the products and services we provide. Achieving our mission also requires a strong commitment to corporate social responsibility: to conduct our business in ways that are principled, transparent, and accountable to key stakeholders. We believe doing so generates long-term value for our business, our shareholders, and communities around the world.

10

Microsoft’s corporate social responsibility commitments include the areas of accessibility, corporate governance, environmental sustainability, empowering our people, ethical business conduct, human rights, privacy, and responsible sourcing. In addition, through Microsoft Philanthropies, we are investing Microsoft’s assets – our technology, investments, voice, and people – to drive greater inclusion and empowerment of people who do not have access to technology and the opportunities it offers and enables.

Atwww.microsoft.com/csr we share a broad range of information on our policies, practices, and performance across all these areas and others, ranging from our carbon footprint to how we’ve responded to requests from law enforcement agencies for customer data. Ultimately, our goal is to meet the high standards we have for ourselves and to consistently earn the trust and confidence of the public, our customers, partners, employees, and shareholders.

Political contributions transparency

Microsoft recognizes the interest of U.S. public company shareholders in establishing greater transparency about corporate political contributions. We disclose our political contributions to support candidates and ballot measures and how certain of our trade association membership dues are used for political activities. As part of our commitment to transparency, we developed our Principles and Policies Guiding Microsoft Participation in Public Policy Process in the United States, which focus on ensuring compliance with applicable federal and state laws and are designed to go beyond compliance to implement what we consider leading practices in corporate accountability, transparency, integrity, and responsibility. The policy is available atwww.microsoft.com/politicalengagement.

How to communicate with our Board

We invite shareholders to contact the Board about corporate governance or matters related to the Board. Communications about these topics will be received and processed by management before being forwarded to the Board, a committee of the Board, or a director as designated in your message. Communications relating to other topics, including those that are primarily commercial in nature, will not be forwarded.

	@			AskBoard@microsoft.com
				MSC 123/9999 Office of the Corporate Secretary Microsoft Corporation Notice of 2013 Annual Meeting of Shareholders Date: November 19, 2013 Time: 8:00 a.m. Pacific Time Place: Meydenbauer Center 11100 NE 6th Street Bellevue, Washington 98004 Record date: September 13, 2013. Only shareholders of record at the close of business on the record date are entitled to receive notice of, and to vote at, the Annual Meeting. Proxy voting: Important. Please vote your shares at your earliest convenience. This will ensure the presence of a quorum at the meeting. Promptly voting your shares via the Internet, by telephone, or by signing, dating, and returning the enclosed proxy card or voting instruction form will save the expenses and extra work of additional solicitation. If you wish to vote by mail, we have enclosed an addressed envelope, postage prepaid if mailed in the United States. Submitting your proxy now will not prevent you from voting your shares at the meeting, as your proxy is revocable at your option. Items of business: • To elect nine directors from among the nominees described in this Proxy Statement • To approve material terms of the performance criteria under the Executive Officer Incentive Plan • To approve, on a non-binding advisory basis, the compensation paid to our Named Executive Officers • To ratify the selection of Deloitte & Touche LLP as our independent auditor for fiscal year 2014 • To transact other business that may properly come before the Annual Meeting Virtual meeting: You may also vote at the meeting via the Internet by visitingwww.virtualshareholdermeeting.com/MSFT13 and following the instructions. Important notice regarding the availability of proxy materials for the shareholder meeting to be held on November 19, 2013. Our Proxy Statement and Annual Report to Shareholders are available atwww.microsoft.com/investor. By order of the Board of Directors Bradford L. Smith Secretary Redmond, Washington October 7, 2013 Proxy summary This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information you should consider, and you should read the entire Proxy Statement carefully before voting. Annual Meeting of Shareholders Date: November 19, 2013 Time: 8:00 a.m. Pacific Time Place: Meydenbauer Center 11100 NE 6th Street Bellevue, Washington 98004 Record date: September 13, 2013 Voting: Shareholders as of the record date are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and one vote for each of the proposals to be voted on. Admission to meeting: Proof of share ownership will be required to enter the Microsoft Annual Meeting – see Part 1 – “Information about the meeting” for details. Please follow the directions to Meydenbauer Center on the last page of this Proxy Statement. Meeting agenda Election of nine directors Approve material terms of the performance criteria under the Executive Officer Incentive Plan Advisory vote on executive compensation Ratification of Deloitte & Touche LLP as our independent auditor for fiscal year 2014 Transact other business that may properly come before the meeting Voting matters and vote recommendation See Part 6 – “Proposals to be voted on at the meeting” for more information.      Matter Board vote recommendation     Management proposals Election of directors For each director nominee Approve material terms of the performance criteria under the Executive Officer Incentive Plan For Advisory vote on executive compensation For Ratification of Deloitte & Touche LLP as our independent auditor for fiscal year 2014 For i Proxy summary Our director nominees See Part 3 – “Board of Directors” for more information. The following table provides summary information about each director nominee. Each director is elected annually by a majority of votes cast. Name   Age     Director since     Occupation   Inde-  pendent    Other public  boards    Committee memberships             AC   CC   GN   RPP Steven A. Ballmer     57        2000      CEO, Microsoft     0         Dina Dublon     60        2005      Former CFO and EVP, JPMorgan Chase & Co.   •   2   F   M     William H. Gates III     57        1981      Chairman, Microsoft     1         Maria M. Klawe     62        2009      President, Harvey Mudd College   •   1     M     M Stephen J. Luczo     56        2012      CEO, Seagate Technology PLC   •   1   F   C     David F. Marquardt     64        1981      General Partner, August Capital   •   0       M   Charles H. Noski     61        2003      Former Vice Chairman, Bank of America Corporation   •   2   C, F     M   Helmut Panke     67        2003      Former Chairman of the Board of Management, BMW Bayerische Motoren Werke AG   •   3   F       C John W. Thompson     64        2012      CEO, Virtual Instruments, Inc.   •   0       C   M AC Audit Committee C Chair CC Compensation Committee M Member GN Governance and Nominating Committee F Financial expert RPP Regulatory and Public Policy Committee Attendance Each director nominee is a current director and attended at least 75% of the aggregate of all fiscal year 2013 meetings of the Board and each committee on which he or she served. Proxy summary ii Executive compensation matters See Part 4 – “Named Executive Officer compensation” and Part 6 – “Proposals to be voted on at the meeting” for more information. Business highlights Fiscal year performance results included: $77.31 billion in revenue as adjusted,* an increase of 4% (GAAP revenue of $77.85 billion) $26.96 billion in operating income as adjusted,* a decrease of 5% (GAAP operating income of $26.76 billion) $2.62 diluted earnings per share as adjusted,* a decrease of 6% (GAAP diluted earnings per share of $2.58) $22.4 billion in unearned revenue as of fiscal year end, a record amount $12.3 billion returned to shareholders through dividends and stock buybacks Slower than anticipated sales of Surface RT devices resulted in a price reduction to accelerate sales and a $900 million inventory charge Server and Tools Business, Windows Division and Microsoft Business Division revenue grew 9%, 5%, and 3%, respectively We also took significant steps in our evolution as a devices and services company. In July 2013, we announced a company-wide realignment, as One Microsoft, involving a range of initiatives including consolidating development into fewer core engineering groups and further unifying our core technologies for greater efficiency. In October 2012, we launched our new operating system, Windows 8 and on October 18, 2013 we will release to market the Windows 8.1 update. We launched the Surface RT and Pro devices, significantly increased retail distribution of Surface in the second half of fiscal year 2013, and completed much of the work that led to the Surface 2 and Surface 2 Pro devices and accessories that will be available on October 22. We released Office 365 for home use, offering enhancements including deeper integration of SkyDrive and Skype. As of the end of the fiscal year we had more than one million Office 365 Home Premium subscribers. In November 2012, we launched the next version of our Windows Phone operating system, Windows Phone 8. In September 2012, we launched Windows Server 2012 and Visual Studio 2012. * See Annex A for a reconciliation of non-GAAP and GAAP measures presented. Executive compensation advisory vote Our Board of Directors recommends that shareholders vote to approve, on an advisory basis, the compensation paid to the Company’s Named Executive Officers, as described in this proxy statement for the following reasons. Pay for performance Our compensation program allows our Compensation Committee and Board to determine pay based on a comprehensive view of quantitative and qualitative factors designed to produce long-term business success. The correlation between our financial results and executive officer compensation awarded, as described in Part 4 – “Named Executive Officer compensation – Compensation discussion and analysis,” demonstrates the success of this approach. Sound program design We designed our executive officer compensation programs to attract, motivate, and retain the key executives who drive our success and industry leadership. Pay that reflects performance and alignment with the interests of long-term shareholders are key principles. We achieve our objectives through compensation that: provides a competitive total pay opportunity, consists primarily of stock-based compensation, links a significant portion of total compensation to performance we believe will create long-term shareholder value, differentiates rewards based on the executive officer’s contributions to business performance, enhances retention by subjecting much of total compensation to multi-year vesting, and does not encourage unnecessary and excessive risk taking. iii Proxy summary Best practices in executive compensation Our compensation programs for our Named Executive Officers incentivize superior individual and business performance and do not reward inappropriate risk taking. Some of our leading practices include: an executive compensation recovery policy, an executive stock ownership policy, a policy prohibiting pledging and hedging ownership of Microsoft stock, no special perquisites or benefits, no employment contracts or change in control protections, and no supplemental executive or similar retirement programs. Auditors See Part 5 – “Audit Committee matters” for more information. We ask that our shareholders ratify the selection of Deloitte & Touche LLP as our independent auditor for fiscal year 2014. Below is summary information about Deloitte & Touche’s fees for services provided in fiscal years 2013 and 2012. Year ended June 30   2013     2012   Audit fees     $23,075,000        $23,133,000    Audit related fees     13,782,000        8,317,000    Tax fees     57,000        50,000    All other fees     410,000        12,000    Total     $37,324,000        $31,512,000    2014 Annual Meeting Shareholder proposals submitted for inclusion in our 2014 proxy statement pursuant to SEC Rule 14a-8 must be received by us no later than June 9, 2014. Notice of shareholder proposals to be raised from the floor of the 2014 Annual Meeting of shareholders outside of SEC Rule 14a-8 must be delivered to us no earlier than July 22, 2014 and no later than August 21, 2014. Note about forward-looking statements Certain statements in this proxy statement, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may appear throughout this report, including without limitation, this Proxy Summary and Part 4 – “Named Executive Officer compensation.” These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the section titled “Risk Factors” of our Forms 10-K and 10-Q. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. Proxy summary iv Proxy Statement table of contents Part 1. Information about the meeting Internet availability of proxy materials 1 Proof of ownership required for attending meeting in person 1 Participation in electronic meeting 1 Solicitation of proxies 2 Householding 2 Election of directors 2 Voting procedures 2 Tabulation of votes 2 Majority vote standard for election of directors 3 Vote required; effect of abstentions and brokernon-votes 3 Vote confidentiality 4 Where to find more proxy voting information 4 Other business 4 Part 2. Corporate governance at Microsoft Corporate governance principles and practices 5 Board independence 5 Chief executive officer, chairman, and lead independent director 5 Board committee independence and expertise 5 Shareholder authority 5 Compensation 5 Stock ownership 5 Hedging and pledging policy 6 Director orientation and continuing education 6 Risk oversight 6 Political contributions 6 Corporate governance guidelines and committee charters 7 Microsoft corporate governance website 7 Board and executive leadership 7 Director independence 8 Shareholder communication with directors 8 Certain relationships and related transactions 9 Section 16(a) – Beneficial ownership reporting compliance 10 Information regarding beneficial ownership of principal shareholders, directors, and  management 10 Part 3. Board of Directors Director nominations and qualifications 12 Our director nominees 14 Meetings and meeting attendance 19 Board committees 19 Audit Committee 19 Compensation Committee 20 Governance and Nominating Committee 20 Regulatory and Public Policy Committee 21 Director compensation 21 Part 4. Named Executive Officer compensation Compensation discussion and analysis 24 Section 1 – Performance and pay 24 Section 2 – Compensation setting process and decisions for fiscal year 2013 26 Section 3 – Other compensation policies and information 33 Compensation risk assessment 35 Fiscal year 2013 compensation tables 36 Compensation Committee interlocks and insider participation 41 Compensation Committee report 41 Part 5. Audit Committee matters Audit Committee report 42 Fees billed by Deloitte & Touche 44 Audit fees 44 Audit-related fees 44 Tax fees 44 All other fees 44 Policy on Audit Committeepre-approval of audit and permissiblenon-audit services of independent auditor 45 v Table of contents Part 6. Proposals to be voted on at the meeting Election of directors 46 Approval of material terms of the performance goals under the Executive Officer Incentive Plan 47 Advisory vote on executive compensation 50 Statement in support 50 Ratification of independent auditor 51 Proposals of shareholders for 2014 Annual Meeting 51 Annex A Reconciliation of non-GAAP and GAAP Financial Measures 52 Driving directions and parking Downtown Bellevue Back Cover Table of contents vi   Part 1 Information about the meeting This Proxy Statement was first mailed to shareholders on or about October 7, 2013. It is furnished in connection with the solicitation of proxies by the Board of Directors of Microsoft Corporation (“Microsoft” or “the Company”) to be voted at the Annual Meeting of Shareholders for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders. The Annual Meeting of Shareholders will be held at 8:00 a.m. Pacific Time on November 19, 2013 at Meydenbauer Center, 11100 NE 6th Street, Bellevue, Washington 98004. Shareholders who execute proxies retain the right to revoke them at any time before the shares are voted by proxy at the meeting. A shareholder may revoke a proxy by delivering a signed statement to our Corporate Secretary at or prior to the Annual Meeting or by timely executing and delivering, by Internet, telephone, mail, or in person at the Annual Meeting, another proxy dated as of a later date. Microsoft will pay the cost of solicitation of proxies. Internet availability of proxy materials We are furnishing proxy materials to our shareholders primarily via the Internet, instead of mailing printed copies of those materials to each shareholder. By doing so, we save costs and reduce the environmental impact of our Annual Meeting. On October 7, 2013, we mailed a Notice of Internet Availability of Proxy Materials to certain of our shareholders. The Notice contains instructions about how to access our proxy materials and vote online or vote by telephone. If you would like to receive a paper copy of our proxy materials, please follow the instructions included in the Notice of Internet Availability of Proxy Materials. If you previously chose to receive our proxy materials electronically, you will continue to receive access to these materials via e-mail unless you elect otherwise. Proof of ownership required for attending meeting in person You are entitled to attend the Annual Meeting only if you are a shareholder as of the close of business on September 13, 2013, the record date, or hold a valid proxy for the meeting. In order to be admitted to the Annual Meeting, you must present proof of ownership of Microsoft stock on the record date. This can be: a brokerage statement or letter from a bank or broker indicating ownership on September 13, 2013, the Notice of Internet Availability of Proxy Materials, a printout of the proxy distribution email (if you received your materials electronically), a proxy card, a voting instruction form, or a legal proxy provided by your broker, bank or nominee. Any holder of a proxy from a shareholder must present the proxy card, properly executed, and a copy of the proof of ownership. Shareholders and proxy holders must also present a form of photo identification such as a driver’s license. We will be unable to admit anyone who does not present identification or refuses to comply with our security procedures. Participation in electronic meeting You may also attend this year’s Annual Meeting of Shareholders via the Internet. The accompanying proxy materials include instructions on how to participate in the meeting and the means by which you may vote your shares of Company stock. To submit your questions during the Annual Meeting, please log on towww.virtualshareholdermeeting.com/MSFT13. You will need to enter the 12-digit control number received with your Notice or Proxy to enter the meeting. 1 Information about the meeting Solicitation of proxies The Board of Directors of Microsoft is soliciting the proxy accompanying this Proxy Statement. Proxies may be solicited by officers, directors, and employees of Microsoft, none of whom will receive any additional compensation for their services. Also, Phoenix Advisory Partners, LLC may solicit proxies at a cost we anticipate will not exceed $15,000. These solicitations may be made personally or by mail, facsimile, telephone, messenger, email, or the Internet. Microsoft will pay persons holding shares of common stock in their names or in the names of nominees, but not owning such shares beneficially, such as brokerage houses, banks, and other fiduciaries, for the expense of forwarding solicitation materials to their principals. Microsoft will pay all proxy solicitation costs. Shareholders of record at the close of business on September 13, 2013 will be entitled to vote at the meeting on the basis of one vote for each share held. On September 13, 2013, there were 8,360,743,755 shares of common stock outstanding, held of record by 119,361 shareholders. Householding To reduce costs and reduce the environmental impact of our Annual Meeting, a single proxy statement and annual report, along with individual proxy cards or individual Notices of Internet Availability, will be delivered in one envelope to certain shareholders having the same last name and address and to individuals with more than one account registered at our transfer agent with the same address, unless contrary instructions have been received from an affected shareholder. Shareholders participating in householding will continue to receive separate proxy cards. If you are a registered shareholder and would like to enroll in this service or receive individual copies of this year’s and/or future proxy materials, please contact our transfer agent, American Stock Transfer & Trust Company, by mail at P.O. Box 2362, New York, NY 10272-2362, by phone at (800) 285-7772, option 1, or by email atmsft@amstock.com. If you are a beneficial shareholder, you may contact the broker or bank where you hold the account. Election of directors Nine directors are to be elected at the Annual Meeting to hold office until the next annual meeting of shareholders, and until their respective successors are elected and qualified. If, for any reason, the directors are not elected at an Annual Meeting, they may be elected at a special meeting of shareholders called for that purpose in the manner provided by the Bylaws of Microsoft Corporation (“Bylaws”). The accompanying proxy will be voted in favor of the nominees presented in Part 3 – “Board of Directors – Our director nominees” to serve as directors unless the shareholder indicates to the contrary on the proxy. All the nominees are current directors. The Board of Directors expects that each of the nominees will be available for election, but if any of them is unable to serve at the time the election occurs, the proxy will be voted for the election of another nominee designated by our Board. Voting procedures Tabulation of votes Our independent election inspector, American Stock Transfer & Trust Company LLC, will tabulate votes cast by proxy or in person at the meeting. We expect to publish the final vote tabulation on our website,www.microsoft.com/investor/votingresults, within one business day after the Annual Meeting. We will also report the results in a Form 8-K filed with the Securities and Exchange Commission (“SEC”) within four business days of the Annual Meeting. Information about the meeting 2 Majority vote standard for election of directors In an uncontested election, each director will be elected by a vote of the majority of the votes cast. A majority of votes cast means the number of shares cast “for” a director’s election exceeds the number of votes cast “against” that director. We will not treat as cast any share (a) whose ballot is marked as withheld, (b) that is otherwise present at the meeting but for which there is an abstention, or (c) a share otherwise present at the meeting as to which a shareholder gives no authority or direction. In a contested election, the directors will be elected by a plurality of the votes cast, meaning the directors receiving the largest number of “for” votes will be elected. A contested election is one in which: as of the last day for giving notice of a shareholder nominee, a shareholder has nominated a candidate for director according to the requirements of our Bylaws and as of the date that notice of the meeting is given, the Board of Directors considers that a shareholder candidacy has created a bona fide election contest. In an uncontested election, a nominee who does not receive a majority vote will not be elected. Except as explained in the next paragraph, an incumbent director who is not elected because he or she does not receive a majority vote will continue to serve as a holdover director until the earliest of: (a) 90 days after the date on which the election inspector determines the voting results as to that director, (b) the date on which the Board of Directors appoints an individual to fill the office held by that director, or (c) the date of that director’s resignation. The Board of Directors may fill any vacancy resulting from the non-election of a director as provided in our Bylaws. The Governance and Nominating Committee will consider promptly whether to fill the office of a nominee who fails to receive a majority vote and make a recommendation to our Board about filling the office. The Board of Directors will act on the Governance and Nominating Committee’s recommendation and within 90 days after certification of the shareholder vote will disclose publicly its decision. Additional details about this process are specified in our Bylaws, which are available on our website atwww.microsoft.com/bylaws. Vote required; effect of abstentions and broker non-votes The shares of a shareholder whose ballot on any or all proposals is marked as “abstain” will be included in the number of shares present at the Annual Meeting to determine whether a quorum is present. If you are the beneficial owner of shares held by a broker or other custodian, you may instruct your broker how to vote your shares through the voting instruction form included with this Proxy Statement. If you wish to vote the shares you own beneficially at the meeting, you must first request and obtain a “legal proxy” from your broker or other custodian. If you choose not to provide instructions or a legal proxy, your shares are referred to as “uninstructed shares.” Whether your broker or custodian has the discretion to vote these shares on your behalf depends on the ballot item. The following table summarizes the votes required for passage of each proposal and the effect of abstentions and uninstructed shares held by brokers. Brokers and custodians can no longer vote uninstructed shares on your behalf in director elections. For your vote to be counted, you must submit your voting instruction form to your broker or custodian.    Proposal     number Item Votes required for approval Abstentions Uninstructed shares     1 Election of directors Majority of shares cast Not voted Not voted   2 Performance criteria under the Executive Officer Incentive Plan Majority of shares cast Not voted Not voted   3 Advisory vote on executive compensation (“Say on Pay”) Majority of shares cast Not voted Not voted   4 Ratification of independent auditor Majority of shares cast Not voted Discretionary vote 3 Information about the meeting For purposes of our majority vote standard for uncontested director elections, the following will not be votes cast: (a) a share whose ballot is marked as withheld, (b) a share otherwise present at the meeting but for which there is an abstention, and (c) a share otherwise present at the meeting as to which a shareholder gives no authority or direction. Vote confidentiality We maintain the confidentiality of the votes of individual shareholders. Ballots, proxy forms, and voting instructions returned to brokerage firms, banks, and other holders of record are kept confidential. Only the proxy solicitor, the proxy tabulator, and the inspector of election have access to the ballots, proxy forms, and voting instructions. The proxy solicitor and the proxy tabulator will disclose information taken from the ballots, proxy forms, and voting instructions only if there is a proxy contest, if the shareholder authorizes disclosure, to defend legal claims, or as otherwise required by law. If you write comments on your proxy card or ballot, management may learn how you voted in reviewing your comments. Where to find more proxy voting information • The SEC website has a variety of information about the proxy voting process atwww.sec.gov/spotlight/proxymatters.shtml. • Contact the Microsoft Investor Relations department through our website atwww.microsoft.com/investor/contacts/default.aspx or by phone at 425.706.4400. • You may view our annual report and vote your shares atwww.proxyvote.com. Contact the broker or bank through which you beneficially own your shares. Other business The Board of Directors does not intend to bring any other business before the Annual Meeting, and so far as is known to our Board, no matters are to be brought before the meeting other than as specified in the notice of meeting. In addition to the scheduled items of business, the meeting may consider other shareholder proposals and matters relating to the conduct of the meeting. As to any other business that may properly come before the meeting, proxies will be voted in accordance with the judgment of the persons voting such proxies. Representatives of Deloitte & Touche LLP (“Deloitte & Touche”), independent auditor for Microsoft for fiscal year 2013 and the current fiscal year, will be present at the Annual Meeting, will have an opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions. Information about the meeting 4   Part 2 Corporate governance at Microsoft Corporate governance principles and practices Corporate governance at Microsoft is used to promote the long-term interests of our shareholders, as well as to maintain internal checks and balances, strengthen management accountability, engender public trust, and foster responsible decision making and accountability. We continue to strengthen existing governance practices and develop new policies that make us a better company. Our Board of Directors periodically reviews evolving legal, regulatory, and best practice developments to determine those that will best serve the interests of our shareholders. Our Corporate Governance Guidelines were most recently updated in July 2013. Highlights of our corporate governance framework include: Board independence Seven of our nine directors are independent of the Company and management. We are committed to maintaining a substantial majority of independent directors. At each quarterly meeting, time is set aside for the independent directors to meet in executive session without Company management present. Additional executive sessions may be held as needed. Per the policy of the Compensation Committee, the compensation consultant retained by the Committee is independent of the Company and management. Chief executive officer, chairman, and lead independent director The roles of chairman and chief executive officer have been separate since 2000. Mr. Gates serves as Chairman and Mr. Ballmer serves as Chief Executive Officer (“CEO”). Mr. Thompson serves as lead independent director. That role is described in this Part 2 under “Board and executive leadership.” Board committee independence and expertise Only independent directors are members of the Audit, Compensation, Governance and Nominating, and Regulatory and Public Policy Committees. All members of the Audit Committee are “audit committee financial experts” under SEC rules. Shareholder authority We have a majority vote standard for director elections. In an uncontested election, directors will be elected by the majority of votes cast. All directors are elected annually; Microsoft does not have a classified board. We have a confidential voting policy to protect our shareholders’ voting privacy. Shareholders representing 25% or more of outstanding shares can call a special shareholders meeting by following the procedural requirements in our Bylaws. Compensation We have an executive compensation recovery policy that applies to executive officers, including our principal accounting officer. This policy, along with other compensation practices that we believe reflect good governance, is described in greater detail in Part 4 – “Named Executive Officer compensation – Compensation discussion and analysis – Other compensation policies and information.” Stock ownership Our Board of Directors has adopted stock ownership policies for directors, executive officers, and other senior executives. The policies were established to promote a long-term perspective in managing the enterprise, and to help align the interests of our shareholders, 5 Corporate governance at Microsoft executives, and directors. For directors, a more complete description of the stock ownership policy appears in Part 3 – “Board of Directors – Director compensation.” For executive officers, a more complete description of the stock ownership and holding requirements appears in Part 4 – “Named Executive Officer compensation – Compensation discussion and analysis – Other compensation policies and information.” Hedging and pledging policy We prohibit our directors and executive officers from hedging their ownership of Microsoft stock, including trading in options, puts, calls, or other derivative instruments related to Company stock or debt. Directors and executive officers are prohibited from purchasing Microsoft stock on margin, borrowing against Microsoft stock held in a margin account, or pledging Microsoft stock as collateral for a loan. Director orientation and continuing education The Governance and Nominating Committee and management are responsible for director orientation programs and for director continuing education programs to assist directors in maintaining skills and knowledge necessary or appropriate for the performance of their responsibilities. Orientation programs are designed to familiarize new directors with Microsoft’s businesses, strategies, and policies and to assist new directors in developing the skills and knowledge required for their service on the Board of Directors. Continuing education programs for directors may include a combination of internally developed materials and presentations, programs presented by third parties, and financial and administrative support for attendance at qualifying academic or other independent programs. Risk oversight The Board is responsible for overseeing risk management at the Company. The Board exercises direct oversight of strategic risks to the Company and other risk areas not delegated to one of its committees. The Audit Committee reviews and assesses the Company’s processes to manage financial reporting risk and to manage investment, tax, and other financial risks. It also reviews the Company’s policies for risk assessment and steps management has taken to control significant risks, except those delegated by the Board to other committees. The Compensation Committee oversees compensation programs and policies and their effect on risk taking by management. The Regulatory and Public Policy Committee oversees operational risks including those related to business continuity, security, privacy, and competition law-related risks. In each case, management periodically reports to the Board or relevant committee, which provides guidance on risk assessment and mitigation. Each committee charged with risk oversight reports up to the Board on those matters. Political contributions • Microsoft recognizes the increasing interest of U.S. public company shareholders in establishing greater transparency about corporate political contributions. Microsoft discloses its political contributions to support candidates and ballot measures as well as how certain of our trade association membership dues are used for political activities. As part of our commitment to transparency, after the U.S. Supreme Court’s decision in theCitizens United case in 2010, Microsoft amended its Principles Guiding Microsoft Participation in the Political Process in the United States to clarify that Microsoft will not make independent political expenditures or electioneering communications as are permitted after the court’s decision. The policy is available atwww.microsoft.com/politicalengagement. Corporate governance at Microsoft 6 Corporate governance guidelines and committee charters Our Corporate Governance Guidelines and the charters of the four standing committees of the Board of Directors describe our governance framework. The Corporate Governance Guidelines and charters are intended to ensure our Board has the necessary authority and practices in place to review and evaluate our business operations and to make decisions that are independent of management. Our Corporate Governance Guidelines also are intended to align the interests of directors and management with those of our shareholders, and comply with or exceed the requirements of the NASDAQ Stock Market (“NASDAQ”) and applicable law. They establish the practices our Board follows with respect to: Board composition and member selection, Board meetings and involvement of senior management, chief executive officer performance evaluation, management succession planning, Board committees, and director compensation. Our Board annually conducts a self-evaluation to assess its adherence to the Corporate Governance Guidelines and committee charters and identify opportunities to improve Board performance. The Board periodically reviews our Corporate Governance Guidelines and committee charters and updates them as necessary to reflect changes in regulatory requirements and evolving oversight practices. Microsoft corporate governance website If you would like additional information about our corporate governance practices, you may view the following documents atwww.microsoft.com/investor/corporategovernance: Corporate Governance Guidelines Director Independence Guidelines Audit Committee Charter and Responsibilities Calendar Compensation Committee Charter Governance and Nominating Committee Charter Regulatory and Public Policy Committee Charter Microsoft Finance Code of Professional Conduct Microsoft Standards of Business Conduct Stock Ownership and Holding Requirements for Microsoft Corporation Executives Executive Compensation Recovery Policy Compensation Consultant Independence Standards Amended and Restated Articles of Incorporation Bylaws We will provide any of the foregoing information without charge upon written request to MSC 123/9999, Office of the Corporate Secretary, Microsoft Corporation, One Microsoft Way, Redmond, WA 98052-6399. Board and executive leadership Since 2000, the roles of chairman and chief executive officer have been held separately. Mr. Gates serves as Chairman and Mr. Ballmer serves as Chief Executive Officer. The Board of Directors does not have a policy as to whether the chairman should be an independent director, an affiliated director, or a member of management. When the chairman is an affiliated director or a member of Company management, or when the independent directors determine that it is in the best interests of the Company, the independent directors will annually appoint a lead independent director. Mr. Thompson has served as lead independent director since November 2012. The lead independent director coordinates the activities of the independent directors, may call meetings of the independent directors, coordinates with the chief executive officer and corporate secretary to set the agenda for Board meetings, chairs executive sessions of the independent directors, is available for consultation with shareholders as appropriate, and performs the other duties specified in the Corporate Governance Guidelines or assigned from time to time by the Board. Our Board believes its current leadership structure is appropriate because it effectively allocates authority, responsibility, and oversight between management and the independent members of our Board. It does this by giving primary responsibility for the operational leadership and strategic direction of the Company to our chief executive officer, while enabling the lead independent director to facilitate our Board’s independent 7 Corporate governance at Microsoft oversight of management, promote communication between management and our Board, and support our Board’s consideration of key governance matters. The Board believes its programs for overseeing risk, as described in this Part 2 under “Risk oversight,” would be effective under a variety of leadership frameworks and therefore do not materially affect its choice of structure. See “Shareholder communication with directors” in this Part 2 for information about how to communicate with the lead independent director. Director independence Our Corporate Governance Guidelines provide that a substantial majority of our directors will be independent. Our Board of Directors has adopted director independence guidelines to assist in determining each director’s independence. These guidelines are available on our website atwww.microsoft.com/investor/independenceguidelines. The guidelines either meet or exceed the independence requirements of NASDAQ. The guidelines identify categories of relationships the Board has determined would not affect a director’s independence, and therefore are not considered by the Board in determining director independence. Under the director independence guidelines, the Board of Directors must affirmatively determine a director has no relationship that would interfere with the exercise of independent judgment in carrying out his or her responsibilities as a director. To facilitate this determination, annually each director completes a questionnaire that provides information about relationships that might affect the determination of independence. Management provides the Governance and Nominating Committee and our Board with relevant facts and circumstances of any relationship bearing on the independence of a director or nominee that is outside the categories permitted under the director independence guidelines. Based on the review and recommendation by the Governance and Nominating Committee, the Board of Directors analyzed the independence of each director and determined that Messrs. Luczo, Marquardt, Noski, and Thompson, Ms. Dublon, and Drs. Panke and Klawe meet the standards of independence under our Corporate Governance Guidelines, the director independence guidelines, and applicable NASDAQ listing standards, including that each member is free of any relationship that would interfere with his or her individual exercise of independent judgment. In making this determination, our Board considered that certain Board members have in the past and may in the future invest in investment funds of which Mr. Marquardt is a general partner or that are managed directly or indirectly by the firm of which Mr. Marquardt is a partner and that the Company may at times invest in businesses in which such funds have invested. The Board also considered the transactions in which the Company purchased software licenses and hardware devices for technology from Virtual Instruments, Inc. that enhances the performance and reliability of the Company’s storage area network resources. The Virtual Instruments solution offers unique functionality which we believe will provide a better return on investment compared to other alternatives evaluated by the Company. Mr. Thompson is the chief executive officer of and has a less-than-10% beneficial interest in Virtual Instruments. In fiscal year 2013, the Company made payments for this technology that were less than 5% of Virtual Instruments’ annual gross revenue. The purchases were negotiated at arms-length between the Virtual Instruments sales account team and the Microsoft business groups that sought to implement the technology. The process for evaluating the Virtual Instruments technology included a technical review by senior management independent of the affected business groups, which concluded that the technology provides unique diagnostic value for optimizing the performance of the storage area networks on which it is being deployed. The Company expects to purchase technology from Virtual Instruments in the future. Shareholder communication with directors Shareholders may contact an individual director, the lead independent director, our Board of Directors as a group, or a specified Board committee or group, including the non-employee directors as a group, by the following means. Email:   AskBoard@microsoft.com Mail:      MSC 123/9999               Office of the Corporate Secretary               Microsoft Corporation               One Microsoft Way               Redmond, WA 98052-6399 Each communication should specify the applicable addressee or addressees to be contacted. Management will initially receive and process communications before forwarding them to the addressee(s). We also may refer communications to other departments in Microsoft. We generally will not forward to the directors a communication that is primarily commercial in nature, relates to an improper or irrelevant topic, or requests general information about Microsoft. Corporate governance at Microsoft 8 Concerns about accounting or auditing matters or possible violations of our Standards of Business Conduct should be reported pursuant to the procedures outlined in the Microsoft Standards of Business Conduct, which is available on our website atwww.microsoft.com/mscorp/legal/buscond. Certain relationships and related transactions We are a global devices and services company with extensive operations in the United States and many foreign countries. Every year we spend tens of billions of dollars for goods and services from third parties. We have approximately 99,000 employees and the authority to purchase goods and services is widely dispersed. Because of these far-reaching activities, there are transactions and business arrangements with businesses and other organizations in which one of our directors, executive officers, or nominees for director, or their immediate families, or a greater than 5% owner of our stock, may also be a director, executive officer, or investor, or have some other direct or indirect material interest. We will refer to these relationships generally as related-party transactions. Related-party transactions have the potential to create actual or perceived conflicts of interest between Microsoft and its directors and executive officers or their immediate family members. The Audit Committee has established a written policy and procedures for review and approval of related-party transactions. If a related-party transaction subject to review directly or indirectly involves a member of the Audit Committee (or an immediate family member or domestic partner), the remaining Committee members will conduct the review. In evaluating a related-party transaction involving a director, executive officer, or their immediate family members, the Audit Committee considers, among other factors: the goods or services provided by or to the related party, the nature of the transaction and the costs to be incurred by Microsoft or payments to Microsoft, the benefits associated with the transaction and whether comparable or alternative goods or services are available to Microsoft from unrelated parties, the business advantage Microsoft would gain by engaging in the transaction, the significance of the transaction to Microsoft and to the related party, and management’s determination that the transaction is in the best interests of the Company. To receive Audit Committee approval, a related-party transaction must have a Microsoft business purpose and be on terms that are fair and reasonable to Microsoft, and as favorable to the Company as would be available from non-related entities in comparable transactions. The Audit Committee also requires that the transaction meet the same Company standards that apply to comparable transactions with unaffiliated entities. As in prior years, during fiscal year 2013 the Company engaged in business transactions with Corbis Corporation, a company that provides digitized images and production services. Mr. Gates is the sole shareholder of Corbis. Microsoft paid Corbis approximately $345,000 in fiscal year 2013 as licensing fees for digital images to be used in Microsoft’s products, services, and marketing materials. Those licenses were entered into at arm’s length, and are similar to license agreements Microsoft enters into from time to time with other providers of digital images. The terms of the Corbis transactions were established by Corbis and the business group at Microsoft seeking to use the digital images. We believe the terms were no less favorable to Microsoft than those offered by Corbis to other large customers. Corbis uses Microsoft software in its business, and paid approximately $288,000 in fiscal year 2013 for software and support under our standard licensing programs. Mr. Gates was not involved in negotiating these agreements or setting price or other terms, either on behalf of Microsoft or Corbis. As described above in this part 2 under “Director Independence,” in fiscal year 2013 the Company paid Virtual Instruments approximately $2.3 million for software licenses and hardware devices for technology that enhances the performance and reliability of the Company’s storage area network resources. The purchases were negotiated at arms-length between the Virtual Instruments sales account team assigned to Microsoft and the business groups that wished to implement the technology. The technology was acquired on terms we believe are at least as favorable to Microsoft as those offered by Virtual Instruments to other large customers. The purchases were initiated before being submitted for Committee review but were reviewed before substantial performance proceeded. The policy contemplates advance notice of the transaction being given. 9 Corporate governance at Microsoft The Audit Committee has reviewed and approved these arrangements. In addition, Mr. Gates has extensive personal holdings in private and public companies where he is not involved in management or daily operations. Microsoft may do business with these companies in the ordinary course. Mr. Gates also owns several business entities that purchase technology consulting services from Microsoft. The business described in this paragraph is conducted at arm’s length on terms that are available to unrelated parties. The business is not material to Microsoft or Mr. Gates. Section 16(a) – Beneficial ownership reporting compliance Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers, and persons who own more than 10% of our common stock to file reports of their ownership and changes in ownership of our common stock with the SEC. Our employees prepare these reports for our directors and executive officers using information obtained from them and from Microsoft’s records. We believe our executive officers met all applicable Section 16(a) filing requirements during fiscal year 2013. Information regarding beneficial ownership of principal shareholders, directors, and management The following table describes, as of September 13, 2013, the beneficial ownership of our common stock by all directors, our chief executive officer, our chief financial officer, our former chief financial officer, and the three other highest paid executive officers for fiscal year 2013, and our directors and all executive officers as a group. In computing the number and percentage of shares beneficially owned by each person, we include any shares of common stock that could be acquired within 60 days of September 13, 2013 by the exercise of options or the vesting of stock awards. These shares, however, are not counted in computing the percentage ownership of any other person. Beneficial ownership table   Name    Amount and  nature of beneficial ownership of common shares as of  9/13/20131      Percent  of class     William H. Gates III      377,989,165 2       4.52%      Steven A. Ballmer      333,252,990         3.99%      Dina Dublon      38,609 3       *      Maria M. Klawe      22,336         *      Stephen J. Luczo      145,082 4       *      David F. Marquardt      677,612 5       *      Charles H. Noski      81,292 6       *      Helmut Panke      41,840         *      John W. Thompson      5,151         *      Peter S. Klein      400         *      Amy E. Hood      71,113 7       *      Kurt D. DelBene      13,921         *      Satya Nadella      113,666         *      B. Kevin Turner      218,520         *      Executive Officers and Directors as a group (19 persons)      714,362,908 8       8.54%      BlackRock, Inc. 40 East 52nd Street New York, NY 10022      468,957,475 9       5.57%    Corporate governance at Microsoft 10 * Less than 1% (1) Beneficial ownership represents sole voting and investment power. (2) Excludes 424,816 shares held by Mr. Gates’ spouse, as to which he disclaims beneficial ownership. (3) Includes 16,738 shares representing deferred stock. (4) Includes 11,582 shares representing deferred stock. (5) Includes an aggregate of 3,975 shares held in trusts for three of Mr. Marquardt’s children. (6) Includes 69,112 shares representing deferred stock. (7) Includes restricted stock units for 44,779 shares that will vest within 60 days of September 13, 2013 (“RSU shares”). (8) Includes 97,432 shares representing deferred stock, 228,738 RSU shares, and 161,460 options to purchase Company stock exercisable within 60 days of September 13, 2013. (9) All information about BlackRock, Inc. is based on a Schedule 13G filed with the SEC on February 11, 2013. 11 Corporate governance at Microsoft   Part 3 Board of Directors Each member of our Board of Directors has been nominated for election at the Annual Meeting to hold office until the next annual meeting of shareholders. Information about their professional backgrounds, qualifications, and other board memberships follows. You can also view our video series featuring members of our Board atwww.microsoft.com/investor/board. Director nominations and qualifications The Governance and Nominating Committee annually reviews with the Board of Directors the applicable skills and characteristics required of Board nominees, considering current Board composition and Company circumstances. In making its recommendations to our Board, the Governance and Nominating Committee considers, among other things, the qualifications of individual director candidates. The Committee retains any search firms and approves payment of their fees. The Governance and Nominating Committee works with our Board to determine the appropriate characteristics, skills, and experiences for the Board as a whole and its individual members with the objective of having a board with diverse backgrounds and experience in business, education, and public service. Characteristics expected of all directors include: independence, integrity, high personal and professional ethics, sound business judgment, and the ability and willingness to commit sufficient time to the Board. In evaluating the suitability of individual Board members, our Board takes into account many factors, including general understanding of marketing, finance, and other disciplines relevant to the success of a large publicly traded company in today’s business environment; understanding of our business and technology; educational and professional background; personal accomplishment; and geographic, gender, age, and ethnic diversity. Our Board evaluates each individual in the context of the Board as a whole, with the objective of recommending a group that can best perpetuate the success of our business and represent shareholder interests through the exercise of sound judgment using its diversity of experience. In determining whether to recommend a director for re-election, the Governance and Nominating Committee considers the director’s past attendance at meetings, participation in and contributions to the activities of the Board, and the results of the most recent Board self-evaluation. The Governance and Nominating Committee assesses the effectiveness of its efforts to maintain an effective and diverse Board of Directors in the course of its regular responsibilities, which include annually reporting to our Board on the performance and effectiveness of the Board, presenting to our Board individuals recommended for election to the Board at the annual shareholders meeting, and obtaining or performing an assessment of the Committee’s own performance. Board of Directors 12 The table below summarizes key qualifications, skills or attributes each of our directors possess that were most relevant to the decision to nominate him or her to serve on the Board of Directors. The lack of a mark does not mean the director does not possess that qualification of skill; rather a mark indicates a specific area of focus or expertise on which the Board relies most heavily. Each director’s bio below describes these qualifications and relevant experience in more detail.    Experience, expertise   or attribute  Ballmer   Gates  Dublon  Klawe   Luczo   Marquardt   Noski   Panke   Thompson    Technology, devices and services • • • • • • •   Leadership • • • • • •   Global business • • • • • • •   Financial • • • • • • • •   Mergers and acquisitions • • • • • • •   Public company board service and governance • • • • • • • • •   Sales and marketing • • • •   Research and academic •   Ethnic, gender, national or other diversity • • • • Director candidates submitted by shareholders The Governance and Nominating Committee will consider shareholder recommendations for candidates for the Board of Directors, using the same criteria described above. The name of any recommended candidate for director, together with a brief biographical sketch, a document indicating the candidate’s willingness to serve if elected, and evidence of the nominating shareholder’s ownership of Company stock must be sent to the attention of MSC 123/9999, Office of the Corporate Secretary, Microsoft Corporation, One Microsoft Way, Redmond, WA 98052-6399. A shareholder who wishes to nominate a candidate must follow the procedures described in Sections 1.3, 1.13, and 1.14 of our Bylaws. 13 Board of Directors Our director nominees Steven A. Ballmer Age 57 Director since 2000 Mr. Ballmer has led several Microsoft divisions during the past 33 years, including operations, operating systems development, and sales and support. In July 1998, he was promoted to President, a role that gave him day-to-day responsibility for running Microsoft. He was named Microsoft’s Chief Executive Officer in January 2000, assuming full management responsibility for the Company. In August 2013 Mr. Ballmer announced that he would be retiring as Chief Executive Officer of Microsoft within the next 12 months. Public company directorships in the last five years: Microsoft Corporation One Microsoft Way Redmond, WA 98052-6399