Activision, Inc. — 2004 Annual Report Management’s Discussion and Analysis of Financial Condition  and Results of Operations Results of Operations—Fiscal Years Ended March 31, 2004 and 2003 Net Revenues Net income for the year ended March 31, 2004 was $77.7 million or $0.54 per diluted share, as compared to $66.2 million or $0.43 per diluted share for the year ended March 31, 2003. We primarily derive revenue from sales of packaged interactive software games designed for play on video game  consoles (such as the PS2, Xbox and GameCube), PCs and hand-held game devices (such as the GBA). We  also derive revenue from our distribution business in Europe that provides logistical and sales services to third-party  publishers of interactive entertainment software, our own publishing operations and third-party manufacturers of inter- active entertainment hardware. Consolidated net revenues increased 10% from $864.1 million for the year ended March 31, 2003 to $947.7  million for the year ended March 31, 2004. This increase was generated by both our publishing and distribution  businesses. The increase in consolidated net revenue was driven by the following: • Strong performance of our fiscal 2004 third quarter releases of  True Crime: Streets of L.A. and  Tony Hawk’s Underground for the PS2, Xbox and GameCube and  Call of Duty for the PC. We continued to see strong sales of these titles through March 2004. In addition, we had strong results from several other titles released during fis- cal 2004 including  Return to Castle Wolfenstein, X2: Wolverine’s Revenge, Cabela’s Dangerous Hunts, Cabela’s Deer Hunt 2004 Season, and in select European markets,  Jedi Knight: Jedi Academy . We also had strong catalog sales from a number of our franchises, including Spider-Man. Catalog sales are sales of titles released prior to the  current fiscal year. • Publishing console net revenues increased by 9% from $466.1 million for the year ended March 31, 2003 to $508.4 million for the year ended March 31, 2004. As expected, within the mix of specific consoles, net  revenues from the sale of software for the prior generation console hardware systems, such as PS1, continued to decline while the net revenues from the sale of software for the current generation of console hardware systems continued to grow. The following table details our consolidated net revenues by business segment and our publishing net revenues by territory for the years ended March 31, 2004 and 2003 (in thousands): Increase/ Percent Year ended March 31, 2004 2003 (Decrease) Change Publishing Net Revenues North America $446,812 $432,261 $14,551 3% Europe 197,300 164,984 32,316 20% Other 21,620 18,730 2,890 15% Total International 218,920 183,714 35,206 19% Total Publishing Net Revenues 665,732 615,975 49,757 8% Distribution Net Revenues 281,924 248,141 33,783 14% Consolidated Net Revenues $947,656 $864,116 $83,540 10% page 20