Activision, Inc. — 2004 Annual Report business strategy. Accordingly, in the future, when we determine that market conditions are appropriate, we may seek to achieve long-term value for the shareholders through, among other things, new debt or equity financings or refinancings, share repurchases and other transactions involving our equity or debt securities. The increase in gross accounts receivable was primarily the result of: Reserves for returns, price protection and bad debt decreased from $57.4 million at March 31, 2003 to $47.0  million at March 31, 2004, primarily due to the strong sell through to end consumers of our key third quarter fiscal 2004 releases. The increase in inventories was driven by our distribution business, primarily the result of: The increase in software development and intellectual property licenses was primarily the result of: Offset by: page 37 • Continued investment in software development and intellectual property licenses. We spent approximately $115.2 million in the year ended March 31, 2004 in connection with the acquisition of publishing or distribution rights for products being developed by third parties, the execution of new license agreements granting us long-term rights to intellectual property of third parties, as well as the capitalization of product development costs relating to internally developed products. • $87.9 million of amortization and write-offs of capitalized software development costs and intellectual prop- erty licenses. • Higher PS2 hardware on hand at March 31, 2004 at our UK distribution facility. • Higher sales in the fourth quarter of fiscal 2004 over the prior year quarter due to the continued strong sales of our key third quarter fiscal 2004 releases,  True Crime: Streets of L.A., Tony Hawk’s Underground and  Call of Duty, and an increase in the number of titles released in the fourth quarter of fiscal 2004 ( Tenchu: Return from Darkness on Xbox and  Pitfall: The Lost Expedition and  MTX: Mototrax on multiple platforms) over the prior year quarter ( Tenchu: Wrath of Heaven on PS2). • A significant increase in business of our UK distribution facility with large, mass-market customers. Large, mass- market customers typically have longer trading terms than smaller, independent accounts. Key Balance Sheet Accounts Accounts Receivable March 31, March 31, Increase/ (Amounts in thousands) 2004 2003 (Decrease) Gross accounts receivable $109,605 $73,178 $36,427 Net accounts receivable 62,577 15,822 46,755 Inventories March 31, March 31, Increase/ (Amounts in thousands) 2004 2003 (Decrease) Inventories $26,427 $19,577 $6,850 Software Development and Intellectual Property Licenses March 31, March 31, Increase/ (Amounts in thousands) 2004 2003 (Decrease) Software development and intellectual property licenses $135,201 $107,921 $27,280