UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.               )

Adobe Systems Incorporated
345 Park Avenue
San Jose, California 95110-2704

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held March 28, 2006

Dear Stockholders:

You are cordially invited to attend our 2006 Annual Meeting of Stockholders to be held on March 28, 2006 at 3:00 p.m. at our headquarters located at 321 Park Avenue, San Jose, California 95110 in the East Tower. We are holding the meeting to:

1.                Elect six Class I members of our Board of Directors to serve for a two-year term;

2.                Approve amendments to the Amended 1994 Performance and Restricted Stock Plan to enable compensation paid under the plan to qualify as deductible performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended;

3.                Approve the Executive Cash Performance Bonus Plan to permit the payment of cash bonuses that will qualify as deductible performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended;

4.                Ratify the appointment of KPMG LLP as our independent registered public accounting firm for our fiscal year ending on December 1, 2006; and

5.                Transact any other business that may properly come before the meeting.

If you owned our common stock at the close of business on Monday, February 13, 2006, you may attend and vote at the meeting. If you cannot attend the meeting, you may vote by telephone or by using the Internet as instructed on the enclosed proxy card or by mailing the proxy card in the enclosed postage-paid envelope. Any stockholder attending the meeting may vote in person, even if you have already returned a proxy card. A list of stockholders eligible to vote at the meeting will be available for review during our regular business hours at our headquarters in San Jose for the ten days prior to the meeting for any purpose related to the meeting.

We look forward to seeing you at the meeting.

February 24, 2006
San Jose, California

As promptly as possible, please vote by telephone or by using the Internet as instructed on the enclosed proxy card or complete, sign and date the proxy card and return it in the enclosed postage-paid envelope.

ADOBE SYSTEMS INCORPORATED

Proxy Statement
for
Annual Meeting of Stockholders
To Be Held March 28, 2006

TABLE OF CONTENTS

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ADOBE SYSTEMS INCORPORATED

PROXY STATEMENT

INFORMATION CONCERNING SOLICITATION AND VOTING

Our Board of Directors is soliciting proxies for our Annual Meeting of Stockholders to be held March 28, 2006. This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the meeting. Please read it carefully.

Voting materials, which include the proxy statement, proxy card and our 2005 Annual Report to Stockholders, will be mailed to stockholders on or about February 24, 2006. Our principal executive offices are located at 345 Park Avenue, San Jose, California 95110. Our telephone number is (408) 536-6000.

We will bear the expense of soliciting proxies. In addition to these mailed proxy materials, our directors and employees (who will receive no compensation in addition to their regular salaries) may also solicit proxies in person, by telephone or by other means of communication. We have also hired Innisfree M&A, Incorporated to help us solicit proxies from brokers, bank nominees and other institutional owners. We expect to pay Innisfree a fee of $6,500 for its services and will reimburse Innisfree for reasonable out-of-pocket expenses, estimated at about $15,000. We will reimburse banks, brokers and other custodians, nominees and fiduciaries for reasonable charges and expenses incurred in forwarding soliciting materials to their clients.

QUESTIONS AND ANSWERS

Q:             Who may vote at the meeting?

A:               Our Board set February 13, 2006, as the record date for the meeting. If you owned our common stock at the close of business on February 13, 2006, you may attend and vote at the meeting. Each stockholder is entitled to one vote for each share of common stock held on all matters to be voted on. On February 13, 2006, 601,307,315 shares of our common stock were outstanding.

Q:             What is the quorum requirement for the meeting?

A:               A majority of our outstanding shares as of the record date must be present at the meeting in order to hold the meeting and conduct business. This is called a quorum.

Shares are counted as present at the meeting if you:

·       are present and entitled to vote in person at the meeting; or

·       have properly submitted a proxy card or voted by telephone or by using the Internet.

If you abstain from voting on any or all proposals, your shares are still counted as present and entitled to vote.

Each proposal identifies the votes needed to approve or ratify the proposed action.

Q:             What proposals will be voted on at the meeting?

A:               There are four proposals scheduled to be voted on at the meeting:

·       Election of the six Class I members of the Board of Directors;

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·       Approval of amendments to the Amended 1994 Performance and Restricted Stock Plan;

·       Approval of the Executive Cash Performance Bonus Plan; and

·       Ratification of KPMG LLP as our independent registered public accounting firm.

We will also consider other business that properly comes before the meeting.

Q:             How may I vote my shares in person at the meeting?

A:               If your shares are registered directly in your name with our transfer agent, Computershare Investor Services LLC, you are considered, with respect to those shares, the shareowner of record, and the proxy materials, including a proxy card, are being sent directly to you. As the shareowner of record, you have the right to vote in person at the meeting. If your shares are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in street name, and the proxy materials are being forwarded to you with a voting instruction card. As the beneficial owner, you are also invited to attend the annual meeting. Since a beneficial owner is not the shareowner of record, you may not vote these shares in person at the meeting unless you obtain a “legal proxy” from your broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the meeting.

Q:             How can I vote my shares without attending the meeting?

A:               Whether you hold shares directly as a registered shareowner of record or beneficially in street name, you may vote without attending the meeting. You may vote by granting a proxy or, for shares held in street name, by submitting voting instructions to your stockbroker, trustee or nominee. In most cases, you will be able to do this by telephone, by using the Internet or by mail. Please refer to the summary instructions included with your proxy materials and on your proxy card. For shares held in street name, the voting instruction card will be included by your stockbroker, trustee or nominee.

BY TELEPHONE OR THE INTERNET   - If you have telephone or Internet access, you may submit your proxy by following the instructions with your proxy materials and on your proxy card.

BY MAIL   - You may submit your proxy by mail by signing your proxy card or, for shares held in street name, by following the voting instruction card included by your stockbroker, trustee or nominee and mailing it in the enclosed, postage-paid envelope. If you provide specific voting instructions, your shares will be voted as you have instructed.

Q:             How can I change my vote after I return my proxy card?

A:               You may revoke your proxy and change your vote at any time before the final vote at the meeting. You may do this by signing and submitting a new proxy card with a later date, voting by telephone or by using the Internet (your latest telephone or Internet proxy is counted) or by attending the meeting and voting in person. Attending the meeting alone will not revoke your proxy unless you specifically request your proxy to be revoked.

Q:             Where can I find the voting results of the meeting?

A:               The preliminary voting results will be announced at the meeting. The final results will be published in our quarterly report on Form 10-Q for the second quarter of fiscal 2006.

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PROPOSAL 1
ELECTION OF DIRECTORS

General

We currently have 11 members on our Board, which is divided into two classes (Class I and Class II) with alternating two-year terms. Proxy holders will vote for the six Class I nominees listed below to serve a two-year term ending in 2008. The accompanying proxy will be voted for the nominees to serve as directors unless you indicate to the contrary on the proxy card. The six Class I nominees receiving the most “FOR” votes will be elected. Abstentions have no effect on the vote. The members of our Board who are Class II Directors will be up for election in 2007. There are no family relationships among our directors or executive officers.

Each of the nominees listed below is currently a director of Adobe. On September 1, 2005, our Board approved an increase in the size of the Board pursuant to our certificate of incorporation and our bylaws. Edward W. Barnholt was appointed to our Board on September 1, 2005, to fill the vacancy created by such increase. All other Class I nominees have previously been elected by the stockholders. If any nominee is unable or declines to serve as a director, our current Board may designate another nominee to fill the vacancy and the proxy will be voted for that nominee. The term of each person elected as a Class I Director will continue until the Annual Meeting of Stockholders to be held in 2008 and until his or her successor has been elected and qualified, or until the director’s death, resignation or removal.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR ALL” NOMINEES

The following tables set forth the name and age of each nominee and each director of Adobe whose term of office continues after the meeting, the principal occupation of each during the past five years, and the year each began serving as a director of Adobe:

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Independence of Directors

As required under The NASDAQ Stock Market’s listing standards, a majority of the members of our Board must qualify as “independent,” as affirmatively determined by the Board. The Board consults with our legal counsel to ensure that the Board’s determinations are consistent with all relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in pertinent listing standards of NASDAQ.

Consistent with these considerations, after review of all relevant transactions and relationships between each director, or any of his or her family members, and Adobe, our executive officers and our independent registered public accounting firm, the Board has affirmatively determined that the majority of our Board is comprised of  independent directors. Our independent directors include:  Mr. Barnholt, Mr. Cannon, Mr. Daley, Dr. Geschke, Ms. Mills, Ms. Pouliot, Dr. Sedgewick, Dr. Warnock and Mr. Yocam.

Meetings of the Board and Committees

The Board held 13 meetings and its four standing Committees collectively held a total of 28 meetings in fiscal 2005. Of the meetings held during the fiscal year, each director attended at least 75% of the meetings (held during the period that such director served) of the Board and Committees on which such director serves. During fiscal 2005, the Board had an Audit Committee, Executive Compensation Committee, Investment Committee and Nominating and Governance Committee. Effective fiscal 2006, the Investment Committee was dissolved and its duties and responsibilities were assumed by the Board. We encourage members of the Board to attend our annual meetings of stockholders.  Six of our Board members attended last year’s meeting.

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The following table sets forth the four standing Committees of our Board for fiscal 2005, the members of each Committee during the fiscal year and the number of meetings held by our Board and the Committees:

Membership Roster(1)

(1)          Reflects roster for fiscal 2005. For fiscal 2006, membership on the Committees consists of the following:

(2)          Mr. Barnholt was appointed to our Board on September 1, 2005. He was designated a Class I director. He was appointed to our Executive Compensation Committee and Nominating and Governance Committee effective December 3, 2005.

(3)          Mr. Burgess was appointed to our Board on December 3, 2005. He was designated a Class II director.

(4)          Denotes chairperson of Board or respective Committee.

(5)          Ms. Mills served on the Investment Committee until January 2005.

The Audit Committee’s role includes the oversight of our financial, accounting and reporting processes, our system of internal accounting and financial controls and our compliance with related legal and regulatory requirements, the appointment, engagement, termination and oversight of our independent registered public accounting firm, including conducting a review of their independence, reviewing and approving the planned scope of our annual audit, overseeing our independent registered public accounting firm’s audit work, reviewing and pre-approving any audit and non-audit services that may be performed by them, reviewing with management and our independent registered public accounting firm the adequacy of our internal financial and disclosure controls, reviewing our critical accounting policies and the application of accounting principles, monitoring the rotation of partners of our independent registered public accounting firm on our audit engagement team as required by law, establishing procedures, as required under applicable law, for the receipt, retention and treatment of complaints received by us regarding

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accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters, and meeting to review our annual audited financial statements and quarterly financial statements with management and our independent registered public accounting firm. See “Report of the Audit Committee” contained in this proxy statement. Each member of the Audit Committee meets the independence criteria prescribed by applicable law and the rules of the Securities and Exchange Commission (the “SEC”) for audit committee membership and is an “independent director” within the meaning of applicable NASDAQ listing standards. Each Audit Committee member meets the NASDAQ’s financial literacy requirements, and the Board has further determined that Mr. Daley (i) is an “audit committee financial expert” as such term is defined in Item 401(h) of Regulation S-K promulgated by the SEC and (ii) also meets the NASDAQ’s professional experience requirements. The Audit Committee acts pursuant to a written charter, which complies with the applicable provisions of the Sarbanes-Oxley Act of 2002 and related rules of the SEC and NASDAQ. A copy of the Audit Committee charter can be found on our website at www.adobe.com/aboutadobe/invrelations/corpgovern.html.

The Executive Compensation Committee sets and administers the policies governing the annual compensation of our executive officers, including cash and non-cash compensation and equity compensation programs. See “Report of the Executive Compensation Committee” contained in this proxy statement. The Executive Compensation Committee also reviews and approves equity-based compensation grants to our non-officer employees and consultants, other than stock option grants to our non-officer employees, which are approved by a Management Committee appointed by the Executive Compensation Committee consisting of our Chief Executive Officer and Senior Vice President, Human Resources. The Executive Compensation Committee is also responsible for oversight of our overall compensation plans and benefit programs. The members of the Executive Compensation Committee are all independent directors within the meaning of applicable NASDAQ listing standards. The Executive Compensation Committee acts pursuant to a written charter, a copy of which can be found on our website at www.adobe.com/aboutadobe/invrelations/corpgovern.html.

The Investment Committee evaluates the advisability of Adobe’s investing in outside-managed venture capital funds and direct investments by Adobe, focusing on startup companies in businesses strategically related to our markets and technology. The Investment Committee monitors the performance of our direct investments and performs any tasks required in our role as a limited partner in our venture capital limited partnerships, which invest in early stage companies. Effective fiscal 2006, the Investment Committee was dissolved and its duties and responsibilities were assumed by the Board.

The Nominating and Governance Committee’s primary purpose is to evaluate candidates for membership on our Board and make recommendations to our Board regarding candidates, make recommendations with respect to the composition of our Board and the Committees, make recommendations concerning Board and Committee compensation, review and make recommendations regarding the functioning of our Board as an entity, recommend corporate governance principles applicable to Adobe and assist our Board in its reviews of the performance of our Board and each Committee. The Nominating and Governance Committee also reviews and approves all related-party transactions between Adobe and our executive officers and directors and assists our Board in reviewing and assessing management development and succession planning for executive officers. The members of our Nominating and Governance Committee are all independent directors within the meaning of applicable NASDAQ listing standards. The Nominating and Governance Committee operates pursuant to a written charter, a copy of which can be found on our website at www.adobe.com/aboutadobe/invrelations/corpgovern.html.

In carrying out its function to nominate candidates for election to our Board, the Nominating and Governance Committee consider the mix of skills, experience, character, commitment, and diversity of background, all in the context of the requirements of our Board at that point in time. The Nominating and

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Governance Committee believes that each candidate should be an individual who has demonstrated integrity and ethics in such candidate’s personal and professional life, has an understanding of elements relevant to the success of a publicly-traded company and has established a record of professional accomplishment in such candidate’s chosen field. Each candidate should be prepared to participate fully in Board activities, including attendance at, and active participation in, meetings of the Board, and not have other personal or professional commitments that would, in the Nominating and Governance Committee’s judgment, interfere with or limit such candidate’s ability to do so. Each candidate should also be prepared to represent the best interests of all of our stockholders and not just one particular constituency. Additionally, in determining whether to recommend a director for re-election, the Nominating and Governance Committee also considers the director’s past attendance at Board and Committee meetings and participation in and contributions to the activities of our Board. The Nominating and Governance Committee has no stated specific, minimum qualifications that must be met by a candidate for a position on our Board. The Nominating and Governance Committee does, however, believe it appropriate for at least one member of our Board to meet the criteria for an “audit committee financial expert” as defined by SEC rules, and that a majority of the members of our Board meet the definition of “independent director” within the meaning of applicable NASDAQ listing standards.

The Nominating and Governance Committee’s methods for identifying candidates for election to our Board include the solicitation of ideas for possible candidates from a number of sources—members of our Board; our executives; individuals personally known to the members of our Board; and other research. The Nominating and Governance Committee may also from time to time retain for a fee one or more third-party search firms to identify suitable candidates. Mr. Barnholt, one of our directors nominated for election this year, was appointed by our Board in September 2005, to fill a newly-created Board vacancy and has not been previously elected by the stockholders. Mr. Barnholt was recommended by a third-party search firm retained by the Nominating and Governance Committee.

Any of our stockholders may nominate one or more persons for election as a director of Adobe at an annual meeting of stockholders if the stockholder complies with the notice, information and consent provisions contained in our bylaws. In addition, the notice must include any other information required pursuant to Regulation 14A under the Securities Exchange Act of 1934. In order for the director nomination to be timely for our Annual Meeting of Stockholders to be held in 2007, a stockholder’s notice to Adobe’s Secretary must be delivered to our principal executive offices not later than October 27, 2006. Our bylaws specify additional requirements if stockholders wish to nominate directors at special meetings of stockholders.

The Nominating and Governance Committee will consider all candidates identified through the processes described above, and will evaluate each of them, including incumbents, based on the same criteria.

Communications with the Board of Directors

Any stockholder who desires to contact our Board or specific members of our Board may do so electronically by sending an email to the following address: directors@adobe.com. Alternatively, a stockholder can contact our Board or specific members of our Board by writing to: Stockholder Communications, Adobe Systems Incorporated, 345 Park Avenue, San Jose, California 95110-2704 USA.

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PROPOSAL 2
APPROVAL OF
AMENDMENTS TO THE
AMENDED 1994 PERFORMANCE AND RESTRICTED STOCK PLAN

Our Board approved the adoption of our 1989 Restricted Stock Plan in February 1989, and our stockholders subsequently approved such adoption in March 1989. Our Board, with stockholder approval, has subsequently amended the 1989 Restricted Stock Plan (subsequently renamed the Amended 1994 Performance and Restricted Stock Plan) from time to time to increase the number of shares authorized (the “1994 Plan”).

In September 2005, our Board further amended the 1994 Plan, subject to stockholder approval, to modify the performance factors and performance period in connection with performance awards. Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), limits the deductibility of annual compensation for federal income tax purposes to $1 million per “covered employee” within the meaning of Section 162(m) of the Code, unless such compensation qualifies as “performance-based compensation” under Section 162(m) of the Code. The 1994 Plan is being submitted to the stockholders for approval, in its amended form, in order to continue to qualify awards paid to covered employees under the 1994 Plan as “performance-based compensation.”

Vote Required and Board Recommendation

Approval of the amendments to the 1994 Plan requires the affirmative vote of holders of a majority of the shares present or represented by proxy and entitled to vote at the meeting. Abstentions will have the same effect as a negative vote. Broker non-votes will have no effect on the outcome of this proposal.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THIS PROPOSAL

Summary of the 1994 Plan Terms

The following summary of the 1994 Plan is qualified in its entirety by the specific language of the 1994 Plan, a copy of which has been filed with the SEC with this proxy statement.

General.   The purpose of the 1994 Plan is to provide an incentive program to attract, retain and reward our employees and to motivate such persons to contribute to the financial success and progress of Adobe. We may provide these incentives through the grant of performance-based restricted stock, restricted stock, performance shares or performance units.

Shares Subject To Plan.   Subject to adjustment as described below, the maximum number of shares of common stock that may be issued under the 1994 Plan is 16,000,000 (reflecting common stock splits on October 26, 1999, October 24, 2000 and May 23, 2005). We are not asking you to approve an additional share increase. As of February 13, 2006, a total of 5,189,183 shares remain available for grant. The closing price of our common stock, as reported on the NASDAQ National Market on February 13, 2006, was $38.19 per share. If an award expires or is cancelled, terminated or paid in cash, or if shares subject to an award are forfeited, the shares subject to such award or such forfeited shares are returned to the 1994 Plan and become available for future awards. In the event of a stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification or similar change in our capital structure, appropriate adjustments will be made to the shares subject to the 1994 Plan and to any outstanding awards denominated in shares of stock.

Administration.   The 1994 Plan is administered by two committees duly appointed by our Board, specifically the Executive Compensation Committee and the Management Committee. The Management Committee, consisting of our Chief Executive Officer and Senior Vice President, Human Resources, is authorized by our Board to grant awards to eligible participants who are not executive officers. With

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respect to eligible participants who are executive officers, the 1994 Plan will be administered by the Executive Compensation Committee, which consists of at least two directors, each of whom is both a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act and an “outside director” for purposes of Section 162(m) of the Code. For purposes of this summary, the term “Committee” will refer to either such duly appointed Committee.

The Committee has the authority to select persons to receive awards from among the eligible employees, determine the types and sizes of awards, and set the terms and conditions of each award consistent with the terms of the 1994 Plan. In addition, the 1994 Plan authorizes the Committee to amend any award, waive any restrictions or conditions on an award, accelerate the vesting of any award, and determine whether an award will be paid in cash or in shares of our common stock. The Committee may establish rules and policies for administration of the 1994 Plan and adopt one or more forms of agreement to evidence awards made under the 1994 Plan. The Committee interprets the 1994 Plan and any agreement used under the 1994 Plan, and all determinations of the Committee will be final and binding on all persons having an interest in the 1994 Plan or any award granted under the 1994 Plan.

Eligibility.   Employees of Adobe or of any present or future parent or subsidiary corporation are eligible to participate in the 1994 Plan. As of February 13, 2006, we had a total of 5,336 employees, including six executive officers, who are eligible to participate in the 1994 Plan.

Performance Awards.   The Committee may grant performance awards which are performance-based restricted stock, performance shares or performance units. A participant awarded performance-based restricted stock receives shares of common stock subject to forfeiture to the extent that the applicable performance goals are not met within a performance period, while a participant awarded performance shares or performance units is credited with bookkeeping units denominated in shares of common stock or dollar amounts, respectively, for which payment will be made following the end of the performance period to the extent that the applicable performance goals are met. A performance period is a period established by the Committee, at the end of which the degree of attainment of the performance goals is measured. The 1994 Plan, prior to its most recent amendment, provided that a performance period was three consecutive fiscal years. Performance awards are evidenced by written agreements, in a form established by the Committee, specifying a predetermined number of shares of common stock or the dollar amount covered, the performance goals established by the Committee, the period in which such goals are to be met and the other terms, conditions and restrictions of the performance award. No monetary payment is required as a condition of receiving a performance award. Performance awards may be settled in cash, shares of our common stock (including shares of restricted stock) or any combination thereof. Subject to appropriate adjustment in the event of any change in our capital structure, we may not grant performance shares to any one participant that could result in the participant receiving more than 1,600,000 shares of common stock (reflecting common stock splits on October 26, 1999, October 24, 2000 and May 23, 2005) with respect to any performance period or performance units to any one participant that could result in the participant receiving more than $10,000,000 with respect to any performance period. A participant may receive only one performance award with respect to any performance period.

No later than the earlier of (i) the date 90 days after the commencement of the applicable performance period or (ii) the date on which 25% of the performance period has elapsed, and, in any event, at a time when the outcome of the performance goals remains substantially uncertain, or such later date as permitted under Section 162(m) of the Code, the Committee will establish one or more performance goals applicable to the performance award in accordance with a formula or a table that provides the basis for computing the value of a performance award. Once established, the performance goals shall not be changed during the performance period. The performance goals will be based on the attainment of specified levels with respect to one or more measures of our business or financial performance and of each parent and subsidiary corporation consolidated with our results for financial reporting purposes, or such division or business unit of ours as may be selected by the Committee. Under

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the 1994 Plan, prior to its most recent amendment, the Committee, in its discretion, could base performance goals on one or more of the following measures: growth in revenue; operating margin; total return on shares of our common stock relative to the increase in an appropriate index selected by the Committee; earnings per share; return on stockholder equity; return on assets; and cash flow, as indicated by book earnings before interest, taxes, depreciation and amortization. The 1994 Plan, as amended, adds the following measures for performance goals: growth in market price of our common stock; gross margin; operating income; pre-tax profit; earnings before interest, taxes and depreciation; net income; return on net assets; expenses; return on capital; economic value added; and market share. The performance goals applicable to a performance award shall be calculated in accordance with generally accepted accounting principles, but prior to the accrual or payment of any performance award for the same performance period and excluding the effect (whether positive or negative) of any change in accounting standards or any extraordinary, unusual or nonrecurring item, as determined by the Committee, occurring after the establishment of the performance goals applicable to the performance award.

As soon as practicable following the completion of the applicable performance period, the Committee will certify in writing the extent to which the applicable performance goals have been attained and the resulting value to be paid to the participant in accordance with the performance award formula. The Committee retains the discretion to eliminate or reduce, but not increase, the amount that would otherwise be payable on the basis of the performance goals attained to a participant who is a covered employee. However, no such reduction may increase the amount paid to any other participant. The Committee may make positive or negative adjustments to performance award payments to participants other than covered employees to reflect the participant’s individual job performance or other factors determined by the Committee. Under the 1994 Plan, prior to its most recent amendment, the Committee only had discretion to make negative adjustments. Unless otherwise provided in the award agreement, performance award payments shall be made in a lump sum. If any payment is to be made on a deferred basis, the Committee may provide for the payment of dividend equivalents or interest during the deferral period. No performance award may be sold or transferred other than by will or the laws of descent and distribution prior to the end of the applicable performance period.

Unless otherwise required by law, payment of the final value, if any, of a performance award held by a participant who has taken in excess of 30 days of leaves of absence during a performance period shall be prorated on the basis of the number of days of the participant’s service during the performance period during which the participant was not on a leave of absence. The effect of a participant’s termination of service on the participant’s performance award shall be as determined by the Committee, in its discretion, and set forth in the award agreement. The 1994 Plan, prior to its most recent amendment, did not specifically address the situations of leave of absence and termination of service.

Restricted Stock.   The Committee may also issue shares of common stock without monetary payment pursuant to a restricted stock award. The award will typically provide for the forfeiture of shares in the event the participant’s employment with Adobe is terminated for any reason prior to the end of one or more vesting periods. Typically, shares of restricted stock become vested and nonforfeitable in annual and/or monthly installments over a number of years. However, the Committee has the discretion to waive vesting requirements in full or in part. No monetary payment is required as a condition of receiving restricted stock. A participant may not transfer shares of restricted stock until they have become vested.

Rights as a Stockholder.   A participant will have no rights as a stockholder with respect to an award of performance shares or performance units under the 1994 Plan until shares of common stock are issued to the participant. Participants issued shares of common stock pursuant to an award of performance-based restricted stock or restricted stock may vote such shares. However, with respect to such shares, the Committee, in its sole discretion, may provide either for the current payment of dividends or the accumulation and payment of dividends to the extent that such shares become nonforfeitable. In the discretion of the Committee, participants awarded performance shares may be paid dividend equivalents,

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which may be accumulated and paid to the extent that the performance shares become nonforfeitable. Dividend equivalents will not be paid with respect to performance units.

Change of Control.   In the event of a change of control of Adobe, in order to preserve participants’ rights under awards granted under the 1994 Plan: (i) outstanding performance awards, based on the target amount that may be earned under the award agreement, will be paid pro rata to the portion of the performance period elapsed prior to the occurrence of the change of control, and (ii) restricted stock will become nonforfeitable. A change of control will occur in the event of (i) the direct or indirect sale or exchange of all or substantially all of Adobe’s stock in which the stockholders of Adobe do not retain at least a majority of the voting stock of Adobe, (ii) a merger or consolidation in which Adobe is not the surviving corporation or in which the stockholders do not retain at least a majority of the voting stock of Adobe, (iii) the sale, exchange or transfer of all or substantially all of the assets of Adobe (other than to one or more subsidiary corporations of Adobe), or (iv) a liquidation or dissolution of Adobe.

Termination or Amendment.   Unless earlier terminated by the Committee, the 1994 Plan will continue until all of the shares subject to the 1994 Plan have been issued and all restrictions on shares awarded under the 1994 Plan have lapsed. The Committee may terminate or amend the 1994 Plan or any award thereunder at any time. However, no such termination or amendment may adversely affect any outstanding award without the participant’s consent, unless necessary to comply with any law or governmental regulation.

Summary of Federal Income Tax Consequences of the 1994 Plan

The following summary is intended only as a general guide to the U.S. federal income tax consequences under current law of participation in the 1994 Plan and does not attempt to describe all possible federal or other tax consequences of such participation or tax consequences based on particular circumstances. Furthermore, the tax consequences are complex and subject to change, and a taxpayer’s particular situation may be such that some variation of the described rules is applicable.

Performance Awards.   A participant generally will recognize no income upon the grant of a performance share or performance unit award. Upon the settlement of such awards, participants normally will recognize ordinary income in the year of receipt in an amount equal to the cash received and the fair market value of any unrestricted shares received. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. If the participant receives shares of performance-based restricted stock, the participant generally will be taxed in the same manner as described under “Restricted Stock” below. Upon the sale of any shares received, any gain or loss, based on the difference between the sale price and the fair market value on the “determination date” (as defined below), will be taxed as capital gain or loss. The “determination date” is the date on which the participant acquires the shares unless they are subject to a substantial risk of forfeiture and are not transferable, in which case the determination date is the earlier of (i) the date on which the shares become transferable or (ii) the date on which the shares are no longer subject to a substantial risk of forfeiture. If the determination date is after the date on which the participant acquires the shares, the participant may elect, pursuant to Section 83(b) of the Code, to have the date of acquisition be the determination date by filing an election with the Internal Revenue Service no later than 30 days after the date the shares are acquired. We generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant on the determination date, except to the extent such deduction is limited by applicable provisions of the Code.

Restricted Stock.   A participant acquiring restricted stock generally will recognize ordinary income equal to the difference between the fair market value of the shares on the determination date and their purchase price, if any. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of shares acquired pursuant to a restricted

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stock award, any gain or loss, based on the difference between the sale price and the fair market value on the determination date, will be taxed as capital gain or loss. We generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant on the determination date, except to the extent such deduction is limited by applicable provisions of the Code.

Performance awards under the 1994 Plan are made at the discretion of the Committee. As of February 13, 2006, no performance awards have been made to any covered employee under the 1994 Plan. See “Report of the Executive Compensation Committee—Compensation Components” for a description of performance awards granted in fiscal 2006 to covered employees under our 2003 Equity Incentive Plan (the “2003 Plan”).

PROPOSAL 3
APPROVAL OF
THE EXECUTIVE CASH PERFORMANCE BONUS PLAN

In February 2006, our Executive Compensation Committee unanimously approved, subject to stockholder approval, the Executive Cash Performance Bonus Plan (the “Executive Bonus Plan”) and the Board directed that the Executive Bonus Plan be submitted to our stockholders at this meeting. Stockholder approval of the Executive Bonus Plan will allow bonuses paid under it to covered employees to qualify as deductible “performance-based compensation” within the meaning of Section 162(m) of the Code.

Vote Required and Board Recommendation

Approval of the Executive Bonus Plan requires the affirmative vote of holders of a majority of the shares present or represented by proxy and entitled to vote at the meeting. Abstentions will have the same effect as a negative vote. Broker non-votes will have no effect on the outcome of this proposal.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THIS PROPOSAL

Summary of the Executive Bonus Plan

The following paragraphs provide a summary of the principal features of the Executive Bonus Plan. This summary does not purport to be complete and is subject to, and qualified in its entirety by, the provisions of the Executive Bonus Plan, a copy of which has been filed with the SEC with this proxy statement.

General.   The purpose of the Executive Bonus Plan is to motivate eligible employees to achieve goals relating to the performance of Adobe or one of our business units or other objectively determinable goals, and to reward them when those objectives are satisfied, thereby increasing stockholder value and the success of Adobe. If certain requirements are satisfied, bonuses awarded under the Executive Bonus Plan to covered employees will qualify as deductible “performance-based compensation” within the meaning of Section 162(m) of the Code.

Eligibility.   Participants in the Executive Bonus Plan are members of senior management of Adobe who are chosen solely at the discretion of the Executive Compensation Committee. As of February 13, 2006, no participants had been chosen to participate in the Executive Bonus Plan. If the Executive Bonus Plan is approved by stockholders, the first participants in the Executive Bonus Plan will be chosen for participation for fiscal 2007. No person is automatically entitled to participate in the Executive Bonus Plan in any Executive Bonus Plan year. Adobe may also pay discretionary bonuses, or other types of compensation, outside of the Executive Bonus Plan. See “Report of the Executive Compensation Committee—Compensation Components” for a description of our corporate profit sharing plan and cash incentive bonus under our Adobe Executive Annual Incentive Plan for fiscal 2005 and 2006.

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Administration.   The Executive Bonus Plan will be administered by the Executive Compensation Committee, which consists of at least two directors, each of whom is both a “non-employee director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 and an “outside director” for purposes of Section 162(m) of the Code. The Executive Compensation Committee shall be responsible for the general administration and interpretation of the Plan and for carrying out its provisions. The Executive Compensation Committee has the authority to select persons to receive awards from among the eligible employees and set the terms and conditions of each award consistent with the terms of the Executive Bonus Plan. The Executive Compensation Committee may establish rules and policies for administration of the Executive Bonus Plan and adopt one or more forms of agreement to evidence awards made under the Executive Bonus Plan. The Executive Compensation Committee interprets the Executive Bonus Plan and any agreement used under the Executive Bonus Plan, and all determinations of the Executive Compensation Committee that are not inconsistent with the Executive Bonus Plan will be final and binding on all persons.

Determination of Awards.   Under the Executive Bonus Plan, participants will be eligible to receive cash awards based upon the attainment and certification of certain performance goals established by the Executive Compensation Committee over the applicable performance period. The performance goals that may be selected by the Executive Compensation Committee include one or more of the following:  growth in revenue; growth in the market price of stock; operating margin; gross margin; operating income; pre-tax profit; earnings before interest, taxes and depreciation; earnings before interest, taxes, depreciation and amortization; net income; total return on shares of stock relative to the increase in an appropriate index as may be selected by the Executive Compensation Committee; earnings per share; return on stockholder equity; return on net assets; expenses; return on capital; economic value added; market share; operating cash flow; cash flow, as indicated by book earnings before interest, taxes, depreciation and amortization; cash flow per share; customer satisfaction; implementation or completion of projects or processes; improvement in or attainment of working capital levels; stockholders’ equity; and other measures of performance selected by the Executive Compensation Committee.

The performance goals may be based on absolute target numbers or growth in one or more such categories compared to a prior period, and may differ for each participant. The performance goals may also, as the Executive Compensation Committee specifies, either include or exclude the effect of payment of the bonuses under the Executive Bonus Plan or any other bonus plans of Adobe. Performance goals may apply to Adobe or to one of our business units. Any performance goals that are not specifically described above must relate to a goal that is objectively determinable within the meaning of Section 162(m) of the Code.

Our Executive Compensation Committee may provide that attainment of a performance goal shall be measured by adjusting the evaluation of performance as follows: to exclude restructuring and/or other nonrecurring charges; to exclude exchange rate effects, as applicable, for non-U.S. dollar denominated net sales and operating earnings; to exclude the effects of changes to generally accepted accounting standards required by the Financial Accounting Standards Board; to exclude the effects of any statutory adjustments to corporate tax rates; to exclude the effects of any “extraordinary items” as determined under generally accepted accounting principles; to exclude any other unusual, non-recurring gain or loss or other extraordinary item; to respond to, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development; to respond to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions; to exclude the dilutive effects of acquisitions or joint ventures; to assume that any business divested by Adobe achieved performance objectives at targeted levels during the balance of a performance period following such divestiture; to exclude the effect of any change in the outstanding shares of common stock of Adobe by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholders other than regular

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cash dividends; to reflect a corporate transaction, such as a merger, consolidation, separation (including a spinoff or other distribution of stock or property by a corporation), or reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code); and to reflect any partial or complete corporate liquidation.

Our Executive Compensation Committee retains the discretion to reduce or eliminate any award that would otherwise be payable pursuant to the Executive Bonus Plan.

Payment of Awards.   All awards will be paid in cash as soon as is practicable following their determination, but in no event later than 2 ½ months after the end of the applicable performance period, unless the Executive Compensation Committee chooses to defer the payment of awards, as it determines, in its discretion, is necessary or desirable to preserve the deductibility of such awards under Section 162(m) of the Code. In addition, the Executive Compensation Committee, in its sole discretion, may permit a participant to defer receipt of the payment of cash that would otherwise be delivered to a participant under the Executive Bonus Plan.

Maximum Award.   The amounts that will be paid pursuant to the Executive Bonus Plan are not currently determinable. The maximum bonus payment that any participant may receive under the Executive Bonus Plan for  any performance period is $5,000,000 multiplied by the number of our complete fiscal years contained within the performance period.

Term of Executive Bonus Plan.   The Executive Bonus Plan shall first apply to fiscal 2007. The Executive Bonus Plan shall terminate with respect to fiscal 2007 and all subsequent years unless it is approved at this meeting. Once approved by our stockholders, the Executive Bonus Plan shall continue until the earlier of (i) the date as of which the Executive Compensation Committee terminates the Executive Bonus Plan and (ii) the last day of the Executive Bonus Plan fiscal year ending in 2010 unless the Executive Bonus Plan again shall be approved by our stockholders prior to such day.

Amendment and Termination.   The Executive Compensation Committee may amend, modify, suspend or terminate the Executive Bonus Plan, in whole or in part, at any time and in any respect, including the adoption of amendments deemed necessary or desirable to correct any defect or supply omitted data or to reconcile any inconsistency in the Executive Bonus Plan or in any award granted thereunder. Any such amendment, modification, suspension or termination may be made without the consent of any affected participant. However, in no event may any such amendment, modification, suspension or termination result in an increase in the amount of compensation payable pursuant to any award under the Executive Bonus Plan or cause compensation that is, or may become, payable under the Executive Bonus Plan to fail to qualify as deductible “performance-based compensation” within the meaning of Section 162(m) of the Code.

Federal Income Tax Consequences.   Under present federal income tax law, participants will recognize ordinary income equal to the amount of the award received in the year of receipt. That income will be subject to applicable income and employment tax withholding by Adobe. If and to the extent that the Executive Bonus Plan payments satisfy the requirements of Section 162(m) of the Code and otherwise satisfy the requirements for deductibility under federal income tax law, we will receive a deduction for the amount constituting ordinary income to the participant.

Awards to be Granted to Certain Individuals and Groups

Awards under the Executive Bonus Plan are determined based on actual future performance, so it is not possible to determine the awards that would have been made had the Executive Bonus Plan been in effect in fiscal 2005. For fiscal 2006, no participants will be chosen to participate in the Executive Bonus Plan, as the Executive Bonus Plan shall first apply to fiscal 2007. We have paid and will pay for fiscal 2006, if target goals are met, discretionary bonuses, or other types of compensation, outside of the Executive

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Bonus Plan. See “Report of the Executive Compensation Committee—Compensation Components” for a description of our corporate profit sharing plan and cash incentive bonus under our Adobe Executive Annual Incentive Plan for fiscal 2005 and 2006.

PROPOSAL 4
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has selected KPMG LLP as our independent registered public accounting firm for fiscal 2006, and urges you to vote for ratification of KPMG’s appointment. KPMG has audited our financial statements since fiscal 1983. Although we are not required to seek your approval of this appointment, we believe it is good corporate practice to do so. No determination has been made as to what action our Audit Committee and our Board would take if you fail to ratify the appointment. Even if the appointment is ratified, the Audit Committee retains discretion to appoint a new independent audit firm if the Audit Committee concludes such a change would be in the best interests of Adobe and our stockholders. We expect representatives of KPMG to be present at the meeting and available to respond to appropriate questions by stockholders. Additionally, the representatives of KPMG will have the opportunity to make a statement if they so desire.

Vote Required and Board Recommendation

Stockholder ratification of KPMG as our independent registered public accounting firm requires the affirmative vote of holders of a majority of the shares present or represented by proxy and entitled to vote at the meeting. Abstentions will have the same effect as a negative vote. Broker non-votes will have no effect on the outcome of this proposal.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THIS PROPOSAL

Audit Fees

During fiscal 2005 and 2004, we retained KPMG to provide services in the following categories and amounts:

(1)          The audit fees reported for fiscal 2004 have been updated.  Our proxy statement for our 2005 Annual Meeting of Stockholders contained an estimate of audit fees of $2,054,400 as final audit fees were not available at time of filing.

Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements. The audit-related fees in fiscal 2005 were related to KPMG’s review of our registration statement on Form S-4 in connection with our acquisition of Macromedia. No audit-related fees were incurred in fiscal 2004.

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Tax fees consist of fees for professional services for tax compliance, tax advice and tax planning. This category includes fees related to the preparation and review of federal, state and international tax returns and assistance with tax audits.

All other fees for fiscal 2005 were for information testing services. All other fees for fiscal 2004 consisted primarily of information testing services and international executive tax return preparation services.

The Audit Committee has determined that the rendering of these non-audit services by KPMG is compatible with maintaining the independence of KPMG.

Policy on Pre-Approval by Audit Committee of Services Performed by Independent Registered Public Accountants

The policy of our Audit Committee is to pre-approve all audit and permissible non-audit services to be performed by KPMG during the fiscal year. Our Audit Committee pre-approves services by authorizing specific projects within the categories outlined above, subject to the budget for each category. Our Audit Committee’s charter delegates to its Chairperson the authority to address any requests for pre-approval of services between Audit Committee meetings, and the Chairperson must report any pre-approval decisions to our Audit Committee at its next scheduled meeting.

All services related to audit fees, audit-related fees, tax fees and all other fees provided by KPMG during fiscal 2004 and 2005 were pre-approved by the Audit Committee in accordance with the pre-approval policy described above.

For more information on KPMG, please see the “Report of the Audit Committee” below.

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REPORT OF THE AUDIT COMMITTEE*

The Audit Committee’s role includes the oversight of our financial, accounting and reporting processes, our system of internal accounting and financial controls and our compliance with related legal and regulatory requirements, the appointment, engagement, termination and oversight of our independent registered public accounting firm, including conducting a review of their independence, reviewing and approving the planned scope of our annual audit, overseeing our independent registered public accounting firm’s audit work, reviewing and pre-approving any audit and non-audit services that may be performed by them, reviewing with management and our independent registered public accounting firm the adequacy of our internal financial and disclosure controls, reviewing our critical accounting policies and the application of accounting principles, monitoring the rotation of partners of our independent registered public accounting firm on our audit engagement team as required by law, establishing procedures, as required under applicable law, for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters, and meeting to review our annual audited financial statements and quarterly financial statements with management and our independent registered public accounting firm. The Audit Committee held 12 meetings during fiscal 2005.

Each member of the Audit Committee meets the independence criteria prescribed by applicable law and the rules of the SEC for audit committee membership and is an “independent director” within the meaning of applicable NASDAQ listing standards.  Each Audit Committee member meets the NASDAQ’s financial literacy requirements, and the Board has further determined that Mr. Daley (i) is an “audit committee financial expert” as such term is defined in Item 401(h) of Regulation S-K promulgated by the SEC and (ii) also meets the NASDAQ’s professional experience requirements. The Audit Committee acts pursuant to a written charter, a copy of which can be found on our website at www.adobe.com/aboutadobe/invrelations/corpgovern.html.

We have reviewed and discussed with KPMG matters required to be discussed pursuant to Statement on Auditing Standards No. 61 (Communications with Audit Committees). We have received from KPMG a formal written statement describing the relationships between KPMG and Adobe that might bear on KPMG’s independence consistent with Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees). We have discussed with KPMG matters relating to its independence, including a review of both audit and non-audit fees, and considered the compatibility of non-audit services with KPMG’s independence.

We have reviewed and discussed with management and KPMG our audited financial statements. We discussed with KPMG and Adobe’s internal auditors the overall scope and plans of their audits. We met with KPMG, with and without management present, to discuss results of their examinations, their evaluation of Adobe’s internal controls, and the overall quality of Adobe’s financial reporting.

Based on the reviews and discussions referred to above and our review of Adobe’s audited financial statements for fiscal 2005, we recommended to our Board that our audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 2, 2005, for filing with the SEC.

Respectfully submitted,

AUDIT COMMITTEE

James E. Daley
Robert Sedgewick
Delbert W. Yocam

*                    The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference into any filing of Adobe under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

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ANNUAL REPORT

Accompanying this proxy statement is our Annual Report on Form 10-K for fiscal 2005. The Annual Report contains audited financial statements covering our fiscal years ended December 2, 2005, December 3, 2004 and November 28, 2003.

CORPORATE GOVERNANCE

We believe in sound corporate governance practices and have adopted formal Corporate Governance Guidelines to enhance our effectiveness. Our Board adopted such Corporate Governance Guidelines in order to ensure that our Board will have the necessary authority and practices in place to review and evaluate our business operations as needed and to make decisions that are independent of our management. The Corporate Governance Guidelines are also intended to align the interests of directors and management with those of our stockholders. The Corporate Governance Guidelines set forth the practices our Board will follow with respect to board composition and selection, board meetings and involvement of senior management, Chief Executive Officer performance evaluation and succession planning, and board committees and compensation. You can access our corporate governance materials, including our Corporate Governance Guidelines, on our website at www.adobe.com/aboutadobe/invrelations/corpgovern.html.

Code of Ethics

We adopted a Code of Ethics applicable to our Chief Executive Officer, Chief Financial Officer, Corporate Controller, Treasurer and certain other finance executives, which is a “code of ethics” as defined by applicable rules of the SEC. This Code of Ethics is publicly available on our website at www.adobe.com/aboutadobe/invrelations/corpgovern.html. If we make any amendments to this Code of Ethics other than technical, administrative, or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of this Code of Ethics to our Chief Executive Officer, Chief Financial Officer, Corporate Controller, Treasurer or certain other finance executives, we will disclose the nature of the amendment or waiver, its effective date and to whom it applies on our website at www.adobe.com/aboutadobe/invrelations/corpgovern.html or in a report on Form 8-K filed with the SEC. There were no waivers of the Code of Ethics during fiscal 2005.

Code of Business Conduct

We have also adopted a Code of Business Conduct applicable to all officers, directors and employees as required by applicable NASDAQ listing standards. This Code of Business Conduct includes an enforcement mechanism, and any waivers for directors or officers must be approved by our Board and disclosed in a Form 8-K within five days. This Code of Business Conduct is publicly available on our website at www.adobe.com/aboutadobe/invrelations/corpgovern.html. There were no waivers of the Code of Business Conduct for directors or officers during fiscal 2005.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table shows how much of our common stock is beneficially owned as of February 15, 2006 by each entity or person who is known to beneficially own 5% or more of our common stock, each director, each Named Executive Officer identified in the “Summary Compensation Table” and all current directors and executive officers as a group.(1)

*                    Less than 1%.

(1)          This table is based upon information supplied by officers, directors and principal stockholders. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based on 601,307,315 shares outstanding on February 13, 2006, adjusted as required by rules promulgated by the SEC.

(2)          Of the 31,363,035 shares attributed to Barclays Global Investors, N.A. (“Barclays Global”), it has sole voting power over 19,999,384 of the shares and sole dispositive power over 23,732,458 of the shares. Additionally, of the 31,363,035 shares attributed to Barclays Global:  3,068,004 shares are held by

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Barclays Global Fund Advisors, which has sole voting power over 3,023,626 of the shares and sole dispositive power over 3,068,004 of the shares; 3,889,572 of the shares are held by Barclays Global Investors, Ltd., which has sole voting power over 3,572,477 of the shares and sole dispositive power over 3,889,572 of the shares; 524,706 shares are held by Barclays Global Investors Japan Trust and Banking Company Limited, which has sole voting and dispositive power over all of such shares; 100,165 shares are held by Barclays Bank PLC, which has sole voting and dispositive power over all of such shares; 48,125 shares are held by Barclays Capital Securities Limited, which has sole voting and dispositive power over all such shares; and 5 shares are held by Palomino Limited, which has sole voting and dispositive power over all of such shares. This information was provided pursuant to Schedules 13G filed with the SEC on January 10, 2006 and January 26, 2006.

(3)          PRIMECAP Management Company has sole dispositive power as to all shares and sole voting power as to 5,679,288 shares. This information was provided pursuant to a Schedule 13G/A filed with the SEC on February 14, 2006. PRIMECAP Management Company’s holdings include 34,146,000 shares held by Vanguard Chester Funds-Vanguard PRIMECAP Fund that was reported on a Schedule 13G/A filed with the SEC on February 13, 2006. This information was confirmed by a representative of PRIMECAP Management Company on February 15, 2006.

(4)          Consists of 198,526 shares held by the Chizen Trust, of which Mr. Chizen is a trustee, and 3,731,481 shares issuable upon exercise of outstanding options held by Mr. Chizen exercisable within 60 days of the date of this table.

(5)          Consists of 102,729 shares held by the Narayen Family Trust, of which Mr. Narayen is a trustee, and 955,600 shares issuable upon exercise of outstanding options held by Mr. Narayen exercisable within 60 days of the date of this table.

(6)          Includes 340,327 shares issuable upon exercise of outstanding options held by Mr. Demo exercisable within 60 days of the date of this table. On December 13, 2005, Mr. Demo announced his intention to resign as Chief Financial Officer of Adobe, but he will remain as the Chief Financial Officer through March 31, 2006, or longer if his successor has not been hired by then, in order to assist with the transition. For purposes of this table, we have assumed that Mr. Demo’s resignation will occur March 31, 2006, and therefore, no vesting will occur thereafter.

(7)          Includes 50,000 shares issuable upon exercise of outstanding options held by Mr. Brennan exercisable within 60 days of the date of this table and 3,334 shares of restricted stock.

(8)          On October 5, 2005, Mr. Lamkin announced his intention to resign as Senior Vice President of the Creative Solutions Business Unit, but will remain with Adobe through February 20, 2006. For purposes of this table, we have assumed that Mr. Lamkin’s resignation will occur February 20, 2006, and therefore, no vesting will occur thereafter.

(9)          Effective March 31, 2005, Mr. Stephens resigned his position as Senior Vice President, Worldwide Sales and Field Operations but remained an employee of Adobe until November 30, 2005. He does not hold any outstanding options.

(10)   Includes 12,500 shares issuable upon the exercise of outstanding options held by Mr. Barnholt exercisable within 60 days of the date of this table.

(11)   Consists of 184,203 shares held by the Burgess Family Trust, of which Mr. Burgess is a trustee, 1,622 shares, for which Mr. Burgess has shared voting and dispositive power, held in trust for the benefit of the children of Mr. Burgess, and 497,567 shares issuable upon the exercise of outstanding options held by Mr. Burgess exercisable within 60 days of the date of this table.

(12)   Includes 112,500 shares issuable upon the exercise of outstanding options held by Mr. Cannon exercisable within 60 days of the date of this table.

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(13)   Includes 117,500 shares issuable upon the exercise of outstanding options held by Mr. Daley exercisable within 60 days of the date of this table.

(14)   Consists of 560,064 shares held by the Geschke Family Trust, of which Dr. Geschke is a trustee, and 357,500 shares issuable upon the exercise of outstanding options held by Dr. Geschke exercisable within 60 days of the date of this table.

(15)   Includes 117,500 shares issuable upon the exercise of outstanding options held by Ms. Mills exercisable within 60 days of the date of this table.

(16)   Consists of 20,000 shares held by the Pouliot Family Trust, of which Ms. Pouliot is a trustee, and 116,961 shares issuable upon the exercise of outstanding options held by Ms. Pouliot exercisable within 60 days of the date of this table.

(17)   Includes 1,200 shares held by Dr. Sedgewick’s minor child, as to all of which Dr. Sedgewick disclaims beneficial ownership, and 197,500 shares issuable upon exercise of outstanding options held by Dr. Sedgewick exercisable within 60 days of the date of this table.

(18)   Includes 22,400 shares held by trust for the benefit of Dr. Warnock’s child, over which he shares voting and investment power with his spouse and Dr. Geschke, and 265,000 shares issuable upon the exercise of outstanding options held by Dr. Warnock exercisable within 60 days of the date of this table.

(19)   Includes 157,500 shares issuable upon the exercise of outstanding options held by Mr. Yocam exercisable within 60 days of the date of this table.

(20)   Includes 7,283,993 shares issuable upon exercise of outstanding options held by directors and current executive officers exercisable within 60 days of the date of this table and 103,500 shares of restricted stock held by a current executive officer. See also Notes 4 through 6 and 10 through 19.

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EXECUTIVE COMPENSATION

Summary of Cash and Certain Other Compensation

The following table provides information about the compensation for our last three fiscal years (2005, 2004, and 2003) of our Chief Executive Officer, plus our four other most highly compensated executive officers as of the end of fiscal 2005 and one additional individual who would have been among the four highest paid executive officers had he been serving in that capacity at the end of fiscal 2005. This group is referred to in this proxy statement as the Named Executive Officers.

SUMMARY COMPENSATION TABLE

(1)           The amounts shown in this column include payments under our profit sharing plan, in which all regular employees of Adobe participated, as follows:

Profit Sharing Plan Payments*

*                     See “Report of the Executive Compensation Committee—Compensation Components” for a description of the profit sharing plan.

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(2)            The amounts disclosed in this column for fiscal 2005, 2004 and 2003 include life insurance premiums, our contributions under our 401(k) Retirement Savings Plan, physical exams, severance payments, sign-on bonus and patent award as follows:

All Other Compensation

(3)             On December 13, 2005, Mr. Demo announced his intention to resign as Chief Financial Officer of Adobe, but he will remain as the Chief Financial Officer through March 31, 2006, or longer if his successor has not been hired by then, in order to assist with the transition.

(4)             Mr. Brennan became an executive officer and employee of Adobe in July 2004.

(5)             This amount represents the grant-date value ($21.96 per share) of 5,000 shares of restricted stock that was granted to Mr. Brennan on July 12, 2004. The restricted stock vests at a rate of 33 1/3% on each anniversary of the grant date. As of December 2, 2005, 3,334 of these shares remain restricted and have a market value of $116,590 based on the closing price of our common stock as of such date, which was $34.97 as reported on the NASDAQ National Market.

(6)             On October 5, 2005, Mr. Lamkin announced his intention to resign as Senior Vice President of the Creative Solutions Business Unit, but will remain with Adobe through February 20, 2006.

(7)             Effective March 31, 2005, Mr. Stephens resigned his position as Senior Vice President, Worldwide Sales and Field Operations but remained an employee of Adobe until November 30, 2005.

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Stock Options

The following table sets forth information regarding stock options granted in fiscal 2005 to our Named Executive Officers, each under our 2003 Plan. All options were granted with an exercise price equal to the closing price of our common stock on the date of grant as reported on the NASDAQ National Market. Potential realizable values are net of exercise price, but before taxes associated with exercise. These amounts represent hypothetical gains that could be achieved for the options if exercised at the end of the option term of seven years. The assumed 5% and 10% rates of stock price appreciation are provided for purposes of illustration only and do not represent our estimate or projection of the future price of our common stock.

OPTION GRANTS IN LAST FISCAL YEAR