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.     )

Filed by the Registrant  x

Filed by a Party other than the Registrant  ¨

Check the appropriate box:

Mattel, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

NOTICE OF ANNUAL MEETING

and

PROXY STATEMENT

Annual Meeting of Stockholders

Manhattan Beach MarriottThe Westin Los Angeles Airport Hotel

1400 Parkview Avenue5400 West Century Boulevard

Manhattan Beach,Los Angeles, California 90045

May 19, 200511, 2006

MATTEL, INC.

333 Continental Boulevard

El Segundo, California 90245-5012

NOTICE OF THE 20052006 ANNUAL MEETING OF STOCKHOLDERS

The 20052006 Annual Meeting of Stockholders of Mattel, Inc., will be held on Thursday, May 19, 2005,11, 2006, at 10:00 a.m. (Los Angeles time), at the Manhattan Beach Marriott, 1400 Parkview Avenue, Manhattan Beach, California 90266.The Westin Los Angeles Airport Hotel, 5400 West Century Boulevard, Los Angeles, CA 90045. The following items of business are to be considered and acted on at the Annual Meeting:

Each of the above items of business is described in more detail in the Proxy Statement accompanying this Notice. The Board of Directors recommends a vote FOR each of the teneleven nominees for director named in the accompanying Proxy Statement, a vote FOR the proposalsproposal described above in itemsitem 2 and 3 and a vote AGAINST the proposals described above in items 4 and3 through 5.

If you were a holder of record of Mattel common stock at the close of business on March 23, 2005,16, 2006, you are entitled to notice of and to vote at the Annual Meeting.

A list of record holders of Mattel common stock entitled to vote at the Annual Meeting will be available for examination at Mattel’s offices at 333 Continental Boulevard, El Segundo, CaliforniaCA 90245-5012, for any purpose germane to the Annual Meeting, by any stockholder during normal business hours for ten days prior to the Annual Meeting.

The Manhattan Beach MarriottWestin Los Angeles Airport Hotel is accessible to those who require special assistance. If you require special assistance, please call the Marriotthotel at (310) 546-7511.310-216-5858.

By Order of the Board of Directors

Robert Normile Secretary

El Segundo, California

April 13, 20052006

All stockholders are cordially invited to attend the Annual Meeting in person. If you plan to attend the Annual Meeting in person, please check the appropriate box on the proxy card and bring with you the items that are required pursuant to Mattel’s admission policyAdmission Policy for the 2006 Annual Meeting. A description of the admission policyAdmission Policy can be found in the Proxy Statement under the heading “General Information—Admission Policy for Annual Meeting.” The admission policyAdmission Policy is also printed on the Admission Ticket,Policy card, which is enclosed with the Proxy Statement.

Whether or not you expect to attend the Annual Meeting, please vote as soon as possible in order that your stock will be represented at the Annual Meeting. You may vote in person or by proxy at the Annual Meeting or you may submit a proxy by mail, by telephone or via the Internet. If you wish to submit a proxy by mail, please complete, date, sign and return the enclosed proxy card in the enclosed postage-prepaid envelope as soon as possible. If you wish to submit a proxy by telephone or via the Internet, please follow the instructions on the proxy card or voting information form with regard to telephone or Internet voting.

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MATTEL, INC.

333 Continental Boulevard

El Segundo, California 90245-5012

PROXY STATEMENT

20052006 ANNUAL MEETING OF STOCKHOLDERS

To Be Held On May 19, 200511, 2006

TABLE OF CONTENTS

GENERAL INFORMATION

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Mattel, Inc., a Delaware corporation (“Mattel”), for use at its 20052006 Annual Meeting of Stockholders, to be held on May 19, 2005,11, 2006, at 10:00 a.m. (Los Angeles time), at the Manhattan Beach Marriott, 1400 Parkview Avenue, Manhattan Beach, California,The Westin Los Angeles Airport Hotel, 5400 West Century Boulevard, Los Angeles, CA 90045, and at any adjournment or postponement of such meeting. This Proxy Statement and the form of proxy to be utilized at the Annual Meeting were first mailed or delivered to the stockholders of Mattel on or about April 13, 2005.2006.

Record Date, Shares Outstanding and Voting

The Board of Directors of Mattel has fixed March 23, 200516, 2006 as the record date to determine stockholders entitled to notice of and to vote at the Annual Meeting. Only holders of record of shares of Mattel common stock at the close of business on the record date are entitled to notice of and to vote at the Annual Meeting.

As of the close of business on the record date, there were 416,727,222388,917,323 outstanding shares of common stock held by approximately 42,100approximately40,866 holders of record. At the Annual Meeting, each share of common stock will be entitled to one vote.

Quorum, Broker Voting, Cumulative Voting for Directors and Effect of Abstentions

Mattel’s common stock is listed on the New York Stock Exchange (the “NYSE”). under the symbol “MAT.”

With respect to all matters submitted to a vote at the Annual Meeting, other than Proposal 3 (Approval of the Mattel, Inc. 2005 Equity Compensation Plan), the presence of holders of a majority of the voting power of the shares of the stock entitled to vote at the Annual Meeting, in person or by properly executed proxy, is necessary to constitute a quorum for the transaction of business at the Annual Meeting. Pursuant to the rules of the NYSE, approval of Proposal 3 requires the affirmative vote of a majority of the total votes cast with regard to Proposal 3, and furthermore requires that the total votes cast with regard to Proposal 3 must represent over 50% of the voting power of all shares of stock entitled to vote on Proposal 3. Shares represented in person or by proxy will be counted for the purposes of determining whether a quorum is present at the Annual Meeting. Shares that abstain from voting on any proposal will be treated as shares that are present and entitled to vote at the Annual Meeting for purposes of determining whether a quorum exists. Although abstentions will be counted for purposes of determining whether a quorum is present, they will not be counted in determining the number of votes cast as to any proposal and thus will not have any effect as to whether any proposal is approved,provided that abstentions could affect whether sufficient votes have been cast with regard to Proposal 3 for purposes of the above-mentioned NYSE rules.approved.

The NYSE has rules that govern brokers who have record ownership of listed company stock held in brokerage accounts for their clients who beneficially own the shares. Under these rules, brokers who do not receive voting instructions from their clients have the discretion to vote uninstructed shares on certain matters (“discretionary matters”) but do not have discretion to vote uninstructed shares as to certain other matters (“non-discretionary matters”). Mattel expects that the NYSE will evaluate the proposals to be voted on at the Annual Meeting to determine whether each proposal is a discretionary or non-discretionary matter. Mattel believes that the election of directors and the ratification of the

selection of the independent registered public accounting firm will be deemed to be discretionary matters, and brokers will be permitted to vote uninstructed shares as to such matters. However, Mattel anticipates that the other proposals contained in this Proxy Statement will be deemed to be non-discretionary matters, and brokers will not be permitted to vote uninstructed shares as to such matters. A broker may return a proxy card on behalf of a beneficial owner from whom the broker has not received instructions that casts a vote with regard to discretionary matters but expressly states that

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the broker is not voting as to non-discretionary matters. The broker’s inability to vote with respect to the non-discretionary matters is referred to as a “broker non-vote.” Broker non-votes will be counted for the purpose of determining the presence of a quorum, but will not be counted in determining the number of votes cast as to non-discretionary matters. Thus, broker non-votes dowill not have any effect as to whether a proposal regarding a non-discretionary matter is approved,provided that broker non-votes could affect whether sufficient votes have been cast with regard to Proposal 3 for purposes of the above-mentioned NYSE rules.approved.

In the election of directors, holders of common stock are entitled to elect teneleven directors, with the teneleven candidates who receive the highest number of affirmative votes being elected. In electing directors, stockholders have the right to cumulate their votes and give one candidate the number of votes equal to the number of directors to be elected (ten)(eleven) multiplied by the number of votes entitled to be cast by such stockholder at the Annual Meeting or to distribute such votes among as many candidates as they see fit. Stockholders may cumulate their votes by giving instructions on the enclosed form of proxy as to how the votes are to be cumulated or by voting in person at the Annual Meeting. Executed proxies (including but not limited to executed proxies that indicate no voting instructions) will grant the persons named in the enclosed proxy card discretionary authority to cumulate votes in connection with the election of directors, except that votes may not be cast for the election of any individual to the extent that authority to vote has been withheld as to such individual and except to the extent that specific instructions have been given as to cumulative voting. If and to the extent that voting authority is withheld with regard to a particular nominee or nominees, the proxy holders may, in their discretion, cumulate the withheld votes in favor of other nominees, and if different specific instructions are given, the specific instructions will be followed.

Voting of Proxies

All shares of common stock that are entitled to vote and are represented at the Annual Meeting by properly executed proxies received prior to or at the Annual Meeting, and not revoked, will be voted at the Annual Meeting in accordance with the instructions indicated on such proxies. If the enclosed proxy card is executed and returned without instructions as to how it is to be voted, the proxy card will be deemed an instruction to vote:

The Board of Directors does not know of any matters other than those described in the notice of the Annual Meeting that are to come before the Annual Meeting. If any other matters are properly presented for consideration at the Annual Meeting, including, among other things, consideration of a motion to adjourn or postpone the Annual Meeting to another time and/or place for the purposes of soliciting additional proxies for or against a given proposal, the persons named in the enclosed proxy card and acting thereunder generally will have discretion to vote on such matters as they see fit.

Revocation of Proxies

Any proxy regarding shares of common stock given pursuant to this solicitation may be revoked by the person giving it at any time before it is voted. Proxies may be revoked by:

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Any written notice of revocation or subsequent proxy should be sent to Secretary, Mail Stop M1-1516, Mattel, Inc., 333 Continental Boulevard, El Segundo, CA 90245-5012, or hand delivered to the Secretary of Mattel at or before the taking of the vote at the Annual Meeting. Stockholders that have instructed a broker to vote their shares must follow directions received from the broker in order to change their vote or to vote at the Annual Meeting.

Admission Policy for Annual Meeting

Admission to the Annual Meeting is limited to stockholders of Mattel, family members accompanying stockholders of Mattel, persons holding executed proxies from stockholders who held Mattel stock as of the close of business on March 23, 2005,16, 2006, and invited guests of Mattel.

If you are a stockholder of Mattel,, you must bring certain documents with you in order to be admitted to the Annual Meeting and in order to bring family members with you. The purpose of this requirement is to help us verify that you are actually a stockholder of Mattel. Please read the following rules carefully, because they specify the documents that you must bring with you to the Annual Meeting in order to be admitted. The items that you must bring with you differ depending upon whether or not you were a record holder of Mattel stock as of the close of business on March 23, 2005.16, 2006. A “record holder” of stock is someone whose shares of stock are registered in his or her name in the records of Mattel’s transfer agent. Many stockholders are not record holders because their shares of stock are registered in the name of their broker, bank or other nominee, and the broker, bank or other nominee is the record holder instead; this is sometimes referred to as holding shares in “street name.” If you are unsure as to whether you were a record holder of Mattel common stock as of the close of business on March 23, 2005,16, 2006, please call Mattel’s transfer agent, EquiServeComputershare Trust Company, N.A., at 1-888-909-9922.

If you were a record holder of Mattel common stock as of the close of business on March 23, 2005,16, 2006,then you must bring:

At the Annual Meeting, we will check your name for verification purposes against our list of record holders as of the close of business on March 23, 2005.16, 2006.

If a broker, bank or other nominee was the record holder of your shares of Mattel common stock as of the close of business on March 23, 2005,16, 2006,then you must bring:

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Examples of proof of ownership include the following: (1) an original or a copy of the voting information form from your bank or broker with your name on it, (2) a letter from your bank or broker stating that you owned Mattel common stock as of the close of business on March 23, 2005,16, 2006, or (3) a brokerage account statement indicating that you owned Mattel common stock as of the close of business on March 23, 2005.16, 2006.

If you acquired your shares of Mattel common stock at any time after the close of the business on March 23, 2005,16, 2006,you do not have the right to vote at the Annual Meeting, but you may attend it if you bring:

Examples of proof of ownership include the following:

If you are a proxy holder for a stockholder of Mattel who owned shares of Mattel common stock as of the close of business on March 23, 2005,16, 2006, then you must bring:

You may not use cameras, recording equipment or other electronic devices during the Annual Meeting. Shares may be voted at the Annual Meeting only by (a) the record holder as of the close of business on March 23, 200516, 2006 or (b) a person holding a valid proxy executed by such record holder.

Internet Andand Telephone Voting

As an alternative to using the paper proxy card to vote, MattelMattel’s stockholders may vote by submitting a proxy electronically via the Internet or by telephone.

If you were a record holder of Mattel common stock as of the close of business on March 23, 2005,16, 2006, you may submit a proxy with respect to your shares by calling the toll-free number on the proxy card or by voting on the Internet at the Web address stated on the proxy card.

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If a bank, broker or other nominee was the record holder of your shares of Mattel common stock as of the close of business on March 23, 2005,16, 2006, you will be able to vote by submitting a proxy over the telephone or on the Internet, by following the instructions on the voting information form that you receive from your bank, broker or other nominee.

Voting by Mail

If you choose to vote by submitting a proxy through the mail, simply mark your proxy card, date and sign it, and return it in the enclosed postage-prepaid envelope. If the envelope is missing, please mail your completed proxy card to the following address: Proxy Services, EquiServec/o Computershare Trust Company, N.A., P.O. Box 8583, Edison, NJ 08818.43102, Providence, RI 02940.

Single Set of Disclosure Materials; “Householding”

To reduce the expense of delivering duplicate disclosure materials to our stockholders, we are taking advantage of new “householding” rules that permit us to deliver a single copy of our annual report, proxy statement and any information statement to any household at which two or more stockholders reside if we believe the stockholders are members of the same family. Each record stockholder will continue to receive a separate notice of meeting and proxy card or voting instruction card. Also, householding will not in any way affect dividend check mailings.

How to Obtain a Separate Set of Materials

If you share an address with another Mattel stockholder and your household received only one set of Mattel’s annual report and proxy statement, you may call Mattel’s transfer agent, EquiServe,Computershare Trust Company, N.A. at 1-888-909-9922, to request a separate copy of these materials at no cost to you. You may also write to EquiServeComputershare Trust Company, N.A. at P.O. Box 43010, Providence, RI 02940-3010.02940.

How to Change Your “Householding” Status for the Future

If you would like to receive your own additional set of Mattel’s disclosure documents in the future, please follow the instructions given below. Similarly, if you share an address with another Mattel stockholder and together both of you would like to receive only a single set of Mattel’s disclosure documents, please follow these instructions:

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PRINCIPAL STOCKHOLDERS

As of March 31, 2005,2006, the only persons known by Mattel to own beneficially, or to be deemed to own beneficially, more than 5% of Mattel’s common stock were:

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth information regarding the beneficial ownership of Mattel common stock as of March 31, 2005,2006, by (1) each director and nominee for director, (2) the Chief Executive Officer and each of the four other most highly compensated executive officers of Mattel as of December 31, 2004,2005, (3) Matthew C. Bousquette, former President of the former Mattel Brands division, and (3)(4) all current directors and executive officers of Mattel as a group.

Name of Beneficial Owner		Position with Mattel		Amount and Nature of Beneficial Ownership(1)
Michael J. Dolan		Director		20,000	(2)
Robert A. Eckert		Chairman of the Board and Chief Executive Officer		3,605,000	(2)(4)
Kevin M. Farr		Chief Financial Officer		730,963	(2)(3)
Neil B. Friedman		President, Fisher-Price Brands		1,317,090	(2)(3)
Tully M. Friedman		Director		172,500	(2)(5)
Ronald M. Loeb		Director		138,545	(2)
Dr. Andrea L. Rich		Director		41,250	(2)
Ronald L. Sargent		Director		22,000	(2)
Christopher A. Sinclair		Director		62,300	(2)
G. Craig Sullivan		Director		50,850	(2)(6)
John L. Vogelstein		Director		1,322,500	(2)
Kathy Brittain White		Director		32,250	(2)
All current Directors and Executive Officers, as a group (22 persons)				11,279,494	(7)

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PROPOSALS

A total of five proposals are set forth in this Proxy Statement. The Board of Directors considered each proposalthese proposals on January 27, 2006 and March 16, 2005,2006, and the recommendation of the Board of Directors on each proposal is set forth herein.

PROPOSAL 1

ELECTION OF DIRECTORS

TenEleven directors are to be elected at the Annual Meeting to serve until the next annual meeting of stockholders and until their respective successors have been duly elected and qualified. In the absence of instructions to the contrary, executed proxies will be voted in favor of the election of the persons listed below. In the event that any nominee for election as director should become unavailable to serve, votes will be cast, pursuant to the enclosed proxy card, for such substitute nominee or nominees as may be nominated by the Board of Directors or an authorized committee thereof. Management presently believes that each of the persons named will be available to serve. As discussed in “General Information—Quorum, Broker Voting, Cumulative Voting for Directors and Effect of Abstentions,” the election of directors shall be determined by a plurality of the votes cast at the Annual Meeting, with the teneleven candidates who receive the highest number of affirmative votes being elected.

No arrangement or understanding exists between any nominee and Mattel or, to Mattel’s knowledge, any other person or persons pursuant to which any nominee was or is to be selected as a director or nominee, except that Mr. Eckert’s employment agreement with Mattel provides that Mr. Eckert shall have the position and title of Chairman of the Board and Mattel’s Bylaws provide that the Chairman of the Board shall be a director of Mattel. None of the nominees has any family relationship to any other nominee or to any executive officer of Mattel.

The Board of Directors currently consists of eleven members. The Board of Directors Amended and Restated Guidelines on Corporate Governance contain a provision pursuant to which, after attaining the age of 72, a director will not stand for re-election to the Board at subsequent meetings of the stockholders. Mr. Loeb, who has served as a director since 1970, is over the age of 72, and accordingly he will not stand for re-election to the Board of Directors at the 2005 Annual Meeting of Stockholders. As a result, the Board of Directors has decided to reduce the size of the Board to ten members effective as of the election of directors at the Annual Meeting.

Information Concerning Nominees to the Board of Directors

Information is set forth below concerning the nominees for election as directors. All of the nominees are currently directors. Each nominee has furnished the information as to his or her beneficial ownership of common stock as of March 31, 2005,16, 2006, and the nominee’s principal occupation. Each nominee has consented to being named in this Proxy Statement as a nominee for election as director and has agreed to serve as a director if elected.

Name		Principal Occupation or Position		Age		Director Since
Michael J. Dolan		Chairman, America’s Choice, Inc.; Senior Advisor, Kohlberg Kravis Roberts & Co. (also a director of Regal Entertainment Group)		58		2004
Robert A. Eckert		Chairman of the Board and Chief Executive Officer of Mattel (also a director of McDonald’s Corporation)		50		2000
Tully M. Friedman		Chairman and Chief Executive Officer, Friedman Fleischer & Lowe, LLC, a private investment firm (also a director of The Clorox Company, Capital Source Holdings LLC and TempurPedic, Inc.)		63		1984
Dr. Andrea L. Rich		President, Chief Executive Officer and Director, Los Angeles County Museum of Art		61		1998
Ronald L. Sargent		Chairman, Chief Executive Officer and President, Staples, Inc. (also a director of Staples, Inc., ARAMARK Corporation and Yankee Candle Company, Inc.)		49		2004
Christopher A. Sinclair		Chairman, Scandent Group Holdings, Mauritius (also a director of Footlocker Inc. and eMerge Interactive, Inc.)		54		1996
G. Craig Sullivan		Former Chairman and Chief Executive Officer, The Clorox Company (also a director of Levi Strauss & Co. and Kimberly-Clark Corporation)		65		2001
John L. Vogelstein		Vice Chairman and Member, Warburg Pincus LLC (also a director of Journal Register Company)		70		1983
Kathy Brittain White		Founder, Horizon Institute of Technology; President and Founder, Rural Sourcing, Inc. (also a director of Certegy, Inc. (formerly Equifax Payment Services) and Novell, Inc.)		55		2001

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Except as described below, each of the directors has served in the principal occupation or position indicated in the above table for at least the past five years.

Mr. Beard has served as Chairman and Chief Executive Officer of Westport Asset Fund, Inc. since January 2004, and has served as President of Westport Asset Fund, Inc. for more than five years. He served as ana Special Advisor ofto The Interpublic Group of Companies from 2000 to 2003. Prior to that, he served as Vice Chairman, Finance and Operations of The Interpublic Group of Companies from 1995 to 1999.

Mr. Dolan has served as Executive Vice President and Chief Financial Officer of Viacom Inc. since May 2005 and has served as Chairman of America’s Choice, Inc. andsince October 2004. He also served as Senior Advisor to Kohlberg Kravis Roberts & Co. sincefrom October 2004.2004 to May 2005. Prior to that, he served in the following positions with Young & Rubicam, Inc.: Chairman and Chief Executive Officer (2001 to 2003), Vice Chairman and Chief Operating Officer (2000 to 2001) and Vice Chairman and Chief Financial Officer (1996 to 2000).

Mr. Eckert has been Chairman of the Board of Directors and Chief Executive Officer since May 2000. He was formerly President and Chief Executive Officer of Kraft Foods, Inc., the largest packaged food company in North America, from October 1997 until May 2000. From 1995 to 1997, Mr. Eckert was Group Vice President of Kraft Foods, Inc. From 1993 to 1995, Mr. Eckert was President of the Oscar Mayer foods division of Kraft Foods, Inc. Mr. Eckert worked for Kraft Foods, Inc. for 23 years prior to joining Mattel.

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Mr. Friedman has served as Chairman and Chief Executive Officer of Friedman Fleischer & Lowe, LLC since April 1997. Prior to that, he was a founding partner of Hellman & Friedman, a private investment firm, for more than five years.

Mr. Ng has served as Chairman, Chief Executive Officer and President of East West Bancorp, Inc. and East West Bank since 1992. Prior to that, Mr. Ng was President of Seyen Investment, Inc. from 1990 to 1992, and prior to that Mr. Ng served for over a decade as a Certified Public Accountant with Deloitte & Touche LLP.

Dr. Rich has served as President, Chief Executive Officer and Director of the Los Angeles County Museum of Art (“LACMA”) sincefrom 1999 to 2005, and as President and Chief Executive Officer of LACMA since November 1995.from 1995 to 1999. Prior to that, she served as Executive Vice-Chancellor and Chief Operating Officer of the University of California, Los Angeles, from 1991 to 1995.

Mr. Sargent has served as Chairman of Staples, Inc. since March 2005 and as Chief Executive Officer and President of Staples, Inc. since 2002. Prior to that, Mr. Sargent served as President and Chief Operating Officer of Staples, Inc. from 1998 to 2002 and served in various other positions with Staples, Inc. since 1991.1989.

Mr. Sinclair has served as Chairman of Scandent Group Holdings, a Mauritius-based information technology services company, since May 2002. and has served as Executive Chairman of Scandent Solutions Corporation Ltd. since November 2005. He also served as a Managing Director of Manticore Partners, LLC, a venture capital advisory firm, from February 2001 to December 2004. Prior to that, he served as an Operating Partner of Pegasus Capital Advisors, LP, a private equity firm, from June 2000 to June 2002. Prior to that, Mr. Sinclairhe served as Chairman and Chief Executive Officer of Caribiner International, Inc. from January 1999 to May 2000. Prior to that, he served as President and Chief Executive Officer of Quality Food, Inc., Chairman and Chief Executive Officer of Pepsi-Cola Company and President and Chief Executive Officer of PepsiCo Foods & Beverages International and Pepsi-Cola International for more than five years.

Mr. Sullivan served as Chairman and Chief Executive Officer of The Clorox Company from 1992 to 2003 and retired in 2003 after 32 years with Clorox.

Mr. Vogelstein has served as Vice Chairman and Member of Warburg Pincus LLC since 2003, and has served in senior positions (such as Vice Chairman, President and Director) with Warburg Pincus LLC and its predecessor entities for more than 20 years.

Ms. White founded the Horizon Institute of Technology in 2002. She also has served as President of Rural Sourcing, Inc. (“RSI”), an information technology services provider, since 2003. Ms. White served as Executive Vice President, e-business and Chief Information Officer of Cardinal Health, Inc. from 1999 until February 2003. From 1996 to 1999, Ms. White was Senior Vice President and Chief Information Officer for Allegiance Corporation, which merged with Cardinal Health, Inc. in 1999.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTEFOR EACH OF THE NOMINEES FOR ELECTION AS DIRECTORS NAMED HEREIN.

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THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Board Meetings and Remuneration

During 2004,2005, the Board of Directors held sevenfive meetings, and no director attended less than 75% of the aggregate of all Board of Directors meetings and of all meetings held by any committee of the Board of Directors on which he or she served.

Non-employee members of the Board of Directors receive an annual retainer of $50,000 per year. Each non-employee committee chair receives an additional annual retainer, the amount of which differs depending upon the committee, as follows: Audit Committee, $20,000; Compensation Committee, $15,000; and all other committees, $10,000. Non-employee board members receive a fee of $2,000 per Board meeting attended, and non-employee committee members receive a fee per committee meeting attended, the amount of which differs depending upon the committee, as follows: Audit Committee, $3,000; Compensation Committee, $2,000; Governance and Social Responsibility Committee, $2,000; and all other committees, $1,500. The full amounts of meeting fees stated in the preceding sentence are paid for attendance in person or by videoconference; attendance by telephone is compensated at a reduced rate of $1,000 per meeting; provided, however, that if the meeting was scheduled as a telephonic meeting, the full amount will be paid for attendance by telephone.

Directors may elect to receive either all or a portion of the annual retainer in the form of shares of Mattel common stock. In addition, directors may elect to defer all or part of their directors’ fees under the Mattel, Inc. Deferred Compensation Plan for Non-Employee Directors, which provides for the investment of deferred amounts in Mattel common stock equivalent accounts or in interest-bearing accounts; the distribution of such deferred amounts may be in a lump sum or installments over a period of years commencing after the date the individual ceases to be a director of Mattel. Mattel reimburses directors for their expenses incurred while traveling on Board of Directors business and permits directors to use company aircraft when traveling on Board business.

Mr. Eckert serves as Chairman of the Board and Chief Executive Officer of Mattel. For a description of Mr. Eckert’s compensation, see “Employment Agreements—Employment Agreement with Robert A. Eckert.”

Grants of Equity Compensation to Non-Employee Directors under the Mattel, Inc. 2005 Equity Compensation Plan

The Mattel, Inc. 2005 Equity Compensation Plan (the “2005 Plan”) sets forth the maximum number of shares that may be awarded to individuals when they first became non-employee directors (“initial grants”) and on the date of each annual meeting to non-employee directors re-elected on such date who are not receiving initial grants on the same date (“annual grants”). Initial grants and annual grants may be comprised of stock options, restricted stock and/or restricted stock units (“RSUs”), with each share of restricted stock and each RSU counted using the 2005 Plan’s “full-value share debiting rate” (initially three-to-one) for purposes of the limit on shares that may be granted to non-employee directors.

For each initial grant, the maximum number of shares that may be granted is 20,000 shares per director, and for each annual grant, the maximum number of shares that may be granted is 18,000 shares per director. The Compensation Committee sets the type and amount of grants and may reset the type and amount from year to year, subject to these maximums.

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In 2005 the Compensation Committee initially set the amounts as follows: (a) for initial grants, a non-qualified stock option for 7,500 shares and 2,500 RSUs, with dividend equivalent rights; and (b) for annual grants, a non-qualified stock option for 6,000 shares and 2,000 RSUs, with dividend equivalent rights. In creating the maximum set forth in the 2005 Plan, in setting the initial level of grants and in determining the terms and conditions of the grants, the Compensation Committee received advice from the Compensation Committee’s independent compensation consultant with regard to competitive market rates of compensation for non-employee directors and exercised its business judgment.

Pursuant to the terms of the Mattel 1996 Stock Option2005 Plan, (the “1996 Plan”), upon joining the Board of Directors, each newall stock options granted to non-employee member of the Board of Directors receives options to purchase 15,000 shares of common stock withdirectors must have an exercise price equal to the fair market value of suchMattel common stock on the date of grant. The

As provided in forms of grant agreements adopted by the Compensation Committee pursuant to the 2005 Plan, options granted to non-employee directors under the plan have the following terms and conditions. Initial grants of stock options to non-employee directors are immediately exercisablefully vested on the date of grant, annual grants of stock options vest in three installments on the first, second and third anniversaries of the date of grant at the rates of 33%, 33% and 34%, respectively, and all stock options granted to non-employee directors expire no later than ten years from the date of grant; provided, however, thatgrant. When a non-employee director ceases to be a non-employee director (a “severance”), the treatment of his or her options depends on the circumstances of the termination. Generally, any unvested options then outstanding will terminate on the date of severance and any vested options then outstanding will terminate 90 days after the director ceases to be a memberseverance date (or, if sooner, at the end of their ten-year term). However, if the Board of Directors unless the director ceases to be a member of the Board of Directorsseverance occurs as a result of death or disability, in which case the date90 days is extended to one year from the severance date (or, if sooner, for the balance of their ten-year term). If the severance occurs after the non-employee director ceases to behas attained age 55 and has completed at least five years of service, and is not a memberresult of the Board of Directors. Upon each annual re-election, each non-employee member of the Board of Directors receivesdirector’s death or termination for cause (a “retirement”), then-outstanding options to purchase an additional 12,000 shares of common stock with an exercise price equal to the fair market value of such stock ongranted at least six months before the date of grant. The optionsretirement (i) to the extent not already vested, will vest annually over fourin full and (ii) will remain exercisable for five years at a rate of 25% for each year, and such options expire ten years fromafter the date of grant; provided, however, that suchretirement (or if sooner, for the balance of their ten-year term). Pursuant to the 2005 Plan, if a non-employee director’s severance is for cause, all then-outstanding options will terminate 90 days after the director ceases to be a member of the Board of Directors, unless the director ceases to be a member of the Board of Directors as a result of death or disability, in which case the date is extended to one year from the date the director ceases to be a member of the Board of Directors.immediately.

As more fully described belowprovided in “Proposal 3—Approvalforms of the Mattel, Inc. 2005 Equity Compensation Plan,” under the subheadings “Types of Awards—Grants to Non-Employee Directors” and “Estimate of Benefits,” if the Mattel, Inc. 2005 Equity Compensation Plan (the “Plan”) is approvedgrant agreements adopted by the stockholders atCompensation Committee pursuant to the 2005 Annual MeetingPlan, annual grants of Stockholders, then no further grants will beRSUs made

under the 1996 Plan, and the 1996 Plan will terminate on the date of the 2005 Annual Meeting except with regardof Stockholders to non-employee directors who were re-elected on that date will vest half on the second anniversary of such date and the remainder on the third anniversary; and subsequent annual grants then outstanding underof RSUs, and initial grants of RSUs, will vest entirely on the 1996 Plan. Accordingly, if the Plan is approved, grants to the non-employee membersthird anniversary of the Board of Directors will, starting with the annual grant on the date of the 2005 Annual Meeting, be made under the Plan instead of under the 1996 Plan. For a discussion of the provisions of the Plan relatinggrant. With regard to all RSU grants to non-employee directors, see Proposal 3 underpursuant to the subheadings “Typesforms of Awards—Grants to Employee Directors.” For information aboutgrant agreements adopted by the valueCompensation Committee, (a) in the event of a severance as a result of death, disability or retirement after the first anniversary and through and including the second anniversary of the grant date, one-half of the RSUs will vest immediately and the remainder will be forfeited as of the severance date; (b) in the event of a severance as a result of death, disability or retirement after the second anniversary and before the third anniversary of the grant date, the RSUs will vest immediately as of the severance date; and (c) in the event of a severance for any other reason (including for cause), the non-employee director’s then-outstanding unvested RSUs will be forfeited. The RSUs are granted with dividend equivalent rights.

In creating the maximum set forth in the 2005 Plan, in setting the initial level of grants that may be madeand in determining other provisions of the 2005 Plan and grants thereunder relating to non-employee directors, under the Compensation Committee received advice from the Compensation Committee’s

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independent compensation consultant with regard to competitive market rates of compensation for non-employee directors and exercised its business judgment.

The 2005 Plan ifhas provisions concerning the Plan is approved, see Proposal 3 undereffect of a “Change in Control” (as defined in the heading “Estimate2005 Plan) on grants of Benefits.”stock options, restricted stock and RSUs pursuant to the 2005 Plan; these provisions generally would result in acceleration of vesting in the event of a Change in Control.

Non-Employee Director Stock Ownership

The Board of Directors has adopted policies regarding non-employee director stock ownership and retention of shares purchased upon exercise of stock options. These policies state that, within five years after joining the Board, non-employee members of the Board should attain a target minimum level of stock ownership. For this purpose, stock holdings are valued at the greater of actual cost or market value, and the target minimum level equals three times the annual cash retainer; and directors who have deferred any of their cash compensation into investments in Mattel stock equivalent accounts in any Mattel deferred compensation plan(s) receive credit for such amounts. In addition, during their service on the Board, each non-employee member of the Board must either hold his or her options to purchase shares of stock, or, if exercised, must hold the underlying shares of stock, until ceasing to be a member of the Board; provided, however, that a member of the Board may sell shares obtained in connection with a stock option exercise if the transaction otherwise complies with Mattel’s stock trading policies and one of the following applies: (a) the exercise occurs within one year of the date on which the director will be retiring from the Board; or (b) the shares are sold at the time of or otherwise in connection with the exercise, and the number of shares sold is limited to the amount necessary to generate sufficient funds to cover the exercise price of the option, the estimated amount of taxes that will be owed in connection with the exercise of the option and any associated transaction costs.

Mr. Eckert serves as Chairman of the Board and Chief Executive Officer of Mattel. For a description of Mr. Eckert’s compensation, see “Employment Agreements—Employment Agreement with Robert A. Eckert.”

Board Committees

Mattel’s Audit Committee is chaired by Mr. Beard and includes Mr. Dolan, Mr. Loeb, Mr. Sinclair and Mr. Vogelstein as members. All of the members of the Committee are independent directors; for additional information regarding the independence of Mr. Loeb, see “Report of the Audit Committee” below.directors. During 2004,2005, the Audit Committee held 1412 meetings. In November 2004,January 2006, the Board of Directors amended and restated the charter of the Audit Committee; a copy of the amended and restated charter is attached to this Proxy Statement asAppendix A.

The purpose of the Audit Committee is to provide assistance to the Board of Directors in fulfilling the Board’s oversight responsibilities regarding the quality and integrity of Mattel’s financial reports; the independence, qualifications and performance of Mattel’s independent registered public accounting firm; the performance of Mattel’s internal audit function; and Mattel’s compliance with legal and regulatory requirements. The Audit Committee has the sole authority to appoint or replace the independent registered public accounting firm. The Committee is directly responsible for the compensation and oversight of the work of the independent registered public accounting firm for the purpose of preparing or issuing an audit report or related work. The independent registered public accounting firm reports directly to the Committee.

The Audit Committee meets periodically with management, the senior internal auditing officer and the independent registered public accounting firm in separate executive sessions. The Committee may request any officer or employee of Mattel or Mattel’s outside counsel or independent registered public accounting firm to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee. The Committee has the authority, to the extent it deems necessary or appropriate, to retain independent legal, accounting or other advisors.

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Additional duties and responsibilities of the Audit Committee are outlined in the Committee’s charter, and include the following: to pre-approve audit services, internal-control-related services and permitted non-audit services to be performed for Mattel by its independent registered public accounting firm; to meet with the independent registered public accounting firm and management in connection with each annual audit to discuss the scope of the audit and the procedures to be followed; to review and discuss Mattel’s quarterly and annual financial statements with management, the independent registered public accounting firm and the internal audit group; to discuss with management and the independent registered public accounting firm Mattel’s practices with respect to risk assessment, risk management and critical accounting policies; and to discuss periodically with the independent registered public accounting firm and the senior internal auditing officer the adequacy and effectiveness of Mattel’s accounting and financial controls, and consider any recommendations for improvement of such internal control procedures.

Mattel has a Governance and Social Responsibility Committee chaired by Mr. Sullivan that includes Mr. Friedman, Dr. Rich, Mr. Sargent and Ms. White as members. All of the members of the Committee are independent directors. During 2004,2005, the Governance and Social Responsibility Committee held fivefour meetings. In September 2004, the Board of Directors changed the name of the Committee from “Nominations/Corporate Governance Committee” to “Governance and Social Responsibility Committee” and added corporate social responsibility issues to the topics addressed by the Committee. In November 2004, the Board of Directors amended and restated the charter of the Governance and Social Responsibility Committee.

The primary purposes of the Governance and Social Responsibility Committee are (a) to assist the Board of Directors by identifying individuals qualified to become Board members, consistent with the criteria approved by the Board, and to select, or to recommend that the Board select, the director nominees for the next annual meeting of stockholders; (b) to develop and recommend to the Board the Corporate Governance Guidelines applicable to Mattel; (c) to lead the evaluation of the Board’s performance; (d) to recommend to the Board nominees for each committee; (e) to assist the Board with oversight and review of social responsibility matters such as sustainability, corporate citizenship, community involvement, global manufacturing principles, public policy matters and environmental, health and safety issues; and (f) to provide oversight with regard to philanthropic activities. The Committee also works closely with the Chief Executive Officer and other members of Mattel’s management to assure that the company is governed effectively and smoothly, and has additional authority and responsibilities as specified in its charter.

Mattel has a Compensation Committee chaired by Mr. Vogelstein that includes Mr. Beard, Dr. Rich and Mr. Sullivan as members. All of the members of the Committee are independent directors and are “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code. During 2004,2005, the Compensation Committee held fiveseven meetings.

The purpose of the Compensation Committee is to develop, evaluate, and in certain instances approve or determine the compensation plans, polices, and programs of Mattel. The Committee has the

authority to undertake and may exercise all of the powers of the Board of Directors with respect to the specific responsibilities listed in the Committee’s charter, including approving all forms of compensation to be provided to executives in the “Executive Leadership Band” and above in Mattel’s compensation structure, reviewing and evaluating the Chief Executive Officer’s performance, and administering Mattel’s short- and long-term incentive plans and equity compensation plans.

The Compensation Committee has access to, and in its discretion may meet with, any officer or other employee of Mattel or its subsidiaries. The Committee meets at least once each calendar year without the Chief Executive Officer present. The Committee may utilize the services of Mattel’s regular corporate legal counsel with respect to legal matters or, in its discretion, retain other legal counsel if it determines that such counsel is necessary or appropriate under the circumstances.

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The Compensation Committee may, in its discretion, utilize the services of a compensation consultant or other professional or expert to provide data and advice to the Committee regarding the compensation of executives of Mattel and to assist the Committee in performing its other responsibilities. The retention and, where appropriate, the termination of any such compensation consultant are at the sole discretion of the Committee without the participation of any officer or other member of management of Mattel. The Committee, in its sole discretion, approves the fees to be paid to the compensation consultant and any other terms of the engagement of the compensation consultant.

Mattel has an Executive/Finance Committee chaired by Mr. Vogelstein that includes Messrs. Beard Friedman and LoebFriedman as members. During 2004,2005, the Executive/Finance Committee held no meetings. The Executive/Finance Committee may exercise all the powers of the Board of Directors, subject to limitations of applicable law, between meetings of the Board of Directors.

Mattel has a Pension Committee chaired by Mr. Sinclair that includes Mr. Sargent as a member. During 2004,2005, the Pension Committee held two meetings. Its primary functions are to oversee the operation of Mattel’s pension and employee retirement and savings plans by reviewing investment and financial performance, the selection of investment managers, trustees and other fiduciaries, and monitoring the administration of the plans.

Mattel has a Capital Allocation Committee chaired by Mr. Vogelstein that includes Mr. Beard, Mr. Friedman and Mr. Sinclair as members. During 2004,2005, the Capital Allocation Committee held four meetings. The Committee’s primary functions are to advise and make recommendations to the Board of Directors with regard to Mattel’s use of available capital, including but not limited to dividends to stockholders, mergers and acquisitions and stock repurchase programs.

Mattel Children’s Foundation

Until May 2004, the members of Mattel’s Board of Directors also served as the members of the Mattel Children’s Foundation, a charitable organization incorporated as a non-profit public benefit corporation (the “Foundation”), and Mr. Friedman, Mr. Loeb and Ms. White and former Mattel director Ronald M. Loeb served as the Foundation’s Board of Directors. In May 2004, the governance structure of the Foundation was updated so that Mattel itself became the sole member of the Foundation, and nine employees of Mattel, none of whom are Mattel directors, were appointed as the Foundation’s Board of Directors. Thus, since May 2004, none of Mattel’s non-employee directors has served as either a member or a director of the Foundation.

Director Independence

The NYSE requires each NYSE-listed company to have a board of directors with at least a majority of independent directors. Generally, under the NYSE rules a director qualifies as independent if the listed company’s board of directors affirmatively determines that he or she has no material relationship with the company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company). The NYSE rules specify five categories of relationships between a director and a listed company that render a director ineligible to be independent. Mattel’s Board of Directors has adopted Amended and Restated Guidelines on Corporate Governance Guidelines that include the categorical standards forprovisions regarding director independence, as set forth inAppendix B to this Proxy Statement. These categorical standards for independence conformprovisions incorporate the NYSE’s five categories of relationships between a director and a listed company that render a director ineligible to the standards required by the NYSE for listed companies such as Mattel.be independent.

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In accordance with NYSE rules and the applicable provisions of Mattel’s Corporate Governance Guidelines, the Board of Directors has alsoaffirmatively determined that each of the following directors has no material relationship with Mattel (either directly or as a partner, shareholder or officer of an organization that has a relationship with Mattel) and is independent within the meaning of both Mattel’s and the NYSE’s director independence standards, as currently in effect:

Eugene P. Beard

Michael J. Dolan

Tully M. Friedman

Ronald M. LoebDominic Ng

Dr. Andrea L. Rich

Ronald L. Sargent

Christopher A. Sinclair

G. Craig Sullivan

John L. Vogelstein

Kathy Brittain White

The directors listed above include (a) all of the current directors of Mattel, except the Chairman and Chief Executive Officer, and (b) all directors who are standing for election at the 20052006 Annual Meeting of Stockholders, except the Chairman and Chief Executive Officer.

Furthermore, the Board of Directors has determined that each of the members of the Audit Committee, the Compensation Committee and the Governance and Social Responsibility Committee has no material relationship with Mattel (either directly or as a partner, shareholder or officer of an organization that has a relationship with Mattel) and is independent within the meaning of the director independence standards in the Amended and Restated Guidelines on Corporate Governance Guidelines and the NYSE director independence standards (and in the case of the Audit Committee, SEC rules) applicable to members of such committees.

In making these determinations, the Board of Directors considered, among other things, the relationship of each member ofrelationships described in the Board of Directors with the Mattel Children’s Foundation. As described above under the heading “Mattel Children’s Foundation,” until May 2004, the members of Mattel’s Board of Directors also served as the members of the Foundation, which is a charitable organization incorporated as a non-profit public benefit corporation, and Mr. Friedman, Mr. Loeb and Ms. White served as the Foundation’s Board of Directors. In May 2004, the governance structure of the Foundation was updated so that Mattel itself became the sole member of the Foundation, and nine employees of Mattel were appointed as the Foundation’s Board of Directors. Since May 2004, none of Mattel’s non-employee directors has served as either a member or a director of the Foundation. Mattel provides all of the funding for the Foundation and contributed approximately $5.9 million, $5.9 million and $4.9 million to the Foundation in 2004, 2003 and 2002, respectively.following three paragraphs. The Board of Directors concludedhas determined that sincenone of these relationships is material and that none of these relationships impairs the Foundation is sponsored byindependence of any non-employee director.

The Board considered that, in the ordinary course of business, Mattel and its subsidiaries enter into transactions with Viacom Inc. or its subsidiaries, and Mr. Dolan serves as an executive officer of Viacom Inc. The amounts paid to or received from Viacom Inc. and its subsidiaries in each of the last three fiscal years were below the threshold of 2% of consolidated gross revenues as set forth in Mattel’s criteria for director independence. The Board also determined that these transactions were not otherwise material to Viacom Inc. or to Mattel and that Mr. Dolan did not have a material interest in the transactions. The Board therefore determined that these relationships of Mattel’s non-employee directors with the Foundation aredo not the type of relationships that would impair theirMr. Dolan’s independence as directorsa director of Mattel or as membersa member of the Board’s Audit Committee, Compensation Committee or Governance and Social Responsibility Committee.

In making the independence determinations described above, theThe Board of Directors also considered that Mr. Eckert in his personal capacity invests in a private equity fund sponsored by Friedman Fleischer & Lowe, LLC (“FFL”), an investment firm in which Mr. Tully Friedman is a principal. The Board concluded that this investment, which does not involve the payment of any material compensation to any director or to FFL and is not material in amount to FFL, does not adversely affect the independence of Mr. Friedman as a director of Mattel or a member of the Governance and Social Responsibility Committee. TheIn addition, the Board also considered that one or more

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directors that are not also officers of Mattel may alsofrom time to time invest in funds sponsored by FFL, but that no such investment would impact the independence of Mr. Friedman or any such investing director, because of the absence of any relationship between such investment and any member of management of Mattel.

In making the independence determinationsThe Board furthermore considered that, as described above under the heading “Mattel Children’s Foundation,” until May 2004, the members of Mattel’s Board of Directors further consideredalso served as the members of the Foundation, which is a charitable organization incorporated as a non-profit public benefit corporation, and Mr. Friedman and Ms. White served on the Foundation’s Board of Directors. In May 2004, the governance structure of the Foundation was updated so that in connection withMattel itself became the departuresole member of the Foundation, and nine employees of Mattel were appointed as the Foundation’s Board of Directors. Since May 2004, none of Mattel’s former Chief Executive Officer on February 3, 2000, Mr. Loeb agreednon-employee directors has served as either a member or a director of the Foundation. Mattel provides all of the funding for the Foundation and contributed approximately $5.1 million, $5.9 million and $5.9 million to the request of the Board of Directors that he serve on an interim basis as the Acting Chief Executive Officer of Mattel,Foundation in 2005, 2004 and that Mr. Loeb served as Acting Chief Executive Officer of Mattel from February 2000 to May 2000, when Mr. Eckert was appointed as Mattel’s new Chief Executive Officer.2003, respectively. The Board of Directors determinedconcluded that, Mr. Loeb’s service in this capacity during this brief interim period doessince the Foundation is sponsored by Mattel, the relationships of Mattel’s non-employee directors with the Foundation are not the type of relationships that would impair histheir independence as a directordirectors of Mattel or as a membermembers of the Board’s Audit Committee, Compensation Committee or Governance and Social Responsibility Committee.

Presiding Independent Director at Executive Sessions of the Board

The independent directors of Mattel have selected John L. Vogelstein as the independent director to preside at executive sessions of the independent members of the Board of Directors, during which no members of management are present. The independent directors meet in executive session at least once every quarter.

Communications with the Board of Directors

The independent directors of Mattel have unanimously approved a process by which stockholders of Mattel and other interested persons may send communications to any of the following: (a) the Board of Directors, (b) any committee of the Board, (c) the presiding independent director or (d) the independent directors. Such communications should be submitted in writing by mailing them to the relevant addressee at the following address:

[Addressee]

Mattel, Inc.—Secretary, Mail Stop M1-1516

333 Continental Blvd.

El Segundo, CA 90245-5012

Any such communications will be relayed to the Board members that appear as addressees, except that the following categories of communications will not be so relayed (but will be available to Board members upon request):

Communications concerning company products and services;

Solicitations;

Matters that are entirely personal grievances; and

Communications about litigation matters.

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Policy Regarding Attendance of Directors at the Annual Meeting of Stockholders

Each member of Mattel’s Board of Directors is expected, but not required, to attend Mattel’s annual meeting of stockholders. There were 11ten directors at the time of the 20042005 Annual Meeting of Stockholders, and 10nine of them attended the meeting.

Director Nominations Process

Mattel’s Board of Directors Guidelines on Corporate Governance Guidelines contain provisions concerning the process of selecting candidates for director positions and the role of the Governance and Social Responsibility Committee in identifying director qualifications and potential candidates.

Pursuant to the Guidelines, the full Board of Directors is responsible for selecting candidates for Board membership, and Board members are encouraged to suggest candidates for consideration. The Board delegates the screening process involved to the Governance and Social Responsibility Committee with input from the Board Chair. Prior to selection, candidates whom the Committee expresses interest in pursuing meet personally with at least two members of the Governance and Social Responsibility Committee.

Pursuant to the Guidelines, the Governance and Social Responsibility Committee is responsible for reviewing with the Board on an annual basis the appropriate skills and characteristics required of Board members in the context of the current make-up of the Board, and in accordance with the guidelines established by the Committee. This review includes an assessment of the talent base, skills, areas of expertise, experience, diversity and independence of the Board and its members, and consideration of any changes that may have occurred in any director’s responsibilities, as well as such other factors as may be determined by the Committee to be appropriate for review, all in the context of an assessment of the perceived needs of the Board at that point in time.

The Governance and Social Responsibility Committee Charter also contains provisions concerning the process for identifying candidates. Pursuant to these provisions, the Committee actively seeks individuals qualified to become Board members for recommendation to the Board. The Committee, with input from the Board Chair, screens candidates to fill vacancies on the Board; solicits recommendations from Board members as to such candidates; and considers recommendations for Board membership submitted by stockholders as described further below. The Committee recommends to the Board director nominees for each annual meeting of stockholders.

To further implement the provisions described above, the Governance and Social Responsibility Committee has adopted a Director Nominations Policy. A copy of the Director Nominations Policy is available in the “Corporate Governance” section of Mattel’s corporate Web site,http://www.mattel.com. The purpose of the Director Nominations Policy is to describe the methodology for selecting the candidates that are included in the Board’s recommended slate of director nominees. The Director Nominations Policy is intended to provide a flexible set of guidelines for the effective functioning of Mattel’s director nominations process. The Governance and Social Responsibility Committee intends to review the Director Nominations Policy at least annually and anticipates that modifications may be necessary from time to time as Mattel’s needs and circumstances evolve, and as applicable legal or listing standards change. The Governance and Social Responsibility Committee may amend the Director Nominations Policy at any time, in which case the most current version will be available in the “Corporate Governance” section of Mattel’s corporate Web site.

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Qualifications of Nominees

Pursuant to the Director Nominations Policy, the Governance and Social Responsibility Committee evaluates potential nominees for election to the Board of Directors on the basis of the entirety of their credentials and in light of the criteria set forth below.

Each nominee should possess at least the following qualifications, as determined in the judgment of the Governance and Social Responsibility Committee:

In addition, it is desirable that nominees possess the following skills, experiences or qualities, as determined in the judgment of the Governance and Social Responsibility Committee:

The issue of whether the nominee would be an independent director of Mattel is also considered, in the context of the overall independence of Mattel’s Board and the independence of the committees of the Board.

Internal Process for Identifying Candidates

The Governance and Social Responsibility Committee, on a periodic basis, solicits ideas for possible candidates from a number of sources, including members of the Board, individuals personally known to the members of the Board, research undertaken by or on behalf of the Committee and professional search firms. The Committee also considers recommendations and nominations made by stockholders, as described below. The Committee evaluates candidates using the same criteria regardless of the source of the candidacy.

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Pursuant to its Charter, the Governance and Social Responsibility Committee has the sole authority to retain and terminate any search firm to be used to identify director candidates and has the sole authority to approve such search firm’s fees and the other terms of such search firm’s engagement. If the Governance and Social Responsibility Committee retains such a search firm, the firm may be asked to identify possible candidates who meet the minimum and desired qualifications expressed in the Director Nominations Policy, to preliminarily interview and screen such candidates (including conducting appropriate background and reference checks), and to act as a liaison among the Board, the Governance and Social Responsibility Committee and each candidate during the screening and evaluation process. In addition to or in lieu of such a search firm, the Committee may determine that its own members, other directors, Mattel personnel or other third parties should perform some or all of the screening functions. The Committee may also determine to interview or have a subcommittee interview one or more potential candidates.

Nominations and Recommendations by Stockholders

Pursuant to the Director Nominations Policy, the Governance and Social Responsibility Committee considers stockholder nominations of possible candidates for Board membership that are submitted properly pursuant to the advance notice provisions of Mattel’s Bylaws and applicable law, as well as recommendations made by stockholders as described below. In evaluating such nominations and recommendations, the Governance and Social Responsibility Committee applies the same criteria as are used for evaluating candidates generally, as described above under the subheading “Qualifications of Nominees.”

Any stockholder of Mattel may nominate one or more persons for election as a director of Mattel at an annual meeting of stockholders if the stockholder complies with the advance notice provisions for such nomination contained in Mattel’s Bylaws and applicable law. These provisions are described below under the heading “Deadline for Future Proposals of Stockholders.” The required notice should be sent to: Secretary, Mail Stop M1-1516; Mattel, Inc.; 333 Continental Boulevard; El Segundo, CA 90245-5012.

Any stockholder of Mattel may also recommend one or more persons for nomination by the Board for election as a director by sending to the Governance and Social Responsibility Committee the name of such recommended nominee, as well as a detailed statement explaining why such person is making such recommendation. Any such recommendation should be sent in compliance with the timing outlined in Mattel’s Bylaws for the making of nominations (described below under the heading “Deadline for Future Proposals of Stockholders”), and must include all information that would be required for such stockholder to nominate such person for election to Mattel’s Board in connection with Mattel’s Bylaws and applicable law. Such recommendation should be sent to: Governance and Social Responsibility Committee, c/o Secretary, Mail Stop M1-1516; Mattel, Inc.; 333 Continental Boulevard; El Segundo, CA 90245-5012.

Any nomination made by a stockholder in accordance with Mattel’s Bylaws and applicable law and any recommendation made by a stockholder as set forth above is referred to the Governance and Social Responsibility Committee, and any materials provided by the stockholder in connection with such a nomination or recommendation are forwarded to the Governance and Social Responsibility Committee.

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Selection of Nominee Mr. Ng

There is one nominee for election to Mattel’s Board this year who has not been previously elected by the stockholders to serve as a director. This nominee, Mr. Ng, was elected by the Board on January 27, 2006, and joined the Board effective March 16, 2006. The Governance and Social Responsibility Committee retained a leading professional search firm, Korn/Ferry International, to help identify, evaluate and review potential nominees, and such firm identified and recommended Mr. Ng.

Golden Parachute Policy

In 2005, a stockholder submitted a proposal to Mattel regarding “golden parachute vote provision,” which requested that the Board of Directors seek stockholder approval for future “golden parachute” severance packages for senior executives that exceed 299% of the sum of any executive’s base salary plus bonus. The proposal was included as Proposal 4 in Mattel’s 2005 Notice of Annual Meeting and Proxy Statement, dated April 13, 2005.

In 2006, following consideration of the vote received by the stockholder’s proposal at the 2005 Annual Meeting of Stockholders, and after discussion by the Compensation Committee and the Governance and Social Responsibility Committee, Mattel’s Board of Directors adopted a statement of policy on this topic, which appears asAppendix C to this Proxy Statement.

Corporate Governance Documentation; How to Obtain Copies

Mattel is committed to having solid standards of corporate governance. Current copies of the following materials related to Mattel’s corporate governance standards and practices are available

publicly in the “Corporate Governance” section of Mattel’s corporate Web site athttp://www.mattel.com:

A copy of any or all of these documents may also be obtained, free of charge, by mailing a request in writing to: Secretary, Mail Stop M1-1516, Mattel, Inc., 333 Continental Boulevard, El Segundo, CA 90245-5012.

Compensation Committee Interlocks and Insider Participation

During 2004,2005, Mr. Vogelstein, Mr. Beard, Dr. Rich and Mr. Sullivan served on the Mattel Compensation Committee. During 2004,2005, there were no interlocks with other companies within the meaning of the SEC’s proxy rules. None of the members of the Compensation Committee is or has been an officer or employee of Mattel or any of its subsidiaries.

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REPORT OF THE AUDIT COMMITTEE

To the fullest extent permitted under applicable laws and regulations, the following Report of the Audit Committee shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission (“SEC”) or subject to Regulations 14A or 14C of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or the liabilities of Section 18 of the Exchange Act. To the fullest extent permitted under applicable laws and regulations, the Report of the Audit Committee shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent Mattel specifically incorporates it by reference.

The Audit Committee operates pursuant to a written charter adopted by the Board of Directors. In November 2004,January 2006, the Board of Directors amended and restated the charter of the Audit Committee, a copy of which is attached to this Proxy Statement asAppendix A and may be found in the “Corporate Governance” section of Mattel’s corporate Web site,http://www.mattel.com. A copy may also be obtained free of charge by mailing a request in writing to: Secretary, Mail Stop M1-1516, Mattel, Inc., 333 Continental Blvd., El Segundo, CA 90245-5012.

The Board of Directors has determined that each of the members of the Audit Committee, including Dominic Ng (who is anticipated to join the Audit Committee effective April 17, 2006), meets the SEC and New York Stock Exchange (“NYSE”) independence requirements for members of audit committees. Mr. Loeb serves on the Audit Committee despite having served as Acting Chief Executive Officer of Mattel from February to May 2000. Mr. Loeb was not a member of the Audit Committee during the brief period during which he served as Acting Chief Executive Officer. In connection with the departure of Mattel’s former Chief Executive Officer on February 3, 2000, Mr. Loeb agreed to the request of the Board of Directors that he serve on an interim basis as the Acting Chief Executive Officer of Mattel. Mr. Loeb stepped down as Acting Chief Executive Officer on May 15, 2000, in connection with Mr. Eckert’s appointment as Mattel’s new Chief Executive Officer. Mr. Loeb had been a long-term, valued member of the Audit Committee prior to the time that Mattel’s Board of Directors asked him to serve as Acting Chief Executive Officer due to unusual and exigent circumstances. After his service as Acting Chief Executive Officer ended, Mattel’s Board of Directors determined, pursuant to the listing standards of the NYSE, that Mr. Loeb’s unique situation presented exceptional circumstances pursuant to which his continued service on the Audit Committee was required in the best interests of Mattel and its stockholders.

The Board of Directors has further determined in its business judgment that each member of the Audit Committee is “financially literate,” as such term is used in the listing standards of the NYSE; and the Board has determined that Eugene P. Beard, the Chair of the Audit Committee, is an “audit committee financial expert” as such term is defined in Item 401(h) of Regulation S-K promulgated by the SEC. The Board has also determined that Mr. Beard has “accounting or related financial management expertise,” as such term is used in the listing standards of the NYSE.

The Audit Committee’s responsibility is to assist the Board of Director’sDirectors in its oversight of (a) the quality and integrity of Mattel’s financial reports, (b) the independence, qualifications and performance of Mattel’s independent registered public accounting firm, (c) the performance of Mattel’s internal audit function and (d) the compliance by Mattel with legal and regulatory requirements. Management of Mattel is responsible for Mattel’s consolidated financial statements as well as Mattel’s financial reporting process, disclosure controls and procedures, and internal control over financial reporting. Mattel’s independent registered public accounting firm is responsible for performing an integrated audit of Mattel’s annual consolidated financial statements and of its internal control over financial reporting.

In this context, the Audit Committee has reviewed and discussed the audited financial statements of Mattel as of and for the year ended December 31, 20042005 and Management’s Report on Internal Control over Financial Reporting with management, the senior internal auditing officer of Mattel and the independent registered public accounting firm. Management has confirmed to the Audit Committee that, as required by Section 404 of the Sarbanes-Oxley Act, management has evaluated the effectiveness of Mattel’s internal control over financial reporting using the framework inInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission and concluded that it was effective at December 31, 2004.2005.

Mattel’s independent registered public accounting firm has expressed its opinion that: (1) Mattel’s consolidated financial statements present fairly, in all material respects, its financial position as of

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December 31, 20042005 and 2003,2004, and its results of operations and cash flows for each of the three years in the period ended December 31, 20042005 in conformity with accounting principles generally accepted in the United States of America; (2) Mattel has maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004,2005, based on criteria established inInternal Control—Integrated Framework issued by COSO; and (3) management’s assessment, included in Management’s Report on Internal Control over Financial Reporting, is fairly stated, in all material respects.

In addition, Mattel’s Chief Executive Officer and Chief Financial Officer reviewed with the Audit Committee, prior to filing with the SEC, the certifications that were filed pursuant to the requirements of the Sarbanes-Oxley Act of 2002 and the disclosure controls and procedures management has adopted to support the certifications. The Audit Committee met privately at its regularly scheduled meetingsperiodically meets in separate executive sessions with bothmanagement, the senior internal auditing officer and the independent registered public accounting firm. Each of the independent registered public accounting firm, and the senior internal auditing officer, as well as with the Chief Financial Officer and general counsel, each of whomthe General Counsel has unrestricted access to the Audit Committee.

The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by Statement on Auditing Standards No. 61,Communication with Audit Committees, as currently in effect.effect, and Public Company Accounting Oversight Board Auditing Standard No. 2,An Audit of Internal Control over Financial Reporting Performed in Conjunction with an Audit of Financial Statements. In addition, the Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by Independence Standards Board Standard No. 1,Independence Discussions with Audit Committees, as currently in effect, and they have discussed with the independent registered public accounting firm their independence from Mattel.

The Audit Committee has also considered whether the independent registered public accounting firm’s provision of non-audit services to Mattel is compatible with maintaining their independence from Mattel.

The members of the Audit Committee are not engaged in the accounting or auditing profession and, consequently, are not experts in matters involving auditingaccounting or accountingauditing including in respect of auditor independence. As such, it is not the duty of the Audit Committee to plan or conduct audits or to determine that Mattel’s consolidated financial statements fairly present Mattel’s financial position, results of operations and cash flows and are in conformity with accounting principles generally accepted in the United States of America and applicable laws and regulations. Each member of the Audit Committee is entitled to rely on (i) the integrity of those persons within Mattel and of the professionals and experts (such as the independent registered public accounting firm) from which the Audit Committee receives information, (ii) the accuracy of the financial and other information

provided to the Audit Committee by such persons, professionals or experts absent actual knowledge to the contrary, and (iii) representations made by management or the independent registered public accounting firm as to any information technology services of the type described in Rule 2-01(c)(4)(ii) of Regulation S-X and other non-audit services provided by the independent registered public accounting firm to Mattel.

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Based on the reports and discussions described above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in Mattel’s Annual Report on Form 10-K for the year ended December 31, 2004,2005, for filing with the SEC.

AUDIT COMMITTEE

Eugene P. Beard (Chair)

Michael J. Dolan

Ronald M. Loeb

Christopher A. Sinclair

John L. Vogelstein

March 16, 200515, 2006

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REPORT OF THE COMPENSATION COMMITTEE

To the fullest extent permitted under applicable laws and regulations, the following Report of the Compensation Committee covering Mattel’s fiscal year ended December 31, 2004,2005, and the Performance Graph that follows shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission (the “SEC”) or subject to Regulations 14A or 14C of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or the liabilities of Section 18 of the Exchange Act. To the fullest extent permitted under applicable laws and regulations, the Report and the Performance Graph that follows shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, notwithstanding any general incorporation by reference of this Proxy Statement into any other document.

General

The Compensation Committee, a committee composed entirely of independent directors who have never served as officers of Mattel, reviews and approves compensation to be provided to executive officers of Mattel, and acts as an administrator of the stock optionequity and incentive compensation plans for Mattel’s employees. In evaluating the performance of members of senior management, the Compensation Committee has access to, and in its discretion may meet with, any officer or other employee of Mattel or its subsidiaries. The Compensation Committee met fiveseven times during 2004.2005.

Statement on Philosophy of Executive Compensation

In establishing and evaluating the effectiveness of compensation programs for executive officers, as well as other senior executives of Mattel, the Compensation Committee is guided by three basic principles:

Mattel benchmarks its total compensation levels by comparing itself to other large, global, consumer product companies, in order to make Mattel’s compensation opportunities competitive with what other leading companies are providing. Mattel compares its compensation programs and practices to leading companies because Mattel wants to attract and retain talented employees who will lead Mattel to greater business success. Mattel generally intends for its overall executive compensation packages to be at or above the average for global consumer product companies, but Mattel does not target a specific percentile for benchmarking purposes.

Compensation Consultants

The Board of Directors has adopted a charter for the Compensation Committee which provides, among other things, that the Compensation Committee may, at its discretion, utilize an independent

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compensation consultant or other professional or expert. The retention and, where appropriate, the

termination of such compensation consultant are at the sole discretion of the Compensation Committee without the participation of any officer or other member of management of Mattel. The Compensation Committee has retained The Hay Group as its independent compensation consultant. In 2004,2005, the independent compensation consultant assisted the Compensation Committee with regard to comparative market data regarding compensation, the companies with which Mattel compares its compensation programs and practices, aspects of compensation paid to senior executives of Mattel, incentive concepts, financial and other performance measures and equity incentive plans. Among other things,Specifically, The Hay Group advised the Compensation Committee with regard to, among other things: base salaries, the listachievement of companies with whichperformance goals for 2004 under the 2002 Mattel compares its compensation programs and practices, the competitiveness of the Mattel, Inc. Amended and Restated Supplemental Executive RetirementIncentive Plan (the “SERP”“MIP”), approachesthe establishment of performance goals and award levels for 2005 under the MIP, the establishment of performance goals and award levels for a Long-Term Incentive Plan performance cycle beginning in 2005, the design of the Mattel, Inc. 2005 Equity Compensation Plan criteria for a Long-Term Incentive(the “2005 Plan”), grants of equity compensation, acceleration of the vesting of certain stock options, the design of the Mattel, Inc. 2005 Supplemental Executive Retirement Plan performance cycle beginning in 2005(the “2005 SERP”), the compensation of Mattel’s Chief Executive Officer and the compensation of non-employee members of Mattel’s Board of Directors. The Hay Group also advised the Compensation Committee with regard to Mattel’s severance obligations to Mr. Bousquette.

Review of Total Compensation “Tally Sheets”

In 2005, the Compensation Committee reviewed “tally sheets” of the compensation and benefits of each named executive officer and each other executive officer who reports directly to the Chief Executive Officer, and discussed the tally sheets with the Compensation Committee’s independent compensation consultant. At the Compensation Committee’s suggestion, the tally sheets were also reviewed with the full Board of Directors.

Base Salaries

The Compensation Committee establishes the base salaries of executive officers at levels it determines areto be appropriate in light of the duties and scope of responsibilities of each officer’s position. The Compensation Committee reviews executive officer salaries regularly, usually at least once every 12 months, and makes adjustments as warranted to reflect continued individual contributions, sustained performance and competitive market factors. The Compensation Committee measures individual contributions and performance against total annual compensation, including incentive awards, rather than against base salary alone. During 2004,2005, the Compensation Committee did not increase the base salary of Mr. Eckert,Eckert. As part of a regular review of executive salaries in the ordinary course, increases were made, effective February 2005, to the annual base salaries of Mr. Bousquette, Mr. Debrowski,Friedman, Mr. Farr, or Mr. Neil Friedman.Debrowski and Mr. Stockton. In October 2005, Mattel announced the consolidation of its previously existing Mattel Brands and Fisher-Price Brands divisions into a new division called Mattel Brands. In connection with Mr. Friedman’s promotion to the newly created position of President of the consolidated Mattel Brands division, the Compensation Committee increased Mr. Friedman’s base salary, in recognition of the increased responsibilities of his new position; and at the same time, the Compensation Committee increased Mr. Stockton’s base salary. In making these salary adjustments, the Compensation Committee reviewed competitive compensation data, relied upon the advice of the Compensation Committee’s independent compensation consultant and exercised its business judgment.

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Annual Incentives

Certain employees of Mattel and its subsidiaries are eligible for annual cash incentive compensation under the 2002 Mattel Incentive Plan (the “MIP”), which was approved by Mattel’s stockholders in 2002. The performance goalsobjectives used to determine payments under the MIP may be based on one or more of a variety of different financial business criteria with respect to (1)��Mattel, (2) Mattel’s worldwide operations, regional operations, country specific operations and/or subsidiaries, business units, affiliates, corporations, divisions, groups, functions or employees and/or (3) Mattel’s brands, groups of brands or specific brands. EachIn the first quarter of each year, the Compensation Committee establishes specific targetsthe performance goals that must be achieved beforefor that year in order for annual incentive payments are paid, as well as maximum levels for participants, which provide a ceiling on the total amount payable.to be made. The performance goals for named executive officers are based on objective formulae or standards, as required to qualify for the exception from Internal Revenue Code Section 162(m) for performance-based compensation. For other employees, the Compensation Committee has the discretion to establish performance goals based on other standards, including individual performance goals, business and personal contributions and management discretion.

In March 2004,2005, the Compensation Committee established performance goals and formulae for the year 20042005 under the MIP. For Mr. Eckert, Mr. Farr and Mr. Debrowski, theseThese goals and formulae were based on the following criteria for the following named executive officers: (a) the overall corporate financial performance of Mattel and achievement of objectively measurable strategic initiatives, and for each of the following officers: Mr. BousquetteEckert, Mr. Farr and Mr. Neil Friedman, they were based onDebrowski; (b) the overall corporate financial performance of Mattel, the financial performance of the executive’s respective business unit and achievement of objectively measurable strategic initiatives, for each of the following officers: Mr. Bousquette and Mr. Friedman; and (c) with regard to Mr. Stockton, the overall corporate financial performance of Mattel, the financial performance of the International, Mattel Brands and Fisher-Price Brands business units and achievement of objectively measurable strategic initiatives.

At the time they were set, all of the 20042005 performance goals were substantially uncertain to be achieved. The goals were set at threshold, target and maximum levels. The performance goals with

respect to the overall corporate financial performance of Mattel were based upon net operating profit after taxes less a capital charge. The performance goals with regard to the financial performance of each business unit were based on the business unit’s U.S. operating profit less an inventory charge and the business unit’s international operating profit at planned overhead less an inventory charge. The specific numbers used with regard to these performance goals are highly sensitive and confidential.Withconfidential. With regard to the objectively measurable strategic initiatives, which are highly sensitive and confidential in nature, the Compensation Committee established several sets of precise measures and determined the relative weight given to each set, and the Compensation Committee established rules as to how many of the precise measures needed to be achieved within each set in order to reach the threshold, target and maximum levels. For 2004,2005, the maximum amounts that named executive officers were eligible to receive under the MIP ranged from 90% to 200% of base salary; insalary.

In determining these amounts,the performance goals and award levels for each named executive officer for 2005 under the MIP, the Compensation Committee reviewed competitive data regarding annual incentive levels,total executive compensation, relied upon the advice of the Compensation Committee’s independent compensation consultant and exercised its business judgment.

With regard to the year 2004, some of the objectively measurable strategic initiatives were achieved and others were not;2005, Mattel achieved the overall corporate financial performance goals at a level between the threshold and target levels;level; the Mattel Brands business unit did not achieve its financial performance goals at the threshold level; and the Fisher-Price Brands business unit achieved its financial performance goals at a

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level betweenslightly above the target level; and the International business unit did not achieve its financial performance goals at the threshold level. Some of the objectively measurable strategic initiatives were achieved and target levels.some were not; overall, the threshold level was not achieved with regard to the objectively measurable strategic initiatives. Annual incentive payments under the MIP to Mr. Eckert, Mr. Bousquette, Mr. Debrowski, Mr. Farr, and Mr. Neil Friedman and Mr. Stockton were calculated and paid accordingly, as shown in the Summary Compensation Table.

Long-Term Incentive Plan

Executive officers and certain other employees of Mattel are eligible for long-term incentive compensation under the Mattel, Inc. 2003 Long-Term Incentive Plan (the “LTIP”), which was approved by Mattel’s stockholders in 2003. Awards under the LTIP are based on Mattel’s financial performance over the cycle relative to performance targets relating to its long-range financial goals and are paid in the quarter following the end of the performance cycle.

In March 2003,2005, the Compensation Committee established the performance targets for the January 1, 2003-December2005-December 31, 20062007 LTIP performance cycle. For the 2003-20062005-2007 performance cycle, the Compensation Committee based the performance targets on net operating profit after taxes less a capital charge. The specific numbers used with regard to these performance targets are highly sensitive and confidential. In March 2003,2005, the Compensation Committee established the level of each executive’s participation and threshold, target and maximum levels for the performance criteria that hadhave to be achieved before incentive payments wouldwill be awardedmade under the LTIP at the threshold, target and maximum payout levels. These performance criteria included criteria for an interim(a) a cumulative payment based on cumulative financial performance over the entire 2005-2007 performance cycle; and (b) if there is no cumulative payment, a payment at a reduced rate based upon financial performance during the January 1, 2003-December 31, 2004 portion of the 2003-2006 performance cycle.fiscal year 2007. At the time that they were set, the goals that the Compensation Committee established were substantially uncertain to be achieved. The

In determining the performance criteriagoals and award levels for an interim payment were not satisfied,each executive under the 2003-2006 and thus no interim payment was made with regard2005-2007 LTIP performance cycles, the Compensation Committee reviewed competitive data regarding total executive compensation, relied upon the advice of the Compensation Committee’s independent compensation consultant and exercised its business judgment.

In March 2005, the Compensation Committee amended the LTIP to provide that awards and payments under the LTIP for performance cycles beginning on or after January 1, 2003-December 31, 2004 portion of the 2003-2006 performance cycle.2005 may be subject to cancellation, reduction and recapture under certain circumstances.

Equity-Based Incentive Compensation

The2005 Equity Compensation Plan

At the Annual Meeting of Stockholders on May 19, 2005, the stockholders of Mattel approved the Mattel, Inc. 2005 Equity Compensation Plan (the “2005 Plan”). Prior to the approval of the 2005 Plan, Mattel had in place an Amended and Restated Mattel 1996 Stock Option Plan (the “1996 Plan”) and a 1999 Stock Option Plan (the “1999 Plan”). As a result of the approval of the 2005 Plan by the stockholders, the 1996 Plan and the 1999 Plan terminated on May 19, 2005, except with regard to grants already outstanding under the 1996 Plan and the 1999 Plan. No further grants under the 1996 Plan or the 1999 Plan have been made, nor can they be made, after May 19, 2005.

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The 2005 Plan authorizes the Compensation Committee to make grants and awards of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights and other stock-based awards. Stock options are granted under the 19962005 Plan with an exercise price equal to the market price of Mattel’s common stock on the date of grant and generally

vest semi-annually over three years. This approach is designed to motivate management to increase stockholder value over the long term, because the full benefit of the compensation package cannot be realized unless stock price appreciation occurs over a number of years.

Grants of Equity Compensation to Named Executive Officers in 2005

In determiningMarch 2005, a grant of 7,500 shares of restricted stock was made to Mr. Bousquette and a grant of 5,000 shares of restricted stock was made to Mr. Stockton. The grants were made pursuant to the amount1996 Plan and typeprovided for vesting of awards to be granted,the shares on March 16, 2006, the first anniversary of the grant date. In authorizing the grants, the Compensation Committee considers competitive market practices, the duties and scope of responsibilities ofnoted that each executive’s positionbusiness unit presented challenges as to which the executive’s leadership would be critical over the year, and determined in its business judgment, with input from the amountCompensation Committee’s independent compensation consultant, that awards of restricted stock would provide appropriate retention and terms of awards previously granted to management.

By its terms, the 1997 Premium Price Stock Option Plan (the “PPO Plan”) terminated on December 31, 2002, except with respect to stock options then outstanding.

See “Proposal 3—Approval of the Mattel, Inc. 2005 Equity Compensation Plan”compensation enhancements for information concerning the proposed new Mattel, Inc. 2005 Equity Compensation Plan.such period.

In 2004,August 2005, Mr. Eckert, Mr. Bousquette, Mr. Debrowski, Mr. Farr, and Mr. Neil Friedman and Mr. Stockton were granted options to purchase 375,000, 250,000, 100,000, 125,000, 250,000 and 250,000100,000 shares of Mattel common stock, respectively, pursuant to the 19962005 Plan. The exercise price per share of the options is equal to the closing price per share of Mattel common stock on the date of grant. The options vest and become exercisable as follows: as to 10% of the shares six months after the grant date, as to an additional 10% of the shares one year after the grant date, and as to an additional 20% of the shares every six months thereafter, with the options becoming fully exercisable on the third anniversary of the grant date. The options expire no later than ten years from the date of grant. The primary basis for the Compensation Committee’s granting of such options was to recognize the executives as key leaders of the company and to provide them with strong incentives to increase Mattel’s stockholder value during the term of the options. The Compensation Committee reviewed competitive data regarding equity incentive levels, relied upon the advice of the Compensation Committee’s independent compensation consultant and exercised its business judgment in determining the number of options to grant.

In October 2005, in connection with Mr. Friedman’s promotion to the position of President, Mattel Brands, Mr. Friedman received a grant of 25,000 restricted stock units (“RSUs”) with dividend equivalents pursuant to the 2005 Plan, in recognition of the increased responsibilities of his new position. The RSUs vest in full on the third anniversary of the grate date. In making this grant to Mr. Friedman, the Compensation Committee considered input from its independent compensation consultant and exercised its business judgment.

Acceleration of Vesting of Stock Options

In December 2005, the Compensation Committee approved the acceleration of vesting of all outstanding unvested stock options with an exercise price of $16.09 or greater granted to employees other than Mattel’s Chairman and Chief Executive Officer under the 1996 Plan, the 1999 Plan and the 2005 Plan. Options held by non-employee members of the Board of Directors were excluded from the acceleration. The effective date of the acceleration was December 28, 2005; on such date, the closing price of Mattel’s common stock on the New York Stock Exchange was $15.95 per share.

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The options as to which vesting was accelerated have exercise prices per share ranging from $16.09 to $22.52 and a weighted average exercise price per share of $18.34. As a result of the acceleration, options for approximately 12.4 million shares became immediately exercisable. Typically, stock options granted to employees under the 1996 Plan, the 1999 Plan and the 2005 Plan vest over a three-year period. The number of shares subject to, and exercise prices of, the options as to which vesting was accelerated remain unchanged.

Of the approximately 12.4 million shares subject to options as to which vesting was accelerated, approximately 1.7 million, or approximately 14%, correspond to options held by Mattel’s executive officers as a group. With regard to the accelerated options held by Mattel’s named executive officers and other executive officers reporting directly to the Chief Executive Officer, Mattel imposed a restriction consisting of a holding period on shares underlying the portion of such options as to which vesting was accelerated. Pursuant to this restriction, each such executive officer is required to refrain from selling any shares acquired upon exercise of any portion of such options that was accelerated, until the earlier of (a) the date on which the portion of the option being exercised by such executive officer would have become vested pursuant to the option’s original vesting schedule or (b) the date on which such executive officer ceases to be an executive officer of Mattel.

The primary purpose of the accelerated vesting was to enable Mattel to avoid recognizing future compensation expense associated with the accelerated stock options under the adoption by Mattel in 2006 of FASB Statement No. 123R, “Share-Based Payment.” Mattel expects the accelerated vesting to reduce the pre-tax stock compensation expense it otherwise would be required to record by approximately $30 million over the period from 2006 through 2008. Also, there may be future benefits for the provision of income taxes for financial reporting purposes.

Stock Ownership Guidelines

The Compensation Committee believes that significant equity interests in Mattel held by its executives more closely align the interests of stockholders and management. In light of this belief, Mattel has established stock ownership guidelines that apply to the named executive officers and certain other executive officers. Those executive officers to whom the guidelines apply have up to five years to attain target minimum levels of stock ownership, based on an ascending scale commensurate with their level in Mattel. Compliance with these guidelines, while not mandatory, is taken into consideration when the Compensation Committee grants stock options.makes equity grants.

Other Executive Compensation and Benefits

The Compensation Committee is also responsible for, and periodically reviews, all other elements of the compensation and benefits of executive officers. These other elements include

Supplemental Executive Retirement Plans

In late 2004, as part of the American Jobs Creation Act, the federal income tax law governing non-qualified deferred compensation arrangements was significantly revised. Benefits provided under the Mattel, Inc. Amended and Restated Supplemental Executive Retirement Plan, as amended (the “SERP”), which is described under “Retirement Plans.” Duringthat were not considered to have been earned and vested as of December 31, 2004, were subject to the new law. The SERP was originally adopted by Mattel effective May 1, 1996, and amended effective November 4, 1999.

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In response to this tax law change, on March 16, 2005, the Compensation Committee asked its independent consultant, The Hay Group,approved freezing the SERP as of December 31, 2004, in order to evaluate and report onensure that SERP benefits that are not subject to the competitivenessnew tax law continue to be provided under the terms of the SERP. The consultant performedSERP as in effect when it was frozen, without adverse tax consequences for the evaluation and suggested thatparticipants. At the same time, the Compensation Committee consider enhancements to the SERP to increase its competitiveness. The Compensation Committee, considering the input of the consultant and exercising its business judgment, directed at the end of 2004 that work should begin onapproved the Mattel, Inc. 2005 Supplemental Executive Retirement Plan (the “2005 SERP”), which. The 2005 SERP provides for supplemental retirement benefits that are subject to the new tax law, on terms and conditions intended to comply with the new tax law.

The 2005 SERP has two purposes: to help retain selected key Mattel executives by providing them with retirement benefits more consistent with current competitive practices than those provided under the SERP; and for SERP participants who are not eligible for these enhanced benefits, to provide continued benefit accruals under the formula of the SERP, but on terms and conditions that comply with the requirements of the new tax law. The latter benefits are referred to as “Part A Benefits” and the enhanced benefits are referred to as “Part B Benefits.” Participants who receive Part B Benefits generally will not receive Part A Benefits.

All participants in the SERP who are employed with Mattel as of January 1, 2005, are automatically participants in the 2005 SERP with Part A Benefits, including named executive officers Mr. Eckert, Mr. Debrowski, Mr. Farr, Mr. Neil Friedman and Mr. Stockton. All of such named executive officers have been designated to receive Part B Benefits.

With regard to the design of the 2005 SERP, the Compensation Committee received advice from its independent compensation consultant, reviewed information with regard to competitive compensation practices, and exercised its business judgment.

Additional information regarding the 2005 SERP is describedset forth below under “Retirement Plans.”

Deferred Compensation and PIP Excess Plan

Executive officers and other Mattel employees also participate in the Mattel, Inc. Deferred Compensation and PIP Excess Plan (the “DCPEP”), a non-qualified deferred compensation plan that

provides for deferral of compensation in excess of the amounts that are legally permitted to be deferred under the Mattel, Inc. Personal Investment Plan (the “PIP”), Mattel’s tax-qualified 401(k) savings plan. Participants in the DCPEP are permitted to direct the investment of their deferred compensation accounts, choosing from a range of investment choices that are similar, but not identical, to those available under the PIP.choices.

Perquisites

Mattel also provides its executive officers and certain other employees with various perquisites. As to Mattel’s named executive officers, perquisites are described under “Employment Agreements.”

Amendment to Mr. Debrowski’s Employment Agreement

On October 12, 2005, Mattel and Mr. Debrowski entered into a letter agreement amending Mr. Debrowski’s employment agreement. The amendment concerned Mr. Debrowski’s entitlement to severance benefits after a “Change of Control” (as defined in the employment agreement) of Mattel. Specifically, the amendment provided that if Mr. Debrowski were to terminate his employment with Mattel for any reason during the 30-day period following the six-month anniversary of a “Change of

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Control,” he would be entitled to the same severance benefits as are required to be paid under the employment agreement if he were to terminate his employment for “Good Reason” (as defined in the employment agreement) within 18 months following a “Change of Control.” The purpose of the amendment was to bring the provision in Mr. Debrowski’s employment agreement into alignment with similar provisions in the employment agreements of Mattel’s other named executive officers.

Separation Agreement with Mr. Bousquette

On December 22, 2005, Mattel and Mr. Bousquette entered into a Separation Agreement dated as of December 15, 2005. The Separation Agreement generally implemented the provisions of Mr. Bousquette’s employment agreement intended to apply to Mr. Bousquette following a termination of his employment. See “Employment Agreements—Separation Agreement with Mr. Bousquette.” The Compensation Committee received advice from its independent compensation consultant with regard to Mattel’s severance obligations to Mr. Bousquette pursuant to the terms of his employment agreement.

Consulting Agreement with Mr. Bousquette

On December 22, 2005, Mattel and Mr. Bousquette entered into a Consulting Agreement dated as of December 15, 2005 pursuant to which Mr. Bousquette agreed to make himself available to render consulting services to Mattel during the period beginning January 1, 2006 and ending December 31, 2007, in exchange for cash compensation of $750,000 per year, subject to the terms and conditions set forth in the Consulting Agreement. In approving the Consulting Agreement, the Compensation Committee exercised its business judgment, considering among other things the value to Mattel of having Mr. Bousquette available to provide consulting services to Mattel after the termination of his employment.

The Consulting Agreement includes a provision that, to avoid a conflict of interest, during the consulting period Mr. Bousquette will not provide services to entities with significant involvement in marketing, developing or selling toys, and he will not induce or solicit Mattel’s employees to leave their employment.

Compensation of the Chief Executive Officer

Mr. Eckert’s Employment Agreement dated as of October 18, 2000, effective as of May 16, 2000, established the terms and conditions of his employment with Mattel, including a minimum base salary, minimum levels of participation in incentive plans, the minimum benefits to which he was entitled under the compensation plans available to Mattel’s executive officers and payments or benefits to which he would be entitled upon termination of his employment. See “Employment Agreements” below. The Compensation Committee typically reviews the base salary of the Chief Executive Officer at least every 12 months pursuant to the same policies the Compensation Committee uses to evaluate the base salaries of the other executive officers. Mr. Eckert’s base salary was reviewed by the Compensation Committee during the year 20042005 and was not increased.

In March 2005, the Compensation Committee approved an amendment to Mr. Eckert’s employment agreement. The amendment grants Mr. Eckert the use of company aircraft for personal use up to 60 hours per year while he serves as Chief Executive Officer, and an amount adequate to pay his income taxes on the amount of imputed income he receives as a result of this benefit and the payment of his taxes. In determining to grant this benefit to Mr. Eckert, the Compensation Committee

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was advised by its independent compensation consultant and took note of Mr. Eckert’s personal travel schedule, which has been extensive, due to personal family obligations that will continue to result in frequent air travel. The Compensation Committee reviewed a detailed financial analysis of the out-of-pocket costs and tax consequences to Mattel of providing this benefit. The Compensation Committee believes that providing this benefit as part of Mr. Eckert’s compensation will benefit Mattel and its shareholders by minimizing the disruptions and burdens of Mr. Eckert’s personal travel.

Multiple components of Mr. Eckert’s compensation are tied directly to Mattel’s financial performance. Mr. Eckert’s stock options and deferrable restricted stock units are tied to Mattel’s financial performance in that the value of these equity securities is directly determined by the market value of Mattel’s stock. In 2004,2005, the Compensation Committee awarded to Mr. Eckert an option under the 19962005 Plan to purchase 375,000 shares of Mattel common stock. The purpose of this award was to provide Mr. Eckert with a continuing incentive to increase Mattel’s stock value during the term of the option. The Compensation Committee reviewed competitive data regarding total compensation packages and equity incentive levels for officers in Chairman and Chief Executive Officer positions, relied upon the advice of its independent compensation consultant and exercised its business judgment in making this grant to Mr. Eckert.

Mr. Eckert participates in Mattel’s annual incentive plan, the MIP. As explained above, the Compensation Committee met in March 20042005 to establish performance goals under the MIP for the year 2004.2005. Mr. Eckert’s performance goals were based upon two types of goals: Mattel’s overall corporate financial performance, specifically Mattel’s net operating profit after taxes less a capital charge, and upon achievement of objectively measurable strategic initiatives. The performance goals were set at threshold, target and maximum levels; consistentlevels. Consistent with the terms of Mr. Eckert’s employment agreement, if both types of goals were achieved at the maximum level, his annual bonus opportunity was $2,500,000 (200% of his base salary), and if both types of goals were achieved at the target level, his annual bonus opportunity was 100%$1,250,000 (100% of his base salary, and if thesalary). If both types of goals were achieved at the maximumthreshold level, his bonus opportunity was 200%$625,000 (50% of his base salary. Achievementsalary), and achievement on both types of goals below the threshold level would have resulted in no annual bonusMIP payment to Mr. Eckert. Achievement at the threshold, target or maximum levels would have resulted in annual bonus payments of $625,000, $1,250,000 or $2,500,000, respectively. With regard to the year 2004,2005, Mattel achieved overall corporate financial performance betweenat the threshold and target levels, and somelevel, but the threshold level was not all ofachieved with regard to the objectively measurable strategic initiatives were achieved.initiatives. As a result, Mr. Eckert received an annual bonus of $984,344.$468,750.

Mr. Eckert also participates in the LTIP. In March 2003,2005, the Compensation Committee established goals under the LTIP for a plan cycle that began January 1, 20032005 and ends on December

31, 2006.2007. As explained above, Mr. Eckert’s performance goals under the LTIP are based exclusively upon Mattel’s corporate financial performance, specifically Mattel’s net operating profit after taxes less a capital charge. The goals were set at threshold, target and maximum levels; under the criteria established by the Compensation Committee, achievement of financial performance below the threshold level would result in no LTIP payment to Mr. Eckert, and achievement at the threshold, target or maximum levels would result in payments of $3,000,000, $6,000,000 or $12,000,000, respectively. The criteria established by the Compensation Committee included criteria for an interim(a) a cumulative payment based on cumulative financial performance over the entire 2005-2007 performance cycle; and (b) if there is no cumulative payment, a payment at a reduced rate based upon Mattel’s corporate financial performance during the January 1, 2003-December 31, 2004 portion of the 2003-2006 performance cycle. The performance criteria for an interim payment were not satisfied, and thus no interim payment was made with regard to the January 1, 2003-December 31, 2004 portion of the 2003-2006 performance cycle.fiscal year 2007.

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Internal Revenue Code Section 162(m)

As one of the factors in its review of compensation matters, the Compensation Committee considers the anticipated tax treatment to Mattel and to its executives of various payments and benefits. The deductibility of some types of compensation payments depends upon the timing of an executive’s vesting or exercise of previously granted rights or on whether such compensation qualifies for the exemption for “performance-based” compensation under the provisions of Internal Revenue Code Section 162(m). Furthermore, interpretations of and changes in the tax laws and other factors beyond the Compensation Committee’s control also affect the deductibility of compensation. For these and other reasons, the Compensation Committee will not necessarily limit executive compensation to the amount deductible under Internal Revenue Code Section 162(m). The Compensation Committee will consider various alternatives to preserve the deductibility of compensation payments and benefits to the extent reasonably practicable and to the extent consistent with its other compensation objectives.

COMPENSATION COMMITTEE

John L. Vogelstein (Chair)

Eugene P. Beard

Dr. Andrea L. Rich

G. Craig Sullivan

March 16, 200515, 2006

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PERFORMANCE GRAPH

The following graph compares the performance of Mattel common stock with that of the S&P 500 Index and the S&P 500 Consumer Staples Index. The Cumulative Total Return listed below assumes an initial investment of $100 on December 31, 19992000 and reinvestment of dividends.

Comparison of Five Year Cumulative Total Return

Mattel, Inc., S&P 500 and S&P 500 Consumer Staples Index

19992000 to 20042005

Mr. Debrowski serves as Executive Vice President, Worldwide Operations; Mr. Farr serves as Mattel’s Chief Financial Officer; and Mr. Friedman serves as President, Fisher-PriceMattel Brands. The employment agreements for each of these executives contain substantially similar terms except as described below.

The agreements generally provide a three-year term of employment, except for Mr. Debrowski’s agreement, which provides for a two-year term. On the first day of each month, the term of each agreement is automatically extended by one month unless the executive or Mattel gives notice to the other that the agreement will not be extended and will be terminated. The agreements generally provide that each executive is to receive a base salary at least equal to his salary in effect on the date of the agreement, and base salaries must be reviewed no less frequently than once every eighteen months and may be increased at any time. As of December 31, 2004, the base salary for each of Mr. Bousquette and Mr. Friedman was $900,000, the base salary for Mr. Farr was $675,000 and the base salary for Mr. Debrowski was $660,000. As a resultEffective February 28, 2005, as part of a meritregular review of executive salaries in the ordinary course, increases were made to theannual base salaries effective February 28, 2005, as follows: the salary of each of Mr. Bousquette and Mr. Friedman was increased from $900,000 to $935,000,$935,000; the salary of Mr. Farr was increased from $675,000 to $700,000$700,000; and the salary of Mr. Debrowski was increased from $660,000 to $685,000. In October 2005, Mattel announced the consolidation of its previously existing Mattel Brands and Fisher-Price Brands divisions into a new division called Mattel Brands. In connection with Mr. Friedman’s promotion to the newly created position of President of the consolidated Mattel Brands division, Mr. Friedman’s salary was increased to $1,000,000 per year, in recognition of the increased responsibilities of his new position. Effective February 27, 2006, as part of a regular review of executive salaries in the ordinary course, Mr. Farr’s salary was increased to $725,000 and Mr. Debrowski’s salary was increased to $710,000. Each agreement also provides for the executive’s participation in various incentive and employee benefit plans as may be in effect from time to time with respect to executives employed by Mattel, including but not limited to the MIP, the LTIP, Mattel’s stock option plans and retirement plans, as well as other benefit plans and programs available to executive officers and employees generally.

Mattel may terminate the executive’s employment for “cause,” as defined in the agreements, if the Chief Executive Officer of Mattel determines that “cause” exists. Each executive may terminate his employment if “good reason” exists, as defined in the agreements. “Good reason” includes, among other things, any change in duties, authority or responsibility of the executive that is inconsistent with the executive’s position as described in his respective agreement, any failure of a successor to Mattel to

assume or perform the agreement and any requirement by Mattel that the executive be based outside of Los Angeles (or,or, in the case of Mr. Friedman, New York),York, in each case without the executive’s consent. Mr. Friedman has consented to being relocated to Los Angeles. If the executive’s employment is terminated for cause or if the executive terminates his employment without good reason, Mattel will pay the executive his full base salary through the termination date at the then-effective rate. The agreements also provide for, among other things, certain health care and disability benefits to the executives or their families in the event of termination of employment by death or disability.

If Mattel terminates the executive’s employment other than for cause, death or disability or the executive resigns for good reason (in each case, other than within 18 months following a change of control):

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any

With respect to only Mr. Bousquette and Mr. Friedman, if Mattel terminates the executive’s employment other than for cause, death or disability, or if the executive resigns for good reason, and such termination occurs within 18 months after the date upon which Mattel changes the person to whom the executive immediately reports, then (1) the executive’s Bonus, as described above, will be no less than the executive’s maximum targeted annual incentive plan bonus for the year in which the termination of employment occurs, and (2) the executive’s LTIP payment described above will be based on the maximum LTIP payment that the executive could have received with respect to the pending performance period, rather than the amount which would have been payable to the executive had he remained employed for the entire performance period.

If, within 18 months following a “change of control” of Mattel, the executive resigns for good reason, Mattel terminates the executive’s employment other than for cause or disability, or in the case of each executive other than Mr. Debrowski, within the 30-day period immediately following the six-month anniversary of a change of control, the executive terminates employment for any reason, Mattel will, among other things, make all the payments and provide all the benefits to the executives described in the two paragraphs immediately above, except

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for the pro rated LTIP payment. Instead of the prorated LTIP payment, each of the agreements (other than Mr. Debrowski’s) provide for the payment of the LTIP benefits in connection with a change of control in accordance with the terms of the LTIP’s change of control provisions. Mr. Debrowski’s agreement entitles him to an LTIP payment for the current year, assuming achievement of the three-year maximum award, without proration, reduced by any amounts paid to Mr. Debrowski under the LTIP for the current year as a result of a change of control, if the change of control occurs during the year in which termination occurs.

In addition, in the event of a change of control, options that accelerate under the executive’s agreement will remain exercisable for the longer of 90 days following the termination date (two years following the termination date, in the case of Mr. Farr only) or the period specified in the applicable agreement or plan, but in no event past the expiration date of the options. Furthermore, Mr. Debrowski will receive two years’ age and service credit for purposes of computing any service and age-related benefits under the SERP, the deferred compensation plan, and the retiree medical plan. If, with respect to payments or distributions in the nature of compensation (including accelerated vesting and exercisability of stock options) made by Mattel due to a change of control, the executive is subject to the payment of excise tax under Section 4999 of the Internal Revenue Code, Mattel will pay such executive an additional amount so as to place the executive in the same after-tax position such executive would have been in had such excise tax not applied.

In addition, pursuant to amendments, each dated February 10, 2000 in the case of Mr. Bousquette and Mr. Friedman and dated July 20, 2000 in the case of Mr. Farr, if an executive’s employment with Mattel is terminated without cause by Mattel, because of death or disability, by the executive for good reason, or by the executive within the 30-day period immediately following the six-month anniversary of a change of control, all then-outstanding stock options issued under the 1990 Plan or the 1996 Plan held by the executive that were outstanding as of February 1, 2000 (or in the case of Mr. Farr, that were outstanding as of March 30, 2000) will become immediatelyremain exercisable and he will have until the date that is ten years from the date each such outstanding option was granted to exercise such option.

granted. In addition, pursuant to an amendment dated July 20,the terms of the grant agreement for a March 30, 2000 grant of a stock option for 500,000 shares to Mr. Bousquette’sFriedman pursuant to the 1997 Plan, if Mr. Friedman’s employment agreement, in the event that the employmentwith Mattel is terminated without cause by Mattel, because of Mr. Bousquette is terminatedFriedman’s death or disability, by Mattel without causeMr. Friedman for good reason, or by Mr. Bousquette for good reason after he has attained fifty-two yearsFriedman within the 30-day period immediately following the six-month anniversary of age, the executive’s benefits under the SERPa change of control, any portion of such option that is then outstanding will be fully vested. Furthermore,remain exercisable until March 30, 2010.

In addition, pursuant to an amendment dated November 14, 2000 to Mr. Friedman’s employment agreement, in the event that Mr. Friedman’s employment is terminated by Mattel without cause, by Mr. Friedman for good reason or by Mr. Friedman as a result of his retirement after the age of 55, his benefits under the SERP will be fully vested and, in lieu of the payments provided under the SERP, he will be entitled to an annual benefit of $300,000 for his lifetime, regardless of his years of service, age, actual compensation or average compensation. Mr. Friedman also agreed in this amendment that he had no intention, other than a result of physical limitations beyond his control, to retire prior to the age of 58.

Pursuant to an amendment dated March 6, 2002 to Mr. Farr’s employment agreement, certain provisions of Mr. Farr’s employment agreement relating to the calculation of SERP benefits were revised. Mr. Farr’s employment agreement had previously provided that if (a) Mattel terminated his employment for other than cause or disability, or if Mr. Farr terminated his employment for good reason (in each case, other than within 18 months following a change of control), (b) within 18 months

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following a change of control, Mr. Farr terminated his employment for good reason or Mattel or the surviving entity terminated Mr. Farr’s employment other than for cause or disability or (c) within the 30 day period immediately following the six month anniversary of a change of control Mr. Farr terminated his employment for any reason, then the SERP benefit would be calculated based upon 25% of the average of the final three years of his base salary, plus the average of the greater two out of his three most recent annual bonuses under the annual incentive plan. The amendment revised the percentage from 25% to 35%, to make the percentage consistent with a percentage set forth in the SERP itself.

Mr. Bousquette, Mr. Debrowski, Mr. Farr and Mr. Friedman are all participants in the 2005 SERP, which is described above under “Retirement Plans.”They have all been designated as eligible for the enhanced benefits (Part B Benefits) under the 2005 SERP, and in connection with that designation, each executive’s employment agreement was amended by a letter agreement dated April 4, 2005, as described below.

In order to be eligible for Part B Benefits, each of the executives must waive his right to benefits under the SERP. In addition, Mr. Friedman is required to remain employed with Mattel through August 19, 2007, and Mr. Debrowski is required to remain employed with Mattel through May 25, 2008; however, this continued employment requirement will be waived if the executive’s employment is terminated by Mattel without cause or the executive resigns for good reason, or inif the case of Mr. Friedman, if heexecutive resigns within the 30-day period immediately following the six-month anniversary of a change of control.

In addition, the letter agreements preserve, for purposes of the 2005 SERP, the special agreements regarding retirement benefits for each executive under the applicable employment agreement. Accordingly, each letter agreement provides that references in the executive’s employment agreement to the “SERP” will be deemed to refer to the 2005 SERP, so that any additional years of service and age that are credited to the executive under the employment agreement in connection with a termination of employment, as described above, will apply for purposes of computing the executive’s Part B Benefits. Mr. Bousquette will also be deemed to have reached age 55 and satisfied the requirement for 60 months of service for purposes of the 2005 SERP, if his employment with Mattel is

terminated by Mattel without cause or by him for good reason after he has attained fifty-two years of age. Furthermore, Mr. Friedman will receive the greater of his Part B Benefit under the 2005 SERP or the $300,000 annual benefit described above. Finally, the special SERP formula included in Mr. Farr’s employment agreement is deleted, because his Part B Benefit will be greater.

Employment Letter with Bryan G. Stockton

Pursuant to an employment letter dated as of August 22, 2000 and described below, Mr. BousquetteStockton was hired as Mattel’s Executive Vice President, Worldwide Business Planning and Development. Mr. Friedman each received a loan from Mattel on October 29, 1999, in the principal amount of $1.0 million, and a second loan from Mattel on April 7, 2000, in the principal amount of $2.0 million, which were all due and payable on or before October 29, 2002, with interest to accrue annually at 7% per annum. With respect to each executive, ifStockton began his employment with Mattel hadin November 2000. In February 2003, Mr. Stockton assumed the position of Executive Vice President, International.

The salary amounts paid to Mr. Stockton for 2003, 2004 and 2005 are set forth above under the heading “Summary Compensation Table.” As part of a regular review of executive salaries in the ordinary course, Mr. Stockton’s annual base salary was increased effective February 28, 2005 from $600,000 to $625,000. In October 2005, in connection with the consolidation of the Mattel Brands division and the Fisher-Price Brands division, Mr. Stockton’s base salary was increased to $675,000 per year.

Pursuant to the terms of his employment letter, Mr. Stockton received a signing bonus in the amount of $500,000. Under the employment letter, Mr. Stockton’s target bonus opportunity for 2000 was 50% of his annual base salary and his maximum bonus opportunity was 75% of his annual base

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salary. Furthermore, Mr. Stockton was recommended to the Compensation Committee for participation in the LTIP with a target level award of $750,000 and a maximum level award of $1,500,000 for the cycle commencing in 2000.

Mr. Stockton’s employment letter provided that he was eligible to participate in the SERP. Mr. Stockton is a participant in the 2005 SERP, which is described above under “Retirement Plans.” He has been terminateddesignated as eligible for the enhanced benefits (Part B Benefits) under the 2005 SERP, and in connection with that designation, he entered into a letter agreement with Mattel on March 28, 2005 pursuant to which he waived his right to benefits under the SERP.

Under the employment letter, Mr. Stockton is also eligible for benefits under various Mattel benefit plans, is eligible to participate in Mattel’s deferred compensation plan and was provided with relocation benefits in connection with the commencement of his employment with Mattel.

The employment letter provides that Mr. Stockton was eligible for a monthly automobile allowance of $1,150, along with a gasoline credit card. In addition, Mr. Stockton’s employment letter provides for participation in Mattel’s financial counseling program for senior executives.

Pursuant to the employment letter, if Mattel terminates Mr. Stockton’s employment other than for cause, orMr. Stockton will be provided with two years of base salary plus two times the executive had resigned without good reason, prioraverage of Mr. Stockton’s last two years’ MIP bonus. Receipt of these severance benefits is subject to October 30, 2002, thenMr. Stockton’s execution of a general release.

Separation Agreement with Matthew C. Bousquette

On December 22, 2005, Mattel and Mattel’s former President of its former Mattel Brands division, Matthew C. Bousquette, entered into a Separation Agreement dated as of December 15, 2005. The Separation Agreement generally implemented the loansprovisions of Mr. Bousquette’s employment agreement, as amended, intended to such executive would,apply to Mr. Bousquette following a termination of his employment. Among other things, the Separation Agreement confirmed Mattel’s obligation to provide the following payments and benefits to Mr. Bousquette pursuant to the terms of his Employment Agreement, which were generally subject to Mr. Bousquette’s execution and non-revocation of a release of claims in favor of Mattel:

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As of his termination date, Mr. Bousquette held options to purchase 1,973,750 shares of Mattel common stock. Of these options, vesting was accelerated, as mentioned above, with regard to options for a total of 500,000 shares, of which 250,000 had an exercise price per share of $18.71, 150,000 had an exercise price per share of $16.96 and 100,000 had an exercise price per share of $19.43. All of the options as to which vesting was be accelerated expired on March 15, 2006.

In consideration for the payments and benefits set forth above, Mr. Bousquette agreed not to use or disclose confidential and proprietary information of Mattel and to cooperate with Mattel regarding certain proceedings involving third parties. He also agreed that his eligibility to receive severance payments and other benefits is contingent on his not engaging in certain activities that compete with Mattel, and he agreed that so long as he is receiving any such payments or benefits and for a period of 12 months thereafter he will not recruit or solicit Mattel’s employees.

Consulting Agreement with Matthew C. Bousquette

On December 22, 2005, Mattel and Mr. Bousquette entered into a Consulting Agreement dated as of December 15, 2005 pursuant to which Mr. Bousquette agreed to make himself available to render consulting services to Mattel during the period beginning January 1, 2006 and ending December 31, 2007, in exchange for cash compensation of $750,000 per year, subject to the terms ofand conditions set forth in the loans, the principal amount of the loans to such executives and all accrued unpaid interest were forgiven. In addition, the executives, pursuant to the terms of the loans, became entitled to receive additional payments to reimburse them for all federal, state and local income taxes and employment taxes with respect to the forgiveness of the loans and with respect to such taxes, as and when the taxes are required to be paid, subject to requirements of continued employment under the terms of the loans.Consulting Agreement.

The Consulting Agreement includes a provision that, to avoid a conflict of interest, during the consulting period Mr. Farr received a loan from Mattel on February 3, 2000,Bousquette will not provide services to entities with significant involvement in the principal amount of $500,000,marketing, developing or selling toys, and another loan from Mattel on April 7, 2000, also in the principal amount of $500,000. Each of these loans was due and payable onhe will not induce or before February 4, 2003, with interestsolicit Mattel’s employees to accrue annually at 7% per annum. If Mr. Farr’s employment with Mattel had been terminated for cause, or if he had resigned without good reason, prior to February 4, 2003, then the loans to Mr. Farr would, pursuant to the terms of the loans, have become due and payable, including interest accrued, 30 days after such termination date. Mr. Farr remained employed by Mattel on February 3, 2003 and accordingly, pursuant to the terms of the loans, the principal amount of the loans to Mr. Farr and all accrued unpaid interest were forgiven. In addition, Mr. Farr, pursuant to the terms of the loans, became entitled to receive additional payments to reimburse him for all federal, state and local income taxes and employment taxes with respect to the forgiveness of the loans and with respect to such taxes, as and when the taxes are required to be paid, subject to requirements of continued employment under the terms of the loans.leave their employment.

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CERTAIN TRANSACTIONS

On October 29, 1999, Mattel loaned $1.0 million at 7% per annum to each of Mr. Bousquette and Mr. Neil Friedman. On February 3, 2000, Mattel loaned $500,000 at 7% per annum to Mr. Farr. On April 7, 2000, Mattel loaned $2.0 million at 7% per annum to each of Mr. Bousquette and Mr. Neil Friedman. Also on April 7, 2000, Mattel loaned an additional $500,000 to Mr. Farr at 7% per annum. On May 18, 2000, Mattel loaned $5.5 million at 7% per annum to Mr. Eckert. All of such loans have been forgiven, pursuant to the terms of such loans. In connectionMattel’s employment agreements with the forgiveness of such loans, the executives, pursuant to the terms of the loans, became entitled to receive additional payments to reimburse them for all federal, state and local income taxes and employment taxes with respect to the forgiveness of the loans and with respect to such taxes, as and when the taxesits named executive officers are required to be paid, subject to requirements of continued employmentdescribed above under the terms of the loans. See “Employment Agreements” above.Agreements.”

As disclosed in a Schedule 13G dated February 7, 2005 and filed with the SEC on February 9, 2005 by Citigroup Inc. (“Citigroup”), Citigroup is deemed to beneficially own more than 5% of Mattel’s common stock. An affiliate of Citigroup is a co-syndication agent and lender with a commitment of $100 million under Mattel’s $1.3 billion domestic unsecured committed revolving credit facility. Since January 1, 2004, Mattel has paid fees and interest in the aggregate amount of $0.4 million to such Citigroup affiliate with regard to its services pursuant to the credit facility. Other affiliates of Citigroup provide services to Mattel, including acting as a commercial paper dealer for Mattel, selling forward currency contracts to Mattel, providing banking and cash management services for Mattel and providing lines of credit to certain Mattel subsidiaries.58

PROPOSAL 2

RATIFICATION OF SELECTION OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee of the Board of Directors has selected PricewaterhouseCoopers LLP as Mattel’s independent registered public accounting firm for the year ending December 31, 2005.2006. Representatives of PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting to respond to appropriate questions and will have an opportunity to make a statement if they desire to do so.

Fees Incurred by Mattel for Services by PricewaterhouseCoopers LLP

The following table summarizes the fees accrued by Mattel for audit and non-audit services provided by PricewaterhouseCoopers LLP during fiscal years 20042005 and 2003:2004:

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The charter of the Audit Committee provides that the Audit Committee pre-approves all audit services and permitted non-audit services to be performed for Mattel by its independent registered public accounting firm, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act, which are approved by the Audit Committee prior to the completion of the work.Act. In addition, consistent with SEC rules regarding auditor independence, the Audit Committee has adopted a Pre-Approval Policy, which provides that the Audit Committee is required to pre-approve the audit and non-audit services performed by Mattel’s independent registered public accounting firm. The Pre-Approval Policy sets forth procedures to be used for pre-approval requests relating to audit services, audit-related services, tax services and all other services, and provides that the term of the pre-approval is 12 months from the date of pre-approval, unless the Audit

Committee specifically provides for a different period or the services are specifically associated with a period in time. Pursuant to the Pre-Approval Policy, the Audit Committee may consider the amount of estimated or budgeted fees as a factor in connection with the determination of whether a proposed service would impair the independence of the registered public accounting firm. Requests or applications to provide services that require separate approval by the Audit Committee are submitted to the Audit Committee by both the independent registered public accounting firm and the Chief Financial Officer or Controller, and must include a joint statement as to whether, in their view, the request or application is consistent with the rules of the SEC on auditor independence. The Pre-Approval Policy provides that the Audit Committee may delegate pre-approval authority to one or more of its members, and if the Audit Committee does so, the member or members to whom such authority is delegated shall report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The Pre-Approval Policy further provides that the Audit Committee does not delegate to management its responsibilities to pre-approve services performed by the independent registered public accounting firm.

The ratification of the selection of Mattel’s independent registered public accounting firm requires the affirmative vote of a majority of the total votes cast with regard to this proposal by holders of shares of Mattel common stock who are present in person or represented by proxy and entitled to vote such shares at the Annual Meeting. Unless marked to the contrary, proxies received will be voted for this proposal.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTEFOR THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS MATTEL’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2005.2006.

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PROPOSAL 3

APPROVAL OF THE MATTEL, INC. 2005 EQUITY COMPENSATION PLAN

On March 16, 2005, the Compensation Committee of the Board of Directors approved, subject to stockholder approval, the Mattel, Inc. 2005 Equity Compensation Plan (referred to in this Proposal as the “Plan”). The Board recommends that the stockholders vote to approve the Plan for the reasons indicated below.

The Plan is designed to promote the interests of Mattel and its stockholders by enabling Mattel and its subsidiaries and designated affiliates (collectively referred to in this Proposal as the “Company”) to offer an opportunity to acquire an equity interest in Mattel so as to better attract, retain, and reward employees, non-employee directors and other persons providing services to the Company and, accordingly, to strengthen the mutuality of interests between those persons and Mattel’s stockholders by providing those persons with a proprietary interest in pursuing the Company’s long-term growth and financial success.

Mattel currently has two equity compensation plans in effect: the Mattel 1996 Stock Option Plan (referred to in this Proposal as the “1996 Plan”), which was approved by the stockholders in May 1996; and the Mattel 1999 Stock Option Plan (referred to in this Proposal as the “1999 Plan”), which was adopted in 1999 without stockholder approval. If the Plan is approved by the stockholders, no further grants will be made under the 1999 Plan or the 1996 Plan and the 1999 Plan and the 1996 Plan will each terminate as of the date the stockholders approve the Plan, except with regard to grants then outstanding under the 1999 Plan and the 1996 Plan.

The Compensation Committee and the Board of Directors believe that it is in the best interests of the Company and its stockholders to provide, through the Plan, a comprehensive equity compensation program designed to enable the Company to attract, retain and reward employees, non-employee directors and other persons providing services to the Company. The Plan provides for a broader range of types of awards than the 1996 Plan, to enable the Company to respond to market trends and to tailor incentives to its business goals. In particular, the Plan authorizes the grant of stock options, stock appreciation rights (referred to in this Proposal as “SARs”), restricted stock, restricted stock units (referred to in this Proposal as “RSUs”), dividend equivalents and bonus stock. The Compensation Committee anticipates that, if the Plan is approved by the stockholders, grants may be made during 2005 to employees in the form of a mix of (1) non-qualified stock options and (2) RSUs with dividend equivalents and/or restricted stock. Previously, non-qualified stock options have been the primary form of equity compensation used by Mattel. In reconsidering the previous approach and designing a new approach to equity compensation, the Compensation Committee considered new accounting rules that will require the expensing of stock options, received input from its independent compensation consultant with regard to competitive market practices and exercised its business judgment.

The Plan includes provisions regarding the grant of awards that vest based upon the achievement of performance goals established by the Committee (as such term is defined below under the heading “Administration of the Plan”) and, like the 1996 Plan, is designed so that awards can be exempted from the limitations on tax deductibility imposed by Section 162(m) of the Internal Revenue Code of 1986 (referred to in this Proposal as the “Internal Revenue Code”), as discussed in greater detail below under “Certain Federal Income Tax Consequences—Limits on the Company’s Deductions.”

Summary of the Plan

The following summarizes the material features of the Plan. The summary is subject to and qualified in its entirety by reference to the terms of the Plan document, which is included asAppendix C to this Proxy Statement.

Persons Eligible for Grants. The Plan permits the Committee to make grants to employees of, and other providers of services to, the Company, as well as providing for grants under specified parameters to Mattel’s non-employee directors. Recipients of grants are referred to below as participants. As of March 31, 2005, the Company had approximately 25,000 employees, and Mattel had ten non-employee directors.

Shares Available Under the Plan. The maximum number of shares of Mattel common stock for which grants may be made under the Plan is 50 million. For purposes of calculating the shares that remain available for grants under the Plan, each stock option or SAR will be treated as using one available share for each share actually subject to the grant, and each other type of grant (referred to in this Proposal as “full-value grants”) will be treated as using more than one available share for each share actually subject to the grant. This higher debiting rate for full-value grants is referred to in this Proposal as the “full-value share debiting rate.” The Plan calls for a full-value share debiting rate of three-to-one, or a higher rate (such as four-to-one or five-to-one) if the Committee so determines. These different debiting rates for full-value grants, on the one hand, and stock options and SARs, on the other hand, are designed to reflect the possibility that full-value grants may be more dilutive than stock options and SARs. Having a higher debiting rate for full-value grants is intended to protect Mattel’s existing stockholders from the possibly greater dilutive effect of full-value grants.

If a stock option or SAR expires without having been exercised, or is settled for cash in lieu of shares, the shares subject to the grant will be added back to the number of shares remaining available for future grants under the Plan. If a full-value grant is forfeited or otherwise terminates without the issuance of shares or is settled for cash in lieu of shares, the number of shares remaining available for future grants under the Plan will be increased by the number of shares not issued as a result, multiplied by three.

The maximum number of shares as to which grants may be made to a single participant in a single calendar year is 5 million.

The Plan provides that in the event of a stock dividend, stock split, reverse stock split, share combination, or recapitalization or similar event affecting the capital structure of the Company, or a merger, consolidation, acquisition of property or shares, separation, spinoff, reorganization, stock rights offering, liquidation, disaffiliation of a subsidiary, affiliate or division, or similar event affecting the Company, the Committee or the Board of Directors may in its discretion make such substitutions or adjustments as it deems appropriate and equitable to the aggregate number and kind of shares of common stock or other securities reserved for grants under the Plan, the limitations described above, the number and kind of shares or other securities subject to outstanding grants, and the maximum number and kind of shares of common stock or other securities to be granted to non-employee directors, as described below.

The Plan also provides that if a grant is made pursuant to the conversion, replacement or adjustment of outstanding equity awards in connection with any acquisition, merger or other business combination or similar transaction involving the Company (this kind of grant is referred to in this

Proposal as a “Substitute Grant”), then the number of shares available under the Plan will not be reduced as a result, to the extent the Substitute Grant is permitted without stockholder approval by the listing standards of the NYSE.

On March 31, 2005, the closing price of Mattel common stock on the New York Stock Exchange was $21.35 per share.

Administration of the Plan. The Plan is administered by the Compensation Committee of the Board of Directors, or such other committee of members of the Board as the Board may designate from time to time (referred to in this Proposal as the “Committee”). The Committee is required to have at least three members, and all of its members must qualify as “non-employee directors” for purposes of Rule 16b-3 under the Securities Exchange Act of 1934 and “outside directors” for purposes of Internal Revenue Code Section 162(m), and must meet the independence requirements of the listing standards of the New York Stock Exchange. The Committee may include all members of the Board of Directors, if they all meet the foregoing requirements.

The Committee is authorized to construe and interpret the Plan, the rules and regulations under the Plan, and all grants under the Plan; and to adopt, amend and rescind rules and procedures relating to the administration of the Plan as, in its opinion, may be advisable in the administration of the Plan; and, except as provided in the Plan, to make all other determinations deemed necessary or advisable under the Plan. The Committee may, except to the extent prohibited by applicable law or the listing standards of the New York Stock Exchange, allocate all or any portion of its responsibilities and powers to any one or more of its members or to any other person or persons selected by it, including without limitation Mattel’s Chief Executive Officer. However, the Committee may not make any delegation of its authority with regard to the granting of stock options to Mattel’s directors and executive officers, except to the extent permitted by Rule 16b-3. In addition, it may not delegate its authority with respect to qualified performance-based grants, except to the extent permitted by the performance exception discussed below under “Certain Federal Income Tax Consequences—Limits on the Company’s Deductions.”

Types of Awards. The Plan authorizes the Committee to grant stock options, stock appreciation rights (referred to in this Proposal as “SARs”), restricted stock, RSUs, dividend equivalents and bonus stock, in each case based on Mattel common stock.

Stock Options. The Committee may grant stock options qualifying as incentive stock options under the Internal Revenue Code (called ISOs) and non-qualified stock options. The term of each stock option will be fixed by the Committee, but may not exceed ten years. The exercise price for each stock option will also be fixed by the Committee, but (except in the case of Substitute Grants) may not be less than the fair market value of Mattel common stock on the date of grant. ISOs may only be granted to employees of the Company and corporations connected to it by chains of ownership of voting power representing 50 percent or more of the total outstanding voting power of all classes of stock of the lower-tier entity. Stock options will vest and become exercisable as determined by the Committee.

Stock Appreciation Rights. A stock appreciation right, or SAR, entitles the participant, upon exercise, to receive the excess of the fair market value of the underlying common stock over the exercise price of the SAR. This amount may be paid in cash, in shares of Mattel common stock, or a combination, as determined by the Committee. SARs may be granted under the plan either with a stock option (called tandem SARs) or separately (called free-standing SARs).

Tandem SARs may be granted at the time the related stock option is granted or, in the case of a non-qualified stock option, after the grant. Tandem SARs must vest and be exercisable, and terminate, at the same time as the related stock option. The exercise of a tandem SAR will result in the termination of the related stock option to the same extent, and vice versa.

The term of each free-standing SAR will be fixed by the Committee, but may not exceed ten years. The exercise price of each free-standing SAR will also be fixed by the Committee, but (except in the case of Substitute Grants) may not be less than the fair market value of Mattel common stock on the date of grant. Free-standing SARs will vest and become exercisable as determined by the Committee.

Restricted Stock. The Committee may also award restricted stock, that is, shares of Mattel common stock, the vesting of which is subject to such requirements as the Committee may determine. These requirements may include continued services for a specified period and/or achievement of specified performance goals. The participant will not be permitted to dispose of restricted stock until it vests, but will be entitled to vote the shares and receive dividends and other distributions, although the Committee may make any and all dividends and other distributions with respect to restricted stock subject to the same or different vesting conditions as the restricted stock.

Restricted Stock Units. The Committee may also award restricted stock units (“RSUs”), that is, grants representing a specified number of hypothetical shares of Mattel common stock, the vesting of which is subject to such requirements as the Committee may determine. These requirements may include continued services for a specified period and/or achievement of specified performance goals. Upon or after vesting, RSUs will be settled in cash or shares of Mattel common stock or a combination, as determined by the Committee. A participant to whom RSUs are granted will not have any rights as a shareholder with respect to the units, unless and until they are settled in shares of Mattel common stock.

Dividend Equivalents. The Committee may include dividend equivalents on shares of Mattel common stock that are subject to grants (such as RSUs), and may make separate grants of dividend equivalents with respect to a specified number of hypothetical shares. A dividend equivalent means a right to receive payments, in cash or shares of Mattel common stock, representing the dividends and other distributions with respect to a specified number of hypothetical shares of Mattel common stock, as and when such other dividends and other distributions are actually made to holders of Mattel common stock. The Committee may specify such other terms as it deems appropriate for dividend equivalents, including when and under what conditions the dividend equivalents will be paid and whether any interest accrues on any unpaid dividend equivalents. In the case of dividend equivalents that are part of other grants, the Committee may specify that they are payable currently or only when the grant vests or, in the case of a stock option or SAR, when it is exercised.

Grants to Non-Employee Directors.

The Plan sets forth the maximum number of shares that may be awarded to individuals when they first became non-employee directors (referred to in this Proposal as “initial grants”) and on the date of each annual meeting to non-employee directors re-elected on such date who are not receiving initial grants on the same date (referred to as “annual grants”). Initial grants and annual grants may be comprised of stock options, restricted stock and/or RSUs, with each share of restricted stock and each RSU counted using the full-value share debiting rate (initially three-to-one) for purposes of (a) the limit on shares that may be granted to non-employee directors and (b) the aggregate number of shares remaining available for grant under the Plan.

For each initial grant, the maximum number of shares that may be granted is 20,000 shares per director, and for each annual grant, the maximum number of shares that may be granted is 18,000 shares per director. The Committee will set the type and amount of grants year to year, subject to these maximums. The Compensation Committee has initially set the amounts as follows: (a) for initial grants, a non-qualified stock option for 7,500 shares and 2,500 RSUs, with dividend equivalents that have the same vesting provisions as the RSUs; and (b) for annual grants, a non-qualified stock option for 6,000 shares and 2,000 RSUs, with dividend equivalents that have the same vesting provisions as the RSUs.¹ In creating the maximum set forth in the Plan and in setting the initial level of grants, the Compensation Committee received advice from the Compensation Committee’s independent compensation consultant with regard to competitive market rates of compensation for non-employee directors and exercised its business judgment.

Information is set forth below under “Estimate of Benefits” as to the estimated values of the grants to non-employee directors at the level the Compensation Committee has initially set. The estimated values are based on certain assumptions, as explained below.

All stock options granted to non-employee directors will have an exercise price equal to the fair market value of Mattel common stock on the date of grant. Unless otherwise determined by the Committee, initial grants of stock options to non-employee directors will be fully vested on the date of grant, and annual grants will vest in three installments on the first, second and third anniversaries of the grant date at the rates of 33%, 33% and 34%, respectively. Annual grants of RSUs to be made on the date of the 2005 Annual Meeting of Stockholders to non-employee directors who are re-elected on that day will vest half on the second anniversary of the grant and the remainder on the third anniversary. Unless otherwise determined by the Committee, subsequent annual grants of restricted stock and/or RSUs will vest entirely on the third anniversary of the grant.

Bonus Grants and Grants in Lieu of Cash Compensation. The Committee is authorized to grant shares of Mattel common stock as a bonus, or to grant shares of Mattel common stock or make other grants in lieu of Company obligations to pay cash or deliver other property under the Plan or under other plans or compensatory arrangements. Non-employee directors may also elect to receive grants of shares of Mattel common stock in lieu of all or a portion of their annual cash retainer fees.

Consequences of Severance and Change in Control

The Plan sets forth the consequences for a participant’s grants of his or her ceasing to be an employee, service provider or non-employee director, as applicable (called a severance), unless the Committee determines otherwise or unless the participant has an individual contract that requires a different result. Under these general rules, except as explained below, a participant’s unvested awards are forfeited upon the participant’s severance, and vested stock options remain exercisable for 90 days or until the end of their term, whichever period is shorter.

For Cause. If the severance is for cause, all of the participant’s then-outstanding grants will be immediately forfeited, including vested stock options.

Retirement. If the participant is an employee or non-employee director who retires after attaining age 55 and at least five years of service:

Death or Disability. In the case of a severance as a result of the participant’s death or disability:

Change in Control. The Plan provides that, except as the Committee specifically determines otherwise for a particular grant and unless a participant has an individual contract that requires a different result, all outstanding awards will vest upon a “Change in Control” of the Company (as defined in the Plan) and all outstanding RSUs will be settled immediately. However, if a grant under the Plan is treated as “deferred compensation” subject to Section 409A of the Internal Revenue Code, the foregoing rules will apply upon an Change in Control only to the extent specifically provided in the applicable grant agreement and consistent with the tax requirements applicable to deferred compensation. Section 409A of the Internal Revenue Code is discussed in greater detail below under “Certain Federal Income Tax Consequences—New Tax Law Affecting Deferred Compensation.”

In addition, unless the Committee specifically establishes otherwise for a particular stock option or SAR, the minimum period to exercise vested stock options and SARs after a severance is two years, if the severance occurs during the 18-month period following a Change in Control.

Termination, Rescission and Recapture. In order to better align participants’ long-term interests with those of the Company and its subsidiaries and affiliates, the Plan provides that, subject to certain limitations, the Company may terminate outstanding grants, rescind exercises, payments or deliveries of shares pursuant to grants, and/or recapture proceeds of a participant’s sale of shares of Mattel common stock delivered pursuant to grants if the participant violates specified confidentiality and intellectual property requirements or engages in certain activities against the interest of the Company or any of its subsidiaries and affiliates. These provisions apply only to grants made to employees for services as such, and they do not apply to participants following any severance that occurs within 18 months after a Change in Control.

Transferability. Grants under the Plan are generally non-transferable other than by will or the laws of descent, and stock options and SARs generally may be exercised, during a participant’s lifetime, only by the participant. However, the Committee may allow transfers of non-qualified stock options and free-standing SARs.

Tax Withholding. Participants are required to pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any taxes that are required to be withheld with respect to grants under the Plan. Unless otherwise determined by the Company, the legally required minimum withholding obligations may be settled with shares of Mattel common stock, including shares that are part of the grant that gives rise to the withholding requirement.

Amendment and Termination of the Plan. The Plan may be amended or terminated by the Board of Directors at any time, and outstanding grants may be amended by the Committee. Any such amendment or termination may not adversely affect any grants that are then outstanding without the consent of the affected participant, except for amendments made to cause the Plan or a grant to comply with applicable law, stock exchange rules or accounting rules. Before a Change in Control, the Board or the Committee may cancel any outstanding Grant and replace it with a new Grant having a reasonably equivalent value.

Except as described above under “Shares Available Under the Plan” regarding adjustments to reflect changes in capitalization and corporate transactions, no stock option or SAR may be modified by reducing its exercise price, or cancelled and replaced with a new stock option or SAR with a lower exercise price. Any amendment to the Plan must be approved by the stockholders if so required by the listing standards of the New York Stock Exchange or if it would affect the prohibition on repricing described above. If it is not terminated sooner, the Plan will terminate on May 18, 2015, except with respect to then-outstanding grants.

Estimate of Benefits

Because grants under the Plan to participants other than non-employee directors will be within the discretion of the Committee, it is not possible to determine the grants that will be made to executive officers under the Plan. Information regarding grants made under the 1996 Plan to the Company’s Chief Executive Officer and the other four most highly compensated executive officers in 2004 is provided under the heading “Option/SAR Grants in the Last Fiscal Year” in this Proxy Statement. In 2004, stock options covering a total of 150,000 shares of Mattel common stock were granted to non-employee directors, stock options covering 1,565,000 shares of Mattel common stock were granted to all current executive officers as a group, and stock options covering 5,740,250 shares of Mattel common stock were granted to approximately 2,100 employees, including all current officers who are not executive officers. As noted above, the Compensation Committee anticipates that, if the Plan is approved by the stockholders, grants to employees during the year 2005 may consist of a mix of (1) non-qualified stock options and (2) RSUs with dividend equivalents and/or restricted stock.

The Compensation Committee has, subject to stockholder approval of the Plan and subject to the Plan’s maximum limits on grants to non-employee directors, set the types and amounts of grants to non-employee directors that would initially apply under the Plan. The amounts are as follows: with regard to initial grants, these would consist of non-qualified stock options for 7,500 shares and 2,500 RSUs with dividend equivalents; and with regard to annual grants, these would consist of non-qualified stock options for 6,000 shares and 2,000 RSUs with dividend equivalents.²

Pursuant to the provisions in the Plan about the maximum limits on grants to non-employee directors, the Committee would have the discretion to increase the quantities of initial grants in future years by as much as 33 ¹/3% above the initial levels described above, and would have the discretion to increase the quantities of annual grants in future years by as much as 50%. The amount of additional value to the non-employee directors that might result from any changes or increases in the quantities or types of grants would depend upon a number of factors, such as the mix of the types of grants, fluctuations in the stock price of Mattel and variations in Mattel’s dividend payment rates, none of which can be predicted reliably at this time. However, for illustrative purposes only, if in the future the Committee were to make an increase to the levels of grants to non-employee directors to the maximum allowed under the Plan, and in establishing this hypothetical increased level the Committee retained the proportion of non-qualified stock options to RSUs described above, then, assuming a full-value share debiting rate of 3:1, initial grants would be increased to non-qualified stock options for 10,000 shares and 3,333 RSUs with dividend equivalents, and annual grants would be increased to non-qualified stock options for 9,000 shares and 3,000 RSUs with dividend equivalents.

The following table shows values for the grants described above, based upon certain assumptions. In each case, grants are valued as if they had occurred on December 31, 2004, and the value stated is the value as of that date. It is assumed that RSUs will be settled in stock, not cash, and the fair market value of RSUs is assumed to be $19.49, the closing price per share of Mattel’s common stock on December 31, 2004.³ The values shown for non-qualified stock options are estimates of the grant date present value calculated using a variation of the Black-Scholes pricing model based on the following weighted-average assumptions: 4.227% risk-free rate; 10-year expected life; 1.011% dividend yield; 38.68% volatility factor; 0% forfeiture rate; and, with respect to stock options, an exercise price of $19.49.

The actual value that a non-employee director will realize will depend on many factors, including those described above, as well as, in the case of RSUs, fluctuations in Mattel’s stock price, and in the case of options, the excess of the stock price over the exercise price on the date the option is exercised. Thus, there is no assurance that the value realized by the director will be at or near the amounts shown above.

Certain Federal Income Tax Consequences

The following is a brief description of the principal United States federal income tax consequences related to stock options granted under the Plan and certain other United States federal income tax issues. It is not intended as tax advice to participants, who should consult their own tax advisors.

Non-qualified Stock Options. A participant will not be subject to tax at the time a non-qualified stock option is granted, and no tax deduction will then be available to the Company. Upon the exercise of a non-qualified stock option, an amount equal to the difference between the exercise price and the fair market value of the shares acquired on the date of exercise will be included in the participant’s ordinary income and the Company will generally be entitled to deduct the same amount. Upon disposition of shares acquired upon exercise, appreciation or depreciation after the date of exercise will generally be treated by the participant or transferee of the non-qualified stock option as either capital gain or capital loss.

Incentive Stock Options (ISOs). A participant will not be subject to regular income tax at the time an ISO is granted or exercised, and no tax deduction will then be available to the Company; however, the participant may be subject to the alternative minimum tax on the excess of the fair market value of the shares received upon exercise of the ISO over the exercise price. Upon disposition of the shares acquired upon exercise of an ISO, capital gain or capital loss will generally be recognized in an amount equal to the difference between the sale price and the exercise price, as long as the participant has not disposed of the shares within two years after the date of grant or within one year after the date of exercise and has been employed by the Company at all times from the grant date until the date three months before the date of exercise (one year in the case of permanent disability). If the participant disposes of the shares without satisfying both the holding period and employment requirements, the participant will recognize ordinary income at the time of the disposition equal to the excess of the amount realized over the exercise price but, in the case of a failure to satisfy the holding period requirement, not more than the excess of the fair market value of the shares on the date the ISO is exercised over the exercise price, with any remaining gain or loss being treated as capital.

The Company is not entitled to a tax deduction upon either the exercise of an ISO or upon disposition of the shares acquired pursuant to such exercise, except to the extent that the participant recognizes ordinary income on disposition of the shares.

Limits on the Company’s Deductions. Section 162(m) of the Internal Revenue Code generally places a $1 million annual limit on a company’s tax deduction for compensation paid to a public company’s chief executive officer and the other four highest paid officers named in its proxy statement. This limit does not apply to compensation that satisfies the applicable requirements for the “performance-based compensation” exception (referred to in this Proposal as the “performance exception”), including approval by stockholders of the material terms of the compensation. Approval of the Plan by Mattel’s stockholders will satisfy this stockholder-approval requirement. Grants under the Plan that are intended to satisfy the requirements for the performance exception are referred to in this Proposal as “qualified performance-based awards.”

The Plan incorporates the provisions required so that stock options and SARs will be qualified performance-based awards. These provisions include establishing the maximum number of shares as to which grants may be made to a single participant in a single calendar year at 5 million as described above under “Summary of the Plan—Shares Available Under the Plan,” allowing such stock options and SARs to be granted only by the Committee, and requiring that (except in the case of Substitute Grants) their exercise price be not less than the fair market value of Mattel common stock on the date of grant. Therefore, it is expected that all stock options and SARs granted under the Plan will qualify for the performance exception.

In addition, the Plan gives the Committee the ability to grant restricted stock, RSUs and dividend equivalents designed to be qualified performance-based awards. These awards must be subject to the achievement of performance goals based upon the attainment of specified levels of one or more of the following measures, with respect to the Company, any of its subsidiaries and affiliates, or any of their respective worldwide operations, regional operations, country specific operations and/or subsidiaries, business units, affiliates, corporations, divisions or employees and/or brands, groups of brands or specific brands: net operating profit after taxes (“NOPAT”); NOPAT less a capital charge; return on capital employed; revenue; earnings per share; earnings per share before or after funding for some or all incentive programs; operating profit; operating profit less a charge on one or more of the following items: working capital, inventory or receivables; net income; return on equity; cash flow return on investment; return on invested capital or assets; fair market value of stock; total stockholder return; EBIT; EBITA; EBITDA; OBIT; OBITDA; cash generation; unit volume; market share; sales; asset quality; return on assets; return on operating assets; cost-saving levels; operating income; marketing-spending efficiency; core non-interest income; change in working capital; and achievement of objectively determinable strategic initiatives.

In granting qualified performance-based awards other than stock options and SARs, the Committee must establish the applicable performance measures within the time allowed by the performance exception and at a time when achievement of the goals is substantially uncertain, and it must certify the achievement of those goals before the vesting or payment of the qualified performance-based awards. In addition, in order to assure that qualified performance-based awards in fact qualify for the performance exception, the Plan provides that (1) except in the event of death, disability, or other events permitted by the performance exception, the achievement of the applicable performance goals may not be waived, and (2) awards may not be amended, and the Committee may not exercise discretionary authority, in a way that would cause the awards to cease to qualify for the performance exemption.

As one of the factors in its decisions regarding grants under and administration of the Plan, the Committee will consider the anticipated effect of Section 162(m). These effects will depend upon a number of factors, including not only whether the grants qualify for the performance exception, but also the timing of executives’ vesting in or exercise of previously granted equity awards and receipt of other compensation. Furthermore, interpretations of and changes in the tax laws and other factors beyond the Committee’s control may also affect the deductibility of compensation. For these and other reasons, the Committee may make grants that do not qualify for the performance exception and the Company’s tax deductions for those grants may be limited or eliminated as a result of the application of Section 162(m). Further, if grants vest or are paid on an accelerated basis upon a Change in Control or a subsequent termination of employment, some or all of the value of that acceleration may be considered an “excess parachute payment” under Section 280G of the Internal Revenue Code, which would result in the imposition of a 20 percent federal excise tax on the recipients of the excess parachute payments and a loss of the Company’s deduction for the excess parachute payments.

New Tax Law Affecting Deferred Compensation. Section 409A of the Internal Revenue Code, which was enacted as part of the American Jobs Creation Act in late 2004, substantially changes the federal income tax law applicable to non-qualified deferred compensation, including certain equity-based compensation. It is the intention of the Company that no grants under the Plan be subject to Section 409A of the Internal Revenue Code, unless and to the extent that the Committee specifically determines otherwise. The terms and conditions governing any grants that the Committee determines will be subject to Section 409A of the Internal Revenue Code, including any rules for elective or mandatory deferral of the delivery of cash or shares of Mattel common stock pursuant thereto, must be set forth in writing, and must comply in all respects with Section 409A of the Internal Revenue Code.

Recommendation

The Board of Directors believes that the Plan is a valuable aid to the Company in its efforts to attract and retain employees, non-employee directors and other service providers and to align the interests of such persons with the interests of Mattel’s stockholders.

Approval of the Plan requires the affirmative vote of a majority of the total votes cast with regard to this Proposal by holders of shares of Mattel common stock who are present in person or represented by proxy and entitled to vote such shares at the Annual Meeting, and furthermore requires that the total votes cast with regard to this Proposal must represent over 50% of the voting power of all shares of stock entitled to vote on this Proposal. Unless marked to the contrary, proxies received will be voted for this Proposal.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTEFOR THIS PROPOSAL.

STOCKHOLDER PROPOSAL 4REGARDING

STOCKHOLDER PROPOSAL

REGARDING GOLDEN PARACHUTE VOTE PROVISIONSEPARATING THE ROLES OF CEO AND BOARD CHAIR

John Chevedden, whose address is 2215 Nelson Ave., No. 205, Redondo Beach, California 90278, has requested that the following proposal be included in this Proxy Statement.Statement and has indicated that he intends to bring such proposal before the 2006 Annual Meeting of Stockholders. Mr. Chevedden has advised Mattel that he is the owner of over $2,000 of Mattel common stock. Mr. Chevedden’s proposal and his related supporting statement are followed by a recommendation from the Board of Directors. The Board of Directors disclaims any responsibility for the content of the proposal and the statement in support of the proposal, which are presented in the form received from the stockholder.

The stockholder’s proposal follows:

Golden Parachute Vote ProvisionSeparate the Roles of CEO and Board Chair

RESOLVED: Golden Parachute Vote Provision. Shareholders request that our Boardboard establish a policy of Directors seek shareholder approval for future golden parachutes for senior executives. This applies to benefits exceeding 299%separating the roles of the sum of the executive’s base salary plus bonus. Future golden parachutes include agreements renewing, modifying or extending existing severance or employment agreements with golden parachute or severance provisions.

This includes that golden parachutes not be given for a change in control or merger which is approved but not completed. Or for executives who transfer to a successor company. This proposal would includeboard chair and chief executive officer (CEO) to the fullest extent each gold parachutepracticable, so that an independent director who has not served as an executive officer of our company has or will have the power to grant or modify.Company serves as Chair of our Board of Directors.

OurThis proposal shall not apply to the extent that compliance would necessarily breach any contractual obligations in effect at the time of the 2006 shareholder meeting.

Separating the roles of Chairman and CEO can promote greater management accountability to shareholders. It could help address our essentially flat $18 stock price since 2001 vs. our soaring CEO pay.

Progress Begins with One Step

It is important to take one step forward and adopt the above RESOLVED statement since our 2005 governance was not impeccable. For instance in 2005 it was reported:

“D” in Shareholder Responsiveness.

“D” in CEO Pay.

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John Chevedden, 2215 Nelson Ave., No. 205, Redondo Beach, Calif. 90278 submittedThese less-than-best practices reinforce the reason to take one step forward and adopt this proposal.

51% Yes-VoteSeparate the Roles of CEO and Board Chair

The 26 shareholder proposals voted on this topic achieved an impressive 51% average yes-vote in 2004.

Advancement Begins with a First Step

I believe the reason to take the above RESOLVED step is reinforced by our directors’ vulnerability when compared to best practices in corporate governance. For instance in 2004 it was reported (and concerns are inserted):

Source: Executive Pay Watch Database,

http://www.aflcio.org/corporateamerica/paywatch/ceou/database.cfm

(If CEO pay is excessive—concern that our board was weak in oversight of our CEO.)

Golden parachutes can allow our executives to walk away with millions even if our shareholder value languishes during their tenure. One example of flawed golden parachutes was the $150 million in parachutes for Northrop Grumman executives after a proposed merger with Lockheed Martin fell apart. Major institutional investors such as CalPERS recommend approval of this proposal topic.

Golden Parachute Vote Provision

Yes on 43

* * * * * * * * * * *

The Board of Directors unanimously recommends that stockholders vote AGAINST the stockholder’s proposal for the following reasons:

The Board is committed to adopting corporate management and governance policies and strategies that promote the effective and ethical management of Directors opposesthe Company. In this regard, the Board strongly believes that it should have maximum flexibility in deciding whether the offices of Board Chairman and Chief Executive Officer are combined or separate and, if separate, whether the Board Chairman should be an independent director or an employee. Mattel’s governance guidelines therefore authorize the Board to make this determination whenever it elects a new Chief Executive Officer or appoints a new Board Chairman. Because this proposal because it believes thatnarrows the procedural hurdles and expense of subjecting severancegovernance arrangements with senior executives to shareholder approval would put Mattel at a competitive disadvantage in recruiting and retaining talented executives, and would impose extraordinary costs on Mattel, to the disadvantage ofBoard may consider, we do not believe its shareholders.

The Board of Directors believes that contractual arrangements providing competitive severance benefits for senior executives can be an important and entirely appropriate element of an executive compensation program. Such arrangements are an important tool for Mattel to recruit and retain executives. The decision of whether or not to offer severance benefits is one that must be made in the context of the competitive marketplace for executive talent. Itadoption is in the best interests of all stockholders for Mattel to have the ability to attract highly-qualified and experienced executives.or its stockholders.

Furthermore, provisions regarding severance benefitsThe Board has adopted the following a change of control can provide a means of ensuringcorporate management and governance policies and strategies that it believes promote the stabilityeffective and ethical management of the Company and, at this time, render separation of the offices of Board Chairman and Chief Executive Officer unnecessary:

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The Board reexamines Mattel’s corporate management and reorganizations. This stabilitygovernance policies on an ongoing basis. In view of the Company’s highly independent Board, its strong corporate governance practices and the focal role of its presiding independent director, at this time the Board believes separating the offices of Board Chairman and Chief Executive Officer is unnecessary. Furthermore, the Board believes it would be detrimental to stockholder interests to remove the Board’s business judgment to decide who is the best person to serve as Board Chairman under the particular circumstances that exist from time to time, and whether such person is independent or a member of management. Therefore, we do not believe adoption of this proposal is in the best interests of allMattel or its stockholders.

The Board of Directors, through its Compensation Committee, which is comprised solely of independent directors, sets executive compensation in a manner it believes to be in the best interests of Mattel and its stockholders, with advice from an independent compensation consultant where appropriate. The Board of Directors believes that compensation arrangements with senior executives, including severance agreements, should continue to be the primary responsibility of the Board acting through its Compensation Committee, which is in the best position to assess appropriate and competitive compensation practices.

Requiring prior stockholder approval of severance agreements is not in the best interests of the Company and its stockholders, because the imposition of such a requirement would make it extremely difficult to implement in a timely manner compensation arrangements suited to particular situations. In addition, implementation of this proposal would be costly and disruptive. Calling a special meeting of stockholders to approve an agreement prior to signing with an executive is expensive. Unless the Company incurred the significant expense of a special meeting of stockholders, such arrangements could only be entered into once a year after approval at the annual meeting of stockholders or subject to a general pre-approval, which might not be sufficient for all situations.

The proponent suggests that Mattel could enter into severance arrangements subject to future shareholder approval. The Board of Directors considers this suggestion to be unrealistic. Mattel would be unable to assure a potential senior executive that the agreement would be approved or ratified. As a result of this uncertainty, a candidate could not be sure of the terms of employment and would be more likely to accept a competing offer that provided unconditional final terms.

For these reasons, the Board of Directors opposes the proposal.

Approval of this stockholder proposal requires the affirmative vote of a majority of the total votes cast with regard to this proposal by holders of shares of Mattel common stock who are present in person or represented by proxy and entitled to vote such shares at the Annual Meeting. Unless marked to the contrary, proxies received will be voted against this proposal.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTEAGAINSTPROPOSAL 4.3.