May 15, 2003--Describing Xerox as becoming "stronger and better every day," Chairman and CEO Anne M. Mulcahy reiterated to shareholders today that the company has delivered on its commitment to fortify its financial position, increase profits through strong operations, and strengthen corporate governance - while continuing to relentlessly focus on actions and investments that will return Xerox to growth. "Our performance the past two years has gone a long way to restoring our health, our credibility and our confidence," Mulcahy said at the company's annual shareholders meeting here. At the same time, "we are investing our research and marketing dollars in high-growth areas - the areas that will give our shareholders the greatest return." In 2002 Xerox returned to full-year profitability while generating $1.9 billion in operating cash flow and implementing actions under the turnaround plan to reduce costs by $1.7 billion. Meanwhile, the company launched 17 products complimented by an array of solutions and services. Just last month, the company unveiled 21 new and enhanced digital office systems to meet the needs of workers in offices small to large. Moving forward, Mulcahy said Xerox will continue to direct its annual research and development investments of nearly $1 billion in key growth areas such as office and production color, digital production printing and book publishing, and document and business services. In book publishing, for example, Xerox digital technology is making it possible and economically practical for publishers to print a book only after it is ordered, or to create customized books for a particular university class. In the services area, Xerox brings unique expertise in helping businesses create personalized, one-to-one communications to their clients, as well as in helping businesses discover how to most efficiently create and share documents in the office. These offerings - and customers who are using them - are featured in an extensive global print and television advertising campaign that will continue to run throughout the year. "Increasingly customers are turning to us for help in redesigning processes, improving productivity and strengthening customer relationships - all starting from our base of knowledge and expertise around the document," Mulcahy said. "We have lots of opportunity," she said, "and we are turning these opportunities into big wins in the marketplace." Commenting on the progress Xerox has made to further strengthen corporate governance, Mulcahy told shareholders that Institutional Shareholder Services, an independent analyst group, recently evaluated U.S. companies' corporate governance practices and gave Xerox a positive report. Their research found that Xerox outperformed more than 82 percent of S&P 500 companies and more than 98 percent of companies in the technology sector. Since early 2002, Xerox and the board of directors have taken a number of important governance actions, including adopting a strict 1 percent independence standard for board members, expanding the charters for board committees, requiring annual self-assessments by the board and each committee, launching company-wide efforts to enhance internal controls and reinforce codes of conduct, and hiring a new chief financial officer, controller and treasurer - measures "all aimed at making Xerox a role model in ethical behavior." "All of us at Xerox firmly believe that our best days are still ahead of us. If I sound bullish on Xerox, it's because I am," she said. "Great opportunity stretches before us. We intend to seize it and to deliver increasing shareholder value." Also at the annual meeting, shareholders approved the selection of PricewaterhouseCoopers LLP as the company's independent auditors for 2003, and voted against a shareholder proposal to amend the bylaws to allow shareholders to call meetings for any purpose. Shareholders approved the election of nine members of the Xerox board of directors: Anne M. Mulcahy, Antonia Axson Johnson, Vernon E. Jordan Jr., Yotaro Kobayashi, Hilmar Kopper, Ralph S. Larsen, N.J. Nicholas Jr., John E. Pepper and Ann N. Reese. With the election of Reese as a new director, nearly 80 percent of the Xerox board is considered independent.