The $142 million decrease in cash from first quarter 2008 was primarilydue to GIS`s acquisition of ComDoc, Inc. * $14 million increase due to lower placements of equipment on operating leasesreflecting lower install activity.Cash Flows from Investing ActivitiesNet cash used in investing activities was $207 million in the first quarter2009. * $24 million increase due to lower inventory growth reflecting inventory supplychain management. * $195 million increase from collections on receivables exceeding new billings.Collections in the first quarter 2009 and 2008 include the benefit from thesales of account receivables.

* $28 million decrease due to net payments for the settlement ofsecurities-related litigation. * $50 million decrease due to higher restructuring payments related topreviously reported actions. The $30 million decrease in cash from first quarter 2008 was primarily dueto the following:* $206 million decrease in pre-tax income before litigation. Capital Resources and LiquidityThe following table summarizes our cash and cash equivalents for the threemonths ended March 31, 2009 and 2008:Three Months Ended March 31,Amount (in millions) 2009 2008 ChangeNet cash provided by operating activities $ 22 $ 52 $(30 ) Net cash used in investing activities (207 ) (65)(142) Net cash used in financing activities (482 ) (250 )(232) Effect of exchange rate changes on cash and cash equivalents(13) 6 (19 ) Decrease in cash and cash equivalents (680 ) (257 )(423) Cash and cash equivalents at beginning of period1,2291,099 130 Cash and cash equivalents at end of period$ 549$ 842$(293) Cash Flows from Operating ActivitiesNet cash provided by operating activities was $22 million in the first quarter2009. First quarter 2008 included after-tax restructuring charges of$10 million primarily related to pension settlements. First quarter 2009 includedcharges of $22 million related to our share of Fuji Xerox after-taxrestructuring. Equity in Net (Loss) Income of Unconsolidated AffiliatesEquity in net loss of unconsolidated affiliates of $10 million decreased $38million compared to first quarter 2008, reflecting our 25% share of Fuji Xerox`snet loss reflecting worldwide economic weakness.

4See the "Non-GAAP Financial Measures" section for an explanation of thisnon-GAAP financial measure. We anticipate that our effective tax rate for theremaining quarters of 2009 will approximate 28% excluding the effects of anyfuture discrete events. In addition, oureffective tax rate will change based on discrete or other nonrecurring eventsthat may not be predictable. Our effective tax rate is based on nonrecurring events as well as recurringfactors, including the geographical mix of income and the related tax rates inthose jurisdictions, and available foreign tax credits. statutory tax rate primarily due to the net taxbenefits from the resolution and re-measurement of certain unrecognized taxpositions as well as the geographical mix of income before taxes and the relatedtax rates in those jurisdictions. Excluding theimpact of the litigation charge, the adjusted effective tax rate was 20.3%4,which was lower than the U.S. The 2008 tax rate included a $304 million tax benefit associated with the $795million net provision for securities-related litigation matters.

statutory tax rateprimarily reflecting the benefit to taxes from the geographical mix of incomebefore taxes and the related tax rates in those jurisdictions, the resolutionand re-measurement of certain unrecognized tax positions, as well as theutilization of foreign tax credits. Income TaxesThree Months Ended March 31,(in millions) 2009 2008ChangeIncome tax expense (benefit)$19$(246)$ 265Effective tax rate 24.4%48.3%(23.9) pts The first quarter 2009 effective tax rate was 24.4% as compared to 48.3% in thefirst quarter 2008 The 2009 tax rate was lower than the U.S. OnJanuary 14, 2009, the United States Court for the District of Connecticutentered a Final Order and Judgment approving the Carlson settlement. Xerox Corporation ("Carlson") and othersecurities-related litigation matters, net of expected insurance recoveries.

Legal MattersFirst quarter 2008 charges of $795 million reflected provisions for the $670million settlement of Carlson v. First quarter 2008 currency losses of $19 million were primarily due tosignificant and rapid weakening of the U.S Dollar and Euro as compared to theYen. Dollar, Euro and Yen during thequarter, as well as the increased cost of hedging, particularly in developingmarkets. First quarter 2009 currency losses were primarily due to the significantmovement in exchange rates among the U.S.