GROWTH PLATFORM

While cost containment helped us navigate the shoals of a tough economy, we forged ahead with activities related to our growth strategies. We continued significant investments in research and development (R&D), the primary source of future growth through product innovation. Joint venture investments with Heidelberger Druckmaschinen AG to form NexPress (digital printing), Sanyo Electric to create SK Display Corp. (electronic displays) and with Hewlett-Packard for Phogenix (retail photofinishing) are on track to deliver innovative new products to their markets.

Guiding our growth plans are four key strategies within the $385 billion market, where the convergence of imaging and information technology offers vast opportunity for Kodak as we seek to expand our participation into growing segments:

• Expanding the benefits of film. Our traditional film business is sound as digital imaging continues to evolve. An aggressive share management strategy enabled us to maintain our U.S. consumer film market share. Sales in emerging markets such as China and Russia had solid double-digit growth, allowing more people to benefit from the awesome capabilities of film technology. Our new Kodak Vision2 motion picture film received rave reviews in Hollywood and among the world's cinematographers. Innovative one-time-use cameras continued to grow as a major source of film revenues. We are leveraging our technical leadership in film and digital imaging technology to create imaging systems for consumer, health care, professional and commercial imaging markets.
• Driving image output in all forms. As digital image capture grows in the many markets we serve, demand will accelerate for hard copy images from digital files. For example, in consumer markets, Kodak picture maker kiosk placements worldwide far outnumber our closest competitor, and are driving use of our thermal print media. Kodak Perfect Touch processing from our Qualex high-volume photofinishing operations is now rolling out across the U.S and in parts of Europe. This new service is recognized as a distinct advantage for Kodak as we marry film and digital technology to deliver better, more satisfying photo experiences to consumers. The award-winning Ofoto online picture service continues to attract new customers and grow revenue. In health imaging, our laser printers for digital x-ray hardcopy films are market leaders.
• Making digital imaging easier. The 2002 introduction of our newest generation of Kodak EasyShare digital cameras furthers the simplification of capturing, sharing, storing and printing digital images. In addition to Ofoto, the Kodak picture center online digital network in the U.S. and Europe enables picture takers to order and receive prints via the world's largest network of online retail outlets.