SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscaL year ended: November 30, 1996 OR [] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ______________ to _______________ Commission File Number 1-4471 A. Full title of the plan and address of the plan, if different from that of the issuer named below: XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: Xerox Corporation P.O. Box 1600 Stamford, Connecticut 06904-1600 1 SIGNATURES THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934, the persons who administer the plan have duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized. XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Patricia M. Nazemetz Plan Administrator Stamford, Connecticut Dated May 27, 1997 2 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Financial Statements and Schedule November 30, 1996 and 1995 (With Independent Auditors' Report Thereon) 3 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Statement of Net Assets Available for Plan Benefits with Fund Information November 30, 1996
4Fund Information _________________________________________________________________________________________________________________ Small International Company Xerox Employee Stock U.S Stock Stock Balanced Income Stock Loan Fund Fund Fund Fund Fund Fund Fund Total Assets: Participant notes receivable $ - - - - - - 59,201,070 59,201,070 Investment in Master Trust 136,379,184 138,676,389 131,146,618 757,250,020 693,889,121 179,548,012 - 2,036,889,344 Total assets 136,379,184 138,676,389 131,146,618 757,250,020 693,889,121 179,548,012 59,201,070 2,096,090,414 Liabilities: Accrued expenses and other liabilities 149,535 40,466 91,219 313,420 165,625 43,108 - 803,373 Due from (to) other funds 444,179 1,794,007 2,135,881 (1,319,578) (8,100,444) 2,869,821 2,176,134 - Net assets available for plan benefits $136,673,828 140,429,930 133,191,280 755,617,022 685,623,052 182,374,725 61,377,204 2,095,287,041 The accompanying notes are an integral part of the financial statements. XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Statement of Net Assets Available for Plan Benefits with Fund Information November 30, 1995
5Fund Information _________________________________________________________________________________________________________________ Small International Company Xerox Segregated Employee Stock U.S Stock Stock Balanced Income Stock Assets Loan Fund Fund Fund Fund Fund Fund Fund Fund Total (see note 4) Assets: Participant notes receivable $ - - - - - - - 55,089,047 55,089,047 Investment in Master Trust 73,612,588 75,230,057 71,105,345 584,912,455 767,283,041 130,445,603 864,596 - 1,703,453,685 Total assets 73,612,588 75,230,057 71,105,345 584,912,455 767,283,041 130,445,603 864,596 55,089,047 1,758,542,732 Liabilities: Accrued expenses and other liabilities (9,514) 55,601 29,473 474,491 112,074 38,576 - - 700,701 Due from (to) other funds 91,727 2,807,519 2,213,068 3,637,060 (11,184,917) 1,352,939 - 1,082,604 - Net assets available for plan benefits $73,713,829 77,981,975 73,288,940 588,075,024 755,986,050 131,759,966 864,596 56,171,651 1,757,842,031 The accompanying notes are an integral part of the financial statements. XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Statement of Changes in Net Assets Available for Plan Benefits with Fund Information Year ended November 30, 1996
6Fund Information _________________________________________________________________________________________________________________ Small International Company Xerox Segregated Employee Stock U.S Stock Stock Balanced Income Stock Assets Loan Fund Fund Fund Fund Fund Fund Fund Fund Total (see note 4) Contributions: Employer $ 5,143,474 7,362,449 4,699,323 21,696,033 11,356,376 7,829,947 - - 58,087,602 Employees' - - voluntary 9,362,123 12,440,492 10,185,690 36,787,660 28,677,256 12,365,247 - - 109,818,468 Total contributions 14,505,597 19,802,941 14,885,013 58,483,693 40,033,632 20,195,194 - - 167,906,070 Net income from Master Trust investments, net of administrative expenses 23,593,622 27,001,873 22,455,809 136,258,719 46,256,022 15,057,165 1,124,757 - 271,747,967 Interest income on participant notes receivable - - - - - - - 4,497,685 4,497,685 38,099,219 46,804,814 37,340,822 194,742,412 86,289,654 35,252,359 1,124,757 4,497,685 444,151,722 Benefit payments (4,847,948) (4,391,021) (3,963,761) (32,199,107) (54,862,143) (6,442,732) - - (106,706,712) Transfers among funds 29,708,728 20,034,162 26,525,279 4,998,693 (101,790,509) 21,805,132 (1,989,353) 707,868 - Net increase (decrease) in net assets available for plan benefits 62,959,999 62,447,955 59,902,340 167,541,998 (70,362,998) 50,614,759 (864,596) 5,205,553 337,445,010 Net assets available for plan benefits: Beginning of year 73,713,829 77,981,975 73,288,940 588,075,024 755,986,050 131,759,966 864,596 56,171,651 1,757,842,031 End of year $136,673,828 140,429,930 133,191,280 755,617,022 685,623,052 182,374,725 - 61,377,204 2,095,287,041 The accompanying notes are an integral part of the financial statements. XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Statement of Changes in Net Assets Available for Plan Benefits with Fund Information Year ended November 30, 1995
7Fund Information _________________________________________________________________________________________________________________ Small International Company Xerox Segregated Employee Stock U.S Stock Stock Balanced Income Stock Assets Loan Fund Fund Fund Fund Fund Fund Fund Fund Total (see note 4) Contributions: Employer $ 1,509,983 1,387,801 1,569,077 19,239,174 19,063,717 4,681,935 - - 47,451,687 Employees' - - voluntary 7,537,090 7,455,412 6,676,232 36,759,920 39,766,636 9,394,117 - - 107,589,407 Total contributions 9,047,073 8,843,213 8,245,309 55,999,094 58,830,353 14,076,052 - - 155,041,094 Net income from Master Trust investments, net of administrative expenses 6,053,116 14,407,844 11,494,148 102,880,430 56,404,076 38,105,232 - - 229,344,846 Interest income on participant notes receivable - - - - - - - 3,935,432 3,935,432 15,100,189 23,251,057 19,739,457 158,879,524 115,234,429 52,181,284 - 3,935,432 388,321,372 Benefit payments (3,424,903) (2,689,180) (2,472,416)(38,658,781) (72,667,579) (6,540,282) - - (126,453,141) Transfers among funds (3,405,533) 20,348,762 17,133,524 (8,963,445) (5,709,720) 2,394,412 (18,030,356) (3,767,644) - Transfer from AMTX, Inc. - - - - 337,197 - - - 337,197 Transfer to Xerox Corporation Retirement Income Guarantee Plan - - - - - - (77,038) - (77,038) Net increase (decrease) in net assets available for plan benefits 8,269,753 40,910,639 34,400,565 111,257,298 37,194,327 48,035,414 (18,107,394) 167,788 262,128,390 Net assets available for plan benefits: Beginning of year 65,444,076 37,071,336 38,888,375 476,817,726 718,791,723 83,724,552 18,971,990 56,003,863 1,495,713,641 End of year $73,713,829 77,981,975 73,288,940 588,075,024 755,986,050 131,759,966 864,596 56,171,651 1,757,842,031 The accompanying notes are an integral part of the financial statements. XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements November 30, 1996 and 1995 (1) Description of Plan The following description of the Xerox Corporation Profit Sharing and Savings Plan (Plan) provides only general information. Participants should refer to the Plan document for a more complete description of the Plan's provisions. General The Plan is a defined contribution plan covering substantially all full and part-time U.S. employees of Xerox Corporation (sponsor) and participating subsidiaries, except those covered by a collective bargaining agreement unless that agreement calls for participation in the Plan. Employees are automatically eligible to participate in the Plan after completing one year of service. Payments of Benefits Upon termination of service, a participant may elect to receive either a lump sum amount equal to the value of his or her account, or purchase an annuity payable from a life insurance company. Amounts allocated to participants who have elected to withdraw from the Plan but have not been paid are $2,077,252 and $3,525,402 at November 30, 1996 and 1995, respectively. Employee Savings Contributions Subject to limits imposed by the Internal Revenue Code, eligible employees may contribute up to 18% of pay (as defined in the Plan) through combination of before-tax and after-tax payroll deductions. (The maximum before-tax contribution for the 1996 calendar year is $9,500.) Employees are immediately vested in their savings contributions. Xerox Optional Profit Sharing Contributions Eligible employees may receive an optional profit sharing contribution from the Sponsor. The contribution ranges from zero to 10% of pay and is based upon the return on assets (ROA) of the Xerox Document Processing industry segment as defined in the Plan document. ROA is determined as of the sponsor's calendar year-end, which differs from the November 30 plan year-end. An employee may receive the contribution in cash or Xerox Corporation common stock, or may elect to invest all or part of the contribution on a tax deferred basis, subject to limits imposed by the Internal Revenue Code, through the Plan's investment funds. Employees are immediately vested in optional profit sharing contributions. 8 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements (1) Description of Plan (continued) For the calendar year ended December 31, 1996, the Sponsor's ROA was 17.8% which will result in an optional profit sharing contribution for the plan year ending November 30, 1996 for all eligible active employees at December 31, 1996 equal to 10% of pay or $217,033,647. Participants elected to invest $60,288,722 into the Plan which will be recorded as an employer contribution in the Plan's financial statements for the plan year ended November 30, 1997. For the calendar year ended December 31, 1995, the Sponsor's ROA was 18.5%, which resulted in an optional profit sharing contribution for the plan year ending November 30, 1995 for all eligible active employees at December 31, 1995 equal to 10% of pay or $230,473,696. Participants elected to invest $58,087,602 into the Plan which is recorded as an employer contribution in the Plan's financial statements for the plan year ended November 30, 1996. Investment Funds As further described in note 3, the investment funds are part of the Xerox Trust Agreement to Fund Retirement Plans (Master Trust). Employees can direct their plan accounts to one or more of the following six investment funds: International Stock Fund -- Invests primarily in stocks of companies based outside of the U.S. U.S. Stock Fund -- Invests primarily in stocks of medium to large U.S. companies. Small Company Stock Fund -- Invests primarily in stocks of smaller U.S. companies that fund managers believe have greater value than indicated by the current market price, or above average prospects for long-term growth. Balanced Fund -- Under normal market conditions, invests approximately 70% in stocks; most of the remainder in bonds; some real estate, private placements, and cash. The mix may shift with market outlook. Income Fund -- Invests in contracts with insurance companies and banks; short to intermediate duration, high-quality bonds. Xerox Stock Fund -- Invests in Xerox Corporation common stock and some cash for administrative purposes. Segregated Assets Fund This fund was established on April 1, 1991 and represents participant investments in certain guaranteed investment contracts which are segregated and frozen. See note 4 to the financial statements for further discussion. 9 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements (1) Description of Plan (continued) Employee Loan Fund Participants are permitted to borrow from their profit sharing savings accounts subject to certain limitations. The loans are payable over terms up to 14.5 years and bear interest at the quarterly Citibank commercial prime rate in effect at the time of loan issuance plus 1%. Principal and interest payments on the loans are redeposited into the participants' accounts based on their current investment allocation elections. Loans are issued at market value. At November 30, 1996, market value on loans approximates fair value. (2) Federal Income Taxes The Plan obtained its latest determination letter from the Internal Revenue Service (IRS) on September 18, 1995, covering Plan amendments through January 31, 1995, indicating that the Plan, as designed, was in compliance with the applicable requirements of the Internal Revenue Code. The Plan administrator and the Plan's internal tax counsel believe that the Plan, as currently designed and operated, is in compliance with the applicable requirements of the Internal Revenue Code. Accordingly, they believe that the Plan was qualified and the related trust was tax-exempt as of the financial statement date. As long as the Plan continues to be qualified under present federal income tax laws and regulations, participants will not be taxed on company contributions or on investment earnings on such contributions at the time such contributions and investment earnings are received by the trustee under the Plan, but may be subject to tax thereon at such time as they receive distributions under the Plan. (3) Master Trust As discussed in note 1, the Plan participates in the Master Trust. The following other Xerox employee benefit plans also participate in the Master Trust as of November 30, 1996: The Profit Sharing Plan of Xerox Corporation and The Xerographic Division, Union of Needletrades, Industrial and Textile Employees, A.F.L. - C.I.O. - C.L.C. Xerox Corporation Retirement Income Guarantee Plan; Retirement Income Guarantee Plan of Xerox Corporation and The Xerographic Division,Union of Needletrades, Industrial and Textile Employees, A.F.L. - C.I.O.- C.L.C.; and XDS Investment Plan. The Master Trust has six investment pools -- the International Stock Pool, U.S. Stock Pool, Small Company Stock Pool, All Other Pool, Income Fund, and the Xerox Stock Fund. Participants direct their accounts into investment funds, as described in note 1, which are formed from the aforementioned investment pools. Each of the plans has an ownership interest in one or more of these investment pools in accordance with that interest as determined by participant fund elections. In addition, prior to December 31, 1996 there was a Segregated Assets Fund which is discussed in note 4. The following financial information is presented for the Master Trust and each of the Master Trust investment accounts: 10 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements (3) Master Trust (continued) Statement of Net Assets of the Master Trust as of November 30, 1996:
11Small International Company Xerox Stock U.S Stock Stock All Other Income Stock Pool Pool Pool Pool Fund Fund Total Assets Cash $ 108,596 - - 1,971,597 1,957,053 - 4,037,246 Receivables: Dividends 1,252,417 2,520,631 152,707 211,754 3 - 4,137,512 Interest 215,445 404,275 554,161 13,108,361 7,705,579 4,289 21,992,110 Due from brokers 2,885,545 2,317,272 10,209,426 10,051,565 12,257,266 - 37,721,074 Total receivables 4,353,407 5,242,178 10,916,294 23,371,680 19,962,848 4,289 63,850,696 Investments at quoted fair value: At market value: Short-term investments 37,876,365 52,717,245 119,000,779 296,394,084 68,075,236 1,752,922 575,816,631 Fixed income investments 12,263,211 - - 1,140,116,818 308,267,495 - 1,460,647,524 Equity securities: Xerox common stock - - - - - 197,019,053 197,019,053 Other 898,144,054 1,798,935,366 652,074,653 267,795,216 927 - 3,616,950,216 Investments at contract value: Investment contracts with insurance companies and banks - - - - 634,202,724 - 634,202,724 At estimated fair value: Interest in real estate trusts - - - 120,074,113 - - 120,074,113 Other investments - - - 141,816,200 - - 141,816,200 Total investments 948,283,630 1,851,652,611 771,075,432 1,966,196,431 1,010,546,382 198,771,975 6,746,526,461 Total assets 952,745,633 1,856,894,789 781,991,726 1,991,539,708 1,032,466,283 198,776,264 6,814,414,403 Liabilities Cash overdraft - 639 - - - - 639 Due to brokers 750,632 4,381,597 7,166,878 34,232,374 20,685,156 4,596,115 71,812,752 Net assets $951,995,001 1,852,512,553 774,824,848 1,957,307,334 1,011,781,127 194,180,149 6,742,601,012 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements (3) Master Trust (continued) The allocation of Master Trust investments by investment pool and fund as of November 30, 1996 is as follows:
12Small International Company Xerox Stock U.S Stock Stock Balanced Income Stock Fund Fund Fund Fund Fund Fund Total International Stock Pool $ 144,212,119 - - 807,782,882 - - 951,995,001 U.S. Stock Pool - 145,647,985 - 1,706,864,568 - - 1,852,512,553 Small Company Stock Pool - - 138,176,064 636,648,784 - - 774,824,848 All Other Pool - - - 1,957,307,334 - - 1,957,307,334 Income Fund - - - - 1,011,781,127 - 1,011,781,127 Xerox Stock Fund - - - - - 194,180,149 194,180,149 Total $ 144,212,119 145,647,985 138,176,064 5,108,603,568 1,011,781,127 194,180,149 6,742,601,012 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements (3) Master Trust (continued) Investments in the Master Trust for all participating plans as of November 30, 1996 are as follows:
13Small International Company Xerox Stock U.S Stock Stock Balanced Income Stock Fund Fund Fund Fund Fund Fund Total Xerox Corporation Profit Sharing and Savings Plan $ 136,379,184 138,676,389 131,146,618 757,250,020 693,889,121 179,548,012 2,036,889,344 The Profit Sharing Plan of Xerox Corporation and The Xerographic Division, Union of Needletrades, Industrial and Textile Employes, A.F.L.-C.I.O C.L.C. 7,832,935 6,971,596 7,029,446 48,816,602 85,680,794 14,632,137 170,963,510 Xerox Corporation Retirement Income Guarantee Plan - - - 3,860,398,301 201,917,419 - 4,062,615,720 Retirement Income Guarantee Plan of Xerox Corporation and The Xerographic Division, Union of Needletrades, Industrial and Textile Employees, A.F.L.-C.I.O.- C.L.C. - - - 441,556,944 30,293,793 - 471,850,737 XDS Investment Plan - - - 581,701 - - 581,701 Total $ 144,212,119 145,647,985 138,176,064 5,108,603,568 1,011,781,127 194,180,149 6,742,601,012 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements (3) Master Trust (continued) Statement of Net Assets of the Master Trust as of November 30, 1995:
14Small International Company Xerox Segregated Stock U.S Stock Stock All Other Income Stock Assets Pool Pool Pool Pool Fund Fund Fund Total Assets (see note 4) Receivables: Dividends $ 698,388 951,310 153,069 554,383 - 754,349 - 3,111,499 Interest 338,037 381,209 192,981 10,093,759 7,869,209 1,929 - 18,877,124 Due from brokers 4,232,947 11,272,276 1,602,820 70,751,303 21,414,712 - - 109,274,058 Total receivables 5,269,372 12,604,795 1,948,870 81,399,445 29,283,921 756,278 - 131,262,681 Investments at fair value: At quoted market value: Short-term investments 14,959,661 50,261,165 35,589,654 188,143,760 45,129,459 506,921 - 334,590,620 Fixed income investments 8,948,937 10,355,388 - 809,199,571 281,135,924 - - 1,109,639,820 Equity securities: Xerox common stock - - - - - 139,634,250 - 139,634,250 Other 728,766,550 1,271,544,615 547,487,444 686,264,675 - - - 3,234,063,284 Investments at contract value: Investment contracts with insurance companies and banks - - - - 755,908,409 - 1,269,049 757,177,458 At estimated fair value: Interest in real estate trusts - - - 147,958,900 - - - 147,958,900 Other investments - - - 112,288,466 - - - 112,288,466 Total investments 752,675,148 1,332,161,168 583,077,098 1,943,855,372 1,082,173,792 140,141,171 1,269,049 5,835,352,798 Total assets 757,944,520 1,344,765,963 585,025,968 2,025,254,817 1,111,457,713 140,897,449 1,269,049 5,966,615,479 Liabilities Cash overdraft - 66 13 109,973 - - - 110,052 Due to brokers 10,932,258 19,692,289 4,030,794 98,607,735 3,436,720 1,717,850 - 138,417,646 Net assets $747,012,262 1,325,073,608 580,995,161 1,926,537,109 1,108,020,993 139,179,599 1,269,049 5,828,087,781 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements (3) Master Trust (continued) The allocation of Master Trust investments by investment pool and fund as of November 30, 1995 is as follows:
15Small International Company Xerox Segregated Stock U.S Stock Stock Balanced Income Stock Assets Fund Fund Fund Fund Fund Fund Fund Total (see note 4) International Stock Pool $ 77,482,237 - - 669,530,025 - - - 747,012,262 U.S. Stock Pool - 78,184,642 - 1,246,888,966 - - - 1,325,073,608 Small Company Stock Pool - - 74,130,432 506,864,729 - - - 580,995,161 All Other Pool - - - 1,926,537,109 - - - 1,926,537,109 Income Fund - - - - 1,108,020,993 - - 1,108,020,993 Xerox Stock Fund - - - - - 139,179,599 - 139,179,599 Segregated Assets Fund - - - - - - 1,269,049 1,269,049 Total $ 77,482,237 78,184,642 74,130,432 4,349,820,829 1,108,020,993 139,179,599 1,269,049 5,828,087,781 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements (3) Master Trust (continued) Investments in the Master Trust for all participating plans as of November 30, 1995 are as follows:
16Small International Company Xerox Segregated Stock U.S Stock Stock Balanced Income Stock Assets Fund Fund Fund Fund Fund Fund Fund Total (see note 4) Xerox Corporation Profit Sharing and Savings Plan $ 73,612,588 75,230,057 71,105,345 584,912,455 767,283,041 130,445,603 864,596 1,703,453,683 The Profit Sharing Plan of Xerox Corporation and The Xerographic Division, Union of Needletrades, Industrial and Textile Employes, A.F.L.-C.I.O C.L.C. 3,869,649 2,954,585 3,025,087 37,830,372 95,765,469 8,733,996 85,695 152,264,853 Xerox Corporation Retirement Income Guarantee Plan - - - 3,324,141,518 213,746,813 - 279,767 3,538,168,098 Retirement Income Guarantee Plan of Xerox Corporation and The Xerographic Division, Union of Needletrades, Industrial and Textile Employees, A.F.L.-C.I.O.- C.L.C. - - - 402,496,038 31,225,670 - 38,991 433,760,699 XDS Investment Plan - - - 440,446 - - - 440,446 Total $ 77,482,237 78,184,642 74,130,432 4,349,820,829 1,108,020,993 139,179,599 1,269,049 5,828,087,781 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements (3) Master Trust (continued) Statement of Changes in Net Assets of the Master Trust for the year ended November 30, 1996:
17Small International Company Xerox Segregated Stock U.S Stock Stock All Other Income Stock Assets Pool Pool Pool Pool Fund Fund Fund Total (see note 4) Additions: Transfers in $17,667,117 23,361,582 17,871,703 161,169,556 60,773,598 25,410,969 - 306,254,525 Investment earnings: Interest 1,758,465 7,472,177 5,385,918 77,829,819 70,882,808 56,938 1,615,842 165,001,967 Dividends 11,536,790 64,246,861 8,676,627 27,587,944 3 3,160,301 - 115,208,526 Net App(Dep) 189,455,864 268,707,939 133,179,213 203,226,626 (2,182,375) 12,868,904 - 805,256,171 Margin Var. on futures contracts (40,828) 17,959,290 9,297,242 9,725,636 267,516 - - 37,208,856 Other 552,365 101,265 216,690 2,267,517 92,908 5,553 - 3,236,298 Total investment earnings 203,262,656 358,487,532 156,755,690 320,637,542 69,060,860 16,091,696 1,615,842 1,125,911,818 Total Additions 220,929,773 381,849,114 174,627,393 481,807,098 129,834,458 41,502,665 1,615,842 1,426,166,343 Deductions: Administrative Expense 6,299,902 2,155,352 3,106,127 13,317,170 1,907,429 112,269 - 26,898,249 Transfer out 6,804,169 6,451,303 5,757,577 325,123,111 135,023,860 11,624,843 - 490,754,863 Total deductions 13,104,071 8,606,655 8,833,704 338,440,281 136,931,289 11,737,112 - 517,653,112 Transfers between funds/pools (2,842,963) 154,196,486 28,035,998 (112,596,592) (89,143,035) 25,234,997 (2,884,891) - Net assets: Beginning of year 747,012,262 1,325,073,608 580,995,161 1,926,537,109 1,108,020,993 139,179,599 1,269,049 5,828,087,781 End of year $ 951,995,001 1,852,512,553 774,824,848 1,957,307,334 1,011,781,127 194,180,149 - 6,742,601,012 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements (3) Master Trust (continued) The allocation of net income from Master Trust investments, net of administrative expenses, by investment pool and fund for the year ended November 30, 1996 is as follows:
18Small International Company Xerox Segregated Stock U.S Stock Stock Balanced Income Stock Asset Fund Fund Fund Fund Fund Fund Fund Total International Stock Pool $25,038,377 - - 171,924,377 - - - 196,962,754 U.S. Stock Pool - 28,282,250 - 328,049,930 - - - 356,332,180 Small Company Stock Pool - - 23,630,507 130,019,056 - - - 153,649,563 All Other Pool - - - 307,320,372 - - 1,615,842 307,320,372 Income Fund - - - - 67,153,431 - - 68,769,273 Xerox Stock Fund - - - - - 15,979,427 - 15,979,427 Total $25,038,377 28,282,250 23,630,507 937,313,735 67,153,431 15,979,427 1,615,842 1,099,013,569 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements (3) Master Trust (continued) Net income from Master Trust investments, net of administrative expenses for all participating plans for the year ended November 30, 1996:
19Small International Company Xerox Segregated Stock U.S Stock Stock Balanced Income Stock Asset Fund Fund Fund Fund Fund Fund Fund Total Xerox Corporation Profit Sharing and Savings Plan* $23,752,671 26,986,737 22,517,556 136,097,648 46,800,658 15,061,698 1,124,757 272,341,725 The Profit Sharing Plan of Xerox Corporation and The Xerographic Division, Union of Needletrades, Industrial and Textile Employees, A.F.L.-C.I.O.- C.L.C. 1,285,706 1,295,513 1,112,951 8,689,527 5,525,723 917,729 135,231 18,962,380 Xerox Corporation Retirement Income Guarantee Plan - - - 710,218,766 13,001,192 - 330,112 723,550,070 Retirement Income Guarantee Plan of Xerox Corporation and The Xerographic Division, Union of Needletrades, Industrial and Textile Employees, A.F.L.-C.I.O. C.L.C. - - - 82,206,637 1,825,858 - 25,742 84,058,237 XDS Investment Plan - - - 101,157 - - - 101,157 Total $ 25,038,377 28,282,250 23,630,507 937,313,735 67,153,431 15,979,427 1,615,842 1,099,013,569 * The above allocation of investment results, net of administrative expenses, is at the Master Trust level. This allocation differs from the amounts reported in the statement of changes in net assets available for plan benefits due to the impact of investment manager expenses accrued at the Plan level. XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements (3) Master Trust (continued) Statement of Changes in Net Assets of the Master Trust for the year ended November 30, 1995 is as follows:
20Small International Company Xerox Segregated Stock U.S Stock Stock All Other Income Stock Assets Pool Pool Pool Pool Fund Fund Fund Total (see note 4) Additions: Transfers in $11,203,070 10,647,422 9,889,067 85,878,768 84,155,229 17,685,297 - 219,458,853 Investment earnings: Interest 770,531 3,528,423 2,776,738 76,856,014 74,729,139 76,567 - 157,737,412 Dividends 10,025,054 38,515,695 11,517,423 24,966,258 - 2,953,609 - 87,978,039 Net App(Dep) 58,941,923 271,364,157 102,753,507 224,463,457 8,921,130 37,632,740 - 704,076,914 Margin Variation 1,028,520 - - 24,311,485 (161,741) - - 25,178,264 Other 177,235 31,509 167,756 860,675 34,868 2,867 - 1,274,910 Total investment earnings 70,943,263 313,439,784 117,215,424 351,457,889 83,523,396 40,665,783 - 977,245,539 Total Additions 82,146,333 324,087,206 127,104,491 437,336,657 167,678,625 58,351,080 - 1,196,704,392 Deductions: Administrative Expense 5,498,273 4,104,929 3,358,532 14,784,130 2,519,253 123,498 - 30,388,615 Transfer out 4,762,702 3,679,415 3,354,142 352,038,038 168,483,364 10,173,220 - 542,490,881 Total deductions 10,260,975 7,784,344 6,712,674 366,822,168 171,002,617 10,296,718 - 572,879,496 Transfers between funds/pools (41,175,868) 98,390,567 (199,879,397) 105,200,242 59,242,812 4,638,985 (26,417,341) - Transfer from AMTX, Inc. - - - - 441,916 - - 441,916 Net assets: Beginning of year 716,302,772 910,380,179 660,482,741 1,750,822,378 1,051,660,257 86,486,252 27,686,390 5,203,820,969 End of year $747,012,262 1,325,073,608 580,995,161 1,926,537,109 1,108,020,993 139,179,599 1,269,049 5,828,087,781 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements (3) Master Trust (continued) The allocation of net income from Master Trust investments, net of administrative expenses, by investment pool and fund for the year ended November 30, 1995 is as follows:
21Small International Company Xerox Stock U.S Stock Stock Balanced Income Stock Fund Fund Fund Fund Fund Fund Total International Stock Pool $6,256,251 - - 59,188,739 - - 65,444,990 U.S. Stock Pool - 14,942,724 - 294,392,131 - - 309,334,855 Small Company Stock Pool - - 11,888,984 101,967,908 - - 113,856,892 All Other Pool - - - 336,673,759 - - 336,673,759 Income Fund - - - - 81,004,143 - 81,004,143 Xerox Stock Fund - - - - - 40,542,284 40,542,284 Total $6,256,251 14,942,724 11,888,984 792,222,537 81,004,143 40,542,284 946,856,923 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements (3) Master Trust (continued) Net income from Master Trust investments, net of administrative expenses for all participating plans for the year ended November 30, 1995:
> 22Small International Company Xerox Stock U.S Stock Stock Balanced Income Stock Fund Fund Fund Fund Fund Fund Total Xerox Corporation Profit Sharing and Savings Plan* $5,971,976 14,428,298 11,478,711 102,705,332 56,018,591 38,089,557 228,692,465 The Profit Sharing Plan of Xerox Corporation and The Xerographic Division, Union of Needletrades, Industrial and Textile Employees, A.F.L.-C.I.O.- C.L.C. 284,275 514,426 410,273 6,531,337 6,937,779 2,452,727 17,130,817 Xerox Corporation Retirement Income Guarantee Plan - - - 608,237,890 15,767,773 - 624,005,663 Retirement Income Guarantee Plan of Xerox Corporation and The Xerographic Division, Union of Needletrades, Industrial and Textile Employees, A.F.L.-C.I.O. C.L.C. - - - 74,686,415 2,280,000 - 76,966,415 XDS Investment Plan - - - 61,563 - - 61,563 Master Trust investment income, net of administrative expenses $6,256,251 14,942,724 11,888,984 792,222,537 81,004,143 40,542,284 946,856,923 * The above allocation of investment results, net of administrative expenses, is at the Master Trust level. This allocation differs from the amounts reported in the statement of changes in net assets available for plan benefits due to the impact of investment manager expenses accrued at the Plan level. XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements (3) Master Trust (continued) Master Trust investments are managed by selected investment managers under the direction of the Treasurer of Xerox Corporation. The Finance Committee of the Xerox Corporation Board of Directors is responsible for establishing investment guidelines, reviewing the investment decisions of the Treasurer and reviewing the investment results of the Master Trust. The Finance Committee of the Xerox Corporation Board of Directors consists, at present, of five members of the Xerox Corporation Board of Directors, none of whom are officers of Xerox Corporation. Marketable securities are valued at the last reported sales price on the last business day of the year. Quotations are obtained from national securities exchanges or, in instances where securities are not listed on any of the exchanges, quotations are obtained from brokerage firms. Non-readily marketable investments which include private placements are carried at fair value, based upon the cost of the investments, developments concerning the portfolio investments of the private placements, and other factors as the managing general partners of these investments may deem relevant. The valuations do not necessarily represent amounts which might ultimately be realized from the investments. private placements Securities and trust funds that are not readily marketable are valued based on comparisons to yields of issues of similar quality and maturities. The value of the investment contracts with insurance companies and banks is at contract value, which approximates fair value. In connection with the investment contracts, all of which are fully benefit-responsive, the following information is presented: (i) The average investment yields for the years ended November 30, 1996 and 1995 were 6.5% and 6.9% respectively. (ii) The crediting interest rates at November 30, 1996 and 1995 ranged from 5.0% to 9.3%. (iii) The fair value, as determined by discounting estimated future cash flows for traditional GIC's and the market value of the underlying investments, for synthetic GIC's, at November 30, 1996 and 1995 was approximately $641,588,033 and $767,473,688, respectively. Contract values were $634,202,724 and $757,177,458 at November 30, 1996 and 1995, respectively. The Master Trust invests in real estate investment trusts. These trusts provide pension and profit sharing plans with a medium for pooling their funds for investment in income producing real estate. The investment trusts value real estate holdings at estimated market value based upon independent appraisals, consideration of significant changes in economic circumstances, and capital additions made to properties after the appraisal date. Such market value estimates necessarily involve subjective judgments. Accordingly, the actual market price of the real estate can only be determined by negotiation between independent third parties in a sales transaction. Purchases and sales of securities are recorded on a trade date basis. Dividend income is recorded on the ex-dividend date. Interest income is recorded as earned. Margin variation represents market fluctuations on future investments. 23 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements Derivative financial instruments are used by the Master Trust's equity and balanced portfolio investment managers primarily to rebalance the fixed income/equity allocation of the Master Trust's portfolio and to hedge the currency risk component of the Master Trust's foreign investments. Certain of the Master Trust's fixed income investment managers are permitted to use certain specified types of derivative instruments as part of their respective strategies. These strategies include the use of futures and options as substitutes for certain types of fixed income securities. Leveraging of the Master Trust's assets and speculation are prohibited. Currency hedge positions are not permitted to exceed the level of exposure in the related Master Trust's assets. The derivatives most commonly used by the investment managers are highly liquid exchange traded equity and fixed income futures and over-the-counter foreign exchange forward contracts. The use of derivative instruments is not believed to materially increase the credit or market risk of the Master Trust's investment. The net appreciation (depreciation) of investments for the year ended November 30, 1996 is as follows:
U.S. Small International Stock Company All Other Income Xerox Stock Pool Pool Stock Pool Pool Fund Stock Fund Total Investments at quoted market value: Short-term and fixed income investments $ (243,957) 403,718 - 28,170,610 (2,182,375) - 26,147,996 Xerox common stock - - - - - 12,868,904 12,868,904 Other equity investments 189,699,821 268,304,221 133,179,213 120,369,414 - - 711,552,669 Investments at estimated fair value: Real estate - - - (9,667,515) - - (9,667,515) Other investments - - - 64,354,117 - - 64,354,117 Total $189,455,864 268,707,939 133,179,213 203,226,626 (2,182,375) 12,868,904 805,256,171 24 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements The net appreciation (depreciation) of investments for the year ended November 30, 1995 is as follows:
(4) Segregated Assets Fund - Investment Contracts with Executive Life Insurance Company On April 11, 1991, the California Department of Insurance (CDI) took over Executive Life Insurance Company (ELIC) citing a "serious danger of insolvency" and temporarily suspended all payments on Guaranteed Investment Contracts (GICs) issued by ELIC. Effective April 1, 1991, in order to treat all participants fairly, $66 million was transferred into a Segregated Assets Fund. Through November 30, 1996, the Xerox retirement and savings plans have received $65.5 million in payments related to the ELIC investments These payments represent the recovery of 100% of each participant's original investment plus $1.6 million in interest. Should Xerox receive additional payments from ELIC for unrecognized interest income associated with the original GIC's, the proceeds will be allocated to those participants originally invested in ELIC based upon their percent interest on April 11, 1991. All proceeds will be recorded through the income fund and transferred to other funds based on a participant's allocation elections at the time of receipt. 25U.S. Small International Stock Company All Other Income Xerox Stock Pool Pool Stock Pool Pool Fund Stock Fund Total Investments at fair value: Short-term and fixed income investments $ (65,138) 2,014,943 - 51,373,186 8,921,130 - 62,244,121 Xerox common stock - - - - - 37,632,740 37,632,740 Other equity investments 59,007,061 269,349,214 102,753,507 144,946,924 - - 576,056,706 Investments at estimated fair value: Real estate trust interests - - - 3,810,760 - - 3,810,760 Other investments - - - 24,332,587 - - 24,332,587 Total $ 58,941,923 271,364,157 102,753,507 224,463,457 8,921,130 37,632,740 704,076,914 There are no investments in the Plan that represent 5% or more of Master Trust net assets. Other investment consist primarily of private placement limited partnerships. XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements (5) Unit Values The interests of Plan participants in each of the funds is expressed in terms of units, representing undivided interests in the net assets of the fund. Unit value is calculated monthly by dividing the total value of net assets of each fund (reduced by employer contributions receivable not yet received by the Master Trust, by unaccrued benefit payments and other reconciling items) by units outstanding at the valuation date. The total number of units and net asset value per unit outstanding at month-end during the year ended November 30, 1996 was as follows:
26International Fund U.S Stock Fund Small Co. Fund Balanced Fund Income Fund Xerox Stock Fund Units Unit Units Unit Units Unit Units Unit Units Unit Units Unit Outstanding Value Outstanding Value Outstanding Value Outstanding Value Outstanding Value Outstanding Value December 31: 61,795,806 $1.247564 60,026,532 $1.340973 55,085,964 $1.351324 51,224,934$11.765868 124,318,691 $6.130939 21,394,017 $6.189449 January 31: 62,382,157 1.293327 61,949,688 1.384301 56,320,966 1.342293 51,462,675 12.002653 122,754,641 6.167616 21,814,069 5.599330 February 28: 65,714,223 1.305984 65,078,404 1.398004 57,683,878 1.399105 52,077,595 12.105990 121,118,697 6.185017 23,442,405 5.926790 March 31: 69,908,614 1.345844 71,016,923 1.410330 58,160,173 1.451021 52,443,617 12.315363 117,012,099 6.204795 23,942,955 5.703779 April 30: 76,839,969 1.380051 79,049,752 1.425851 62,190,910 1.547702 54,307,056 12.556639 117,123,296 6.229090 24,929,008 6.669084 May 31: 81,463,488 1.388665 81,502,643 1.457879 66,205,558 1.606726 54,419,516 12.757811 114,645,872 6.258788 24,844,135 7.166556 June 30: 84,965,509 1.403904 82,646,827 1.459497 72,117,763 1.547776 54,152,325 12.786097 111,463,002 6.299196 25,138,171 7.354894 July 31: 87,411,236 1.346170 83,539,982 1.387785 75,583,671 1.432424 54,133,948 12.344405 109,615,217 6.332220 25,291,962 6.928447 August 31: 88,046,503 1.376319 83,529,506 1.421710 76,828,681 1.527109 53,983,112 12.648546 108,953,692 6.366458 25,486,220 7.543459 September 30: 88,945,855 1.420495 83,029,325 1.508419 77,873,140 1.605861 53,949,993 13.201415 107,845,121 6.411511 25,708,519 7.415021 October 31: 90,193,238 1.436266 83,002,657 1.544068 77,837,161 1.606247 53,937,896 13.398674 107,656,305 6.461901 25,874,302 6.410834 November 30: 90,181,655 1.511053 83,361,927 1.664017 77,968,283 1.681941 53,767,635 14.089010 106,860,617 6.501211 26,550,199 6.766386 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements (5) Unit Values (continued) The total number of units and net asset value per unit outstanding at month-end during the year ended November 30, 1995 was as follows:
27International Fund U.S Stock Fund Small Co. Fund Balanced Fund Income Fund Xerox Stock Fund Units Unit Units Unit Units Unit Units Unit Units Unit Units Unit Outstanding Value Outstanding Value Outstanding Value Outstanding Value Outstanding Value Outstanding Value December 31: 60,179,365 $1.071812 37,773,639 $1.004469 36,690,812 $1.087985 50,770,096 $9.492493 127,633,672 $5.675950 19,452,258 $4.367397 January 31: 60,918,573 1.014148 38,136,110 1.028614 37,916,082 1.075133 50,336,147 9.469626 126,443,369 5.714529 19,906,359 4.823003 February 28: 60,355,342 1.014879 38,523,405 1.066364 38,579,023 1.110750 49,787,004 9.722490 126,340,743 5.752417 20,183,338 4.925137 March 31: 59,265,445 1.037801 39,886,643 1.091979 39,875,075 1.146890 49,492,114 9.932212 128,700,201 5.787098 20,253,326 5.223549 April 30: 59,757,540 1.073252 42,605,238 1.117010 41,842,797 1.168077 50,849,044 10.153442 133,055,469 5.823086 21,157,657 5.479653 May 31: 59,157,334 1.097675 44,708,195 1.156870 42,787,760 1.184615 50,599,607 10.431708 133,079,193 5.872766 21,500,659 5.071456 June 30: 59,061,311 1.103583 47,239,526 1.183081 44,598,384 1.242418 50,489,636 10.640895 132,166,538 5.907832 21,626,823 5.239795 July 31: 59,589,319 1.177333 48,392,446 1.220332 45,029,655 1.315199 50,406,023 11.010881 131,346,391 5.938496 21,508,568 5.334043 August 31: 59,851,776 1.166430 51,229,145 1.226032 46,283,955 1.338410 50,659,319 11.078072 130,009,224 5.975351 21,393,739 5.434081 September 30: 60,390,250 1.194367 53,097,498 1.268196 48,525,206 1.369462 50,657,887 11.333167 128,432,861 6.006915 21,073,681 6.033618 October 31: 61,270,010 1.181537 55,792,291 1.256582 51,361,648 1.302074 50,832,431 11.205960 127,391,276 6.047463 20,901,315 5.824325 November 30: 61,395,203 1.200176 57,454,326 1.310284 53,063,815 1.341111 50,871,423 11.509480 125,383,818 6.088388 21,155,151 6.193365 The Segregated Assets Fund had 2,584,689 units outstanding and a net asset value of $864,596 at November 30, 1995. XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements (6) Reconciliation of Financial Statements to Form 5500 The following is a reconciliation of net assets available for plan benefits per the financial statements to the Form 5500: November 30 1996 1995 Net assets available for plan benefits as reported in the Plan financial statements $2,095,287,041 1,757,842,031 Benefit claims payable reported on line 31g of Form 5500 (2,077,252) (3,525,402) Net assets available for plan benefits as reported in the Plan Form 5500 $2,093,209,789 1,754,316,629 The reconciliation of benefits paid per the financial statements to the Form 5500:
28November 30 1996 1995 Benefits paid to participants as reported in the Plan financial statements $106,706,712 126,453,141 Add: Amounts allocated to withdrawing participants at November 30 2,077,252 3,525,402 Less: Amounts allocated to withdrawing participants at November 30, 1996 and 1995, respectively (3,525,402) (4,975,553) Benefits paid to participants as reported in the Form 5500 $105,258,562 125,002,990 Amounts allocated to withdrawing participants are recorded on the Form 5500 for benefit claims that have been processed and approved for payment prior to November 30 but not yet paid as of that date. XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements (7) AMTX, Inc. AMTX, Inc.is a wholly-owned subsidiary of Xerox Corporation. Effective January 1, 1995, the AMTX, Inc. Employees' Retirement Plan was terminated, and employees' balances were transferred into the Xerox Corporation Profit Sharing and Savings Plan. These employees are now participants in the Plan. (8) Stock Split In May 1996, the shareholders approved a three-for-one stock split of the Company's common stock. The stock split does not impact participants' interest in the Xerox Stock Fund. 29 Schedule 1 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Item 27a - Schedule of Assets Held for Investment Purposes November 30, 1996
30Description of investment including Identity of issuer, borrower, maturity date, rate of interest, Historical Cost Current Value lessor, or similar party collateral, par or maturity value Investment in Master Trust See Note 3. $1,760,440,965 $2,036,889,344 Investment in Participant Loans to Plan participants, Loans Receivable maturity dates through 5/31/09, interest rates from 7.0% to 11.5% per annum. - 59,201,070 INDEPENDENT AUDITORS' REPORT The Plan Administrator and Participants of Xerox Corporation Profit Sharing and Savings Plan: We have audited the accompanying statements of net assets available for plan benefits of the Xerox Corporation Profit Sharing and Savings Plan (Plan) as of November 30, 1996 and 1995, and the related statements of changes in net assets available for plan benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of the Plan as of November 30, 1996 and 1995, and the changes in net assets available for plan benefits for the years then ended in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets held for investment purposes is presented for purpose of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The fund information in the statements of net assets available for plan benefits and the statements of changes in net assets available for plan benefits is presented for purposes of additional analysis rather than to present the net assets available for plan benefits and changes in the assets available for plan benefits of each fund. The supplemental schedule and fund information have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. KPMG PEAT MARWICK LLP Rochester, New York April 30, 1997 31 EXHIBIT INDEX Electronic Submission Exhibit Document (b)(1) Accountants' Consent 2
ACCOUNTANTS' CONSENT The Board of Directors Xerox Corporation: We consent to incorporation by reference in the Registration Statements (No. 2-86274 and No. 333-22059) on Form S-8 of Xerox Corporation of our report dated April 30, 1997, relating to the statements of net assets available for plan benefits of the Xerox Corporation Profit Sharing and Savings Plan as of November 30, 1996 and 1995, and the related statements of changes in net assets available for plan benefits for the years then ended and related schedule, which report appears in the November 30, 1996 Annual Report on Form 11-K of the Xerox Corporation Profit Sharing and Savings Plan. KPMG PEAT MARWICK LLP Rochester, New York May 27, 1997