-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UCKuqSg9wzR/zBa6E1g6eSMzeFymtQDsdwpMudCJFPfQ074hv7FnnUTmhjqJUs+J rf8UfvbqE1jYl5z48nuFLw== 0000108772-98-000016.txt : 19980601 0000108772-98-000016.hdr.sgml : 19980601 ACCESSION NUMBER: 0000108772-98-000016 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971130 FILED AS OF DATE: 19980529 SROS: BSE SROS: CSE SROS: CSX SROS: NYSE SROS: PHLX SROS: PCX FILER: COMPANY DATA: COMPANY CONFORMED NAME: XEROX CORP CENTRAL INDEX KEY: 0000108772 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 160468020 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 11-K SEC ACT: SEC FILE NUMBER: 001-04471 FILM NUMBER: 98634557 BUSINESS ADDRESS: STREET 1: P O BOX 1600 STREET 2: 800 LONG RIDGE ROAD CITY: STAMFORD STATE: CT ZIP: 06904-1600 BUSINESS PHONE: 2039683000 MAIL ADDRESS: STREET 1: 800 LONG RIDGE ROAD STREET 2: PO BOX 1600 CITY: STAMFORD STATE: CT ZIP: 06904 FORMER COMPANY: FORMER CONFORMED NAME: HALOID XEROX INC DATE OF NAME CHANGE: 19730813 11-K 1 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, 1997 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 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 29, 1998 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Financial Statements and Schedules December 31, 1997 and November 30, 1997 and 1996 (With Independent Auditors' Report Thereon) 2 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Statement of Net Assets Available for Plan Benefits With Fund Information December 31, 1997 Fund Information Small International Company Stock U.S. Stock Stock Balanced Fund Fund Fund Fund Assets: Investment in Master Trust $ 165,404,600 245,871,622 201,085,797 937,212,155 Participant notes receivable - - - - Employer contributions receivable 5,211,957 11,918,762 7,494,196 23,598,210 Total assets 170,616,557 257,790,384 208,579,993 960,810,365 Liabilities: Accrued expenses and other liabilities 302,084 183,643 263,655 891,305 Due from (to) other funds (5,850,276) 768,616 (2,026,538) (135,363) Due from (to) other plans (4) 7,172 6,306 76,807 Net assets available for plan benefits $ 164,464,193 258,382,529 206,296,106 959,860,504 The accompanying notes are an integral part of the financial statements. 3 Xerox Income Stock Employee Fund Fund Loan Fund Total 635,611,631 311,118,588 - 2,496,304,393 - - 66,182,431 66,182,431 6,747,587 13,248,905 - 68,219,617 642,359,218 324,367,493 66,182,431 2,630,706,441 485,774 17,982 - 2,144,443 976,048 6,267,513 - - 37,083 289,823 - 417,187 642,886,575 330,906,847 66,182,431 2,628,979,185 4 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Statement of Net Assets Available for Plan Benefits With Fund Information November 30, 1997 Fund Information Small International Company Stock U.S. Stock Stock Balanced Fund Fund Fund Fund Assets: Investment in Master Trust $ 166,221,445 238,536,887 201,094,208 928,099,095 Participant notes receivable - - - - Total assets 166,221,445 238,536,887 201,094,208 928,099,095 Liabilities: Accrued expenses and other liabilities 132,804 84,380 146,996 458,427 Due from (to) other funds ( 4,886,292) 2,048,501 858,350 (2,341,145) Net assets available for plan benefits $ 161,202,349 240,501,008 201,805,562 925,299,523 The accompanying notes are an integral part of the financial statements. 5 Xerox Income Stock Employee Fund Fund Loan Fund Total 637,540,756 319,238,274 - 2,490,730,665 - - 64,417,177 64,417,177 637,540,756 319,238,274 64,417,177 2,555,147,842 173,228 29,226 - 1,025,061 (4,955,175) 6,778,874 2,496,887 - 632,412,353 325,987,922 66,914,064 2,554,122,781 6 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Statement of Net Assets Available for Plan Benefits With Fund Information November 30, 1996 Fund Information Small International Company Stock U.S. Stock Stock Balanced Fund Fund Fund Fund Assets: Investment in Master Trust $ 136,379,184 138,676,389 131,146,618 757,250,020 Participant notes receivable - - - - Total assets 136,379,184 138,676,389 131,146,618 757,250,020 Liabilities: Accrued expenses and other liabilities 149,535 40,466 91,219 313,420 Due from (to) other funds 444,179 1,794,007 2,135,881 (1,319,578) Net assets available for plan benefits $ 136,673,828 140,429,930 133,191,280 755,617,022 The accompanying notes are an integral part of the financial statements. 7 Xerox Income Stock Employee Fund Fund Loan Fund Total 693,889,121 179,548,012 - 2,036,889,344 - - 59,201,070 59,201,070 693,889,121 179,548,012 59,201,070 2,096,090,414 165,625 43,108 - 803,373 (8,100,444) 2,869,821 2,176,134 - 685,623,052 182,374,725 61,377,204 2,095,287,041 8 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Statement of Changes in Net Assets Available for Plan Benefits With Fund Information For the one month period ending December 31, 1997 Fund Information Small International Company Stock U.S. Stock Stock Balanced Fund Fund Fund Fund Contributions: Employees' - voluntary $ 629,356 1,080,399 826,091 2,053,150 Employer 5,215,329 11,919,954 7,492,719 23,644,704 Total contributions 5,844,685 13,000,353 8,318,810 25,697,854 Net income (loss) from Master Trust investments, net of administrative expenses 3,493,132 4,312,537 (1,620,555) 10,591,873 Interest income on participant notes receivable - - - - 9,337,817 17,312,890 6,698,255 36,289,727 Benefit payments (377,094) (413,353) (359,371) (2,103,136) Transfers among funds ( 5,698,875) 974,812 (1,854,646) 297,583 Transfer among plans (4) 7,172 6,306 76,807 Net increase (decrease) in net assets available for plan benefits 3,261,844 17,881,521 4,490,544 34,560,981 Net assets available for plan benefits: Beginning of period 161,202,349 240,501,008 201,805,562 925,299,523 End of period $ 164,464,193 258,382,529 206,296,106 959,860,504 The accompanying notes are an integral part of the financial statements. 9 Xerox Income Stock Employee Fund Fund Loan Fund Total 1,118,128 1,137,866 - 6,844,990 6,772,456 13,174,455 - 68,219,617 7,890,584 14,312,321 - 75,064,607 4,094,269 (15,103,176) - 5,768,080 - - 454,887 454,887 11,984,853 (790,855) 454,887 81,287,574 (2,783,365) (812,038) - (6,848,357) 1,235,651 6,231,995 (1,186,520) - 37,083 289,823 - 417,187 10,474,222 4,918,925 (731,633) 74,856,404 632,412,353 325,987,922 66,914,064 2,554,122,781 642,886,575 330,906,847 66,182,431 2,628,979,185 10 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Statement of Changes in Net Assets Available for Plan Benefits With Fund Information Year ended November 30, 1997 Fund Information Small International Company Stock U.S. Stock Stock Balanced Fund Fund Fund Fund Contributions: Employees' - voluntary $ 11,906,142 16,296,309 13,832,494 37,300,231 Employer 6,372,983 8,694,916 8,756,190 20,481,148 Total contributions 18,279,125 24,991,225 22,588,684 57,781,379 Net income from Master Trust investments, net of administrative expenses 11,853,952 48,065,924 31,281,399 145,978,704 Interest income on participant notes receivable - - - - 30,133,077 73,057,149 53,870,083 203,760,083 Benefit payments (7,289,327) (6,860,379) (6,287,499) (39,825,077) Transfers among funds 1,684,771 33,874,308 21,031,698 5,224,612 Transfer from XDS Savings Plan - - - 522,883 Net increase (decrease) in net assets available for plan benefits 24,528,521 100,071,078 68,614,282 169,682,501 Net assets available for plan benefits: Beginning of year 136,673,828 140,429,930 133,191,280 755,617,022 End of year $ 161,202,349 240,501,008 201,805,562 925,299,523 The accompanying notes are an integral part of the financial statements. 11 Xerox Income Stock Employee Fund Fund Loan Fund Total 22,980,521 15,571,159 - 117,886,856 7,750,410 8,332,412 - 60,388,059 30,730,931 23,903,571 - 178,274,915 44,780,652 112,250,036 - 394,210,667 - - 5,240,416 5,240,416 75,511,583 136,153,607 5,240,416 577,725,998 (48,793,032) (10,357,827) - (119,413,141) (79,929,250) 17,817,417 296,444 - - - - 522,883 (53,210,699) 143,613,197 5,536,860 458,835,740 685,623,052 182,374,725 61,377,204 2,095,287,041 632,412,353 325,987,922 66,914,064 2,554,122,781 12 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 Fund Information Small International Company Stock U.S. Stock Stock Balanced Fund Fund Fund Fund Contributions: Employees' - voluntary $ 9,362,123 12,440,492 10,185,690 36,787,660 Employer 5,143,474 7,362,449 4,699,323 21,696,033 Total contributions 14,505,597 19,802,941 14,885,013 58,483,693 Net income from Master Trust investments, net of administrative expenses 23,593,622 27,001,873 22,455,809 136,258,719 Interest income on participant notes receivable - - - - 38,099,219 46,804,814 37,340,822 194,742,412 Benefit payments (4,847,948) (4,391,021) (3,963,761) (32,199,107) Transfers among funds 29,708,728 20,034,162 26,525,279 4,998,693 Net increase (decrease) in net assets available for plan benefits 62,959,999 62,447,955 59,902,340 167,541,998 Net assets available for plan benefits: Beginning of year 73,713,829 77,981,975 73,288,940 588,075,024 End of year $136,673,828 140,429,930 133,191,280 755,617,022 The accompanying notes are an integral part of the financial statements. 13 Xerox Segregated Income Stock Assets Employee Fund Fund Fund Loan Fund Total (see note 4) 28,677,256 12,365,247 - - 109,818,468 11,356,376 7,829,947 - - 58,087,602 40,033,632 20,195,194 - - 167,906,070 46,256,022 15,057,165 1,124,757 - 271,747,967 - - - 4,497,685 4,497,685 86,289,654 35,252,359 1,124,757 4,497,685 444,151,722 (54,862,143) (6,442,732) - - (106,706,712) (101,790,509) 21,805,132 (1,989,353) 707,868 - (70,362,998) 50,614,759 (864,596) 5,205,553 337,445,010 755,986,050 131,759,966 864,596 56,171,651 1,757,842,031 685,623,052 182,374,725 - 61,377,204 2,095,287,041 14 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements December 31, 1997 and November 30, 1997 and 1996 (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. Plan Amendments (i) In December 1997, the Company changed the Xerox Corporation Profit Sharing and Savings Plan (the Plan) year end from November 30 to December 31. As a result, the accompanying financial statements include a statement of net assets available for benefits at December 31, 1997, November 30, 1997 and November 30, 1996 as well as a statement of changes in net assets available for benefits for the one month period ended December 31, 1997 and the years ended November 30, 1997 and November 30, 1996. (ii) Effective January 1, 1998, the Plan Administrator amended the provisions of the Plan pertaining to the valuation date used to value assets of the Plan. This amendment requires the Plan Trustee to value the assets held in each separate fund as of the close of business each day. The Trustee shall appraise them at their market or estimated fair value each day and reflect increases or decreases in the value of each separate fund. Previously, assets of the Plan were valued once a month. (iii) Effective January 1, 1997, the XDS Savings Plan employee balances were transferred into the Xerox Corporation Profit Sharing and Savings Plan. Participant account balances existing at the time of the transfer are subject to the provisions of the XDS Savings Plan while any new contributions are subject to the provisions of the Xerox Corporation Profit Sharing and Savings Plan. (iv) Effective January 1, 1998, employees of Chrystal Software Inc., dpiX, Inc., In Concert, Inc., In Xight Software, Inc., Liveworks, Inc., PD Reader, Inc. and XESystems, Inc. will no longer participate in the Plan's optional profit sharing program. These employees are eligible to continue participating in the savings portion of the Plan. 15 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (1) Description of Plan, Continued 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 may 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 $5,022,493 and $2,077,252 at November 30, 1997 and 1996, respectively. There were no benefits allocated from the Plan for participants at December 31, 1997. 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 a combination of before-tax and after-tax payroll deductions. (The maximum before-tax contribution for the 1997 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 prior to the Plan year end change in 1997 differed 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. For the calendar year ended December 31, 1997, the sponsor's ROA was 18.0% which resulted in an optional profit sharing contribution for the one month period ending December 31, 1997 for all eligible active employees at December 31, 1997 equal to 10% of pay or $245,981,190. Participants elected to invest $68,219,617 into the Plan which has been accrued as an employer contributions receivable in the Plan's financial statements for the one month period ended December 31, 1997. For the calendar year ended December 31, 1996, the sponsor's ROA was 17.8%, which resulted 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 $60,388,059 into the Plan which is recorded as an employer contribution in the Plan's financial statements for the plan year ending November 30, 1997. 16 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (1) Description of Plan, Continued 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 established companies based in economically developed countries of Europe and Asia. 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 cash for administrative purposes. Segregated Assets Fund This fund was established on April 1, 1991 and represented participant investments in certain guaranteed investment contracts which were segregated and frozen. In 1996, all remaining investments in the Segregated Assets Fund were fully recovered. See note 4 to the financial statements for further discussion. 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 December 31, 1997 and November 30, 1997 and 1996, market value on loans approximate fair value. 17 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (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 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 December 31 and November 30, 1997: 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; and 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. 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 participate in 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. For the one month period ended December 31, 1997, accrued administrative expenses and due from (to) other funds activity is recorded at both the Master Trust and plan level. Prior to the one month period ended December 31, 1997, this activity was accrued only at the Plan level. In addition, prior to November 30, 1996 there was a Segregated Assets Fund which is discussed in note 4. 18 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (3) Master Trust, Continued The following financial information is presented for the Master Trust and each of the Master Trust investment pools: Statement of Net Assets of the Master Trust as of December 31, 1997 is as follows: Small International Company Stock U.S. Stock Stock All Other Assets Pool Pool Pool Pool Cash (overdraft) $(440,317) 266,929 (369,071) (13,039) Receivables: Dividends 1,189,113 2,005,454 204,275 108,752 Interest 240,712 750,259 788,274 14,841,482 Due from brokers 11,242,428 8,370,860 16,327,733 85,682,651 Other - 584,373 - - Total receivables 12,672,253 11,710,946 17,320,282 100,632,885 Investments at fair value: At quoted market value: Short-term investments 44,105,848 163,877,893 229,101,207 251,836,466 Fixed income Investments 4,974,135 - - 1,254,277,494 Equity securities: Xerox common Stock - - - - Other 974,400,002 2,325,093,037 729,192,598 358,595,427 At estimated fair value: Interest in real estate trusts - - - 75,286,433 Other investments - - - 139,546,374 Investments at contract value: Investment contracts with insurance companies and banks - - - - Total Investments 1,023,479,985 2,488,970,930 958,293,805 2,079,542,194 Total assets 1,035,711,921 2,500,948,805 975,245,016 2,180,162,040 Liabilities Due to brokers 2,046,663 2,553,077 155,485 138,660,686 Other 6,688,026 - 2,231,618 6,656,682 Net assets 1,026,977,232 2,498,395,728 972,857,913 2,034,844,672 19 Xerox Income Stock Fund Fund Total (92,089) - (647,587) - 1,461,318 4,968,912 8,192,303 5,242 24,818,272 13,113,477 - 134,737,149 - 7,032,593 7,616,966 21,305,780 8,499,153 172,141,299 74,439,579 432,338 763,793,331 588,632,453 - 1,847,884,082 - 337,073,565 337,073,565 2,167,893 - 4,389,448,957 - - 75,286,433 - - 139,546,374 278,816,783 - 278,816,783 944,056,708 337,505,903 7,831,849,525 965,270,399 346,005,056 8,003,343,237 38,229,883 - 181,645,794 139,660 - 15,715,986 926,900,856 346,005,056 7,805,981,457 20 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (3) Master Trust, Continued The allocation of Master Trust net assets by investment pool as of December 31, 1997 is as follows: Small International Company Stock U.S. Stock Stock Balanced Fund Fund Fund Fund International Stock Pool $ 168,557,767 - - 858,419,465 U.S. Stock Pool - 259,252,193 - 2,239,143,535 Small Company Stock Pool - - 210,373,891 762,484,022 All Other Pool - - - 2,034,844,672 Income Fund - - - - Xerox Stock Fund - - - - Total $ 168,557,767 259,252,193 210,373,891 5,894,891,694 21 Xerox Income Stock Fund Fund Total - - 1,026,977,232 - - 2,498,395,728 - - 972,857,913 - - 2,034,844,672 926,900,856 - 926,900,856 - 346,005,056 346,005,056 926,900,856 346,005,056 7,805,981,457 22 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (3) Master Trust, Continued Net assets in the Master Trust for all participating plans as of December 31, 1997 are as follows: Small International Company Stock U.S. Stock Stock Balanced Fund Fund Fund Fund Xerox Corporation Profit Sharing and Savings Plan* $ 159,252,236 246,463,767 198,801,910 936,262,294 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. 9,305,531 12,788,426 11,571,981 65,516,491 Xerox Corporation Retirement Income Guarantee Plan - - - 4,391,614,640 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. - - - 501,498,269 Total $ 168,557,767 259,252,193 210,373,891 5,894,891,694 * The net asset balances at the master trust level do not include the optional profit sharing accrual at December 31, 1997, which is recorded at the Plan level only. 23 Xerox Income Stock Fund Fund Total 636,138,988 317,657,942 2,494,577,137 81,207,045 28,347,114 208,736,588 183,117,495 - 4,574,732,135 26,437,328 - 527,935,597 926,900,856 346,005,056 7,805,981,457 24 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (3) Master Trust, Continued Statement of Net Assets of the Master Trust as of November 30, 1997: Small International Company Stock U.S. Stock Stock All Other Assets Pool Pool Pool Pool Cash 101,955 11,907 - 165,389 Receivables: Dividends 1,293,836 2,721,518 134,380 21,640 Interest 285,100 729,998 687,053 14,841,482 Due from brokers 2,055,055 804,656 4,111,180 99,938,034 Total Receivables 3,633,991 4,256,172 4,932,613 114,801,156 Investments at fair value: At quoted market value: Short-term Investments 72,050,751 158,431,877 141,929,559 307,280,744 Fixed income Investments 5,324,510 - - 1,194,461,407 Equity securities: Xerox common Stock - - - - Other 935,415,759 2,292,047,471 839,706,225 357,400,841 At estimated fair value: Interest in real estate trusts - - - 74,947,472 Other investments - - - 138,439,496 Investments at contract value: Investment contracts with insurance companies and banks - - - - Total Investments 1,012,791,020 2,450,479,348 981,635,784 2,072,529,960 Total assets 1,016,526,966 2,454,747,427 986,568,397 2,187,496,505 Liabilities Cash overdraft - - 282 - Due to brokers 830,987 4,369,061 5,064,018 139,566,815 Net assets $ 1,015,695,979 2,450,378,366 981,504,097 2,047,929,690 25 Xerox Income Stock Fund Fund Total 851 - 280,102 8 - 4,171,382 8,185,309 2,085 24,731,027 11,611,718 - 118,520,643 19,797,035 2,085 147,423,052 32,723,746 281,863 712,698,540 522,657,230 - 1,722,443,147 - 347,575,351 347,575,351 2,176,566 - 4,426,746,862 - - 74,947,472 - - 138,439,496 375,936,203 - 375,936,203 933,493,745 347,857,214 7,798,787,071 953,291,631 347,859,299 7,946,490,225 - 435 717 23,371,769 - 173,202,650 929,919,862 347,858,864 7,773,286,858 26 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (3) Master Trust, Continued The allocation of Master Trust investments by investment pool as of November 30, 1997 is as follows: Small International Company Stock U.S. Stock Stock Balanced Fund Fund Fund Fund International Stock Pool $ 176,349,571 - - 839,346,408 U.S. Stock Pool - 251,186,242 - 2,199,192,124 Small Company Stock Pool - - 213,108,206 768,395,891 All Other Pool - - - 2,047,929,690 Income Fund - - - - Xerox Stock Fund - - - - Total $ 176,349,571 251,186,242 213,108,206 5,854,864,113 27 Xerox Income Stock Fund Fund Total - - 1,015,695,979 - - 2,450,378,366 - - 981,504,097 - - 2,047,929,690 929,919,862 - 929,919,862 - 347,858,864 347,858,864 929,919,862 347,858,864 7,773,286,858 28 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (3) Master Trust, Continued Investments in the Master Trust for all participating plans as of November 30, 1997 are as follows: Small International Company Stock U.S. Stock Stock Balanced Fund Fund Fund Fund Xerox Corporation Profit Sharing and Savings Plan $ 166,221,445 238,536,887 201,094,208 928,099,095 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. 10,128,126 12,649,355 12,013,998 65,159,193 Xerox Corporation Retirement Income Guarantee Plan - - - 4,360,881,801 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. - - - 500,724,024 Total $ 176,349,571 251,186,242 213,108,206 5,854,864,113 29 Xerox Income Stock Fund Fund Total 637,540,756 319,238,274 2,490,730,665 80,336,040 28,620,590 208,907,302 185,079,677 - 4,545,961,478 26,963,389 - 527,687,413 929,919,862 347,858,864 7,773,286,858 30 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (3) Master Trust, Continued Statement of Net Assets of the Master Trust as of November 30, 1996: Small International Company Stock U.S. Stock Stock All Other Assets Pool Pool Pool Pool Cash $ 108,596 - - 1,971,597 Receivables: Dividends 1,252,417 2,520,631 152,707 211,754 Interest 215,445 404,275 554,161 13,108,361 Due from brokers 2,885,545 2,317,272 10,209,426 10,051,565 Total Receivables 4,353,407 5,242,178 10,916,294 23,371,680 Investments at fair value: At quoted market value: Short-term Investments 37,876,365 52,717,245 119,000,779 296,394,084 Fixed income Investments 12,263,211 - - 1,140,116,818 Equity securities: Xerox common Stock - - - - Other 898,144,054 1,798,935,366 652,074,653 267,795,216 At estimated fair value: Interest in real estate Trusts - - - 120,074,113 Other Investments - - - 141,816,200 Investments at contract value: Investment contracts with insurance companies and banks - - - - Total Investments 948,283,630 1,851,652,611 771,075,432 1,966,196,431 Total assets 952,745,633 1,856,894,789 781,991,726 1,991,539,708 Liabilities Cash overdraft - 639 - - Due to brokers 750,632 4,381,597 7,166,878 34,232,374 Net assets $951,995,001 1,852,512,553 774,824,848 1,957,307,334 31 Xerox Income Stock Fund Fund Total 1,957,053 - 4,037,246 3 - 4,137,512 7,705,579 4,289 21,992,110 12,257,266 - 37,721,074 19,962,848 4,289 63,850,696 68,075,236 1,752,922 575,816,631 308,267,495 - 1,460,647,524 - 197,019,053 197,019,053 927 - 3,616,950,216 - - 120,074,113 - - 141,816,200 634,202,724 - 634,202,724 1,010,546,382 198,771,975 6,746,526,461 1,032,466,283 198,776,264 6,814,414,403 - - 639 20,685,156 4,596,115 71,812,752 1,011,781,127 194,180,149 6,742,601,012 32 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (3) Master Trust, Continued The allocation of Master Trust investments by investment pool as of November 30, 1996 is as follows: Small International Company Stock U.S. Stock Stock All Other Fund Fund Fund Fund International Stock Pool $ 144,212,119 - - 807,782,882 U.S. Stock Pool - 145,647,985 - 1,706,864,568 Small Company Stock Pool - - 138,176,064 636,648,784 All Other Pool - - - 1,957,307,334 Income Fund - - - - Xerox Stock Fund - - - - Total $ 144,212,119 145,647,985 138,176,064 5,108,603,568 33 Xerox Income Stock Fund Fund Total - - 951,995,001 - - 1,852,512,553 - - 774,824,848 - - 1,957,307,334 1,011,781,127 - 1,011,781,127 - 194,180,149 194,180,149 1,011,781,127 194,180,149 6,742,601,012 34 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (3) Master Trust, Continued Investments in the Master Trust for all participating plans as of November 30, 1996 are as follows: Small International Company Stock U.S. Stock Stock All Other Fund Fund Fund Fund Xerox Corporation Profit Sharing and Savings Plan $ 136,379,184 138,676,389 131,146,618 757,250,020 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. 7,832,935 6,971,596 7,029,446 48,816,602 Xerox Corporation Retirement Income Guarantee Plan - - - 3,860,398,301 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 XDS Investment Plan - - - 581,701 Total $ 144,212,119 145,647,985 138,176,064 5,108,603,568 35 Xerox Income Stock Fund Fund Total 693,889,121 179,548,012 2,036,889,344 85,680,794 14,632,137 170,963,510 201,917,419 - 4,062,315,720 30,293,793 - 471,850,737 - - 581,701 1,011,781,127 194,180,149 6,742,601,012 36 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (3) Master Trust, Continued Statement of Changes in Net Assets of the Master Trust for the one month period ending December 31, 1997: Small International Company Stock U.S. Stock Stock All Other Pool Pool Pool Pool Additions: Transfers in $ 939,756 1,520,723 1,192,294 3,440,189 Investment earnings: Interest 202,909 750,978 793,609 6,126,673 Dividends 882,124 2,115,534 306,282 2,541,445 Net appreciation (depreciation) 21,900,292 43,019,044 (16,962,885) 5,498,929 Margin variation on futures contracts (95,540) (814,897) 8,628,426 2,300,388 Other 54,282 20,020 31,823 14,924 Total investment earnings (loss) 22,944,067 45,090,679 (7,202,745) 16,482,359 Total additions (deductions) 23,883,823 46,611,402 (6,010,451) 19,922,548 Deductions: Administrative expenses 310,690 194,227 393,228 6,382,549 Transfers out 702,337 840,592 751,755 22,944,703 Total deductions 1,013,027 1,034,819 1,144,983 29,327,252 Transfers between funds/pools (11,589,543) 2,440,779 (1,490,750) (3,680,314) Net assets: Beginning of period 1,015,695,979 2,450,378,366 981,504,097 2,047,929,690 End of period $1,026,977,232 2,498,395,728 972,857,913 2,034,844,672 37 Xerox Income Stock Fund Fund Total 2,391,846 1,835,515 11,320,323 5,154,818 47,787 13,076,774 338,418 1,461,318 7,645,121 636,761 (17,890,578) 36,201,563 51,226 - 10,069,603 553 - 121,602 6,181,776 (16,381,473) 67,114,663 8,573,622 (14,545,958) 78,434,986 575,715 88,500 7,944,909 10,394,122 2,161,969 37,795,478 10,969,837 2,250,469 45,740,387 (622,791) 14,942,619 - 929,919,862 347,858,864 7,773,286,858 926,900,856 346,005,056 7,805,981,457 38 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (3) Master Trust, Continued The allocation of net income (loss) from Master Trust investments, net of administrative expenses, by investment pool and fund for the one month period ended December 31, 1997 is as follows: Small International Company Stock U.S. Stock Stock All Other Fund Fund Fund Fund International Stock Pool $ 3,837,223 - - 18,796,154 U.S. Stock Pool - 4,649,365 - 40,247,087 Small Company Stock Pool - - (1,656,202) (5,939,771) All Other Pool - - - 10,099,810 Income Fund - - - - Xerox Stock Fund - - - - Total $ 3,837,223 4,649,365 (1,656,202) 63,203,280 39 Xerox Income Stock Fund Fund Total - - 22,633,377 - - 44,896,452 - - (7,595,973) - - 10,099,810 5,606,061 - 5,606,061 - (16,469,973) (16,469,973) 5,606,061 (16,469,973) 59,169,754 40 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (3) Master Trust, Continued Net income (loss) from Master Trust Investments, net of administrative expenses, for all participating plans for the one month period ended December 31, 1997: Small International Company Stock U.S. Stock Stock All Other Fund Fund Fund Fund Xerox Corporation Profit Sharing and Savings Plan $ 3,493,132 4,312,537 (1,620,555) 10,591,873 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. 344,091 336,828 (35,647) 695,135 Xerox Corporation Retirement Income Guarantee Plan - - - 46,595,340 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. - - - 5,320,932 Total $ 3,837,223 4,649,365 (1,656,202) 63,203,280 41 Xerox Income Stock Fund Fund Total 4,094,269 (15,103,176) 5,768,080 422,229 (1,366,797) 395,839 952,104 - 47,547,444 137,459 - 5,458,391 5,606,061 (16,469,973) 59,169,754 42 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (3) Master Trust, Continued Statement of Changes in Net Assets of the Master Trust for the year ended November 30, 1997: Small International Company Stock U.S. Stock Stock All Other Pool Pool Pool Pool Additions: Transfers in $ 22,306,484 29,656,915 27,058,668 79,565,183 Investment earnings: Interest 1,757,349 5,278,265 7,297,953 94,879,439 Dividends 18,590,152 30,313,782 4,363,734 32,314,872 Net appreciation (depreciation) 63,334,431 513,193,249 165,120,824 135,330,440 Margin variation on futures contracts (1,755,915) 278,387 (7,435,687) (7,295,238) Other 1,125,898 609,792 490,449 9,218,301 Total investment earnings 83,051,915 549,673,475 169,837,273 264,447,814 Total additions 105,358,399 579,330,390 196,895,941 344,012,997 Deductions: Administrative expenses 7,366,980 4,588,938 5,153,687 14,439,320 Transfers out 9,831,290 9,771,882 8,829,849 260,745,848 Total deductions 17,198,270 14,360,820 13,983,536 275,185,168 Transfers between funds/pools (24,459,151) 32,896,243 23,766,844 21,794,527 Net assets: Beginning of year 951,995,001 1,852,512,553 774,824,848 1,957,307,334 End of year $1,015,695,979 2,450,378,366 981,504,097 2,047,929,690 43 Xerox Income Stock Fund Fund Total 48,095,890 30,942,161 237,625,301 63,253,387 57,861 172,524,254 35,286 5,197,447 90,815,273 (89,293) 116,767,751 993,657,402 (383,641) - (16,592,094) 4,480,888 26,055 15,951,383 67,296,627 122,049,114 1,256,356,218 115,392,517 152,991,275 1,493,981,519 2,207,265 262,852 34,019,042 123,104,702 16,993,060 429,276,631 125,311,967 17,255,912 463,295,673 (71,941,815) 17,943,352 - 1,011,781,127 194,180,149 6,742,601,012 929,919,862 347,858,864 7,773,286,858 44 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (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, 1997 is as follows: Small International Company Stock U.S. Stock Stock All Other Fund Fund Fund Fund International Stock Pool $ 12,519,157 - - 63,165,778 U.S. Stock Pool - 50,619,362 - 494,465,175 Small Company Stock Pool - - 33,159,236 131,524,350 All Other Pool - - - 250,008,494 Income Fund - - - - Xerox Stock Fund - - - - Total $ 12,519,157 50,619,362 33,159,236 939,163,797 45 Xerox Income Stock Fund Fund Total - - 75,684,935 - - 545,084,537 - - 164,683,586 - - 250,008,494 65,089,362 - 65,089,362 - 121,786,262 121,786,262 65,089,362 121,786,262 1,222,337,176 46 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (3) Master Trust, Continued Net income from Master Trust Investments, net of administrative expenses for all participating plans for the year ended November 30, 1997: Small International Company Stock U.S. Stock Stock All Other Fund Fund Fund Fund Xerox Corporation Profit Sharing and Savings Plan* $ 11,837,221 48,109,839 31,337,175 146,126,025 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. 681,936 2,509,523 1,822,061 9,948,427 Xerox Corporation Retirement Income Guarantee Plan - - - 702,386,981 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. - - - 80,702,364 Total $ 12,519,157 50,619,362 33,159,236 939,163,797 * 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. 47 Xerox Income Stock Fund Fund Total 44,788,256 112,236,153 394,434,669 5,468,305 9,550,109 29,980,361 13,026,031 - 715,413,012 1,806,770 - 82,509,134 65,089,362 121,786,262 1,222,337,176 48 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (3) Master Trust, Continued Statement of Changes in Net Assets of the Master Trust for the year ended November 30, 1996 is as follows: Small International Company Stock U.S. Stock Stock All Other Pool Pool Pool Pool Additions: Transfers in $ 17,667,117 23,361,582 17,871,703 161,169,556 Investment earnings: Interest 1,758,465 7,472,177 5,385,918 77,829,819 Dividends 11,536,790 64,246,861 8,676,627 27,587,944 Net appreciation (depreciation) 189,455,864 268,707,939 133,179,213 203,226,626 Margin variation on futures contracts (40,828) 17,959,290 9,297,242 9,725,636 Other 552,365 101,265 216,690 2,267,517 Total investment earnings 203,262,656 358,487,532 156,755,690 320,637,542 Total additions 220,929,773 381,849,114 174,627,393 481,807,098 Deductions: Administrative expenses 6,299,902 2,155,352 3,106,127 13,317,170 Transfers out 6,804,169 6,451,303 5,727,577 325,123,111 Total deductions 13,104,071 8,606,655 8,833,704 338,440,281 Transfers between funds/pools (2,842,963) 154,196,486 28,035,998 (112,596,592) Net assets: Beginning of year 747,012,262 1,325,073,608 580,995,161 1,926,537,109 End of year $ 951,995,001 1,852,512,553 774,824,848 1,957,307,334 49 Xerox Segregated Income Stock Assets Fund Fund Fund Total (see note 4) 60,773,598 25,410,969 - 306,254,525 70,882,808 56,938 1,615,842 165,001,967 3 3,160,301 - 115,208,526 (2,182,375) 12,868,904 - 805,256,171 267,516 - - 37,208,856 92,908 5,553 - 3,236,298 69,060,860 16,091,696 1,615,842 1,125,911,818 129,834,458 41,502,665 1,615,842 1,432,166,343 1,907,429 112,269 - 26,898,249 135,023,860 11,624,843 - 490,754,863 136,931,289 11,737,112 - 517,653,112 (89,143,035) 25,234,997 (2,884,891) - 1,108,020,993 139,179,599 1,269,049 5,828,087,781 1,011,781,127 194,180,149 - 6,742,601,012 50 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: Small International Company Stock U.S. Stock Stock All Other Fund Fund Fund Fund International Stock Pool $ 25,038,377 - - 171,924,377 U.S. Stock Pool - 28,282,250 - 328,049,930 Small Company Stock Pool - - 23,630,507 130,019,056 All Other Pool - - - 307,320,372 Income Fund - - - - Xerox Stock Fund - - - - Total $ 25,038,377 28,282,250 23,630,507 937,313,735 51 Xerox Segregated Income Stock Asset Fund Fund Fund Total - - - 196,962,754 - - - 356,332,180 - - - 153,649,563 - - - 307,320,372 67,153,431 - 1,615,842 68,769,273 - 15,979,427 - 15,979,427 67,153,431 15,979,427 1,615,842 1,099,013,569 52 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (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: Small International Company Stock U.S. Stock Stock All Other Fund Fund Fund Fund Xerox Corporation Profit Sharing and Savings Plan* $ 23,752,671 26,986,737 22,517,556 136,097,648 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 Xerox Corporation Retirement Income Guarantee Plan - - - 710,218,766 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 XDS Investment Plan - - - 101,157 Total $ 25,038,377 28,282,250 23,630,507 937,313,735 * 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. 53 Xerox Segregated Income Stock Asset Fund Fund Fund Total 46,800,658 15,061,698 1,124,757 272,341,725 5,525,723 917,729 135,231 18,962,380 13,001,192 - 330,112 723,550,070 1,825,858 - 25,742 84,058,237 - - - 101,157 67,153,431 15,979,427 1,615,842 1,099,013,569 54 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (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 six 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. 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 one month period ended December 31, 1997 and the years ended November 30, 1997 and November 30, 1996 were 6.8%, 6.8% and 7.3%, respectively. (ii) The crediting interest rates at December 31, 1997, November 30, 1997 and November 30, 1996 ranged from 4.4% 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 December 31, 1997, November 30, 1997 and November 30, 1996 was approximately $274,344,245, $374,333,247 and $641,588,033, respectively. Contract values were $278,816,783, $375,936,203 and $634,202,724 at December 31, 1997, November 30, 1997 and November 30 1996, respectively. The Master Trust invests in real estate group 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 futures investments. 55 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (3) Master Trust, Continued 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 one month period ending December 31, 1997 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 $ (633,644) - - 1,121,169 636,761 - 1,124,286 Xerox common stock - - - - - (17,890,578) (17,890,578) Other equity investments 22,533,936 43,019,044 ( 16,962,885) 3,061,928 - - 51,652,023 Investments at estimated fair value: Interest in real estate trusts - - - 433,096 - - 433,096 Other investments - - - 882,736 - - 882,736 Total $ 21,900,292 43,019,044 (16,962,885) 5,498,929 636,761 (17,890,578) 36,201,563
56 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (3) Master Trust, Continued The net appreciation (depreciation) of investments for the year ended November 30, 1997 is as follows:
U.S. Small International Stock Company All Other Income Xerox Stock Pool Pool Stock Pool Pool Fund Stock Fund Total 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: Interest in real estate trusts - - - (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
57 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (3) Master Trust, Continued There are no investments in the Plan that represent 5% or more of Master Trust net assets. Other investments consist primarily of private placement limited partnerships. (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 in affected assets were transferred into a Segregated Assets Fund. Through November 30, 1996, the Xerox retirement and savings plans received $67.6 million in payments related to the ELIC investments. These payments represented 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. 58 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (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. At December 31, 1997, all accrued administrative expenses and interfund activity is recorded at both the Master Trust and Plan levels. Prior to December 31, 1997, this activity was accrued only at the Plan level. The total number of units and net asset value per unit outstanding from December 31, 1996 through December 31, 1997 were as follows: International Stock Fund U.S. Stock Fund Small Company Stock Fund Units Unit Units Unit Units Unit Outstanding Value Outstanding Value Outstanding Value 1996 December 31 90,563,566 $1.532938 84,859,388 $1.633287 79,486,842 $1.712923 1997 January 31 91,150,844 1.534505 85,893,585 1.730341 80,473,310 1.744382 February 28 94,025,972 1.553327 88,497,656 1.742577 83,858,153 1.692002 March 31 99,136,218 1.567248 96,133,238 1.660099 91,041,937 1.613780 April 30 100,422,099 1.579270 98,707,608 1.753541 93,217,757 1.609185 May 31 101,629,939 1.649894 99,339,876 1.868288 92,842,933 1.787189 June 30 102,618,758 1.720781 101,625,093 1.946789 92,963,998 1.875320 July 31 103,491,932 1.772593 104,087,145 2.110584 93,028,246 2.001355 August 31 104,231,978 1.663151 106,537,307 2.012423 93,690,113 2.028639 Sept. 30 104,171,429 1.782407 109,075,779 2.135018 94,826,934 2.176980 October 31 102,885,514 1.639303 110,452,534 2.065826 97,598,620 2.054848 Nov. 30 102,005,002 1.633471 111,278,329 2.145322 99,308,863 2.030057 Dec 31 95,447,037 1.668488 112,845,473 2.184082 98,744,501 2.013296 Balanced Fund Income Fund Xerox Stock Fund Units Unit Units Unit Units Unit Outstanding Value Outstanding Value Outstanding Value 1996 Dec 31 53,633,066 $14.093684 105,026,066 $6.524472 27,049,139 $7.308812 1997 January 31 53,698,376 14.470430 105,186,425 6.558457 27,006,027 8.145360 Feb 28 54,061,787 14.506426 103,755,361 6.586982 26,402,443 8.694382 March 31 55,945,191 14.137580 102,939,902 6.603786 27,057,319 7.956917 April 30 55,641,654 14.496758 101,687,690 6.648515 27,160,307 8.603987 May 31 55,621,901 15.218038 101,452,051 6.687458 27,192,122 9.481475 June 30 55,927,288 15.768765 99,702,645 6.730846 27,506,326 11.082058 July 31 55,994,477 16.591127 98,453,840 6.791030 27,643,047 11.577523 August 31 55,805,277 16.203908 96,060,680 6.809071 28,488,208 10.631119 Sept 30 55,844,090 16.994571 94,493,225 6.857353 28,923,301 11.894320 October 31 55,744,736 16.580802 93,522,930 6.905255 29,041,937 11.202250 Nov 30 55,470,643 16.747769 92,199,704 6.927294 29,195,255 10.964281 Dec 31 55,266,051 16.941002 91,236,509 6.972417 30,389,848 10.452765 59 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (5) Unit Values, Continued The total number of units and net asset value per unit outstanding during the year ended November 30, 1996 was as follows: International Stock Fund U.S. Stock Fund Small Company Stock Fund Units Unit Units Unit Units Unit Outstanding Value Outstanding Value Outstanding Value Dec 31 61,795,806 $1.247564 60,026,532 $1.340973 55,085,964 $1.351324 January 31 62,382,157 1.293327 61,949,688 1.384301 56,320,966 1.342293 Feb 29 65,714,223 1.305984 65,078,404 1.398004 57,683,878 1.399105 March 31 69,908,614 1.345844 71,016,923 1.410330 58,160,173 1.451021 April 30 76,839,969 1.380051 79,049,752 1.425851 62,190,910 1.547702 May 31 81,463,488 1.388665 81,502,643 1.457879 66,205,558 1.606726 June 30 84,965,509 1.403904 82,646,827 1.459497 72,117,763 1.547776 July 31 87,411,236 1.346170 83,539,982 1.387785 75,583,671 1.432424 August 31 88,046,503 1.376319 83,529,506 1.421710 76,828,681 1.527109 Sept 30 88,945,855 1.420495 83,029,325 1.508419 77,873,140 1.605861 October 31 90,193,238 1.436266 83,002,657 1.544068 77,837,161 1.606247 Nov 30 90,181,655 1.511053 83,361,927 1.664017 77,968,283 1.681941 Balanced Fund Income Fund Xerox Stock Fund Units Unit Units Unit Units Unit Outstanding Value Outstanding Value Outstanding Value Dec 31 51,224,934 $11.765868 124,318,691 $6.130939 21,394,017 $6.189449 January 31 51,462,675 12.002653 122,754,641 6.167616 21,814,069 5.599330 Feb 29 52,077,595 12.105990 121,118,697 6.185017 23,442,405 5.926790 March 31 52,443,617 12.315363 117,012,099 6.204795 23,942,955 5.703779 April 30 54,307,056 12.556639 117,123,296 6.229090 24,929,008 6.669084 May 31 54,419,516 12.757811 114,645,872 6.258788 24,844,135 7.166556 June 30 54,152,325 12.786097 111,463,002 6.299196 25,138,171 7.354894 July 31 54,133,948 12.344405 109,615,217 6.332220 25,291,962 6.928447 August 31 53,983,112 12.648546 108,953,692 6.366458 25,486,220 7.543459 Sept 30 53,949,993 13.201415 107,845,121 6.411511 25,708,519 7.415021 October 31 53,937,896 13.398674 107,656,305 6.461901 25,874,302 6.410834 Nov 30 53,767,635 14.089010 106,860,617 6.501211 26,550,199 6.766386 60 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Notes to Financial Statements, Continued (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: December 31, 1997 Net assets available for plan benefits as reported in the Plan financial statements 2,628,979,185 Benefit claims payable reported on line 31g of Form 5500 - Net assets available for plan benefits as reported in the Plan Form 5500 $2,628,979,185 December 31, 1997 Benefits paid to participants as reported in the Plan financial statements $ 6,848,357 Add: Amounts allocated to withdrawingparticipants at December 31 - Less: Amounts allocated to withdrawing participants at November 30, 1997 (5,022,493) Benefits paid to participants as reported in the Form 5500 $ 1,825,864 Amounts allocated to withdrawing participants are recorded on the Form 5500 for benefit claims that have been processed and approved for payment prior to December 31 but not yet paid as of that date. There were no benefits allocated from the Plan for participants at December 31, 1997. November 30, 1997 1996 Net assets available for plan benefits as reported in the Plan financial statements $2,554,122,781 2,095,287,041 Benefit claims payable reported on line 31g of Form 5500 (5,022,493) (2,077,252) Net assets available for plan benefits as reported in the Plan Form 5500 $2,549,100,288 2,093,209,789 November 30, 1997 1996 Benefits paid to participants as reported in the Plan financial statements $ 119,413,141 106,706,712 Add: Amounts allocated to withdrawingparticipants at November 30 5,022,493 2,077,252 Less: Amounts allocated to withdrawing participants at November 30, 1997 and 1996, respectively (2,077,252) (3,525,402) Benefits paid to participants as reported in the Form 5500 $ 122,358,382 105,258,562 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. (7) 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. Schedule 1 61 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Line 27a - Schedule of Assets Held for Investment Purposes December 31, 1997 Description of investment including Identity of issuer, maturity date, rate of borrower,lessor, interest, collateral, Current or similar party par or maturity value Cost value Investment in Master Trust (1) $2,062,225,164 $2,496,304,393 *Investment in Participant Loans to Plan Loans Receivable participants, maturity dates through 5/31/11, interest rates from 8.0% to 11.5% per annum - 66,182,431 * Party-in-interest (1) See note 3. Schedule 2 62 XEROX CORPORATION PROFIT SHARING AND SAVINGS PLAN Line 27a - Schedule of Assets Held for Investment Purposes November 30, 1997 Description of investment including Identity of issuer, maturity date, rate of borrower,lessor, interest, collateral, Current or similar party par or maturity value Cost value Investment in Master Trust (1) $2,062,242,673 $2,490,730,665 *Investment in Participant Loans to Plan Loans Receivable participants, maturity dates through 5/31/11, interest rates from 8.0% to 11.5% per annum - 64,417,177 * Party-in-interest (1) See note 3. Independent Auditors' Report The Plan Administrator and Participants 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 December 31, 1997 and November 30, 1997 and 1996, and the related statements of changes in net assets available for plan benefits for the one month period ended December 31, 1997 and the years ended November 30, 1997 and November 30, 1996. 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 December 31, 1997, and November 30, 1997 and 1996, and the changes in net assets available for plan benefits for the one month period ended December 31, 1997 and the years ended November 30, 1997 and 1996 in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets held for investment purposes at December 31, 1997 and November 30, 1997 are presented for the purpose of additional analysis and are not a required part of the basic financial statements, but are 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 schedules 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. April 30, 1998 EXHIBIT INDEX Electronic Submission Exhibit Document (b)(1) Accountants' Consent 2 EX-23 2 EXHIBIT (B)(1) 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, 1998, relating to the statement of net assets available for plan benefits of the Xerox Corporation Profit Sharing and Savings Plan as of December 31, 1997 and November 30, 1997 and 1996, and the related statements of changes in net assets available for plan benefits for the one month period ended December 31, 1997 and for the years ended November 30, 1997 and 1996 and related schedule, which report appears in the November 30, 1997 Annual Report on Form 11-K of the Xerox Corporation Profit Sharing and Savings Plan. Rochester, New York May 29, 1998 -----END PRIVACY-ENHANCED MESSAGE-----