FORM 10-K
                      SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C.  20549
(Mark One)
(X)  Annual Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934   For the fiscal year ended:  December 31, 1996 

( )  Transition Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934   For the transition period from: ______ to ______
 
                              XEROX CORPORATION
            (Exact name of registrant as specified in its charter)
 
                                    1-4471
                           (Commission file number)
 
New York                                                            16-0468020
(State of incorporation)                  (I.R.S. Employer Identification No.)

P.O. Box 1600, Stamford, Connecticut                                     06904
(Address of principal executive offices)                            (Zip Code)

       Registrant's telephone number, including area code: (203) 968-3000
 
          Securities registered pursuant to Section 12(b) of the Act:
 
                                                       Name of Each Exchange
Title of Each Class                                    on Which Registered

Common Stock, $1 par value                             New York Stock Exchange
                                                       Chicago Stock Exchange


       Securities registered pursuant to Section 12(g) of the Act:  None
 
Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days.
                                                       Yes: (X)  No: (  )
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 
of Regulation S-K is not contained herein, and will not be contained, to the 
best of registrant's knowledge, in definitive proxy or information statements 
incorporated by reference in Part III of this Form 10-K or any amendment to 
this Form 10-K.
                                                            ( )

The aggregate market value of the voting stock of the registrant held by non-
affiliates as of February 28, 1997 was:                $21,775,109,185.


                            (Cover Page Continued)


Indicate the number of shares outstanding of each of the registrant's classes 
of common stock, as of the latest practicable date:
 
Class                                         Outstanding at February 28, 1997

Common Stock, $1 Par Value                                  324,016,042 Shares


                      Documents Incorporated By Reference
 
Portions of the following documents are incorporated herein by reference:
 
                                                       Part of 10-K in
Document                                               Which Incorporated

Xerox Corporation 1996 Annual Report to Shareholders          I & II

Xerox Corporation Notice of 1997 Annual Meeting of           III & IV
Shareholders and Proxy Statement (to be filed not 
later than 120 days after the close of the fiscal 
year covered by this report on Form 10-K).


This Form 10-K contains certain forward-looking statements and information 
relating to the Company that are based on the beliefs of management as well as 
assumptions made by and information currently available to management.  The 
words "anticipate," "believe," "estimate," "expect," "intends" and similar 
expressions, as they relate to the Company or the Company's management, are 
intended to identify forward-looking statements.  Such statements reflect the 
current views of the Company with respect to future events and are subject to 
certain risks, uncertainties and assumptions.  Should one or more of these 
risks or uncertainties materialize, or should underlying assumptions prove 
incorrect, actual results may vary materially from those described herein as 
anticipated, believed, estimated or expected.  The Company does not intend to 
update these forward-looking statements.


                                    PART I

Item 1. Business

Overview

Xerox Corporation (Xerox or the Company) is The Document Company and a leader 
in the global document market, providing document solutions that enhance 
business productivity.  References herein to "us" or "our" refer to Xerox and 
consolidated subsidiaries unless the context specifically requires otherwise.  
We distribute our products in the Western Hemisphere through divisions and 
wholly-owned subsidiaries. In Europe, Africa, the Middle East and parts of 
Asia including Hong Kong, India and China, we distribute through Rank Xerox 
Limited and related companies (Rank Xerox) in which we have an 80 percent 
financial interest and The Rank Group Plc (Rank Group) has a 20 percent 
financial interest. In Japan and other areas of the Pacific Rim, Australia and 
New Zealand, document processing products are distributed by Fuji Xerox Co. 
Ltd. (Fuji Xerox), an unconsolidated joint venture, which is equally owned by 
Fuji Photo Film Company, Ltd. of Japan and Rank Xerox.  On February 28, 1995, 
we paid Rank Group 620 million pounds sterling, or $972 million, to increase 
our financial interest in Rank Xerox to 80 percent from 67 percent.

Beginning in 1995, the results of our Insurance operations were accounted for 
as discontinued operations. The Document Processing business is now the only 
component of continuing operations.

Our Document Processing activities encompass developing, manufacturing, 
marketing, servicing and financing a complete range of document processing 
products and services designed to make offices around the world more 
productive.  We believe that documents will play a central role in business, 
government, education and other organizations far into the future and that 
efficient processing of documents offers significant opportunities for 
productivity improvements.  The financing of Xerox equipment is generally 
carried out by Xerox Credit Corporation (XCC) in the United States and 
internationally by foreign financing subsidiaries and divisions in most 
countries in which we operate.  Document Processing operations employed 86,700 
people worldwide at year-end 1996.

In 1993, we announced a worldwide Document Processing restructuring program to 
significantly reduce our cost base and to improve productivity. The activities 
associated with this program have reduced employment by 14,000. We have 
achieved our restructuring program objectives with pre-tax cost reductions of 
approximately $350 million in 1994, $650 million in 1995 and $770 million in 
1996. A portion of the savings is being reinvested to reengineer business 
processes, to support the expansion in growth markets and to mitigate pricing 
pressures.

Continuing Operations - Document Processing

The Document Processing Strategy

We believe that documents represent the knowledge base of an organization and 
will play a dynamic and central role in business, government, education and 
other organizations far into the future:

- -  Increasingly, documents are being created and stored in digital electronic 
form.

- -  The use of electronically created paper documents will continue to 
increase.

As The Document Company, we believe that by helping our customers navigate and 
manage the world of documents, we can help them improve their productivity and 
grow their businesses.  We help customers make documents better, make better 
documents, and work better with documents.

We create customer value by providing innovative document technologies, 
products, systems, services and solutions that allow our customers to:

- -  Move easily within and between the electronic and paper forms of documents.

- -  Scan, store, retrieve, view, revise and distribute documents electronically 
anywhere in the world.

- -  Print or publish documents on demand, at the point closest to the need, 
including those locations of our customers' customers.

- -  Integrate the currently separate modes of producing documents, such as the 
data center, production publishing and office environments into a seamless, 
user-friendly enterprise-wide document systems network - with technology 
acting as an enabler.

We have formed alliances to bring together the diverse infrastructures that 
currently exist and to nurture the development of an open document services 
environment to support complementary products from our partners and customers.  
We are working with more than 50 industry organizations to make office, 
production and electronic printing an integrated, seamless part of today's 
digital work place.

Market Overview

We estimate that the global document market that we serve, excluding Japan and 
the Pacific Rim countries served by Fuji Xerox, was over $100 billion in 1996 
and is estimated to grow to about $175 billion in 2000.

We have traditionally had a strong position in the general office document 
market, which is expected to grow at 7 percent per year, or about two to three 
times real economic growth. The remaining production systems market segments, 
which include production publishing and production printing, are expected to 
grow at a substantially higher rate.  With our many new product introductions 
during this decade, our participation in the global document market has been 
considerably broadened and is expected to increase.  This growth will be 
driven by the transfer of document production from offset printing to digital 
publishing, the increase in customer requirements for network and distributed 
printing, and the accelerating demand for color documents.

Xerox Focus

We believe that our competitive advantages lie in our ability to continually 
improve the features and performance of our products and services based on 
demonstrated customer needs; competitive pricing; our excellent reputation for 
performance and service; our substantial on-going investment in research and 
development; expanded sales coverage through our direct sales force, agents 
and retail chains; our leadership position in the rapidly growing document 
outsourcing business; maintenance of our strong market position in emerging 
markets; and an expanded presence in the burgeoning home office market.  As a 
result, we believe we are well positioned to participate fully in the 
anticipated growth in the market segments in which we compete.

Digital Products

Our digital products fall into four categories: black-and-white production 
publishing, black-and-white laser printing, color laser copying and printing, 
and black-and-white digital office systems.

Production Publishing

The era of production publishing was launched in 1990 when we announced the 
DocuTech family which was a major step beyond our traditional reprographics 
market into the publishing industry. We estimate that the black-and-white 
digital production publishing market was $2 billion in 1996 and is estimated 
to grow to over $4 billion in 2000.  Having installed to date more than 14,000 
systems all over the world, our production publishing revenues in 1996 were 
$1.8 billion.

Digital production publishing technology is increasingly replacing older, 
traditional short-run offset printing as customers seek improved productivity 
and cost savings, faster turnaround of document preparation, and the ability 
to print documents "on demand."  We offer the widest range of solutions 
available in the marketplace - from dial-up lines through the Internet to 
state-of-the-art networks - and we are committed to expanding these print-on-
demand solutions as new technology and applications are developed. 

The DocuTech family of digital publishers scans hard copy and converts it into 
digital documents, or accepts digital documents directly from networked 
personal computers or workstations.  A user-friendly electronic cut-and-paste 
workstation allows the manipulation of images or the creation of new 
documents.  For example, in only a few minutes, a page of word-processed text, 
received over a network, can be combined with a photograph scanned from hard 
copy and enhanced electronically:  cropped, positioned precisely, rotated, 
brightened or sharpened.  Digital masters can be prepared in a fraction of the 
time necessary to prepare offset plates, thereby allowing fast turnaround 
time.  Further time can be saved, and frequently significant shipping costs, 
by transmitting electronically and printing where the documents are required.

DocuTech prints high-resolution (600 dots per inch) pages at up to 135 
impressions per minute.  The in-line finisher staples completed sets or 
finishes booklets with covers and thermal-adhesive bindings.  Because the 
finished document can be stored as a digital document, hard copy documents can 
be printed on demand, or only as required, thus avoiding the long production 
runs and high storage and obsolescence costs associated with offset printing.  
The concept of print-on-demand took another major step in 1995 when we 
introduced the 6135 Production Publisher.  It makes print-for-one publishing 
practical; personalized publishing runs can now be as short as one or two 
prints.

Laser Printing

We estimate that the high-end black-and-white laser printing market was over 
$6 billion in 1996 and is expected to grow to about $10 billion in 2000. Our 
revenues from high-end black-and-white laser printers grew 7 percent in 1996 
to $2.1 billion.

This market has largely consisted of high-end host-connected printers and low-
end desktop printers.  We expect significant future growth for robust, fully 
featured printers serving multiple users on networks.  This growth will be 
driven by the increase in personal computers and workstations on networks, 
client-server processing, accelerating growth in the demand for enterprise-
wide distributed printing, and declining electronics costs.  These faster, 
more reliable printers will print collated multiple sets on both sides of the 
paper, insert covers and tabs, and staple or bind; but without the labor-
intensive steps of printing an original and manually preparing the documents 
on copiers.  In addition, documents can be printed on these printers from 
remote data center computers, enabling the efficiencies of distributing 
electronically and then printing, rather than printing paper documents and 
then distributing them.

We have had a strong position in the high-end, high-volume electronic printing 
market segment since 1977.  We are well positioned to capitalize on the growth 
in the electronic printing market because of both our innovative technologies 
and our understanding of customer requirements for distributed printing from 
desktop and host computers.  Our goal is to integrate office, production and 
data-center electronic printing into a single, seamless, user-friendly 
network. 

Xerox pioneered and continues to be a worldwide leader in electronic laser 
printing, which combines computer, laser, communications and xerographic 
technologies.  We market a broad line of robust printers with speeds that 
range from five pages per minute to the industry's fastest cut-sheet printer 
at 135 pages per minute, and continuous-feed production printers at speeds up 
to 420 pages per minute.  Many of these printers have simultaneous interfaces 
that can be connected to multiple host computers as well as local area 
networks.

Breakthrough technology allows printing, in a single pass through our  
highlight color printers, black-and-white plus one customer-changeable color 
(as well as shades, textures and mixtures of each) at production speeds up to 
92 pages per minute.  Other manufacturers' highlight color printers require 
additional passes to add variable color, which increase cost, reduce speed and 
reliability and introduce the possibility of color misalignment.

Productivity-enhancing features include printing collated multiple sets on 
both sides of the paper, inserting covers and tabs, printing checks with 
magnetic ink character recognition (MICR), and stapling; all on cut sheet 
plain paper, with sizes up to 11 by 17 inches.

During 1995, we significantly expanded our opportunities with the introduction 
of two major new printer series that will redefine our role in the electronic 
production printing industry.  With the DocuPrint CF Series family, we entered 
the market for very high-volume, continuous-feed printers at speeds up to 420 
pages per minute.  The new DocuPrint IPS Series makes the IBM Advanced 
Function Presentation (AFP) architecture directly available to our production 
printing customers.

Color Laser Copying and Printing

We estimate that the color laser copying and printing market was $5 billion in 
1996 and is expected to grow to $14 billion in 2000. Our revenues from color 
laser copiers and printers grew 59 percent in 1996 to almost $1 billion.

The use of color originals in the office is accelerating. Independent studies 
have concluded that color documents are more effective in communicating 
information and that decision-maker performance improves with the use of color 
documents. The vast majority of industry shipments of workstations and 
personal computers have color monitors, creating the need for economical, 
convenient and reliable, high-quality color copying and printing. 

The color market has largely consisted of ink-jet and laser copiers and 
printers.  Ink-jet technology offers very low equipment cost but is slow and 
lacks the image quality that most customers require for important documents 
such as presentations and proposals. Laser copiers and printers offer near-
offset image quality, excellent running speeds, and the accessories necessary 
to produce finished sets.

We entered the color laser market in 1991 with the introduction of the Xerox 
5775 color copier/printer and the 4700 printer, both of which print full-color 
at 7.5 pages per minute. We have since expanded the product line with the 4900 
color laser printer, which prints full color at three pages per minute; the 
MajestiK color copier/printer series, which print full color at 6 pages per 
minute; the XPrint family of networked desktop color laser printers, which 
print at resolutions up to 600 x 600 dots per inch; and the Regal color 
copier/printer, which prints full color at 9 pages per minute.

The DocuColor 40, which was introduced in early 1996, copies and prints at 40 
full-color pages per minute and is the industry's fastest and most affordable 
digital color document production system. In less than a full year, the 
DocuColor 40 achieved a market share of approximately two-thirds of the 
installations for the total production color industry and 50 percent of the 
installed population of production color products.

Digital Office Systems

The volume of paper documents used in the office continues to grow.  Pages per 
worker per day in the US have doubled in the last decade and productivity has 
been impaired by the need to manage documents on computer monitors and as 
hard-copy originals.

We intend to help customers improve productivity by controlling their 
documents from a common interface; managing from the desktop; eliminating 
gaps, steps and devices in the work process; and moving smoothly from digital 
to paper and back.

Our strategy is, first, to build from our current strength, the copier.  We 
know how to design and build them with superior marking, paper handling and 
finishing technology.  We know our customers, their requirements and how to 
sell to them.  During 1997, we are introducing new stand-alone digital copiers 
that will have all the features of our traditional light lens copiers, plus 
many advantages, including improved image quality, faster scanning, fewer 
controls and significantly reduced downtime.  These digital copiers will sell 
for a modest premium over light lens copiers.

Second, we will upgrade these copiers to digital office systems and connect 
them to local and wide-area networks, as customers require, to gain 
incremental volume from computer printing and ultimately to replace desktop 
printers and single purpose copiers and faxes.  The upgrades will have 
compelling economics versus the alternative of purchasing comparable printers 
and faxes.

We estimate that the digital copier and digital office systems market was over 
$1 billion in 1996 and is estimated to grow to $14 billion in 2000.  In 1996, 
we entered the market for digital copiers and digital office systems on a 
limited basis and our revenues were almost $100 million.

Our digital office systems, known as Document Centre Systems, were introduced 
in late 1995 and bring production publishing productivity to the office.  This 
new category of robust and extensible systems combines many capabilities - 
printing, scanning, faxing and copying documents - into a single digital 
resource that can be accessed from either a personal computer or on a walk-up 
basis.  With interactive software, a user can easily control the various steps 
of the document cycle - document input, management and output - from the 
desktop.  The seamless integration of services and interoperability will bring 
new levels of efficiency to the office.  These new systems are a portal to the 
network and allow office workers to navigate between digital and paper 
documents, share information and knowledge, and collaborate with other members 
of their work groups.  The multi-tasking architecture allows Document Centre 
Systems to perform multiple functions concurrently.

The two initial models in the Document Centre product family are equipped with 
integrated scanners for digital copying and printing services, accessible 
either from the PC desktop or from the user interface on the devices 
themselves.  The Document Centre System 35 is designed for work groups of up 
to 50 people, and copies and prints at 35 pages per minute with resolutions of 
up to 600 by 2,400 dots per inch. It provides two-sided printing and several 
document finishing options.  The Document Centre System 20 is targeted for 
work groups of up to 20 people, and copies and prints at 20 pages per minute 
with 400 dots per inch resolution.  Fax services, from the desktop or at the 
device, are standard. 

Light Lens Copying

We estimate that the market for light lens copying was approximately $33 
billion in 1996 and that it will decline to $28 billion in 2000. Our revenues 
from light lens copiers declined 1 percent in 1996 to over $9.7 billion.

We market the broadest line of light lens copiers and duplicators in the 
industry, ranging from a three copies-per-minute personal copier to a 135 
copies-per-minute fully-featured duplicator to special copiers designed for 
large engineering and architectural drawings up to 3 feet by 4 feet in size.  
Many of our state-of-the-art products have improved ease of use, reliability, 
copy quality, job recovery and ergonomics as well as productivity-enhancing 
features, including zoom enlargement and reduction, highlight color, copying 
on both sides of the paper, and collating and stapling which allow the 
preparation of completed document sets.

We have a strong position with major accounts who demand a consistently high 
level of service worldwide.  Our competitive advantages include a focus on 
customer call response times, diagnostic equipment that is state-of-the-art 
and availability of 24-hour-a-day, seven-day-a-week service.

We also are increasing our leadership position in small commercial accounts, 
the most competitive copier market segment, through marketing programs such as 
sales through independent agents, retail outlets and trade associations like 
the American Medical Association, which represents more than two million 
current and prospective customers.

The market for commercial copiers is expanding rapidly in emerging countries 
in Latin America, Eastern Europe, the Commonwealth of Independent States 
(formerly the Soviet Union), Africa, China and India.  Although 1996 revenue 
growth slowed because of difficult economic environments, all of these markets 
grew faster than the growth in the developed markets over the past five years.

Although we expect that light lens copiers will increasingly be replaced by 
digital copiers and Document Centre Systems, we intend to continually upgrade 
our light lens products to maintain a leadership position in the industry.

Other Products

We also offer a wide range of other document processing products including 
ink-jet and electrostatic printers, multifunction products, facsimile 
products, scanners, personal computer and workstation software, and integrated 
systems solutions.

We also sell cut-sheet paper to our customers for use in their Document 
Processing products.

Summary of Revenues by Product Category

The following table summarizes our revenues by major product category.  The 
revenues for light lens copiers and digital products include equipment and 
supply sales, service and rental revenues, and finance income.  These revenues 
exclude the impact of foreign currency exchange rate fluctuations which are 
shown combined with the revenues from paper and other products.

     Year ended December 31 (in billions)   1996       1995       1994
     Light lens copiers                    $ 9.7      $ 9.8      $ 9.7
     Digital products                        5.3        4.3        3.7
     Paper, other products, currency         2.4        2.5        1.7
       Total revenues                      $17.4      $16.6      $15.1

Xerox Competitive Advantages

Customer Satisfaction

Our highest priority is customer satisfaction.  Our research shows that 
satisfied customers are far more likely to repurchase products and that the 
cost of selling a replacement product to a satisfied customer is far less than 
selling to a "new" customer.  We regularly survey customers on their 
satisfaction, measure the results, analyze the root causes of dissatisfaction, 
and take steps to correct any problems.

Because of our emphasis on customer satisfaction, we offer a Total 
Satisfaction Guarantee, one of the simplest and most comprehensive offered in 
any industry:  "If you are not satisfied with our equipment, we will replace 
it without charge with an identical model or a machine with comparable 
features and capabilities."  This guarantee applies for at least three years 
to equipment acquired from and continuously maintained by Xerox or its 
authorized agents.

Quality

We were an early pioneer in total quality management and are the only company 
to have won all three of the following prestigious quality awards:  the 
Malcolm Baldrige National Quality Award in the United States in 1989, the 
European Quality Award in 1992 and the Deming Prize in Japan, won by Fuji 
Xerox in 1980.  In addition, we have won top quality awards in Argentina, 
Australia, Belgium, Brazil, Canada, China (Shanghai), Colombia, France, 
Germany, Hong Kong, India, Ireland, Mexico, the Netherlands, Norway, Portugal, 
the United Kingdom, and Uruguay. Our "Leadership Through Quality" program has 
enabled us to improve productivity, accelerate the introduction of new 
products, improve customer satisfaction and increase market share.  Xerox 
products have been consistently rated among the world's best by independent 
testing organizations.

Research and Development

The Xerox research and development (R&D) program is directed toward the 
development of new products and capabilities in support of our document 
processing strategy.  Our research scientists are deeply involved in the 
formulation of corporate strategy and key business decisions.  They regularly 
meet with customers and have dialogues with our business divisions to ensure 
they understand customer requirements and are focused on products that can be 
commercialized.

In 1996, R&D expense was $1,044 million compared with $949 million in 1995 and 
$895 million in 1994. We expect to increase our investment in technological 
development in 1997 and over the longer term to maintain our premier position 
in the rapidly changing document processing market.  Our R&D spending is 
strategically coordinated with Fuji Xerox. The R&D investment by Fuji Xerox 
was $537 million in 1996, bringing the total to $1.6 billion.

Marketing

Xerox document processing products are principally sold directly to users by 
our worldwide sales force of approximately 13,000 employees.  We also market 
through a network of independent agents, dealers, distributors and value-added 
resellers and have arrangements with U.S. retail marketing channels, including 
Sears, Office Depot, Office Max, Service Merchandise, Staples, Wal-Mart, 
Costco, The Wiz, Price Club and MicroAge, to market low-end products not 
generally suited for distribution through our direct sales force.  These 
products are now sold through approximately 3,000 retail stores.

In 1991, Xerox International Partners (XIP), a 51 percent-owned partnership, 
was formed between Xerox and Fuji Xerox to supply printer engines to original 
equipment manufacturers.  XIP has also contracted to supply printer engines to 
resellers.

Service

We have a worldwide service force of approximately 25,000 employees.  In our 
opinion, this direct service force is a significant competitive advantage:  
the service force is continually trained on our new products and its 
diagnostic equipment is state-of-the-art.   24-hour-a-day, seven-day-a-week 
service is available in most metropolitan areas in the United States.  We are 
able to guarantee a consistent level of service nationwide and worldwide 
because our service force is not focused exclusively on metropolitan areas and 
it does not rely on independent local dealers for service.

Revenues

Our total document processing revenues were $17.4 billion in 1996, of which 49 
percent were generated in the United States, 31 percent in Europe, and 20 
percent in the remainder of the world (excluding the unconsolidated $8.1 
billion of Fuji Xerox revenues in Japan and much of the Pacific Rim).

Revenues from supplies, paper, service, rentals, facilities management and 
other revenues, and income from customer financing represented 66 percent of 
total revenues in 1996.  Because these revenues are derived from the installed 
base of equipment and are therefore less volatile than equipment sales 
revenues, they provide significant stability to overall revenues.  Growth in 
these revenues is primarily a function of the growth in our installed 
population of equipment, usage and pricing. The balance of our revenues is 
derived from equipment sales.  These sales, which drive the non-equipment 
revenues, depend on the flow of new products and are more affected by economic 
cycles.

Most of our customers have their equipment serviced by and use supplies sold 
by us.  The market for cut-sheet paper is highly competitive and revenue 
growth is significantly affected by pricing.  Our strategy is to charge a 
spread over mill wholesale prices.  After a number of years of decline, rental 
revenues were essentially flat during 1996, 1995, and 1994.

Our document outsourcing business provides printing, publishing, duplicating 
and related services at more than 4,000 customer locations in 36 countries, 
including legal and accounting firms, financial institutions, insurance 
agencies and manufacturing companies.  Our revenues from these services, which 
are largely in the U.S., increased 39 percent to $1.3 billion in 1996.

We offer our document processing customers financing of their purchases of 
Xerox equipment primarily through XCC in the United States, largely by wholly-
owned financing subsidiaries in Europe, and through divisions in Canada and 
Latin America.

While competition for this business from banks and other finance companies 
remains extensive, we actively market our equipment financing services on the 
basis of customer service, convenience and competitive rates.  Approximately 
80 percent of U.S. equipment sales and 75 percent of European equipment sales 
are financed through Xerox.  Over time, the growth rate of financing income is 
expected to correspond to the growth rate of equipment sales and trends in 
interest rates.

International Operations

Our international operations account for 51 percent of Document Processing 
revenues.  Our largest interest outside the United States is Rank Xerox.  
Marketing and manufacturing operations are also conducted through joint 
ventures in India and China.  Marketing and manufacturing in the Americas 
Customer Operations organization are conducted through subsidiaries or 
distributors in 40 countries. Fuji Xerox develops, manufactures and 
distributes document processing products in Japan and other areas of the 
Pacific Rim, Australia and New Zealand.

Our financial results by geographical area for 1996, 1995 and 1994, which are 
presented on pages 29, 30, and 52 of the Company's 1996 Annual Report to 
Shareholders, are hereby incorporated by reference in this document in partial 
answer to this item.

Discontinued Operations - Insurance and Other Financial Services

The discussion in the first thirteen paragraphs under the caption 
"Discontinued Operations - Insurance and Other Financial Services" on pages 43 
through 45 and under the captions "Other Financial Services" and "Third-Party 
Financing and Real-Estate" on page 47 set forth under the caption "Financial 
Review" in the Company's 1996 Annual Report to Shareholders is hereby 
incorporated by reference in this document in partial answer to this item.

As used herein, the "Remaining insurance companies" include Coregis Group, 
Inc., Crum & Forster Holdings, Inc., Industrial Indemnity Holdings, Inc., 
Westchester Specialty Group, Inc., and The Resolution Group, Inc. ("TRG").

Property and Casualty Reserves

Overview

Losses from claims and related claims handling and legal expense comprise the 
majority of costs from providing insurance products.  Therefore, unpaid losses 
and loss expenses are generally the largest liability on a property and 
casualty insurer's balance sheet.  However, because insurance coverage is 
provided for situations in which the certainty of loss cannot be predicted, 
ultimate losses which will be incurred on policies issued are difficult to 
estimate and are subject to constant reevaluation as new information becomes 
available.  The Remaining insurance companies, like most insurance companies 
utilize a variety of loss trending and analysis techniques to estimate 
anticipated ultimate losses and the time frames when claims are likely to be 
reported and paid.  Loss development patterns vary significantly by type of 
insurance coverage and are affected by the economic, social, judicial, 
weather-related and geological conditions in different geographic areas.

In order to moderate the potential impact of unusually severe or frequent 
losses, the Remaining insurance companies cede (i.e., transfer) through 
reinsurance mechanisms a portion of their gross policy premiums to reinsurers 
in exchange for the reinsurer's agreement to share a portion of the covered 
losses.  Although the ceding of insurance does not discharge the original 
insurer from its primary liability to its policyholder, the reinsurer that 
accepts the risk assumes an obligation to the original insurer.  The ceding 
insurer retains a contingent liability with respect to reinsurance ceded to 
the extent that the reinsurer might not be able to meet its obligations.

The net liability retained by the Remaining insurance companies on individual 
risks varies by product and by the nature of the risk.  Insured liabilities 
can be reinsured either by treaty, wherein reinsurers agree in advance to 
provide coverage above retained limits or for a specified percentage of losses 
attributable to specific products, or by facultative arrangements, wherein 
reinsurance is provided for individual risks based on individual negotiations.

Reserve provisions are established by the Remaining insurance companies to 
provide for the estimated level of claim payments which will be made under the 
policies they write.  Over the policy period, as premiums are earned, a 
portion of the premiums is set aside as gross loss and loss expense reserves 
for incurred but not reported ("IBNR") losses in anticipation of claims which 
will be incurred, net of anticipated salvage and subrogation.  IBNR reserves 
also include amounts to supplement case reserves, when established, to provide 
for potential further loss development.  In addition, gross reserves are 
established for internal and external loss expenses  associated with handling 
the claims inventory.  These expenses are characterized as "allocated loss 
expenses" when they are attributable to a specific claim or series of claims 
and "unallocated loss expenses" when not similarly attributable.  When a claim 
is reported, case reserves are established on the basis of all pertinent 
information available at the time.  Legal defense costs that can be assigned 
to a related claim file and can be included as part of the loss under the 
contract are generally established as part of the gross case reserve.  
Reinsurance recoverables on gross reserves are recorded for amounts that are 
anticipated to be recovered from reinsurers and are determined in a manner 
consistent with the liabilities associated with the reinsured policies.  Net 
reserves are gross reserves less anticipated reinsurance recoverables (net of 
uncollectible reinsurance reserves)and salvage and subrogation on those 
reserves.

The effect of inflation on gross reserves is considered implicitly through 
utilization of historical paid loss and loss expense development when 
estimating the liability for unpaid losses and loss expenses by using 
actuarial methods.  The effect of inflation on individual case basis reserves 
reflects the direction of economic price levels. 

Estimates of the ultimate value of unpaid claims are based in part on 
historical data that reflect past inflation, as well as management's 
assessment of severity and frequency, industry trends and related costs.

Monitoring of Insurance Reserves

Gross and net reserves for business written in both current and prior years is 
continually monitored by the Remaining insurance companies, and senior 
management of Talegen Holdings, Inc. ("Talegen") reviews these reserves on a 
periodic basis.  Each of the Remaining insurance companies employs experienced 
actuarial staff, who as fellows of the Casualty Actuarial Society and members 
of the American Academy of Actuaries, are qualified loss reserve specialists 
who perform regular actuarial reviews of claim development and resulting 
reserve requirements.  On a semi-annual or more frequent basis, detailed 
analyses of gross reserves, ceded reserves and reserves net of reinsurance are 
conducted by line of business and accident year.  Actual claims activity is 
monitored quarterly and compared to expected levels to detect variances or 
trends indicating changes in reserve requirements.  When unique or special 
reserve issues are identified, the Remaining insurance companies and/or 
Talegen routinely seek additional outside expertise from a variety of 
consulting actuaries.  In addition, at year end, the reserves for each of the 
Remaining insurance companies are independently analyzed and certified by an 
outside actuary appointed by the Remaining insurance company's Board of 
Directors.

Overall reserve levels are affected by the types of and amounts of insurance 
coverage currently being written and the trends developing from newly reported 
claims and claims which have been paid and closed.  Adjustments are made to 
reserves in the period they can be reasonably estimated to reflect evolving 
changes in loss development patterns and various other factors.  Such factors 
include increased damage awards by the courts, known changes in judicial 
interpretations of legal liability for asbestos, environmental and other 
latent exposure claims and changes in judicial interpretation of the scope of 
coverage provided by general liability and umbrella policies.  Many of these 
judicial interpretations are still evolving.  Generally, the greater the 
projected time to settlement, the greater the complexity of estimating 
ultimate claim costs and the more likely that such estimates will change as 
new information becomes available.



Use of Reinsurance and Management of Reinsurance Collection

Most of the Remaining insurance companies made significant use of reinsurance 
during the 1970's and early 1980's.  Since that time, the Remaining insurance 
companies have generally increased the portion of business they retain while 
reducing the number of reinsurers used for their reinsurance contracts. During 
1996 and 1995, excluding the reinsurance ceded to pools, associations and 
similar organizations, 88% and 85%, respectively, of total written premiums 
ceded to reinsurers were placed with approximately 35 reinsurers.

Talegen and the Remaining insurance companies have reinsurance security 
committees composed of senior management who approve those reinsurers with 
whom Talegen and the Remaining insurance companies will do business. The 
criteria under which such approvals are granted have become increasingly 
restrictive over the past several years.

The potential uncollectibility of ceded reinsurance has been an industry-wide 
issue.  With respect to the management of recoveries due from reinsurers, the 
Remaining insurance companies operate under common guidelines for the early 
identification of potential collection problems and they utilize the services 
of the Resolution Reinsurance Service Company (a subsidiary of TRG) which 
employs  a specialized group of work-out experts  to aid in the more 
complicated cases.  This unit aggressively pursues collection of reinsurance 
recoverables through mediation, arbitration and, where necessary, litigation 
to enforce the Remaining insurance companies contractual rights against 
reinsurers.  Nevertheless, periodically, it becomes necessary for management 
to adjust reserves for potential losses to reflect their ongoing evaluation of 
developments which affect recoverability, including the financial difficulties 
that some reinsurers can experience.  Based upon the review of financial 
condition and assessment of other available information, the Remaining 
insurance companies maintain a provision for uncollectible amounts due from 
reinsurers.  The balance of reinsurance recoverable is considered to be valid 
and collectible.

Ridge Re Coverage

Under the terms of the reinsurance coverage provided by Ridge Reinsurance 
Limited ("Ridge Re") and subject to the limits established for each of the 
Remaining insurance companies, Ridge Re will reimburse the Remaining insurance 
companies for 85% of net aggregate increases, if any, to ultimate net unpaid 
loss and loss expenses and uncollectible reinsurance reserves which develop on 
its 1992 and prior accident years as carried at December 31, 1992 (net of all 
salvage, subrogation and other recoverables).  At December 31, 1996, Ridge Re 
recognized approximately $650 million of the $1,245 million excess of loss 
reinsurance coverage estimated to be required based on actuarial projections.  
The Ridge Re coverage is guaranteed by Xerox Financial Services, Inc., and, 
subject to certain commutation provisions, remains in effect until all 1992 
and prior accident year claims are paid.  Cessions to Ridge Re, while 
beneficial to the Remaining insurance companies, do not result in a benefit to 
the Insurance segment or consolidated Xerox accounts.

Statutory and GAAP Reporting of Net Unpaid Losses and Loss Expenses

The liability for net unpaid losses and loss expenses required by generally 
accepted accounting principles ("GAAP") differs from the liability reported in 
accordance with Statutory Accounting Practices ("SAP").  Because not all GAAP 
adjustments to the recorded SAP liability can be associated with subsequent 
developments of the liabilities on other than an arbitrary basis, developments 
on the loss and loss expense reserve development table are prepared in 
accordance with SAP.

Loss Development Data

In Note 10 on pages 52 through 55 of the Company's 1996 Annual Report to 
Shareholders, which is hereby incorporated by reference in this document in 
partial answer to this item, the net liability for unpaid losses and loss 
expenses is reconciled for each of the years in the three-year period ended 
December 31, 1996.  Included therein are current year and prior year 
development data.

As a result of claim activity during 1996 and after reflection of prior 
experience, it is management's judgment that the total net liability for 
unpaid losses and loss expenses at December 31, 1996 is reasonably stated.

The loss and loss expense reserve development table illustrates the 
development of statutory balance sheet liabilities for 1986 through 1996 for 
the Remaining insurance companies before cessions to Ridge Re.  Net unpaid 
loss and loss expense reserves and accident year development have been 
restated to exclude the reserves of Constitution Reinsurance Corporation and 
Viking Insurance Company of Wisconsin, which were sold during 1995.  The first 
line of the table is the estimated GAAP liability for unpaid losses and loss 
expenses, net of reinsurance recoverable, recorded at the balance sheet date 
for each year. The second line on the table reconciles the GAAP liability for 
net unpaid losses and loss expenses to the SAP liability for unpaid losses and 
loss expenses. The lower section of the table shows the updated amount of the 
previously recorded SAP liability based on experience as of the close of each 
succeeding year. 

The estimate for unpaid losses and loss expenses is increased or decreased as 
more information becomes known about the claims until all claims are settled.  
Deficiencies or redundancies represent aggregate changes in estimates, as 
calculated on a statutory basis, for all prior calendar years.  The effect as 
calculated under GAAP on income for the latest three years is shown in Note 10 
on pages 52 through 55 of the Company's 1996 Annual Report to Shareholders, 
which is hereby incorporated by reference in this document in partial answer 
to this item.  These changes in estimates have been reflected in the Remaining 
insurance companies' calendar year operating results.  Because the Remaining 
insurance companies recognize adjustments to reserves for changes in loss 
development patterns and various other factors, such as social and economic 
trends and known changes in judicial interpretation of legal liability in the 
period in which they become known, it is not appropriate to extrapolate future 
deficiencies or redundancies based solely on this table.


Loss and Loss Expense Reserve Development

Year ended December 31 (in millions)     1986      1987      1988      1989 _
Liability for unpaid losses and loss
  expenses - GAAP (net of reinsurance) $ 4,127   $ 4,824   $ 5,200   $ 5,637
GAAP to SAP differences                   (256)     (241)     (208)     (215)
Liability for unpaid losses and loss
  expense - SAP (net of reinsurance)     3,871     4,583     4,992     5,422

Paid (cumulative) as of:
  End of year                                -         -         -         -
  One year later                         1,187     1,323     1,246     1,560
  Two years later                        2,080     2,188     2,269     2,635
  Three years later                      2,701     2,933     3,043     3,690
  Four years later                       3,224     3,472     3,854     4,018
  Five years later                       3,611     4,150     4,053     4,508
  Six years later                        4,180     4,316     4,432     4,887
  Seven years later                      4,278     4,571     4,751     5,159
  Eight years later                      4,476     4,859     4,985
  Nine years later                       4,720     5,066
  Ten years later                        4,904

Liability estimated as of: 
  End of year                            3,871     4,583     4,992     5,422
  One year later                         3,893     4,681     5,052     5,611
  Two years later                        4,314     4,870     5,247     5,591
  Three years later                      4,527     5,168     5,171     6,408
  Four years later                       4,928     5,073     5,953     6,329
  Five years later                       4,803     5,832     5,903     6,428
  Six years later                        5,495     5,854     6,029     6,770
  Seven years later                      5,546     5,959     6,381     7,049
  Eight years later                      5,673     6,314     6,666
  Nine years later                       6,045     6,598
  Ten years later                        6,322

Deficiency                             $(2,451)  $(2,015)  $(1,674)  $(1,627)

End of Year:
  Gross liability
  Reinsurance recoverable
  Net liability
One Year Later:
  Gross re-estimated liability
  Re-estimated recoverable
  Net re-estimated liability
Two Years Later:
  Gross re-estimated liability
  Re-estimated recoverable
  Net re-estimated liability
Three Years Later:
  Gross re-estimated liability
  Re-estimated recoverable
  Net re-estimated liability
Four Years Later:
  Gross re-estimated liability
  Re-estimated recoverable
  Net re-estimated liability

Gross cumulative deficiency




  1990      1991      1992      1993      1994      1995      1996 _

$ 5,848   $ 5,743   $ 6,109   $ 5,972   $ 5,618   $ 6,471   $ 6,327
   (287)     (299)     (370)     (254)     (216)     (827)     (625)

  5,561     5,444     5,739     5,718     5,402     5,644     5,702


      -         -         -         -         -         -         -
  1,542     1,721     1,080     1,303     1,242     1,173
  2,882     2,518     2,153     2,264     2,142
  3,412     3,381     2,939     2,969
  4,062     4,008     3,480
  4,563     4,418
  4,894






  5,561     5,444     5,739     5,718     5,402     5,644     5,702
  5,658     6,340     5,734     5,711     5,944     5,903
  6,484     6,274     5,771     6,216     6,165
  6,370     6,326     6,230     6,410
  6,429     6,747     6,401
  6,803     6,957
  7,057





$(1,496)  $(1,513)  $  (662)  $  (692)  $  (763)  $  (259)  $     -


                    $ 9,469   $ 8,526   $ 7,849   $ 8,143   $ 8,337
                      3,730     2,808     2,447     2,499     2,635
                      5,739     5,718     5,402     5,644     5,702

                      9,444     8,590     8,616     8,753
                      3,710     2,879     2,672     2,850
                      5,734     5,711     5,944     5,903

                      9,482     9,316     9,154
                      3,711     3,100     2,989
                      5,771     6,216     6,165

                     10,188     9,810
                      3,958     3,400
                      6,230     6,410

                     10,649
                      4,248
                      6,401

                    $(1,180)  $(1,284)  $(1,305)  $  (610)  $     -


Asbestos, Environmental and Other Latent Exposure Claims

The discussion under the captions "Latent Exposures" and "Reserves for the 
Remaining Insurance Companies" on pages 46 through 47 in the Company's 1996 
Annual Report to Shareholders is hereby incorporated by reference in this 
document in partial answer to this item.

Item 2. Properties

The Company owns a total of eleven principal manufacturing and engineering 
facilities and leases an additional such facility.  The domestic facilities 
are located in California, New York and Oklahoma, while the international 
facilities are located in Brazil, Canada, England, France, Holland and Mexico.  
The Company also has four principal research facilities; two are owned 
facilities in New York and Canada, and two are leased facilities in California 
and France.

In addition, within the Company, there are numerous facilities which encompass 
general offices, sales offices, service locations and distribution centers.  
The principal owned facilities are located in the United States, England, and 
Mexico.  The principal leased facilities are located in the United States, 
Brazil, Canada, England, Mexico, France, Germany and Italy.


The Company's Corporate Headquarters facility, located in Connecticut, is 
leased; a training facility, located in Virginia, is owned by the Company.  In 
the opinion of Xerox management, its properties have been well maintained, are 
in sound operating condition and contain all the necessary equipment and 
facilities to perform the Company's functions.

Item 3. Legal Proceedings

The information set forth under Note 15 "Litigation" on pages 63-64 of the 
Company's 1996 Annual Report to Shareholders is incorporated by reference in 
this document in answer to this item.

In the action by the independent service organizations, in a revised expert 
report prepared, pursuant to Rule 26(a)2)B) of the Federal Rules of Civil 
Procedure, an accountant retained by plaintiffs as an expert indicated that he 
plans to testify at trial that, allegedly as a result of Xerox' conduct, 
plaintiffs have lost profits of approximately $75 million.

On July 21, 1993, the Company was notified that it had been named as a 
respondent by the United States Environmental Protection Agency ("EPA") in a 
unilateral Comprehensive Environmental Response, Compensation and Liability 
Act ("CERCLA") section 106 (a) Administrative Order regarding the Metcoa 
Radiation Site in Pulaski, PA.  The Order directs the Company and 21 other 
companies to perform remedial work at the Site.  The order alleges that these 
parties are jointly and severally liable to perform the work.   Under CERCLA, 
a respondent that does not comply with the Order could be subject to a civil 
penalty of $25,000 for each day of noncompliance and be liable for punitive 
damages at least equal to treble the EPA's cost of cleaning up the Site.  The 
Company denies that it is liable to perform the work described in the Order. 

Item 4. Submission of Matters to a Vote of Security Holders

None.



                                   PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder
        Matters

The information set forth under the following captions on the indicated pages 
of the Company's 1996 Annual Report to Shareholders is hereby incorporated by 
reference in this document in answer to this Item:

              Caption                                           Page No.

      Stock Listed and Traded                                      71
      Dividends and Stock Prices                                   71
      Eleven Years in Review - Common Shareholders
        of Record at Year-End                                  70 and 71

Item 6. Selected Financial Data

The following information, as of and for the five years ended December 31, 
1996, as set forth and included under the caption "Eleven Years in Review" on 
pages 70 and 71 of the Company's 1996 Annual Report to Shareholders, is hereby 
incorporated by reference in this document in answer to this Item:

        Revenues
        Income (loss) from continuing operations
        Primary earnings (loss) per common share from continuing operations
        Total assets
        Long-term debt
        Preferred stock
        Dividends declared

Item 7. Management's Discussion and Analysis of Financial Condition and 
        Results of Operations

The information set forth under the caption "Our Results of Operations and 
Financial Condition" under the caption "Financial Review" on pages 27-34, 36-
41, and 43-47 of the Company's 1996 Annual Report to Shareholders other than 
the pictures and captions to the pictures is hereby incorporated by reference 
in this document in answer to this Item.

Item 8. Financial Statements and Supplementary Data

The consolidated financial statements of Xerox Corporation and subsidiaries 
and the notes thereto and the report thereon of KPMG Peat Marwick LLP, 
independent auditors, which appear on pages 26, 35, 42, 48-67, and 69 of the 
Company's 1996 Annual Report to Shareholders, are hereby incorporated by 
reference in this document in answer to this Item.  In addition, also included 
is the quarterly financial data included under the caption "Quarterly Results 
of Operations (Unaudited)" on page 68 of the Company's 1996 Annual Report to 
Shareholders.

The financial statement schedule required herein is filed as "Financial 
Statement Schedules" pursuant to Item 14 of this Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and 
        Financial Disclosure

Not applicable.



                                   PART III

The information set forth in "Proposal 1--Election of Directors" in the 
Company's Notice of the 1997 Annual Meeting of Shareholders and Proxy 
Statement, to be filed pursuant to Regulation 14A not later than 120 days 
after the close of the fiscal year covered by this report on Form 10-K, is 
hereby incorporated by reference in this document in answer to this Part III.

Executive Officers of Xerox

The following is a list of the executive officers of Xerox, their current 
ages, their present positions and the year appointed to their present 
positions.  There are no family relationships between any of the executive 
officers named.

Each officer is elected to hold office until the meeting of the Board of 
Directors held on the day of the next annual meeting of shareholders, subject 
to the provisions of the By-Laws.
                                                             Year
                                                           Appointed
                                                          to Present   Officer
     Name           Age         Present Position           Position     Since_

Paul A. Allaire*     58    Chairman of the Board, Chief       1991       1983
                           Executive Officer and Chairman
                           of the Executive Committee

William F. Buehler   57    Executive Vice President and       1995       1991
                           Chief Staff Officer

A. Barry Rand        52    Executive Vice President,          1992       1986
                           Operations

Barry D. Romeril     53    Executive Vice President and       1993       1993
                           Chief Financial Officer

Stuart B. Ross       59    Executive Vice President;          1990       1979
                           Chairman and Chief Executive
                           Officer, Xerox Financial
                           Services, Inc.

Allan E. Dugan       56    Senior Vice President,             1992       1990
                           Corporate Strategic Services

John A. Lopiano      58    Senior Vice President; President,  1995       1993
                           Production Systems Group

Mark B. Myers        58    Senior Vice President, Corporate   1992       1989
                           Research and Technology 

David R. Myerscough  56    Senior Vice President;             1996       1989
                           Corporate Business Strategy


* Member of Xerox Board of Directors.


Executive Officers of Xerox, Continued

                                                             Year
                                                           Appointed
                                                          to Present   Officer
     Name           Age         Present Position           Position     Since_

Richard S. Paul      55    Senior Vice President and          1992       1989
                           General Counsel

Brian E. Stern       49    Senior Vice President; President,  1996       1993
                           Office Document Products Group

Eunice M. Filter     56    Vice President, Treasurer          1990       1984
                           and Secretary

Philip D. Fishbach   55    Vice President and Controller      1995       1990

James H. Lesko       45    Vice President; President,         1996       1993
                           Desktop Products Group

Carlos Pascual       51    Vice President; President,         1995       1994
                           U.S. Customer Operations


Each officer named above, with the exception of Barry D. Romeril, has been an 
officer or an executive of Xerox or its subsidiaries for at least the past 
five years.

Prior to joining Xerox in 1993, Mr. Romeril had been Group Finance Director at 
British Telecommunications Plc since 1988.  From 1987 to 1988 he was Finance 
Director at BTR, Plc.



                                    PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

 (a)  (1) and (2)  The financial statements, independent auditors' reports 
      and Item 8 financial statement schedules being filed herewith or 
      incorporated herein by reference are set forth in the Index to Financial 
      Statements and Schedule included herein.

      (3)  The exhibits filed herewith or incorporated herein by reference are 
      set forth in the Index of Exhibits included herein.

 (b)  A Current Report on Form 8-K dated October 31, 1996 reporting Item 5 
      "Other Events" was filed during the last quarter of the period covered 
      by this Report.

 (c)  The management contracts or compensatory plans or arrangements listed
      in the Index of Exhibits that are applicable to the executive officers
      named in the Summary Compensation Table which appears in Registrant's
      1997 Proxy Statement are preceded by an asterisk (*).



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange 
Act of 1934, the registrant has duly caused this report to be signed on its 
behalf by the undersigned, thereunto duly authorized.

                                                 XEROX CORPORATION


                                            By:  /s/ Barry D. Romeril_________
                                                 Executive Vice President and 
                                                 Chief Financial Officer
March 27, 1997

Pursuant to the requirements of the Securities Exchange Act of 1934, this 
report has been signed below by the following persons on behalf of the 
registrant and in the capacities and on the date indicated.

March 27, 1997



    Signature                                 Title

Principal Executive Officer:

Paul A. Allaire                              /s/ Paul A. Allaire______________

                                             Chairman, Chief Executive Officer
                                             and Director


Principal Financial Officer:

Barry D. Romeril                             /s/ Barry D. Romeril_____________

                                             Executive Vice President and
                                             Chief Financial Officer


Principal Accounting Officer:

Philip D. Fishbach                           /s/ Philip D. Fishbach___________

                                             Vice President and Controller


Directors:


/s/ B. R. Inman                                      Director


/s/ Yotaro Kobayashi                                 Director


/s/ Ralph S. Larsen                                  Director


/s/ John D. Macomber                                 Director


/s/ George J. Mitchell                               Director


/s/ N. J. Nicholas, Jr.                              Director


/s/ John E. Pepper                                   Director


/s/ Martha R. Seger                                  Director


/s/ Thomas C. Theobald                               Director


Report of Independent Auditors



To the Board of Directors and Shareholders of Xerox Corporation


Under date of January 23, 1997, we reported on the consolidated balance sheets 
of Xerox Corporation and consolidated subsidiaries as of December 31, 1996 and 
1995 and the related consolidated statements of income and cash flows for each 
of the years in the three-year period ended December 31, 1996, as contained in 
the Xerox Corporation 1996 Annual Report to Shareholders on pages 26, 35, 42, 
and 48-67.  These consolidated financial statements and our report thereon are 
incorporated by reference in the 1996 Annual Report on Form 10-K.  In 
connection with our audits of the aforementioned consolidated financial 
statements, we also have audited the related financial statement schedule 
listed in the accompanying index.  This financial statement schedule is the 
responsibility of the Company's management.  Our responsibility is to express 
an opinion on this financial statement schedule based on our audits.

In our opinion, such financial statement schedule, when considered in relation 
to the basic consolidated financial statements taken as a whole, presents 
fairly, in all material respects, the information set forth therein.



                                                KPMG PEAT MARWICK LLP



Stamford, Connecticut
January 23, 1997



Index to Financial Statements and Schedule

Financial Statements:

   Consolidated statements of income of Xerox Corporation and subsidiaries for
     each of the years in the three-year period ended December 31, 1996

   Consolidated balance sheets of Xerox Corporation and subsidiaries as of 
     December 31, 1996 and 1995

   Consolidated statements of cash flows of Xerox Corporation and subsidiaries 
     for each of the years in the three-year period ended December 31, 1996

   Notes to consolidated financial statements

   Report of Independent Auditors

   Quarterly Results of Operations (unaudited)

      The above consolidated financial statements, related notes, report 
      thereon and the quarterly results of operations which appear on pages 
      26, 35, 42, 48-67, 68, and 69 of the Company's 1996 Annual Report to 
      Shareholders are hereby incorporated by reference in this document.

Commercial and Industrial (Article 5) Schedule:

II - Valuation and qualifying accounts


All other schedules are omitted as they are not applicable, or the information 
required is included in the financial statements or notes thereto.


                                                                   SCHEDULE II

Valuation and Qualifying Accounts
Year ended December 31, 1996, 1995 and 1994

                                           Additions
                             Balance at    charged to   Deductions,   Balance
                              beginning     costs and     net of       at end
(in millions)                 of period     expenses    recoveries   of period

1996
Allowance for Losses on:
   Accounts Receivable            $ 90          $ 73         $ 71         $ 92
   Finance Receivables             322           186          161          347
Deferred Tax Valuation 
   Allowance                        20             -           20            -
                                  $432          $259         $252         $439

1995
Allowance for Losses on:
   Accounts Receivable            $ 79          $ 81         $ 70         $ 90
   Finance Receivables             320           154          152          322
Deferred Tax Valuation 
   Allowance                        34             -           14           20

                                  $433          $235         $236         $432

1994
Allowance for Losses on:
   Accounts Receivable            $ 62          $ 70         $ 53         $ 79
   Finance Receivables             300           132          112          320
Deferred Tax Valuation 
   Allowance                        34            -            -            34

                                  $396          $202         $165         $433




Index of Exhibits

Document and Location
  
(3) (a)     Restated Certificate of Incorporation of Registrant filed by the 
            Department of State of New York on October 29, 1996.
  
            Incorporated by reference to Exhibit 3(a)(1) to Registrant's 
            Quarterly Report on Form 10-Q for the Quarter Ended September 30, 
            1996.

    (b)     By-Laws of Registrant, as amended through May 29, 1991.
  
            Incorporated by reference to Exhibit 3(b)(2) to Registrant's 
            Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1991.
  
(4) (a)     Indenture dated as of January 15, 1990 between Registrant and 
            BankAmerica National Trust Company (as successor in interest to
            Security Pacific National Trust Company (New York)) relating 
            to unlimited amounts of debt securities which may be issued 
            from time to time by Registrant when and as authorized by or
            pursuant to a resolution of Registrant's Board of Directors.

            Incorporated by reference to Exhibit 4(a) to Registration No. 
            33-33150.

    (b)     Indenture dated as of December 1, 1991 between Registrant and 
            Citibank, N.A. relating to unlimited amounts of debt securities 
            which may be issued from time to time by Registrant when and 
            as authorized by or pursuant to a resolution of Registrant's 
            Board of Directors.
  
            Incorporated by reference to Exhibit 4(a) to Registration No. 
            33-44597.
 
    (c)     Indenture dated as of September 20, 1996 between Registrant and 
            Citibank, N.A. relating to unlimited amounts of debt securities 
            which may be issued from time to time by Registrant when and as 
            authorized by or pursuant to a resolution of Registrant's Board 
            of Directors.

            Incorporated by reference to Exhibit 4(a) to Registration 
            Statement No. 333-13179.

    (d)     Indenture dated as of March 1, 1988, as supplemented by the First 
            Supplemental Indenture dated as of July 1, 1988, between Xerox 
            Credit Corporation (XCC) and The First National Bank of Chicago 
            relating to unlimited amounts of debt securities which may be 
            issued from time to time by XCC when and as authorized by XCC's 
            Board of Directors or the Executive Committee of the Board of 
            Directors.

            Incorporated by reference to Exhibit 4(a) to XCC's Registration 
            Statement No. 33-20640 and to Exhibit 4(a)(2) to XCC's Current 
            Report on Form 8-K dated July 13, 1988.



    (e)     Indenture dated as of March 1, 1989, as supplemented by the First 
            Supplemental Indenture dated as of October 1, 1989, between XCC 
            and Citibank, N.A. relating to unlimited amounts of debt 
            securities which may be issued from time to time by XCC when and 
            as authorized by XCC's Board of Directors or Executive Committee 
            of the Board of Directors.
  
            Incorporated by reference to Exhibit 4(a) to XCC's Registration 
            Statement No. 33-27525 and to Exhibit 4(a)(2) to XCC's 
            Registration Statement No. 33-31367.
  
    (f)     Indenture dated as of October 1, 1991, as supplemented by the 
            First Supplemental Indenture dated as of May 1, 1992, between XCC 
            and Citibank, N.A. relating to unlimited amounts of debt 
            securities which may be issued from time to time by XCC when and 
            as authorized by XCC's Board of Directors or Executive Committee 
            of the Board of Directors.
  
            Incorporated by reference to Exhibit 4(a) to XCC's Registration 
            Statement No. 33-43470.

    (g)     Indenture dated as of May 1, 1994, between XCC and State Street 
            Bank and Trust Company (formerly, The First National Bank of 
            Boston) relating to unlimited amounts of debt securities which may 
            be issued from time to time by XCC when and as authorized by XCC's 
            Board of Directors or Executive Committee of the Board of 
            Directors.

            Incorporated by reference to Exhibit 4(a) to XCC's Registration
            Statement No. 33-53533 and to Exhibits 4(a)(1) and 4(a)(2) to
            XCC's Registration Statement No. 33-43470.

    (h)     Indenture dated as of October 2, 1995, between XCC and State 
            Street Bank and Trust Company relating to unlimited amounts of 
            debt securities which may be issued from time to time by XCC when 
            and as authorized by XCC's Board of Directors or Executive 
            Committee of the Board of Directors.

            Incorporated by reference to Exhibit 4(a) to XCC's Registration
            Statement No. 33-61481.

    (i)     Instruments with respect to long-term debt where the total amount 
            of securities authorized thereunder does not exceed 10% of the 
            total assets of the Registrant and its subsidiaries on a 
            consolidated basis have not been filed.  The Registrant agrees to 
            furnish to the Commission a copy of each such instrument upon 
            request. 
  
(10)        The management contracts or compensatory plans or arrangements 
            listed below that are applicable to the executive officers named 
            in the Summary Compensation Table which appears in Registrant's 
            1997 Proxy Statement are preceded by an asterisk (*).
 
   *(a)     Registrant's 1976 Executive Long-Term Incentive Plan, as amended 
            through February 4, 1991.
 
            Incorporated by reference to Exhibit (10)(a) to the Registrant's 
            Annual Report on Form 10-K for the Year Ended December 31, 1991.



   *(b)     Registrant's 1991 Long-Term Incentive Plan, as amended through 
            July 15, 1991.
 
            Incorporated by reference to Exhibit 10(b) to Registrant's 
            Quarterly Report on Form 10-Q for the Quarter Ended June 30, 
            1991.
  
    (c)     Registrant's 1996 Non-Employee Director Stock Option Plan.

            Incorporated by reference to Registrant's Notice of the 1996 
            Annual Meeting of Shareholders and Proxy Statement pursuant to
            Regulation 14A.
  
   *(d)     Description of Registrant's Annual Performance Incentive Plan.

   *(e)     Registrant's 1993 Restatement of Unfunded Retirement Income 
            Guarantee Plan.

            Incorporated by reference to Exhibit 10(e) to Registrant's Annual
            Report on Form 10-K for the year ended December 31, 1993.

   *(f)     1996 Restatement of Registrant's Unfunded Supplemental Retirement 
            Plan.

    (g)     Registrant's 1981 Deferred Compensation Plan, 1985 
            Restatement, as amended through April 2, 1990.

            Incorporated by reference to Exhibit 10(h) to Registrant's 
            Quarterly Report on Form 10-Q for the Quarter Ended March 31, 
            1990.

    (h)     1996 Amendment and Restatement of Registrant's Restricted Stock 
            Plan for Directors.

            Incorporated by reference to Registrant's Notice of the 1996 
            Annual Meeting of Shareholders and Proxy Statement pursuant to
            Regulation 14A.

   *(i)     Form of severance agreement entered into with various executive
            officers.

            Incorporated by reference to Exhibit 10(j) to Registrant's 
            Quarterly Report on Form 10-Q for the Quarter ended June 30, 
            1989.

   *(j)     Registrant's Contributory Life Insurance Plan.

            Incorporated by reference to Exhibit 10(s) to Registrant's 
            Quarterly Report on Form 10-Q for the Quarter Ended June 30, 
            1989. 
 
    (k)     1996 Amendment and Restatement of Registrant's 1989 Deferred 
            Compensation Plan for Directors.

            Incorporated by reference to Exhibit 10(l) to Registrant's Annual
            Report on Form 10-K for the year ended December 31, 1995.

   *(l)     1993 Amendment and Restatement of Registrant's 1989 Deferred 
            Compensation Plan for Executives.

   *(m)     Executive Performance Incentive Plan.

            Incorporated by reference to Registrant's Notice of the 1995 
            Annual Meeting of Shareholders and Proxy Statement pursuant to
            Regulation 14A.

(11)        Statement re computation of per share earnings.
 
(12)        Computation of Ratio of Earnings to Fixed charges.
 
(13)        Pages 26 through 71 of Registrant's 1996 Annual Report
            to Shareholders.

(21)        Subsidiaries of the Registrant.

(23)        Consent of KPMG Peat Marwick LLP.

(27)        Financial Data Schedule (in electronic form only).