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Our Letter

Dear Stakeholders:

It’s been two years now since I was named Chief Executive Officer of Xerox. In that time, we’ve made significant progress – most notably acquiring Affiliated Computer Services (ACS). Now we are the world’s leading enterprise for business process and document management. Through the broader business we’re building, I’m more convinced than ever in the power of this company to help build a better and more sustainable world in three broad ways:

• By helping our customers leverage the power of technology to reduce their carbon footprints, create less waste and otherwise contribute to a more sustainable environment. Our Managed Print Services help our customers reduce paper documents through digital imaging, archiving and indexing. And with our solid ink technology, there is less waste with no cartridges to dispose of and far less packaging to add to landfills.

• By helping our customers build more sustainable enterprises by doing the things we do best, thereby giving our customers the freedom to focus on what they do best and build more successful businesses for the long term. For example, ACS manages automated toll systems like E-ZPass^® – helping state governments reduce traffic and the associated environmental impacts.
• By managing our own business in the most sustainable way, serving as role models for our customers and partners and as a proof statement of what is possible. Our greenhouse gas emissions are down 31 percent from 2002, the result of improved energy efficiency, new technologies and improved energy management practices.

Those three goals are what excite me. The new Xerox is better positioned and equipped than ever to help enterprises around the world leave the planet better than we found it and build organizations that can sustain themselves far into the future.

That’s really important to us. Most of us joined Xerox not just because it’s a big company with fantastic technology, but because we are a company with good values that we take very seriously. Perhaps because we’ve always embraced diversity in the broadest sense, we seem to have a disproportionate number of people for whom a job becomes not only a rewarding career, but also a unique way to make the world better at the same time.

I hope you will take some time to read through this report. You’ll quickly understand and dive deeper in our online citizenship review at www.xerox.com/corporate-citizenship/2011. You’ll quickly understand what I mean. A special culture is hard to define in words. At Xerox, we live our beliefs and our values through our actions. The end result is a rich cultural workplace where camaraderie and opportunity go hand in hand.

As a 31-year veteran of Xerox, I have a great appreciation for what a force a global company can be for the betterment of mankind. With the addition of the 77,000 people of ACS, our capacity to make a difference has grown exponentially. The opportunities we now have to help businesses sustain themselves and provide jobs far into the future are significant and have added a new dimension to the way we see ourselves in the world. Here’s why I say that.

Building a Sustainable Environment

The days when sustainability was considered a “nice” thing to do are long gone. Today, most businesses have come to realize that a focus on sustainability is good business. Yes, it helps to save the planet, but it also saves money.

As part of the “old green guard,” we have known this for decades and we’ve been putting what we’ve learned into technology and practices that help our customers. The list of the innovations we pioneered is long – two-sided copying to use less paper; remanufacturing parts and products to reduce waste; print-on-demand and one-to-one printing to reduce the use of paper; energy-saving devices on our technology; working with our suppliers to source paper from areas that practice sustainable forestry; and partnering with organizations like The Nature Conservancy to further promote responsible forest management both in areas that we source from and in other key geographies around the globe.

More recently – and this still comes as a surprise to many people – we have been working with our customers to reduce their reliance on paper and move to digital documents. This document you are reading exists in both paper and digital form. In fact, we print only 1,000 copies. The rest are read online or printed only when someone needs the traditional paper form. No more boxes of unneeded reports in warehouses and no more mass distribution of printed copies, many of which go unread.

Some of the largest Xerox customers today want to do away with paper wherever and whenever possible – and we are only too happy to help them. It’s a win-win-win value proposition – what has been called the triple bottom line. It’s good for our customers, good for Xerox and good for the planet.

One example of what I mean is the banking industry’s move to communicate with their customers via the Internet – a shift from sending monthly bill statements in the mail to e-mailing digital statements. No more printing and no more costs related to printing and distributing. It started way before the recession, but picked up steam during the economic downturn because of the need to cut costs. I do all my banking online now and chances are good that you do, too. Many clients still use Xerox technology for this kind of transactional printing – checking account statements, credit card bills and the like – but we do less of it these days. We have our eyes wide open to these types of changes. Rather than fight them, we embrace them. We’ve built the new Xerox to do whatever the customer wants – snail mail or e-mail, paper or digital.

Building Sustainable Enterprises

With the acquisition of ACS, we have dramatically expanded our ability to help our customers be more successful – what we call “Ready for Real Business.” Of course, we continue to be the world leader in document technology and services – printers, multifunction devices, publishing systems, managed print services, and a wide array of software and solutions. We’re proud of that heritage and we are committed to continuing to lead in this space. But we are so much more. Here is a flavor of what more we now do:

• We operate over 140 customer care centers around the world. They handle more than a million transactions for their customers a day and they do it in 20 different languages – helping businesses build customer loyalty and grow that revenue.
• We have contracts with all 50 states in the U.S. to handle processes like child-support payments, food stamps, Medicaid, disability, health and welfare – helping governments improve service to their constituents while saving money for taxpayers.
• We work with scores of municipalities to manage public parking facilities, speed travelers through toll gates and gain easy access to transit systems – making these cities run more efficiently while reducing their carbon footprints and giving taxpayers a good return on their investment.
• We process three million credit card applications a month; have a consumer loan servicing portfolio of $65 billion; process 900 million insurance claims per year; and on and on.

The point I am making is that the new Xerox is in some places you wouldn’t expect to see us, doing things you probably didn’t know we could. All these capabilities have a common thread. They require competencies most companies don’t have and time most companies don’t want to invest. By outsourcing that work to Xerox, our clients have the freedom to focus on their real business. And we execute our services in such a way that our customers save money, boost productivity, improve customer care, reduce energy consumption, use less paper and are assured that they are getting best-in-class solutions. That payoff comes from our advantaged technology and expertise in managing basic and complex business functions. Serving as a Role Model

If I sound excited about our capacity to make a difference, it’s because I am. The truth be told, I’m a little frustrated and impatient that we can’t solve all the world’s problems. So are Xerox people. I believe that’s a good thing. We hate the status quo and don’t have much tolerance for people who tell us what can’t be done. For us, impatience with the same old way of doing things is becoming a competitive advantage of ours.

Impatience is in our bones. Chester Carlson, who invented xerography, worked in a patent office and spent countless hours in the New York Public Library hand-writing material he needed for his research on patents. It made him impatient and he found a better way. Joseph C. Wilson, the founder of Xerox, who bet his family’s business on Carlson’s invention, described him as an “unreasonable man because he wouldn’t accept things the way they are.” I think Chester Carlson and Joe Wilson would like the edginess in the company they founded – the belief that things can be better and the commitment to try to make them so.

This report covers our progress for the first year since we acquired ACS and more than doubled the number of people who are included in the Xerox family and work under the Xerox brand. The people of Xerox are focused on so many important things – sustainability, customer focus, community engagement, diversity, respect for the individual, innovation and a determination to return the trust our shareholders place in us with good value. The report is organized around five themes that capture the essence of our global citizenship efforts:

• Conducting our business with integrity and transparency builds credibility and attracts investors.
• Aligning our resources around customer need provides the revenue stream that enables investment in innovation and future growth.
• Nurturing a greener world through sustainable innovation and development saves money, creates value and helps develop new markets.
• Creating a great workplace for our people strengthens our competitiveness.
• Leveraging our resources to make our world better improves the quality of life for our people and the economic climate for our customers.

We know we are far from perfect, but we constantly try to be better. The more we do, the more we discover what we must do. We don’t shrink from those challenges. We embrace them. We’re impatient people – and we believe that’s a virtue.

Ursula M. Burns
Chairman and Chief Executive Officer