AVON PRODUCTS INC, 10-K, 1995-03-27

AVON PRODUCTS INC
10-K, 1995-03-27
PERFUMES, COSMETICS & OTHER TOILET PREPARATIONS

Previous: ATKINSON GUY F CO OF CALIFORNIA, DEF 14A, 1995-03-27

Next: BALL CORP, SC 13D, 1995-03-27

<PAGE>
FORM 10-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

[x] Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

For the fiscal year ended December 31, 1994

[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

For the transition period from ____ to ____

Commission file number 1-4881

AVON PRODUCTS, INC.
(Exact name of registrant as specified in its charter)

NEW YORK 13-0544597
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

9 WEST 57TH STREET, NEW YORK, NEW YORK 10019
(Address of principal executive offices)

(212) 546-6015
(Telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange on
Title of each class which registered
------------------- ----------------
Common Stock (par value $.50) New York Stock Exchange
Preferred Share Purchase Rights New York 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 Common Stock (par value $.50) held by non-
affiliates at February 28, 1995 was $3.9 billion.

The number of shares of Common Stock (par value $.50) outstanding at
February 28, 1995 was 68,658,266.

Documents Incorporated by Reference

Parts I and II --Portions of the 1994 Annual Report to Shareholders.
Part III --Portions of the Proxy Statement for the 1995 Annual
Meeting of Shareholders.

<PAGE>1
PART I

ITEM 1. BUSINESS

Avon Products, Inc. ("Avon" or "Company") is one of the world's leading
manufacturers and marketers of beauty and related products, which include
cosmetic, fragrance and toiletry; gift and decorative; apparel; and fashion
jewelry and accessories. Avon commenced operations in 1886 and was
incorporated in the State of New York on January 27, 1916. Avon's business is
comprised of one industry segment, direct selling, with worldwide operations.
Financial information relating to geographic areas is incorporated by
reference to the analysis of net sales and pretax income from operations by
geographic area on page 26 in Avon's 1994 Annual Report to Shareholders.
During 1994, Avon sold Giorgio Beverly Hills, Inc. ("Giorgio"), its remaining
retail business. For further discussion, see Discontinued Operations section
included herein, and Note 3 of the Notes to the Consolidated Financial
Statements on page 40 in Avon's 1994 Annual Report to Shareholders.

Avon's direct selling business consists of the U.S. and International
operations. Sales are made directly to consumers principally through Avon
Representatives throughout the world. Although some of the products offered
internationally may vary by market, most are substantially the same as those
marketed domestically.

Distribution

Avon's products are sold worldwide by approximately 1.9 million Repre-
sentatives, approximately 440,000 of whom are in the United States. Almost
all Representatives are women who sell on a part-time basis. Representatives
are independent contractors or independent dealers, and are not agents or
employees of Avon. Representatives purchase products directly from Avon and
sell them directly to their customers.

The Company's products are sold to customers through a combination of
direct selling and marketing utilizing independent Representatives, the mail,
by phone or fax. Representatives go where the customers are, either in the
home or in the workplace. Representatives may sell in a territory, which
typically averages 100 homes in the United States and from 100 to 150 homes in
other countries. Representatives in the United States have the opportunity to
take responsibility for sales in larger areas. Representatives also sell in
offices, factories, schools and hospitals.

In the United States, the Representative contacts customers, selling
primarily through the use of brochures which also highlight new products and
specially priced items for each two-week sales campaign. Product samples,
demonstration products, make-up color charts and catalogs are also used.
Generally the Representative forwards an order every two weeks to a designated
distribution center. This order is processed and the products are assembled
at the distribution center and delivered to the Representative's home, usually
by a local delivery service. The Representative then delivers the merchandise
and collects payment from the customer for their own account. Payment by the
Representative to Avon is customarily made when the next order is forwarded to

<PAGE>2

the distribution center. The cost of merchandise to the Representative varies
according to the total order size for each two-week sales campaign and
averages approximately 60 percent of the recommended selling price.

In order to increase support of the Representative in the United States
and allow them to run their business more efficiently as well as to improve
order processing accuracy, Avon has implemented certain electronic order
systems technology. One of these systems permits Avon Representatives to
submit add-on orders with a touch-tone telephone, enabling them to augment
orders already submitted by placing a phone call. Another system, Avon's
Personal Order Entry Terminal, permits approximately 20,000 top-producing
Representatives in the United States to transmit orders electronically by
phone line, 24 hours a day, seven days a week.

Outside the United States, each sales campaign is generally of a three or
four week duration. Although terms of payment and cost of merchandise to the
Representative vary from country to country, the basic method of direct
selling and marketing by Representatives is essentially the same as that used
in the United States, and substantially the same merchandising and promotional
techniques are utilized.

The recruiting and training of Representatives are the primary
responsibility of district managers. In the United States, each district
manager has responsibility for a market area covered by 225 to 300
Representatives. District managers are employees of Avon and are paid a
salary and a commission based on purchases of Avon products by Representatives
in their district. Personal contacts, including recommendations from current
Representatives and local advertising, constitute the primary means of
obtaining new Representatives. Because of the high rate of turnover among
Representatives, a characteristic of the direct-selling method, recruiting and
training of new Representatives are continually necessary.

From time to time, the question of the legal status of Representatives has
arisen, usually in regard to possible coverage under social benefit laws that
would require Avon (and in most instances, the Representatives) to make
regular contributions to social benefit funds. Although Avon has generally
been able to address these questions in a satisfactory manner, the matter has
not been fully resolved in all countries. If there should be a final
determination adverse to Avon in a country, the cost for future, and possibly
past, contributions could be so substantial in the context of the volume of
business of Avon in that country that it would have to consider discontinuing
operations in that country.

Promotion and Marketing

Sales promotion and sales development activities are directed toward
giving selling assistance to the Representatives by making available sales
aids such as brochures, product samples and demonstration products. In order
to support the efforts of Representatives to reach new customers, especially
working women and other individuals who frequently are not at home, specially
designed sales aids, promotional pieces, customer flyers and product and image
enhancing media advertising are used. In addition, Avon seeks to motivate
its Representatives through the use of special incentive programs that reward

<PAGE>3

superior sales performance. Periodic sales meetings with Representatives are
conducted by the district manager. The meetings are designed to keep
Representatives abreast of product line changes, explain sales techniques and
provide recognition for sales performance.

A number of merchandising techniques, including the introduction of new
products, the use of combination offers, the use of trial sizes and the
promotion of products packaged as gift items, are used. In general for each
sales campaign, a distinctive brochure is published, in which new products are
introduced and selected items are offered at special prices or are given
particular prominence in the brochure. Cosmetic, fragrance and toiletry
products are available each sales campaign at a constant low price, while
maintaining introductory specials and periodic sales on selected items for
limited time periods.

From time to time, various regulations or laws have been proposed or
adopted that would, in general, restrict the frequency or duration of, or
volume of sales resulting from new product introductions, special prices or
other special price offers. The Company's pricing flexibility and broad
product lines are expected to be able to mitigate the effect of these
regulations.

Competitive Conditions

The cosmetic, fragrance and toiletry; gift and decorative; apparel; and
fashion jewelry and accessory industries are highly competitive. Avon is
one of the leading manufacturers and distributors of cosmetics and fragrances
in the United States. Its principal competitors are the large and well-known
cosmetics and fragrances companies that manufacture and sell broad product
lines through various types of retail establishments. There are many
other companies that compete in particular products or product lines sold
through retail establishments.

Avon has many competitors in the gift and decorative products industry in
the United States, including retail establishments, principally department
stores, gift shops and direct-mail companies, specializing in these products.

Avon is one of the leading distributors of fashion jewelry and accessories
for women in the United States. Its principal competition in the fashion
jewelry industry consists of a few large companies and many small companies
that manufacture and sell fashion jewelry for women through retail
establishments.

The number of competitors and degree of competition that Avon faces in its
foreign cosmetics, fragrances, toiletries and fashion jewelry markets varies
widely from country to country. Avon is one of the leading manufacturers and
distributors in the cosmetics, fragrances and toiletries industry in most of
its foreign markets, as well as in the fashion jewelry industry in Europe.

There are a number of direct-selling companies which sell product lines
similar to Avon's, some of which also have worldwide operations and compete
with Avon, although none have comparable sales or income.

Avon believes that the personalized customer service offered by
Representatives; the high quality, attractive designs and reasonable prices of
its products; new product introductions; and the guarantee of satisfaction are
significant factors in establishing and maintaining its competitive position.

<PAGE>4

Avon's consolidated net sales, by classes of principal products, are as
follows:

Years ended December 31
------------------------------
1994 1993 1992
---- ---- ----

(In millions)

Cosmetics, fragrances and toiletries...... $2,604.2 $2,375.2 $2,243.1
Gift and decorative....................... 769.2 663.6 683.3
Apparel................................... 480.3 350.0 296.9
Fashion jewelry and accessories........... 412.8 455.3 437.2
-------- -------- --------
$4,266.5 $3,844.1 $3,660.5
======== ======== ========

International Operations

Avon's International operations are subject to certain customary risks
inherent in carrying on business abroad, including the risk of adverse
currency fluctuations, currency remittance restrictions and unfavorable
economic and political conditions.

Avon's International operations are conducted primarily through
subsidiaries in 40 countries and Avon's products are distributed in some 80
other countries.

Manufacturing

Avon manufactures and packages almost all of its cosmetic, fragrance and
toiletry products. Raw materials, consisting chiefly of essential oils,
chemicals, containers and packaging components, are purchased from various
suppliers. Packages, consisting of containers and packaging components, are
designed by its staff of artists and designers.

The design and development of new products are affected by the cost and
availability of materials such as glass, plastics and chemicals. Avon
believes that it can continue to obtain sufficient raw materials and supplies
to manufacture and supply its products.

Avon has eighteen manufacturing laboratories around the world, three of
which are principally devoted to the manufacture of fashion jewelry. In the
United States, Avon's cosmetic, fragrance and toiletry products are produced
in three manufacturing laboratories for the four distribution centers located
throughout the country. Most products sold in foreign countries are
manufactured in Avon's facilities abroad.

The fashion jewelry line is generally developed by Avon's staff and
produced in its two manufacturing laboratories in Puerto Rico, and Avon's
manufacturing laboratory in Ireland or by several independent manufacturers.

<PAGE>5

Trademarks and Patents

Although Avon owns several patents and has several more patent
applications pending in the United States Patent Office, its business, both in
the United States and abroad, is not materially dependent upon patents or
patent protection. Avon has no material licenses, franchises or concessions.

Avon's major trademarks are protected by registration in the United States
and the other countries where its products are marketed as well as in many
other countries throughout the world.

DISCONTINUED OPERATIONS

During 1994, the Company sold Giorgio, its remaining retail business for
cash of $150.0 million. The Company recorded a loss of $25.0 million on the
sale. Since the Company has excess capital loss carryforwards, no tax
benefits have been recognized on the loss. For further discussion, see Note 3
of the Notes to the Consolidated Financial Statements on page 40 to Avon's
1994 Annual Report to Shareholders.

During 1993, Avon recorded a discontinued operations provision of
$10.0 million after tax, or $.14 per share, for the final settlement and
related expenses in an arbitration proceeding related to a business previously
sold.

During 1992, Avon recorded a discontinued operations provision of
approximately $10.0 million principally for claims and litigation relating
to businesses previously sold, which was offset by amounts recovered for notes
and securities previously written off.

Although Avon has completed its divestiture of all discontinued
operations, it may be liable for various contingencies relating to, among
other things, indemnifications given to the purchasers of certain
discontinued operations. An indemnification, currently being litigated,
covers a patent dispute, various environmental claims and numerous other
lawsuits and claims. Due to the complex nature of these contingencies, the
ultimate outcome and related total costs to Avon cannot currently be
determined. For further discussion of the contingencies, see Note 13 of the
Notes to the Consolidated Financial Statements and Item 3 of this report.

SEASONAL NATURE OF BUSINESS

Avon's sales and earnings have a marked seasonal pattern characteristic of
many companies selling cosmetics, fragrances and toiletries; gift and
decorative products; and fashion jewelry. Christmas sales cause a sales peak
in the fourth quarter of the year. Fourth quarter net sales were 32 percent
and 31 percent of full year net sales in 1994 and 1993, respectively, and
fourth quarter pretax income from continuing operations was 42 percent in 1994
and 1993.

<PAGE>6

RESEARCH ACTIVITIES

Avon's research and development department is a leader in the industry,
based on the number of new product launches, including formulating affordable,
effective beauty treatments relevant to women's needs.

A team of researchers and technicians applies the disciplines of science to
the practical aspects of bringing products to market around the world.
Relationships with well known dermatologists and other specialists supplements
Avon's own research to deliver new formulas and ingredients. Each year, Avon
researchers test and develop more than 600 products in the cosmetic,
fragrance, toiletry and jewelry categories as well as analyze, evaluate and
develop gift and decorative products.

Avon has pioneered many innovative products, including Skin-So-Soft, its
best-selling bath oil; BioAdvance, the first skin care product with stabilized
retinol, the purest form of Vitamin A; and Collagen Booster, the premier
product to capitalize on Vitamin C technology. Avon also introduced the
benefits of aromatherapy to millions of American women, encapsulated color for
the Color-Release line and introduced alpha-hydroxy acid for the Anew
Perfecting Complex products.

The amounts incurred on research activities relating to the development of
new products and the improvement of existing products were $27.9 million in
1994, $28.5 million in 1993 and $27.9 million in 1992. This research included
the activities of product research and development and package design and
development. Most of these activities are related to the development of
cosmetic, fragrance and toiletry products.

ENVIRONMENTAL MATTERS

Pursuant to Avon's global environmental policy, environmental audits are
conducted to ensure Avon facilities around the world meet or exceed local
regulatory standards in such categories as waste disposal and air and water
emissions. A corporate environmental operations committee ensures that
opportunities for environmental performance improvements are reflected in our
products and packaging.

In general, compliance with environmental regulations which impact Avon's
global operations has not had, and is not anticipated to have, any material
effect upon the capital expenditures, financial position or competitive
position of Avon. Reference is made to Item 3 of this report for additional
information regarding environmental matters.

EMPLOYEES

At December 31, 1994, Avon employed approximately 30,400 persons. Of
these, approximately 7,900 were employed in the United States and approximate-
ly 22,500 in other countries. The number of employees tends to rise from a
low point in January to a high point in November and decreases somewhat in
December when Christmas shipments are completed.

ITEM 2. PROPERTIES

Avon's principal properties consist of manufacturing laboratories for the
production of cosmetics, fragrances and toiletries and fashion jewelry and
distribution facilities where offices are located and where finished

<PAGE>7

merchandise is warehoused and shipped to Representatives in fulfillment of
their orders. Substantially all of these properties are owned by Avon or its
subsidiaries, are in good repair, adequately meet Avon's needs and operate at
reasonable levels of productive capacity.

The domestic manufacturing laboratories are located in Morton Grove, IL;
Springdale, OH; and Suffern, NY; and the distribution centers are located in
Atlanta, GA; Glenview, IL; Newark, DE; and Pasadena, CA. International
properties include three manufacturing laboratories, including a fashion
jewelry manufacturing laboratory in Ireland, and eight distribution
centers in Europe; five manufacturing laboratories and eleven distribution
centers in Latin America; one manufacturing and one distribution center in
Canada; and four manufacturing laboratories and nine distribution centers in
the Pacific. The research and development laboratories are located in
Suffern, NY. Avon leases space for its executive and administrative offices
in New York City and its fashion jewelry manufacturing facilities in Puerto
Rico. The manufacturing laboratory in Italy was sold in December 1994.

ITEM 3. LEGAL PROCEEDINGS

Various lawsuits and claims (asserted and unasserted), arising in the
ordinary course of business or related to businesses previously sold, are
pending or threatened against Avon. The most significant of these are
described below.

In 1991, a class action suit was initiated against Avon on behalf of
certain classes of holders of Avon's Preferred Equity-Redemption Cumulative
Stock ("PERCS"), alleging various contract and securities law claims relating
to the PERCS (which were fully redeemed that year). Avon has rejected the
assertions in this case, believes it has meritorious defenses to the claims
and is vigorously contesting this lawsuit.

In June 1988, Mallinckrodt, Inc. ("Mallinckrodt") and International
Minerals & Chemical Corporation ("IMC"), now known as Mallinckrodt Group Inc.,
filed a lawsuit against Avon in the St. Louis Missouri City Circuit Court
arising from Avon's sale of Mallinckrodt to IMC in 1986. The suit alleged
that a certain patent dispute and a settlement, referred to as the DuPont
patent case, various environmental claims and numerous other lawsuits and
claims are contingent liabilities covered by an indemnification given by Avon
in connection with the sale of Mallinckrodt. In October 1991, the Missouri
Supreme Court affirmed the Circuit Court's decision that Avon has the
obligation to indemnify IMC and Mallinckrodt in connection with the DuPont
patent case, but remanded the matter for a trial on the damages, if any,
suffered by the parties. On July 27, 1992, a jury returned a verdict in the
DuPont patent case for $16.0 million, and a judgment for that amount plus
approximately $6.5 million interest was entered. On August 11, 1992, IMC and
Mallinckrodt filed post-trial motions, including a motion for a judgment
notwithstanding the verdict or, in the alternative, a motion for a new trial.
On November 5, 1992, the St. Louis Missouri City Circuit Court granted IMC's
and Mallinckrodt's motion for a judgment notwithstanding the verdict and
directed a verdict for plaintiffs in the amount of $27.1 million plus
interest. As of November 5, 1992, the interest amounted to approximately
$11.7 million. Avon, IMC and Mallinckrodt appealed this decision. This
issue was argued before the Missouri Court of Appeals, Eastern District on May
11, 1994. On November 8, 1994, the Court of Appeals overturned the judgment
notwithstanding the verdict and ordered a new trial. All possible further

<PAGE>8

judicial review has now been exhausted and a retrial is expected during 1995.
Pre-trial proceedings and discovery activities are ongoing with respect to the
environmental and general litigation portions of the case.

With respect to the environmental contingencies which constitute a part of
the indemnification litigation, the total cost to Avon cannot be determined
with certainty as a result of such factors as the preliminary status of
information relating to the sites owned by the purchaser, the preliminary
regulatory involvement, the unknown magnitude and timing of cleanup efforts,
if any, to be undertaken by the purchaser or Mallinckrodt, the possibility of
recoveries against other parties, the uncertainty of the success of Avon's
defenses, and unasserted claims, if any. However, these factors have been
assessed and will continue to be assessed by Avon in estimating reserves to be
recorded in its consolidated financial statements.

The ultimate outcome and aggregate cost of resolving all of the above
contingencies will be based on a number of factors and will be determined over
a number of years. Accordingly, the total cost to Avon cannot currently be
determined with certainty. The reserves for such contingencies at December
31, 1994, which are recorded gross without anticipation of insurance
recoveries or other third-party recoveries, if any, have been estimated by
Avon's management based on its review of currently known facts and
circumstances at December 31, 1994. In the opinion of Avon's management,
based on its review of the preliminary information available at this time, the
difference, if any, between the total cost of resolving such contingencies and
reserves recorded by Avon at December 31, 1994 should not have a material
adverse impact on Avon's consolidated financial position or results of
operations, based on the current levels of such amounts. However, this
difference, if any, could have a material effect on results of operations in a
future period when resolved.

Avon is involved in a number of proceedings arising out of the federal
Superfund law and similar state laws. In some instances Avon, along with
other companies, has been designated as a potentially responsible party which
may be liable for costs associated with these various hazardous waste sites.
Based upon Avon's current knowledge of proceedings, management believes,
without taking into consideration any insurance recoveries, if any, that in
the aggregate they would not have a material adverse impact on Avon's
consolidated financial position or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the quarter
ended December 31, 1994.

----------
Executive Officers of the Registrant

Officers are elected by the Board of Directors at its first meeting
following the Annual Meeting of Shareholders. Officers serve until the first
meeting of the Board of Directors following the Annual Meeting of Shareholders
at which Directors are elected for the succeeding year, or until their
successors are elected, except in the event of death, resignation or removal,
or the earlier termination of the term of office.

<PAGE>9

Information regarding employment contracts between Avon and named
executive officers is incorporated by reference to the "Contracts with
Executives" section of Avon's Proxy Statement for the 1995 Annual Meeting of
Shareholders.

Listed below are the executive officers of Avon, each of whom (except as
noted) has served in various executive and operating capacities with Avon
during the past five years:

Elected
Title Name Age Officer
----- ---- --- -------

Chairman of the Board,
Chief Executive Officer and Director. James E. Preston 61 1971
President, Chief Operating Officer
and Director......................... Edward J. Robinson 54 1989
Executive Vice President............... John I. Novosad 54 1989
Senior Vice President, General Counsel
and Secretary........................ Ward M. Miller, Jr. 62 1993 (1)
Senior Vice President and Chief
Financial Officer.................... Edwina D. Woodbury 43 1990
Senior Vice Presidents................. Christina A. Gold 47 1993
Marcia L. Worthing 52 1988
Group Vice President, Controller....... Robert J. Conologue 46 1989
Group Vice President, Taxes and
Treasurer............................ Robert J. Corti 45 1988

----------

(1) Ward M. Miller, Jr. was elected Senior Vice President, General Counsel
and Secretary in October 1994. Mr. Miller joined Avon in February 1993 as
Vice President. Prior to joining Avon, he was Senior Vice President and
General Counsel of Nabisco Brands; and Vice President, Associate General
Counsel and Secretary of its parent, RJR Nabisco.

PART II

ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

This information is incorporated by reference to "Market Prices of Common
Stock by Quarter" on page 34 of Avon's 1994 Annual Report to Shareholders.

ITEM 6. SELECTED FINANCIAL DATA

The information for the five-year period 1990 through 1994 is incorporated
by reference to the "Eleven-Year Review" on pages 52 and 53 of Avon's 1994
Annual Report to Shareholders.

<PAGE>10

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION

This information is incorporated by reference to "Management's Discussion
and Analysis" on pages 24 through 33 of Avon's 1994 Annual Report to
Shareholders.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

This information is incorporated by reference to the "Consolidated
Financial Statements and Notes" on pages 35 through 50, together with the
report thereon of Coopers & Lybrand, L.L.P., on page 51, and "Results of
Operations by Quarter" on page 34 of Avon's 1994 Annual Report to
Shareholders.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding directors is incorporated by reference to the
"Election of Directors" and "Information Concerning the Board of Directors"
sections of Avon's Proxy Statement for the 1995 Annual Meeting of
Shareholders. Information regarding executive officers is presented in Part I
of this report.

ITEM 11. EXECUTIVE COMPENSATION

This information is incorporated by reference to the "Information
Concerning the Board of Directors" and "Executive Compensation" sections of
Avon's Proxy Statement for the 1995 Annual Meeting of Shareholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

This information is incorporated by reference to the "Ownership of Shares"
section of Avon's Proxy Statement for the 1995 Annual Meeting of Shareholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

This information is incorporated by reference to the "Compensation
Committee Interlocks and Insider Participation" section and the "Contracts
with Executives" section of Avon's Proxy Statement for the 1995 Annual Meeting
of Shareholders.

<PAGE>11

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K

Annual
Report to
Shareholders Form 10-K
Page Number Page Number
------------ -----------

(a) 1. Consolidated Financial Statements of
Avon Products, Inc. and Subsidiaries

Consolidated statement of income for
each of the years in the three-year
period ended December 31, 1994........ 35

Consolidated balance sheet at
December 31, 1994 and 1993............ 36

Consolidated statement of cash flows for
each of the years in the three-year
period ended December 31, 1994........ 37

Consolidated statement of changes in
shareholders' equity for each of
the years in the three-year period
ended December 31, 1994............... 38

Notes to consolidated financial
statements............................ 39-50

Report of Independent Accountants
Coopers & Lybrand L.L.P............... 51

(a) 2. Financial Statement Schedules

Report of Independent Accountants
Coopers & Lybrand L.L.P............... S-1

Consent of Independent Accountants
Coopers & Lybrand L.L.P............... S-2

Financial statement schedule for each
of the years in the three-year period
ended December 31, 1994

VIII--Valuation and qualifying
accounts.................... S-3

Financial statements of the registrant and all other financial
statement schedules are omitted because they are not applicable or
because the required information is shown in the consolidated
financial statements and notes.

<PAGE>12

(a) 3. Exhibits

Exhibit
Number Description
------- -----------

3.1 --Restated Certificate of Incorporation of Avon, filed with the
Secretary of State of the State of New York on August 12, 1988
(incorporated by reference to Exhibit 3.1 to Avon's Annual
Report on Form 10-K for the year ended December 31, 1993).

3.2 --By-laws, as amended to April 27, 1990, of Avon (incorporated
by reference to Exhibit 3.1 to Avon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1990).

4.1 --Instrument defining the rights of holders of Avon's preferred
share purchase rights to purchase Avon's Series A Junior
Participating Preferred Stock (reference is made to Article
IIIA of the restated Certificate of Incorporation of Avon,
filed with the Secretary of State of New York State on August
12, 1988 and included as Exhibit 3.1 to the 1993 Annual Report
on Form 10-K).

4.2 --Rights Agreement, dated as of March 30, 1988 (the "Rights
Agreement"), between Avon and First Chicago Trust Company of
New York (as successor to Morgan Shareholder Services Trust
Company) (incorporated by reference to Exhibit 1 to Avon's
Registration Statement on Form 8-A, filed April 7, 1988).

4.3 --Amendment, dated as of January 3, 1989, to the Rights
Agreement (incorporated by reference to Exhibit 3 to Avon's
Amendment No. 1 on Form 8, filed January 4, 1989, amending its
Registration Statement on Form 8-A, filed April 7, 1988).

4.4 --Second Amendment, dated as of April 5, 1990, to the Rights
Agreement (incorporated by reference to Exhibit 4(c) to Avon's
Current Report on Form 8-K, dated April 5, 1990).

4.5 --Third Amendment, dated as of May 10, 1990, to the Rights
Agreement (incorporated by reference to Exhibit 4(d) to Avon's
Current Report on Form 8-K, dated May 10, 1990).

4.6 --Revolving Credit and Competitive Advance Facility Agreement,
dated as of October 5, 1994, among Avon, Avon Capital
Corporation and a group of banks and other lenders
(incorporated by reference to Exhibit 4.1 to Avon's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994).

10.1* --Avon Products, Inc. 1993 Stock Incentive Plan, approved by
stockholders May 6, 1993 (incorporated by reference to Exhibit
10.2 to Avon's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993).

<PAGE>13

10.2* --Form of Stock Option Agreement to the Avon Products, Inc. 1993
Stock Incentive Plan (incorporated by reference to Exhibit
10.2 to Avon's Annual Report on Form 10-K for the year ended
December 31, 1993).

10.3* --Avon Products, Inc. 1994 Long-Term Incentive Plan, effective
as of January 1, 1994 (incorporated by reference to Exhibit
10.3 to Avon's Annual Report on Form 10-K for the year ended
December 31, 1993).

10.4* --Avon Products, Inc. 1970 Stock Option Incentive Plan, as
amended and restated through May 4, 1989 (incorporated by
reference to Exhibit 4.6 to Avon's Registration Statement on
Form S-8, Registration No. 33-28653, filed May 18, 1989).

10.5* --First Amendment, dated as of November 5, 1992, to the Avon
Products, Inc. 1970 Stock Option Incentive Plan as amended
and restated through May 4, 1989 (incorporated by reference to
Exhibit 10.1 to Avon's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993).

10.6* --Supplemental Executive Retirement Plan and Supplemental Life
Plan of Avon Products, Inc., as amended and restated as of
September 1, 1994.

10.7* --Benefit Restoration Pension Plan of Avon Products, Inc.,
effective as of January 1, 1994.

10.8* --Trust Agreement, amended and restated as of March 2, 1990,
between Avon and Chase Manhattan Bank, N.A. (incorporated by
reference to Exhibit 10.2 to Avon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1990).

10.9* --First Amendment, dated as of January 30, 1992, to the Trust
Agreement, dated as of March 2, 1990, by and between Avon and
Chase Manhattan Bank, N.A. (incorporated by reference to
Exhibit 10.2 to Avon's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993).

10.10* --Second Amendment, dated as of June 12, 1992 to the Trust
Agreement, dated as of March 2, 1990, by and between Avon and
Chase Manhattan Bank, N.A. (incorporated by reference to
Exhibit 10.3 to Avon's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993).

10.11* --Third Amendment, dated as of November 5, 1992, to the Trust
Agreement, dated as of March 2, 1990, by and between Avon and
Chase Manhattan Bank, N.A. (incorporated by reference to
Exhibit 10.4 to Avon's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993).

10.12* --The Avon Products, Inc. Deferred Compensation Plan, as amended
and restated as of October 8, 1990 (incorporated by reference
to Exhibit 10.5 to Avon's Annual Report on Form 10-K for the
year ended December 31, 1991).

<PAGE>14

10.13* --First Amendment, dated as of November 5, 1992, to the Avon
Products, Inc. Deferred Compensation Plan, as amended and
restated as of October 8, 1990 (incorporated by reference to
Exhibit 10.5 to Avon's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993).

10.14* --Trust Agreement, dated as of August 3, 1989, between Avon and
Manufacturers Hanover Trust Company (incorporated by reference
to Exhibit 10.4 to Avon's Annual Report of Form 10-K for the
year ended December 31, 1989).

10.15* --Instrument of Amendment, effective as of April 1, 1990
amending various employee benefit plans and agreements as
stipulated in the Instrument of Amendment (incorporated by
reference to Exhibit 10.3 to Avon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1990).

10.16* --Employment Agreement, dated as of November 5, 1992, between
Avon and James E. Preston (incorporated by reference to
Exhibit 10.10 to Avon's Annual Report on Form 10-K for the
year ended December 31, 1992).

10.17* --Non-Qualified Stock Option Award, dated as of December 5,
1991, granted by Avon to James E. Preston (incorporated by
reference to Exhibit 10.11 to Avon's Annual Report on Form
10-K for the year ended December 31, 1991).

10.18* --Employment Agreement, dated as of September 1, 1994, between
Avon and Edward J. Robinson (incorporated by reference to
Exhibit 10.1 to Avon's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994).

10.19* --Restricted Stock Agreement, effective as of November 4, 1993,
granted by Avon to Edward J. Robinson (incorporated by
reference to Exhibit 10.21 to Avon's Annual Report on Form
10-K for the year ended December 31, 1993).

10.20* --Form of Employment Agreement, dated as of September 1, 1994,
between Avon and certain senior officers (incorporated by
reference to Exhibit 10.2 to Avon's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1994).

10.21* --Avon Products, Inc. Directors' Retirement Plan, effective as
of January 1, 1988 (incorporated by reference to Exhibit 10.22
to Avon's Annual Report on Form 10-K for the year ended
December 31, 1991).

10.22* --First Amendment, dated as of November 5, 1992, to the Avon
Products, Inc. Directors' Retirement Plan (incorporated by
reference to Exhibit 10.6 to Avon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1993).

10.23* --Trust Agreement, dated as of December 31, 1991, between Avon
and Manufacturers Hanover Trust Company (incorporated by
reference to Exhibit 10.23 to Avon's Annual Report on Form
10-K for the year ended December 31, 1991).

<PAGE>15

10.24* --First Amendment, dated as of November 5, 1992, to the Trust
Agreement dated as of December 31, 1991, by and between Avon
and Manufacturers Hanover Trust Company (incorporated by
reference to Exhibit 10.7 to Avon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1993).

11.1 --Statement re computation of primary income per share.

11.2 --Statement re computation of fully diluted income per share.

13 --Portions of the Annual Report to Shareholders for the year
ended December 31, 1994 incorporated by reference in response
to Items 1, 5 through 8 in this filing.

21 --Subsidiaries of the registrant.

23 --Consent of Coopers & Lybrand L.L.P. (set forth on page S-2 of
this Annual Report on Form 10-K).

24 --Power of Attorney.

27 --Financial Data Schedule.

99 --Financial statements for the Avon Products, Inc. Employees'
Savings and Stock Ownership Plan and the Avon Mirabella/
Lomalinda Employees' Savings Plan for the year ended December
31, 1994 will be filed by amendment.

*The Exhibits identified above and in the Exhibit Index with an asterisk
(*) are management contracts or compensatory plans or arrangements.

(b) Reports on Form 8-K

There were no reports on Form 8-K filed during the fourth quarter of
1994.

(c) Avon's Annual Report on Form 10-K for the year ended December 31,
1994, at the time of filing with the Securities and Exchange Commission, shall
modify and supersede all prior documents filed pursuant to Section 13, 14 or
15(d) of the Securities Exchange Act of 1934 for purposes of any offers or
sales of any securities after the date of such filing pursuant to any
Registration Statement or Prospectus filed pursuant to the Securities Act of
1933, which incorporates by reference such Annual Report on Form 10-K.

<PAGE>16
SIGNATURES

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, on the 23rd day
of March 1995.

Avon Products, Inc.

By/s/ WARD M. MILLER, JR.
--------------------------------
Ward M. Miller, Jr.
Senior Vice President, General Counsel
and Secretary

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 dates indicated.

Signature Title Date
--------- ----- ----
Chairman of the Board and
Chief Executive Officer--
* Principal Executive
--------------------------- Officer and Director March 23, 1995
James E. Preston

* President, Chief Operating
--------------------------- Officer and Director March 23, 1995
Edward J. Robinson

Senior Vice President and
* Chief Financial Officer--
--------------------------- Principal Financial Officer March 23, 1995
Edwina D. Woodbury

Group Vice President,
* Controller--Principal
--------------------------- Accounting Officer March 23, 1995
Robert J. Conologue

BRENDA BARNES )
RICHARD S. BARTON* )
DANIEL B. BURKE* )
REMEDIOS DIAZ OLIVER* )
STANLEY C. GAULT )
GEORGE V. GRUNE* ) Directors March 23, 1995
CHARLES S. LOCKE* )
ANN S. MOORE* )
JOHN J. PHELAN, JR.* )
JOSEPH A. RICE* )
CECILY C. SELBY* )

*By/s/ WARD M. MILLER, JR.
------------------------------- March 23, 1995
Ward M. Miller, Jr. Attorney-in-fact

<PAGE>S-1

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders of Avon Products, Inc.

Our report on the consolidated financial statements of Avon Products, Inc.
and subsidiaries as of December 31, 1994 and 1993 and for each of the years in
the three-year period ended December 31, 1994 has been incorporated by
reference in this Form 10-K from page 51 of the 1994 Annual Report to
Shareholders of Avon Products, Inc. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedules for each of the years in the three-year period ended December 31,
1994, as listed in the Index under Item 14(a)2 of this Form 10-K.

In our opinion, the financial statement schedule for each of the years in
the three-year period ended December 31, 1994 referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.

New York, New York
February 1, 1995

/s/Coopers & Lybrand L.L.P.

S-1

<PAGE>S-2

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the following Registration
Statements of Avon Products, Inc.: Form S-8 (Reg. No. 2-37955), Form S-8
(Reg. No. 2-48080), Form S-8 (Reg. No. 2-61285), Form S-8 (Reg. No. 2-83235),
Form S-8 (Reg. No. 2-94959), Form S-8 (Reg. No. 33-28653), Form S-8 (Reg. No.
33-47209), Form S-8 (Reg. No. 33-60218), Form S-8 (Reg. No. 33-60918), Form
S-8 (Reg. No. 33-65998), Post Effective Amendment No. 1 to Form S-8 (Reg. No.
2-98707), Pre-Effective Amendment No. 1 to Form S-8 (Reg. No. 33-22099),
of our reports dated February 1, 1995 on our audits of (i) the consolidated
financial statements of Avon Products, Inc. as of December 31, 1994 and 1993
and for each of the years in the three-year period ended December 31, 1994,
which report is included in the 1994 Annual Report to Shareholders and
incorporated by reference in this Annual Report on Form 10-K and (ii) the
1994, 1993 and 1992 financial statement schedules of Avon Products, Inc.,
which report is included in this Annual Report on Form 10-K.

New York, New York
March 23, 1995

/s/Coopers & Lybrand L.L.P.

S-2

<PAGE>S-3

AVON PRODUCTS, INC. AND SUBSIDIARIES

SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
(In millions)

Years ended December 31

Additions
--------------------
Balance at Charged to Charged Balance
beginning costs and to other at end
of period expenses accounts Deductions of period
---------- ---------- -------- ---------- ---------

1994
Allowance for doubtful
accounts receivable. $22.0 $ 64.9 $ -- $ 59.6(a) $27.3
===== ====== ===== ====== =====

1993
Allowance for doubtful
accounts receivable. $21.4 $ 51.4 $ -- $ 50.8(a) $22.0
===== ====== ===== ====== =====

1992
Allowance for doubtful
accounts receivable. $28.5 $ 45.3 $ -- $ 52.4(a) $21.4

Allowance for long-
term receivables
and investments..... 33.1 -- -- 33.1(b) --
----- ------ ----- ------ -----

$61.6 $ 45.3 $ -- $ 85.5 $21.4
===== ====== ===== ====== =====

------------
Note: Amounts have been restated for the sale of Giorgio, see Note 3 of the
Notes to the Consolidated Financial Statements.

(a)Accounts written off, net of recoveries and foreign currency translation
adjustment.

(b)Write-off of various notes and other securities, which Avon received in
connection with the sale of health care and other businesses.

S-3

<PAGE>
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

For the fiscal year ended December 31, 1994 Commission file number 1-4881

____________

AVON PRODUCTS, INC.

(Exact name of registrant as specified in its charter)

____________

EXHIBITS

<PAGE>

INDEX TO EXHIBITS

Exhibit
Number Description
------- -----------

3.2 --By-laws, as amended to April 27, 1990, of Avon (incorporated
by reference to Exhibit 3.1 to Avon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1990).

4.4 --Second Amendment, dated as of April 5, 1990, to the Rights
Agreement (incorporated by reference to Exhibit 4(c) to Avon's
Current Report on Form 8-K, dated April 5, 1990).

4.5 --Third Amendment, dated as of May 10, 1990, to the Rights
Agreement (incorporated by reference to Exhibit 4(d) to Avon's
Current Report on Form 8-K, dated May 10, 1990).

<PAGE>

Exhibit
Number Description
------- -----------

10.6* --Supplemental Executive Retirement Plan and Supplemental Life
Plan of Avon Products, Inc., as amended and restated as of
September 1, 1994.

10.7* --Benefit Restoration Pension Plan of Avon Products, Inc.,
effective as of January 1, 1994.

<PAGE>

Exhibit
Number Description
------- -----------

<PAGE>

Exhibit
Number Description
------- -----------

11.1 --Statement re computation of primary income per share.

11.2 --Statement re computation of fully diluted income per share.

13 --Portions of the Annual Report to Shareholders for the year
ended December 31, 1994 incorporated by reference in response
to Items 1, 5 through 8 in this filing.

21 --Subsidiaries of the registrant.

23 --Consent of Coopers & Lybrand L.L.P. (set forth on page S-2 of
this Annual Report on Form 10-K).

24 --Power of Attorney.

27 --Financial Data Schedule.

*The Exhibits identified above and in the Exhibit Index with an asterisk
(*) are management contracts or compensatory plans or arrangements.

<PAGE>

EXHIBIT 10.2

<PAGE>

Exhibit 10.2

Form of Employment Agreement, dated as of September 1, 1994 between Avon
Products, Inc. and certain senior officers (incorporated by reference to
Exhibit 10.2 to Avon's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994).

Avon has an employment agreement with each of the following senior
officers:

Christina Gold
Susan Kropf
Ward Miller, Jr.
John Novosad
Edwina Woodbury
Marcia Worthing

<PAGE>

EXHIBIT 10.6
<PAGE>

SUPPLEMENTAL EXECUTIVE

RETIREMENT AND LIFE PLAN

AVON PRODUCTS, INC.

AMENDED AND RESTATED AS OF SEPTEMBER 1, 1994

<PAGE>

TABLE OF CONTENTS

PAGE

SECTION 1
INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . 1

SECTION 2
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1

SECTION 3
PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . 8

SECTION 4
SUPPLEMENTAL RETIREMENT ALLOWANCES. . . . . . . . . . . . 9

SECTION 5
SURVIVOR RETIREMENT ALLOWANCES. . . . . . . . . . . . . . 12

SECTION 6
SUPPLEMENTAL LIFE ALLOWANCES. . . . . . . . . . . . . . . 15

SECTION 7
FORMS OF PAYMENT. . . . . . . . . . . . . . . . . . . . . 17

SECTION 8
ADMINISTRATION OF THE PLAN. . . . . . . . . . . . . . . . 18

SECTION 9
CERTAIN RIGHTS AND LIMITATIONS. . . . . . . . . . . . . . 19

SECTION 10
AMENDMENT AND TERMINATION OF THE PLAN . . . . . . . . . . 21

SECTION 11
CLAIM PROCEDURES. . . . . . . . . . . . . . . . . . . . . 25

SECTION 1
INTRODUCTION

Avon Products, Inc. (the "Company") adopted the Supplemental
Executive Retirement Plan and Supplemental Life Plan of Avon Products,
Inc., originally effective as of January 1, 1982, and last amended and
restated such plan as of July 1, 1991. The Company now wishes to merge
the Supplemental Life Plan of Avon Products, Inc., which was established
effective January 1, 1990, into the Supplemental Executive Retirement
Plan and Supplemental Life Plan of Avon Products, Inc., effective as of
January 1, 1995 and to rename such plan the "Supplemental Executive
Retirement and Life Plan of Avon Products, Inc." (the "Plan"). The
terms and conditions of participation and benefits under the Plan are
set out in this document. The Plan provides additional retirement
income and death benefit protection to elected or appointed officers of
the Company and to selected other employees of the Company and its
Subsidiaries in recognition of their contribution to the Company in
carrying out senior management responsibilities.

The Company intends to maintain the Plan indefinitely and,
in order to afford Plan Participants and their Beneficiaries the
maximum security, has established a grantor trust (the "Trust")
to aid it in accumulating the amounts necessary to satisfy its
contractual liability to pay certain benefits under the terms of
the Plan. The Plan provides for the Company to pay all benefits
and administrative costs from its general assets to the extent
not paid by the Trust. The establishment of the Trust shall not
convey rights to the Participants which are greater than those of
the general creditors of the Company and shall not affect the
Company's continuing liability to pay Plan benefits and
administrative costs, except that the Company's liability shall
be offset by actual benefits and administrative cost payments, if
any, made by the Trust.

SECTION 2
DEFINITIONS

As used in this Plan, the masculine pronoun shall include
the feminine and the feminine pronoun shall include the masculine
unless otherwise specifically indicated. In addition, the
following words and phrases as used in this Plan shall have the
following meaning unless a different meaning is plainly required
by the context:

2.1 "Actuarial Equivalent" shall mean a benefit of
equivalent value, when computed on the basis of the same
mortality table and the rate or rates of interest and/or the
empirical tables which are being used to determine the
Participant's benefit under the Retirement Plan. However, in the
case of lump sum distributions of a Participant's Supplemental
Retirement Allowance, the conversion factor used to determine the
Actuarial Equivalent shall be the same as specified in Section
(e) of Appendix I of the Retirement Plan, except that (A) clauses
(i) and (ii) of such Section (e) shall be inapplicable, and (B)
the applicable interest rate with regard to any Participant shall
not be greater than the lowest rate in effect at any time on or
after the date the Participant attains age 60, if the sum of the
Participant's age and Creditable Service is at least 85 years.
<PAGE 2>
2.2 "Annual Benefit Offset" shall mean the aggregate annual
retirement allowance which would have been payable to a
Participant under the Retirement Plan and the Other Plans,
expressed in the form of (A) a joint and 50% survivor annuity with the
Participant's spouse as the survivor annuitant, if the Participant is
married on the date the Supplemental Retirement Allowance is payable
under Plan Section 4, or (B) a single life annuity if the Participant
is not married on that date, which form of benefit shall be the
Actuarial Equivalent of the aggregate benefits which would be payable
under such plans if they commenced on the same date as the Supplemental
Retirement Allowance.

2.3 "Average Final Compensation" shall mean the average annual
Compensation of a Participant during the three years of theParticipant's
last 10 years of Creditable Service in which the Participant's
Compensation was highest. If a Participant has less than three years
of Creditable Service, Average Final Compensation shall be computed over
all such years.

2.4 "Beneficiary" shall mean the person or persons designated by
aParticipant as beneficiary in a time and manner determined by the
Retirement Board. If the Participant fails to designate a beneficiary
or if the beneficiary predeceases the Participant, the Participant's
spouse shall be the beneficiary, or if no spouse survives the
Participant, the Participant's estate shall be the beneficiary. A
Participant may change hisdesignated beneficiary at the time and in the
manner determined by the Retirement Board.

2.5 "Board of Directors" shall mean the Board of Directors
of Avon Products, Inc.

2.6 "Change of Control" shall mean:

(a) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of voting securities
of the corporation where such acquisition causes such person to own
20% or more of the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this
Subsection (a), the following acquisitions shall not be deemed to
result in a Change of Control: (i) any acquisition directly
from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company or (iv) any acquisition by any
corporation pursuant to a transaction that complies with
clauses (i), (ii) and (iii) of Subsection (c) below; and
provided, further, that if any Person's beneficial ownership
of the Outstanding Company Voting Securities reaches or
exceeds 20% as a result of a transaction described in clause
(i) or (ii) above, and such Person subsequently acquires
beneficial ownership of additional voting securities of the
Company, such subsequent acquisition shall be treated as an
acquisition that causes such Person to own 20% or more of
the Outstanding Company Voting Securities; or
<PAGE 3>
(b) individuals who as of the date hereof, constitute
the Board of Directors (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of
Directors; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was
approved by a vote of at least two-thirds of the directors
then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual
or threatened election contest with respect to the election
or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board of Directors; or

(c) the approval by the shareholders of the Company of
a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the
Company ("Business Combination") or, if consummation of such
Business Combination is subject, at the time of such
approval by shareholders, to the consent of any government
or governmental agency, the obtaining of such consent
(either explicitly or implicitly by consummation);
excluding, however, such a Business Combination pursuant to
which (i) all or substantially all of the individuals and
entities who were the beneficial owners of the Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation, a corporation that as a
result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Voting
Securities, (ii) no Person (excluding any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership
existed prior to the Business Combination and (iii) at least
a majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board of Directors at the time of
the execution of the initial agreement, or of the action of
the Board of Directors, providing for such Business
Combination; or

(d) approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.

Notwithstanding the foregoing, no Change of Control shall be
deemed to have occurred with respect to any individual by reason
of any actions or events in which such individual participates in
a capacity other than in his or her capacity as an officer or
employee of the Company (or as a director of the Company or a
Subsidiary, where applicable).

2.7 "Company" shall mean Avon Products, Inc.

2.8 "Compensation" shall mean the regular salary or wages
paid to an Active Participant or deferred for services rendered
to the Company or a Subsidiary during any year in which the
Participant accrues Creditable Service, including any deferrals
under a 401(k) plan or salary reduction under a 125 plan of the
Company or a Subsidiary, plus any bonus payable to an employee
(disregarding any election to defer the receipt thereof) under
the Management Incentive Plan and Variable Incentive Plan or any
similar or successor plan for services performed during the prior
year. Compensation shall not include special termination or
severance payments or benefits, whether characterized as such,
made pursuant to any employment agreement, separation agreement,
severance plan or policy or any similar arrangement, unless such
agreement, plan, policy or arrangement provides that the special
termination or severance payments or benefits are to be included
as Compensation under the Plan.

Notwithstanding the foregoing, with respect to any period of
absence (during which disability benefits are being paid to the
Participant under the Company's Short Term or Long Term
Disability Plan) which is included as Creditable Service, the
Participant's annual Compensation for purposes of the Plan during
such period of absence shall be deemed to be the greater of (i)
his Compensation in the last full calendar year of his employment
immediately preceding the beginning of such absence, or (ii) the
actual Compensation he received in the year the absence began.

2.9 "Compensation Committee" means the Compensation
Committee appointed by the Board of Directors.

2.10 "Creditable Service" shall mean:

(a) The total number of years and completed months of
service rendered by an Active Participant as an employee of
the Company or any Subsidiary;

(b) Periods of authorized leaves of absence from the
Company or a Subsidiary approved by the Retirement Board,
including but not limited to leaves required to be granted
pursuant to the Family and Medical Leave Act of 1993 and the
Uniformed Services Employment and Reemployment Rights Act,
and, notwithstanding any other provision of this Plan to the
contrary, any period of absence while disability benefits
are being paid to the Participant under the Company's Short
Term or Long Term Disability Plans;

(c) Any prior Creditable Service under this Plan
rendered by an employee who was formerly a Participant and
who subsequently becomes a new Active Participant pursuant
to Plan Section 3.1 or 3.2;

(d) Service which is recognized for purposes of the
Plan by reason of any Outside Agreement. To the extent
Creditable Service is recognized under an Outside Agreement
for purposes of eligibility for the Supplemental Retirement
Allowance, it shall also be recognized for purposes of the
Supplemental Life Allowance unless otherwise specifically
provided in such Outside Agreement; and

(e) Solely for purposes of determining the time for
the commencement of benefits under the SERP, a Vested or
Frozen Participant shall continue to earn Creditable Service
during the period in which he is an employee of the Company
or a Subsidiary.

Subject to approval by the Compensation Committee, a
Participant may be granted additional years of Creditable Service
either for purposes of determining the amount of allowance under
the Plan or for purposes of satisfying the service requirements
necessary for benefits under the Plan, or both. Additional
service granted under a specific provision of the Plan or under
provisions of individual contracts with the Participant or under
any severance plan or policy of the Company covering the
Participant shall also be included in determining Creditable
Service, but only in accordance with the specific terms of such
provisions.

2.11 "Dependent Child" shall mean any unmarried child of the
Participant who has not attained age 21, or any unmarried child
of the Participant regardless of the child's age, if the child
becomes incapacitated prior to attaining age 19; provided,
however, that such incapacitated child shall cease to be a
Dependent Child at the later of the date the child attains age 21
or ceases to be incapacitated. The term child shall include a
child born of the Participant, a child legally adopted by the
Participant, and a stepchild of the Participant, in each instance
living with the Participant in a normal parent-child
relationship.

2.12 "Dependent Children's Allowance" shall mean the benefit
payable to the Dependent Children of certain Participants
pursuant to the SERP and as described in Plan Section 5.3.

2.13 "Nonforfeitable" shall refer only to the vested
unsecured contractual right of a Participant, his Surviving
Spouse and his Dependent Children, if any, to benefits under this
Plan. In no event, however, shall "Nonforfeitable" imply any
preferred claim on, or any beneficial ownership interest in, any
assets of the Company before those assets are paid to any
individual pursuant to the terms of the Plan. As provided in
Plan Section 9.5, certain events may result in the forfeiture
even of Nonforfeitable benefits.

2.14 "Normal Retirement Age" shall mean age 65.
<PAGE 6>
2.15 "Other Plans" shall mean the employer-provided portion
of any defined benefit pension plan sponsored by the Company
(other than the Retirement Plan) or any Subsidiary and of any
retirement or pension allowance (but not any form of severance or
special termination payment) set forth and payable pursuant to
any employment contract or any other agreement (other than an
individual deferred compensation contract under which elective
employee salary or bonus deferrals are made) between the
Participant and the Company or a Subsidiary.

The term "Other Plans" shall also include the employer-
provided portion of any other pension or retirement plans
sponsored by the predecessor employer of a Participant and of any
retirement or pension allowance (but not any form of severance or
special termination payment) set forth and payable pursuant to
any employment contract or any other agreement (other than an
individual deferred compensation contract under which elective
employee salary or bonus deferrals are made) between the
Participant and the predecessor employer of a Participant
providing for benefits attributable in whole or in part to
service which is recognized under the Plan as Creditable Service.

Notwithstanding the foregoing, the employer-provided portion
of the benefits paid or payable to or on behalf of a Participant
pursuant to Other Plans shall only include a proportionate share
of such benefits based on the ratio by which the portion of the
service recognized under the Other Plan which is recognized as
Creditable Service bears to the total service recognized under
the Other Plan.

2.16 "Outside Agreement" shall mean a written agreement
entered into between a duly authorized officer of the Company
with authority to act in the matter and a Participant which
recognizes any period of time prior to the commencement of such
Participant's employment with the Company as service for purposes
of certain retirement or other benefits or modifies any of the
benefits or provisions of the Plan.

2.17 "Participant" shall mean any Active Participant, Vested
Participant, Frozen Participant or Retired Participant.

(a) "Active Participant" shall mean an employee from
the time participation in the Plan begins pursuant to Plan
Section 3 until the earliest of the time:

(i) the Participant retires,

(ii) the Participant dies,

(iii) the Participant terminates employment with
the Company and its Subsidiaries, or

(iv) the Plan is terminated.

<PAGE 7>
In addition, if a Participant is placed on inactive employee
status, as defined by the Retirement Board from time to time
under uniform and nondiscriminatory rules, and, at the date
of such change in status, the Participant has attained age
62 or the sum of the Participant's age and years of
Creditable Service total at least 80 years, the Participant
will continue as an Active Participant in the Plan.

(b) "Retired Participant" shall mean a former employee
who has retired on or after meeting the requirements for a
Supplemental Retirement Allowance under Plan Section 4.1.

(c) "Vested Participant" shall mean an employee or
former employee of the Company or Subsidiary who ceased to
be an Active Participant, who has not become a Retired
Participant and who, immediately after ceasing to be an
Active Participant, has a Nonforfeitable right to benefits
under Plan Section 10.

2.18 "Plan" shall mean this Supplemental Executive
Retirement and Life Plan of Avon Products, Inc., as from time to
time amended.

2.19 "Pre-Retirement Spouse's Allowance" shall mean the
benefit payable to the Surviving Spouse of certain Participants,
pursuant to the SERP and as described in Plan Section 5.1.

2.20 "Post Retirement Spouse's Allowance" shall mean the
benefit payable to the Surviving Spouse of certain Participants
pursuant to the SERP and as described in Plan Section 5.2.

2.21 "Retirement Board" shall mean the person or persons
appointed to administer the Plan as provided in Plan Section 8.

2.22 "Retirement Plan" shall mean the Employees' Retirement
Plan of Avon Products, Inc., as amended from time to time.

2.23 "SERP" shall mean the portion of the Plan pursuant to
which Supplemental Retirement Allowances, Pre-Retirement Spouse's
Allowances, Post-Retirement Spouse's Allowances and Dependent
Children's Allowances are payable.

2.24 "SLIP" shall mean the portion of the Plan pursuant to
which Supplemental Life Allowances are payable.

2.25 "Subsidiary" shall mean any majority-owned subsidiary
of the Company.

2.26 "Supplemental Life Allowance" shall mean the benefit
referred to in Plan Section 6.

<PAGE 8>
2.27 "Supplemental Retirement Allowance" shall mean the
benefit referred to in Plan Section 4.

2.28 "Surviving Spouse" shall mean the spouse to whom the
Participant was married on the date the Participant's
Supplemental Retirement Allowance commenced under this Plan or on
the Participant's date of death, if earlier.

SECTION 3
PARTICIPATION

3.1 Commencement of SERP Participation.

(a) Each individual who was a Participant in the SERP
as of August 31, 1994, shall be a Participant in the SERP on
September 1, 1994. A listing of Participants in the SERP as
of January 1, 1995 is attached to the Plan as Appendix A,
which Appendix may thereafter be updated from time to time,
provided that all updates shall be attested by the
signatures of two members of the Retirement Board.

(b) All officers of the Company as of September 1,
1994, on the U.S. payroll at the level of Senior Vice
President or above who are covered by individual employment
agreements with the Company approved by the Board of
Directors are Active Participants in the SERP.

(c) The Compensation Committee shall have the
authority to include as Active Participants in the SERP such
other management or highly compensated employees of the
Company or a Subsidiary (within the meaning of Section
201(2) of the Employee Retirement Income Security Act of
1974, as amended) as it deems fit.

3.2 Commencement of SLIP Participation.

Any employee who is an Active Participant in the SERP shall
also be an Active Participant in the SLIP.

3.3 Termination of SERP Participation.

When an individual ceases to be an Active Participant (as
defined in Section 2.17(a) hereof), he shall cease to be a
Participant and shall have no rights to a Supplemental Retirement
Allowance unless he is a Vested Participant or a Retired
Participant.

<PAGE 9>
3.4 Termination of SLIP Participation.

(a) If an individual who first became a Participant
prior to January 1, 1990, ceases to be an Active
Participant, he shall continue to be a Participant in the
SLIP if he is eligible for a Supplemental Life Allowance in
accordance with the provisions of Plan Section 6.

(b) If an individual who first became a Participant on
or after January 1, 1990, ceases to be an Active
Participant, he shall cease to be a Participant in the SLIP
on the date he ceases to be an Active Participant.

SECTION 4
SUPPLEMENTAL RETIREMENT ALLOWANCES

4.1 Nonforfeitable Right to a Supplemental Retirement
Allowance.

(a) An Active Participant who attains Normal
Retirement Age shall have a Nonforfeitable right to benefits
under this Section 4, subject to the provisions of Plan
Section 9, and may retire and receive payment of a Normal
Retirement Allowance under the SERP. Payment of the Normal
Retirement Allowance shall commence not later than 30 days
after the later of the date the Participant actually retires
or attains age 65.

(b) An Active Participant who has attained age 55 and
has 15 or more years of Creditable Service, or whose
attained age plus his Creditable Service totals at least 85
years, shall have a Nonforfeitable right to benefits under
this Section 4 and may retire and apply for payment of an
Early Retirement Allowance under the SERP. Payment of the
Early Retirement Allowance shall commence on the first day
of the calendar month next following his date of retirement.

(c) An Active Participant who has attained age 58 and
completed 15 or more years of Creditable Service and who is
deemed to be suffering from a hardship, as determined in the
sole and unilateral discretion of the Retirement Board on a
case-by-case basis, shall have a Nonforfeitable right to
benefits under this Section 4 and may retire and apply for
payment of a Hardship Retirement Allowance. Payment of the
Hardship Retirement Allowance shall commence on the first
day of the month following the date the Participant's
application for retirement is approved by the Retirement
Board.

(d) Approval by the Retirement Board under this
Section 4 may be evidenced by the written consent of any two
members of such Board. In the event the Plan is amended or
terminated or in the event of a Change of Control of the
Company, Participants shall have the right to a Supplemental
Retirement Allowance pursuant to Plan Section 10.

<PAGE 10>
4.2 Amount of Normal Retirement Allowance.

(a) The annual Normal Retirement Allowance under the
SERP for Participants who have a Nonforfeitable right to
such an allowance pursuant to Plan Section 4.1(a) shall be
equal to:

(i) 2% of the Participant's Average Final
Compensation multiplied by the Participant's Creditable
Service up to 25 years; plus

(ii) 1% of the Participant's Average Final
Compensation multiplied by the Participant's Creditable
Service in excess of 25 years but not in excess of 35
years; less

(iii) the Annual Benefit Offset.

(b) Notwithstanding the provisions of Plan
Subsection 4.2(a), any Participant entitled to a benefit
pursuant to Plan Section 4.1(a) who (i) is or was an officer
of the Company as of January 1, 1995, at the level of Senior
Vice President or above, and covered by an individual
employment agreement with the Company which had been
approved by the Board of Directors or (ii) is or was a
senior executive designated by the Compensation Committee as
eligible to receive a minimum allowance, shall not receive
an annual Normal Retirement Allowance which, when added to
the Actuarial Equivalent of the benefit paid or payable to
such Participant under the Retirement Plan and Other Plans
(expressed as an annual benefit in the same form as the
benefit under Plan Section 4.2 is payable), is less than 50%
of the Participant's Average Final Compensation. Such
offset shall be calculated in a manner similar to that set
forth in the definition of Annual Benefit Offset.

4.3 Amount of Early Retirement Allowance.

(a) The annual Early Retirement Allowance under the SERP for
Participants who have a Nonforfeitable right to such an allowance
pursuant to Plan Section 4.1(b) shall be equal to the Normal
Retirement Allowance determined in accordance with Plan Subsection
4.2(a), based on the Participant's Average Final Compensation and
Creditable Service at the date of retirement; provided, however,
that if the Participant retires before the sum of suchParticipant's
age and Creditable Service is 85 years, the allowance shall be
calculated by determining the benefit without regard to the Annual
Benefit Offset, by reducing the benefit 3/12ths of 1% for each
month by which the date the allowance commences precedes the month
in which the Supplemental Retirement Allowance would have commenced
if the Participant retired at Normal Retirement Age and by
5/12ths of 1% for each such month in excess of 60 months and
by then applying the Annual Benefit Offset. The Early Retirement
Allowance payable to a Participant whose age and Creditable Service
total at least 85 years shall be equal to
the allowance determined in

<PAGE 11>
accordance with Plan Subsection
4.2(a) based on Average Final Compensation and Creditable
Service at the time of retirement without reduction for
commencement of payment prior to Normal Retirement Age;
provided, however, that if such allowance commences after
the first day of the calendar month following the month in
which the Participant retires, the allowance shall be
increased so that it is the Actuarial Equivalent of the
allowance payable as of the first day of the month following
the month in which the Participant retires.

(b) Notwithstanding the provisions of Plan Subsection
4.3(a) above, any Participant entitled to a benefit pursuant
to Plan Section 4.1(b) who has attained age 60 and completed
15 years of Creditable Service and who (i) is or was an
officer of the Company as of January 1, 1995, at the level
of Senior Vice President or above, and covered by an
individual employment agreement with the Company which had
been approved by the Board of Directors or (ii) is or was a
senior executive designated by the Compensation Committee as
eligible to receive a minimum allowance, shall not receive
an annual Early Retirement Allowance which, when added to
the Actuarial Equivalent of any retirement allowance paid or
payable to such Participant under the Retirement Plan and
any Other Plans (expressed as an annual benefit in the same
form as the benefit payable pursuant to this Plan Section
4.3) is less than 50% of the Participant's Average Final
Compensation, reduced by 4/12ths of 1% for each month by
which the Participant's date of retirement precedes Normal
Retirement Age; provided, however, that if such allowance
commences after the first day of the calendar month
following the month in which the Participant retires, the
allowance shall be increased so that it is the Actuarial
Equivalent of the allowance payable as of the first day of
the month following the month in which the Participant
retires. The offset described in the immediately preceding
sentence shall be calculated in a manner similar to that set
forth in the definition of the Annual Benefit Offset.

4.4 Amount of Hardship Retirement Allowance.

The annual Hardship Retirement Allowance under the SERP for
Participants who have a Nonforfeitable right to such an allowance
pursuant to Plan Section 4.1(c) or 4.1(d) shall be equal to the
Normal Retirement Allowance determined in Plan Subsection 4.2(a),
based on the Participant's Average Final Compensation and
Creditable Service at the date of retirement; provided, however,
such allowance shall in no event be less than the Early
Retirement Allowance to which such Participant would be entitled
upon retirement under Plan Subsection 4.3(b), if applicable.

4.5 Restoration of Retired Participants to Service.

Anything contained in this Plan to the contrary
notwithstanding, if a Participant who has received or is
receiving a Supplemental Retirement Allowance again becomes an
employee of the Company or a Subsidiary, any retirement allowance
payable under this Plan shall cease upon

reemployment and such allowance shall commence to be paid when the
Participant again retires. On subsequent retirement, the Supplemental
Retirement Allowance payable to such Participant shall be based on
Compensation and Creditable Service before and after the period of prior
retirement, reduced by an amount which is the Actuarial Equivalent of
the benefits the Participant received prior to reemployment; provided,
however, that such benefit shall not be less than the benefit the
Participant was receiving during prior retirement.

4.6 Outside Agreements.

(a) To the extent an Outside Agreement provides for a
benefit in addition to (or on the terms and conditions
different from) any benefit otherwise payable under the
Plan, such benefit under such Outside Agreement shall be
deemed to be, and shall be, payable under this Plan.

(b) Nothing in Plan Subsection (a) above shall be
construed to limit any rights of any Participant under an
Outside Agreement, except that any benefits paid hereunder
pursuant to this Plan Section 4.6 shall be offset against
any amounts payable with respect to any substantially
similar obligations under the Outside Agreement so as to
avoid duplication of payment.

SECTION 5
SURVIVOR RETIREMENT ALLOWANCES

5.1 Pre-Retirement Spouse's Allowance.

(a) If, prior to receipt of a Supplemental Retirement
Allowance, a Participant dies while employed by the Company
or a Subsidiary and has at least 10 years of Creditable
Service, or has attained age 65, or dies while receiving
disability benefits under the Company's Short Term or Long
Term Disability Insurance Plans and after having completed
10 years of Creditable Service, or dies with Nonforfeitable
benefits under Plan Section 10, his Surviving Spouse shall
receive a Pre-Retirement Spouse's Allowance under the SERP
payable during the Surviving Spouse's remaining lifetime.

(b) Payment of the annual Pre-Retirement Spouse's
Allowance under the SERP shall commence as of the first day
of the calendar month following the month in which the
Participant died or would have attained age 55, whichever is
later. However, the Retirement Board may, under rules
uniformly applicable to all similarly situated, approve a
request made by a Surviving Spouse to commence payment on
the first day of any earlier calendar month after the
Participant's death ("early commencement date" hereafter).

<PAGE 13>
(c) If the Pre-Retirement Spouse's Allowance commences
as of the first day of the month following the month in
which the Participant died or would have attained age 55,
whichever is later, the Pre-Retirement Spouse's Allowance
shall be an annual allowance for the life of the spouse,
payable monthly, equal to the greater of:

(i) 20% of the Participant's annual rate of
Compensation at the time of his death or earlier
termination of employment, less the Actuarial
Equivalent of the amount of any spouse's allowance
(expressed as an annual amount payable for the life of
the spouse and commencing on the same date as the Pre-
Retirement Spouse's Allowance commences) paid or
payable on behalf of such Participant under the
Retirement Plan and any Other Plans, or

(ii) the allowance (based on the Participant's
Creditable Service as of his date of death) the
Surviving Spouse would have received if the Participant
had retired and begun to receive the Supplemental
Retirement Allowance in the form of a 100% joint and
survivor annuity on the date of death, or on the date
such Participant would have attained age 55, if later.

(d) If the Retirement Board approves an early
commencement date with respect to the Pre-Retirement
Spouse's Allowance under Plan Subsection (b) above, the Pre-
Retirement Spouse's Allowance shall be a monthly allowance
for the life of the Surviving Spouse and shall be equal to
the Pre-Retirement Spouse's Allowance the Surviving Spouse
would have received under Plan Subsection (c) above if the
Retirement Board had not approved the early commencement
date, reduced by 1/12th of 5% for each month by which the
date payments commence precedes the first day of the month
following the month in which the SERP Participant would have
attained age 55, provided that in no event shall such
reduced allowance be less than the Actuarial Equivalent of
the allowance otherwise payable under Plan Subsection (c)
above.

5.2 Post-Retirement Surviving Spouse's Allowance.

The Surviving Spouse of a Retired Participant who dies prior
to the commencement of a Supplemental Retirement Allowance will
receive a Post-Retirement Surviving Spouse's Allowance from the
Plan equal to 50% of the Supplemental Retirement Allowance the
Retired Participant would have been receiving if benefits had
commenced in the form provided for in Plan Section 7.1(b) on the
date of the Retired Participant's death. The Post-Retirement
Surviving Spouse's Allowance under the Plan shall begin on the
first day of the month following the Retired Participant's death
and shall be paid to the Surviving Spouse for such spouse's
remaining lifetime. The Surviving Spouse of a Retired
Participant who dies after the commencement of a Supplemental
Retirement Allowance under the SERP shall be entitled to receive
benefits from the SERP in accordance with the form of benefit
payable to the Retired Participant in accordance with the
provisions of Plan Section 7.
<PAGE 14>
5.3 Dependent Children's Allowance.

(a) Each Dependent Child, up to a maximum of four such
children, shall receive a Dependent Children's Allowance
from the SERP which is a yearly allowance equal to 10% of
the yearly amount of the spouse's allowance calculated under
Plan Section 5.1 or 5.2, whichever is applicable, at the
time of the Participant's death, plus 10% of the yearly
benefits which are payable to the Surviving Spouse under the
Retirement Plan and any Other Plan (based on the assumption
that benefits commence on the same date as benefits commence
hereunder).

(b) For purposes of Plan Subsection (a) above, if the
spouse predeceases the Participant, the allowance under Plan
Section 5.1 or 5.2 shall be determined as if the spouse had
not predeceased the Participant and as if yearly benefits
under the Retirement Plan and any Other Plan are payable to
such predeceased spouse and shall be based upon the spouse's
actuarially determined life expectancy as of the date of the
spouse's death.

(c) For purposes of Plan Subsection (a) above, in the
event that the Participant had no spouse, other than for the
reason that the spouse predeceased the Participant, the
allowance under Plan Section 5.1 or 5.2 shall be based upon
the assumption that the Participant had a spouse who was
five years younger than the Participant, that any yearly
benefits payable under the Retirement Plan and any Other
Plan are payable to such assumed spouse, and that the
spouse's allowance under Plan Section 5.1 or 5.2, whichever
is applicable, had commenced on the date of the
Participant's death.

(d) For purposes of Plan Subsection (a) above, in the
event the spouse of a Participant dies prior to commencement
of benefits under the Plan, the amount of the Dependent
Children's Allowance hereunder shall be determined on the
assumption that the spouse's allowance under Plan Section
5.1 or 5.2, whichever is applicable, had commenced on the
date of the spouse's death and that any yearly benefits
payable under the Retirement Plan and any Other Plan had
commenced on the date of the spouse's death.

(e) The Dependent Children's Allowance hereunder shall
commence on the day payment of the spouse's allowance
commences under the SERP, or the earliest date it could have
commenced had the spouse not predeceased the Participant, or
if the Participant had no spouse for any other reason, on
the earliest date it could have commenced had the
Participant had a spouse who was five years younger than the
Participant, and shall continue to be paid to each Dependent
Child until the earlier of the date such child ceases to be
a Dependent Child or dies.

(f) If there are more than four Dependent Children, the total
amount otherwise payable to four Dependent Children shall be
divided equally among all Dependent

<PAGE 15>
Children at the time such payment is made. When a child
ceases to be a Dependent Child or dies, the total allowance
then payable shall be reallocated among the remaining
Dependent Children to the extent applicable; provided,
however, that no Dependent Child shall be entitled to an
allowance in excess of the benefit set forth in Plan
Subsection (a) above.

5.4 Allowance to Spouse Not Reduced.

The amount of any allowance payable to a Surviving Spouse
under Plan Section 5.1 or 5.2 shall not be reduced due to the
payment of a benefit under the Plan to one or more Dependent
Children.

SECTION 6
SUPPLEMENTAL LIFE ALLOWANCES

6.1 Right to a Supplemental Life Allowance.

(a) A Participant becomes eligible for a Supplemental
Life Allowance payable to his Beneficiary if he dies:

(i) while an Active Participant who is either
employed by the Company or a Subsidiary or is receiving
a disability benefit under the Company's Short Term or
Long Term Disability Plans; or

(ii) while a Frozen Participant or a Retired
Participant, provided he became an Active Participant
in the SLIP prior to January 1, 1990;

(iii) while an employee, provided he became an
Active Participant in the SLIP prior to January 1,
1990, and was an Active Participant for at least five
(5) years;

(b) A Participant who became an Active Participant in
the SLIP prior to January 1, 1990, and is a Participant at
the time the Plan is terminated or modified or at the time
of a Change of Control will be entitled to a Supplemental
Life Allowance as provided in Plan Section 10.

(c) A Participant shall become Nonforfeitable in a
Supplemental Life Allowance only if he dies under one of the
circumstances described in Subsection (a) of this Section,
if he was an Active Participant in the Plan prior to January
1, 1990 and becomes Nonforfeitable in a Supplemental
Retirement Allowance or as provided in Section 10.

6.2 Amount of Supplemental Life Allowance.

(a) If a Participant has a right to a Supplemental Life
Allowance as described above, the Beneficiary of such Participant
shall receive a Supplemental Life Allowance payable upon the death
of a Participant, provided that such Participant has not made the
election described in Plan Section 6.4 or 6.5.

(b) The amount of the Supplemental Life Allowance shall be as
established by the Compensation Committee upon theParticipant's
commencement of participation in the Plan, except that the
Compensation Committee reserves the right to increase or reduce the
amount of such allowance from time to time, subject to the
provisions of Plan Section 10. Notwithstanding the foregoing, if
an Active Participant first became a Participant in the Plan prior
to January 1, 1990, his level of coverage under the SLIP may not be
reduced after he has been an Active Participant for at least two
years for so long as he remains an Active Participant. Further, if
a Participant has a right to a Supplemental Life Allowance pursuant
to Plan Section 6.1(a)(ii) or (iii), his benefit under the slip
will continue at the same level as in effect on the date preceding
the date he ceased to be an Active Participant.

6.3 Notwithstanding the foregoing, if the Company obtains a
life insurance policy (or policies) on the life of a Participant
whether or not in connection with this Plan and the insurer is
not obligated to pay the policy's death benefit proceeds on the
grounds that the Participant committed suicide or any other
grounds based on actions or inactions on the part of the
Participant, then and in that event, the Company's obligation to
make payments of a Supplemental Life Allowance shall be
terminated. The Company shall, in its sole discretion, determine
what steps are necessary and take such action as it deems
reasonably appropriate to pursue and obtain payment of any death
benefit under said policy or policies. Whatever steps are deemed
appropriate by the Company to pursue this matter shall be
conclusive. In no event shall any Participant have any ownership
interest in such policy or policies.

6.4 Notwithstanding the foregoing, a SLIP Participant may
elect not to be covered by the Supplemental Life Allowance
benefit provided under this Plan Section 6.

6.5 Subject to the terms and conditions imposed by the
Retirement Board any Participant who is eligible for the
Supplemental Life Allowance during the time such Participant is a
Retired Participant, may elect, subject to the approval of the
Retirement Board, to forego the Supplemental Life Allowance
coverage provided under this Plan Section 6 in exchange for a
paid-up whole life insurance policy or policies (based on the
application of dividends to pay premiums) on such Retired
Participant's life in an amount to be determined by the
Retirement Board. In the case of any such election, the Company
will also pay cash to such Retired Participant in an amount
sufficient to enable such Participant to pay any federal, state,
and local income taxes (calculated at the highest applicable
marginal rates) resulting from the distribution of such policy or
policies and the corresponding cash payment.
<Page 17>

6.6 If (a) a Participant terminates employment prior to
becoming a Retired Participant or (b) the Company has obtained a
life insurance policy on the life of such Participant to assist
it in meeting its obligations under this Plan, and (c) such
policy provides that it may be assigned, then if the Company
elects, the Participant may purchase such policy from the Company
on such terms and conditions as shall be determined by the
Retirement Board; provided, however, that in no event shall the
Company receive less than the amount of cash it could have
received had it surrendered such policy to the insurer.

SECTION 7
FORMS OF PAYMENT

7.1 Automatic Form.

(a) Except as otherwise provided for married
Participants pursuant to Plan Subsection 7.1(b), or unless
an optional form of retirement allowance has been requested
by the Participant under Plan Section 7.2 and approved by
the Retirement Board, the annual Supplemental Retirement
Allowance shall be payable in monthly installments for the
life of the Participant only, ending with the last monthly
payment during the month of the Participant's death.

(b) Unless an optional form of retirement allowance
has been requested by the Participant under Plan Section 7.2
and has been approved by the Retirement Board, the automatic
form of payment of a Supplemental Retirement Allowance to a
Participant who is married at the date the retirement
allowance begins shall be a joint and survivor benefit
payable to the Participant in the amount determined pursuant
to the applicable Subsection of Plan Section 4 payable
during the lifetime of the Participant with the provision
that after the Participant's death an annual Supplemental
Retirement Allowance shall be payable to the Surviving
Spouse of the Participant equal to one-half the Supplemental
Annual Retirement Allowance payable during the Participant's
life.

(c) Notwithstanding anything contained in Subsections
(a) and (b) of this Plan Section 7.1 to the contrary, if the
Actuarial Equivalent present value of any Supplemental
Retirement Allowance payable to a Participant (including the
value of any benefit payable to his Surviving Spouse after
his death) does not exceed $10,000, or such greater amount
as the Retirement Board shall from time to time determine
under rules of uniform applicability, the Company may pay
the Participant or Beneficiary a single lump sum payment.

(d) Notwithstanding anything contained in the Plan to
the contrary, on and after a Change of Control, the normal
form of Supplemental Retirement Allowance shall be a single
lump sum payment in cash.

7.2 Request for Optional Form.

(a) Any Participant (other than Participants who have
been cashed out by the Company pursuant to Plan Subsection
7.1(c) or 7.1(d)) may, by written notice received by a
member of the Retirement Board at least two months prior to
retirement or in the case of a Vested Participant, at least
two months prior to the due date of the first payment of the
Supplemental Retirement Allowance, request that the
allowance be converted into an optional form of retirement
allowance of Actuarial Equivalent value, in accordance with
any form of payment as may be permitted under the Retirement
Plan. Such request shall be subject to the approval of the
Retirement Board. For purposes of this Plan Section 7.2, an
eligible married Participant's retirement allowance prior to
conversion into an optional form shall include the value of
the benefit to be continued to the Surviving Spouse after
the Participant's death. In the event a lump sum optional
form of benefit is payable and such sum is not paid on the
date benefit payments are scheduled to commence, the lump
sum benefit shall be increased until the date paid by the
interest rate factors utilized in valuing such lump sum.

(b) A surviving spouse entitled to a Supplemental
Retirement Allowance pursuant to Plan Section 5.1 or 5.2
may, by written notice received by a member of the
Retirement Board within 60 days following the Participant's
date of death, or if later, within 30 days following the
surviving spouse's receipt of written notice from the
Company that he or she is entitled to a spouse's allowance
under the Plan, request that the allowance be converted into
a lump sum optional form of benefit of Actuarial Equivalent
value. Such request shall be subject to the approval of the
Retirement Board. In the event a lump sum optional form of
benefit is payable and such sum is not paid on the date
benefit payments are scheduled to commence, the lump sum
benefit shall be increased until the date paid by the
interest rate factors utilized in valuing such lump sum.

7.3 Effective Optional Forms.

The optional form of Supplemental Retirement Allowance
requested and approved under Plan Section 7.2 shall become
effective on the first day of the month for which the
Participant's allowance is payable. If the Participant dies, or
the designated Beneficiary dies before the first day of the month
for which the Participant's allowance is payable under a
contingent annuitant option, the approved option shall thereby be
revoked.

SECTION 8
ADMINISTRATION OF THE PLAN

8.1 Except as otherwise specifically provided in the Plan,
the Retirement Board shall be the administrator of the Plan. The
Retirement Board shall have full authority to determine all
<PAGE 19>

questions arising in connection with the Plan, including the
discretionary authority to interpret the Plan, to adopt
procedural rules and to employ and rely on such legal counsel,
actuaries, accountants and agents as it may deem advisable to
assist in the administration of the Plan. Decisions of the
Retirement Board shall be conclusive and binding on all persons.
The Retirement Board shall provide to the trustee of any Trust
established pursuant to Plan Section 1, such certification or
other documentation as may be required by the trustee in
connection with the payment of benefits to Participants.

8.2 After a Change in Control, the Retirement Board may be
changed by the Company only with the consent of a majority of the
Participants (excluding Beneficiaries).

SECTION 9
CERTAIN RIGHTS AND LIMITATIONS

9.1 The establishment of the Plan shall not be construed as
conferring any legal rights upon any employee or other person for
a continuation of employment, nor shall it interfere with the
rights of the Company or a Subsidiary to discharge any employee
and to treat such employee without regard to the effect which
such treatment might have upon such employee as a Participant of
the Plan.

9.2 If the Retirement Board shall find that a Participant
or other person entitled to a benefit is unable to care for his
affairs because of illness, accident or is a minor, the
Retirement Board may direct that any benefit payment due such
participant or other person, unless claim shall have been made
therefor by a duly appointed legal representative, be paid to the
spouse, a child, parent or other blood relative, or to a person
with whom the Participant or other person resides. Any such
payment so made shall be a complete discharge of the liabilities
of the Plan with respect to such Participant or such other
person.

9.3 Each Participant, before any benefit shall be payable
to or on behalf of such person under the Plan, shall file with a
member of the Retirement Board at least 30 days prior to the time
of retirement or in the case of a Vested Participant prior to the
earliest date the retirement allowance can commence, such
information, if any, as shall be required to establish such
person's rights and benefits under the Plan.

9.4 No benefit under the Plan shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment,
pledge, garnishment, attachment, encumbrance or charge, and any
attempt so to do shall be void; nor shall any such benefit be in
any manner liable for or subject to the debts, contract
liabilities, engagements or torts of the person entitled to such
benefit.

9.5 The obligation of the Company to make or continue
payment of any benefits hereunder shall cease with respect to any
Participant who (a) at any time is convicted of a crime involving
<PAGE 20>

dishonesty or fraud relating to the Company (b) at the time, without the
Company's written consent knowingly uses or discloses any confidential
or proprietary information relating to theCompany or (c) within three
years following termination ofemployment, without the Company's written
consent, accepts employment with, or provides consulting services to,
a principal competitor of the Company.

9.6 Except to the extent a Participant has a Nonforfeitable right
to a benefit pursuant to Plan Section 10, if, after written notice by
the Company, the Participant declines retirement at the request of the
Company, or if the Participant's voluntary retirement (other than for
disability) prior to age 62 is not approved by the Company, the
Retirement Board shall have the right to cause forfeiture of any benefit
to or on account of the Participant under the Plan.

9.7 A Participant at the time participation commences shall supply
the Retirement Board with such evidence of good health and insurability,
including a physical examination, as the Retirement Board may from time
to time require to satisfy any insurance company in connection with
obtaining life insurance for benefits under Plan Section 6. A
Participant who fails to supply such evidence when required shall not be
entitled to such benefits under Plan Section 6.

9.8 All benefits payable under the Plan shall be payable by
the Company from its general assets. The Plan shall not be
funded by the Company. However, solely for its own convenience
the Company reserves the right to provide for payment of benefits
hereunder through a trust which may be irrevocable but the assets
of which shall be subject to the claims of the Company's general
creditors in the event of the Company's bankruptcy or insolvency,
as defined in the Trust established pursuant to Plan Section 1.
In no event shall the Company be required to segregate any amount
credited to any account, which shall be established merely as an
accounting convenience; no Participant, Beneficiary, Surviving
Spouse or Dependent Child shall have any rights whatsoever in any
specific assets of the Company or the Trust; no rights of any
Participant, Beneficiary, Surviving Spouse or Dependent Child,
hereunder shall be subject to participation, alienation, sale,
transfer, assignment, pledge, garnishment, attachment or
encumbrance nor to the debts, contracts, liabilities, engagements
or torts of any Participant, Beneficiary, Surviving Spouse or
Dependent Child.

9.9 When payments commence under the Plan, the Company
shall have the right to deduct from each payment made under the
Plan any required withholding taxes.

9.10 Notwithstanding any other provision of the Plan to the
contrary, the Company shall make payments hereunder before such
payments are otherwise due if it determines, based on a change in
the tax or revenue laws of the United States of America, a
published ruling or similar announcement issued by the Internal
Revenue Service, a regulation issued by the Secretary of the
Treasury or his delegate, a decision by a court of competent
jurisdiction involving a Participant or Beneficiary, or a closing
agreement made under Internal Revenue Code section 7121 that is
approved by the Internal Revenue Service and involves a
Participant or Beneficiary, that a Participant or Beneficiary has
<PAGE 21>

recognized or will recognize income for federal income tax purposes with
respect to amounts that are or will be payable to him under the Plans
before they are paid to him.

SECTION 10
AMENDMENT AND TERMINATION OF THE PLAN

10.1 Right to Amend.

The Board of Directors (or the Compensation Committee to the extent
it has been delegated authority) reserves the right at any time and from
time to time, and retroactively if deemed necessary r appropriate, to
amend or modify in whole or in part, any or all of the provisions of the
Plan pursuant to its normal procedures; provided that no such
modification or amendment shall adversely affect the rights and benefits
of Participants which had accrued or become Nonforfeitable under this
Plan prior to the date such amendment or modification is adopted or
becomes effective, whichever is later. For purposes of this Plan
Section 10, "accrued" benefits refers to the benefits to which a
Participant would be entitled, based on his Creditable Service and
Compensation as of the date the determination is made, assuming the
Participant had a Nonforfeitable right to benefits as of such date.

10.2 Right to Terminate.

The Board of Directors (or the Compensation Committee to the
extent it has been delegated authority) may terminate the Plan
for any reason at any time provided that such termination shall
not adversely affect the rights and benefits of Participants
which had accrued or become Nonforfeitable under the Plan prior
to the date termination is adopted or made effective, whichever
is later.

10.3 Effect of Plan Termination on Benefits.

(a) In the event the Plan is terminated, each
Participant, whether or not such Participant has met the age
or service requirements to be entitled to a benefit under
the SERP or under the Retirement Plan, shall have a
Nonforfeitable right to: (i) the Supplemental Retirement
Allowance described in Plan Section 4, which such
Participant had accrued through the date of the termination
of the Plan; and (ii) to the death benefits described in
Plan Section 5, based upon the Plan Section 4 benefits
accrued by the Participant through the date of Plan
termination.

(b) For purposes of Plan Section 4, such accruedbenefit shall
be computed in accordance with Plan Section 4.3 as though the date
of termination of the Plan were the Participant's date of
retirement, provided that (i) if the Participant is less than age
55, his minimum percentage benefit described in Plan Subsection
4.3(b) shall be determined upon the assumption that the Participant

were 55, and such minimum benefit shall then be multiplied by
a fraction, the numerator of which is the Participant's
years of Creditable Service and the denominator of which is
his years of such Creditable Service projected to age 55,
and (ii) if the Participant terminates employment
involuntarily as described in Plan Section 10.5 before he
attains age 65 and before his age and Creditable Service
total 85 years and his Supplemental Retirement Allowance
commences on or after the date his age and Creditable
Service would have totaled 85 years if his employment with
the Company or a Subsidiary had continued, or it commences
on or after his attainment of age 65, his Supplemental
Retirement Allowance shall be computed without applying the
reduction for early commencement.

(c) The payment of the Supplemental Retirement Allowance
described in this Section shall commence at the time a Participant
(or the Participant's Surviving Spouse or Dependent Children)
meets, under the terms of the Plan at the time of its termination,
the requirements for payment of benefits whether or not employed by
the Company at that time. For this purpose, the Participant shall
be considered to accrue Creditable Service for purposes of
determining the Participant's eligibility for the receipt of a
Supplemental Retirement Allowance as if the Participant continued
in the service of the Company as an Active Participant in the Plan,
whether or not the Participant remains in the employ of the
Company). Notwithstanding the foregoing, the Company in its
discretion can pay a lump sum of Actuarial Equivalent value
of any benefits due to the Participant or his Surviving
Spouse or Dependent Children at any time following the
termination of the Plan.

(d) A Participant who participated in the SLIP prior
to January 1, 1990, shall have a right to the Supplemental
Life Allowance at the same level in effect at the time of
Plan termination. The Company shall fully satisfy all of
its obligations to the Participant with respect to such
Supplemental Life Allowance by immediately distributing or
causing to be distributed to such Participant a fully paid
whole life insurance policy or policies on the Participant's
life which, as of the date of distribution and thereafter
will provide, without application of dividends, at death a
death benefit at least equal to one-half of the amount of
the Supplemental Life Allowance. In the case of any such
distribution of a life insurance policy, the Company will
also pay enough cash to the Participant to enable the
Participant to pay any federal, state and local income taxes
(calculated at the highest applicable marginal rates)
resulting from the distribution of the policy and the
corresponding cash payment made pursuant to this sentence.

10.4 Effect of Plan Amendment on Benefits.

In the event the Plan is amended or modified in whole or in
part to reduce future accruals of benefits, Supplemental
Retirement Allowances or death benefits or to reduce or eliminate
Supplemental Life Allowances, the Participants affected by any
such amendment or modification shall be treated:
<PAGE 23>

(a) with respect to the Supplemental Retirement
Allowance or death benefits based thereon that accrued
through the date of such amendment or modification and were
affected by such amendment or modification as if the Plan
were terminated as of such date and their rights and
entitlement to these benefits shall be determined under Plan
Section 10.3; provided, however, that such Participants
shall be entitled to continue to accrue benefits after the
date of such amendment or modification under such modified
or amended terms of the Plan; and

(b) with respect to a Supplemental Life Allowance as
of the date of such amendment or modification as if the Plan
were terminated as of such date and their rights and
entitlement to these benefits shall be determined under Plan
Section 10.3(d); provided, however, that such Participants
shall be entitled to continue to accrue benefits after the
date of such amendment or modification under such modified
or amended terms of the Plan.

10.5 Effect of a Change of Control.

In the event of a Change of Control of the Company, then,
with respect to

(a) any person who has a right to a Supplemental Life
Allowance as described in Plan Section 6.1, whether retired,
terminated or still actively employed by the Company, and

(b) any person who is an Active Participant in the
SERP at the time of the Change of Control (or a former
officer who is eligible to be a Participant under Plan
Section 4.1(d)) who subsequently either ceases for any
reason, other than voluntary termination of employment as
defined in Plan Section 10.6 below, to be an Active
Participant or becomes eligible for Plan participation at a
reduced level,

then the Plan shall be deemed terminated at the date of the
Change of Control with respect to determining the Supplemental
Life Allowance for persons described in clause (a) above or the
date of termination of employment with respect to determining the
Supplemental Retirement Allowance and death benefits for persons
described in clause (b) above. Any such person's right and
entitlement to Supplemental Retirement Allowances and death
benefits based on the Supplemental Retirement Allowance accrued
through such date, and Supplemental Life Allowances (including
his or her right to an immediate distribution of a fully paid
whole life policy and income tax gross up) payable to
Participants who participated in the SLIP on January 1, 1990,
shall be determined under the provision of Plan Section 10.3;
provided, however that such Participants shall be entitled to
continue to accrue benefits after the date of the Change of
Control under such terms of the Plan if they are still eligible
to continue participation under the Plan.

10.6 Voluntary Termination of Employment.

For purposes of Plan Section 10.5, a voluntary termination
of employment shall mean any termination initiated by the
Participant except a termination initiated after:
(a) any substantial adverse change in position,
duties, title or responsibilities, other than merely by
reason of the Company ceasing to be a publicly-traded
corporation;

(b) any material reduction in base salary or, unless
replaced by equivalent arrangements, any material reduction
in annual bonus opportunity or pension or welfare benefit
plan coverages;

(c) any relocation required by the Company to an
office or location more than 25 miles from the Participant's
current regular office or location; or

(d) any failure of the Company to obtain the agreement
of a successor entity to assume the obligations set forth
hereunder, provided that the successor has had actual notice
of the existence of this arrangement and an opportunity to
assume the Company's responsibilities hereunder during a
period of at least 10 business days after receipt of such
notice; provided that, in order for a particular event to be
treated as an exception to a "voluntary termination," a
Participant must assert such exception within 180 days after
actual knowledge of the events giving rise thereto by giving
the Company written notice thereof and an opportunity to
cure. Notwithstanding the foregoing, in the event that any
employment agreement between the Participant and the Company
or a Subsidiary in effect at the time of such termination
provides a definition of "constructive termination" or
termination for "good reason" or similar terminology, such
definition shall govern over the event described in this
Plan Section 10.6 to the extent that it provides addition
exceptions to the events which are considered a voluntary
termination.

10.7 Effect of Merger or Acquisition.

If any company now or hereafter becomes a Subsidiary of the
Company, the Board of Directors (or the Compensation Committee to
the extent it has been delegated authority) may include an
employee of such Subsidiary in the membership of the Plan upon
appropriate action by such company. In such event, or, as a
result of the merger or consolidation or as the result of
acquisition by the Company of all or part of the assets or
business of another company, the Board of Directors (or the
Compensation Committee to the extent it has been delegated
authority) shall determine to what extent, if any, benefits shall
be granted for previous service with such Subsidiary, or other
company.

SECTION 11
CLAIM PROCEDURES

11.1 Every claim for benefits under the Plan shall be in
writing directed to a member of the Retirement Board.

11.2 Each claim filed shall be passed upon by the Retirement
Board within a reasonable time from its receipt. If a claim is
denied in whole or in part the claimant shall be given written
notice of the denial in language calculated to be understood by
the claimant, which notice shall:

(a) specify the reason or reasons for the denial;

(b) specify the Plan provisions giving rise to the
denial; and

(c) describe any further information or documentation
necessary for the claim to be honored, explain why such
documentation or information is necessary, and explain the
Plan's review procedure.

11.3 Upon written request of any claimant whose claim has
been denied in whole or in part, the Retirement Board shall make
a full and fair review of the claim and furnish the claimant with
a written decision concerning it.

IN WITNESS WHEREOF, the Company has caused this instrument
to be executed as of MARCH 17TH, 1995.

AVON PRODUCTS, INC.

By: /s/
Marcia L. Worthing

Title: Senior Vice President
Human Resources and
Corporate Affairs

ATTEST:

/s/
Ward M. Miller, Jr.
Secretary

[CORPORATE SEAL]

<PAGE>

EXHIBIT 10.7

<PAGE>

BENEFIT RESTORATION PENSION PLAN

AVON PRODUCTS, INC.

Effective as of January 1, 1994

<PAGE>

TABLE OF CONTENTS

Page

ARTICLE 1
Definitions 1

ARTICLE 2
Membership
2

ARTICLE 3
Amount and Payment of Benefits
3

ARTICLE 4
General Provisions 5

ARTICLE 5
Amendment or Termination 7

BENEFIT RESTORATION PENSION PLAN
OF
AVON PRODUCTS, INC.

Introduction

This amendment and restatement of the Excess Benefit Pension
Plan of Avon Products, Inc., which is hereby renamed the Benefit
Restoration Pension Plan of Avon Products, Inc. (the "Plan"), has
been adopted by Avon Products, Inc. effective as of January 1,
1994. The Plan is designed to pay supplemental benefits to
certain Employees who have qualified or may qualify for benefits
under the Retirement Plan, as defined below.

All benefits payable under this Plan shall be paid out of
the general assets of the Company. The Company may establish a
trust in order to aid it in providing benefits due under the
Plan.

ARTICLE 1
Definitions

1.1 "Code" shall mean the Internal Revenue Code of 1986, as
amended.

1.2 "Company" shall mean Avon Products, Inc. or any
successor by merger, purchase or otherwise, with respect to its
employees; or any other affiliated company authorized by the
Board of Directors to participate in the Plan.

1.3 "Compensation Committee" shall mean the Compensation
Committee of the Board of Directors of the Company.

1.4 "Effective Date" shall mean January 1, 1994.

1.5 "Employee" shall mean an individual who is employed by
the Company at any time on or after the Effective Date.

1.6 "Equivalent Actuarial Value" shall mean a benefit of
equivalent value when computed on the basis of the same mortality
table and rate or rates of interest and/or empirical tables which
are being used to determine the Member's Retirement Allowance
under the Retirement Plan.

1.7 "Member" shall mean any Employee or former Employee who
has become a participant in the Plan for so long as his benefits
under the Plan have not been fully distributed pursuant to the
Plan.

1.8 "Normal Retirement Date" shall mean the first day of
the calendar month next following the Member's attainment of age
65.

<PAGE 2>
1.9 "Plan" shall mean the Benefit Restoration Pension Plan
of Avon Products, Inc., as described herein or as hereafter
amended.

1.10 "Retirement Allowance" shall mean the accrued benefit
available under the Retirement Plan, determined without regard to
any benefit provided under Section 17 of that Retirement Plan, in
the event of a change of control.

1.11 "Retirement Board" shall mean the administrative board
appointed to administer the Retirement Plan.

1.12 "Retirement Plan" shall mean the Employees' Retirement
Plan of Avon Products, Inc. as in effect on the Effective Date
and as may thereafter be amended from time to time.

1.13 "Supplemental Benefit" shall mean the accrued
retirement benefit payable under the Plan.

1.14 "Supplemental Executive Retirement Plan" or "SERP"
shall mean the Supplemental Executive Retirement Plan and
Supplemental Life Plan of Avon Products, Inc. as in effect on the
Effective Date and as may thereafter be amended from time to
time.

ARTICLE 2
Membership

2.1 Eligibility

(a) Every Employee who is a participant in the
Retirement Plan shall become a Member of this Plan on the
first day of the calendar month coincident with or next
following the date his accrued Retirement Allowance is
limited as a result of the application of Code Section 415
or 401(a)(17).

(b) Each Employee who was a Member on December 31,
1993 shall continue to be a Member as of the Effective Date.

2.2 Termination of Membership

A Member's participation in the Plan shall terminate on the
later of the date of the Member's death or termination of
employment with the Company or the date benefits payable under
the Plan have been fully distributed.

ARTICLE 3
Amount and Payment of Benefits

3.1 Amount of Supplemental Benefit

The annual amount of Supplemental Benefit payable with respect to
a Member, expressed as a single life annuity, shall be equal to:

(a) the amount of the Retirement Allowance that would
be payable in the form of a single life annuity if (i) the
limitations of Code Section 415 were not applicable, (ii) if the
Member has not been a participant in the Supplemental Executive
Retirement Plan of Avon Products, Inc, the annual compensation
limitations under Code Section 401(a)(17) were equal to $250,000,
or, if the Member was a participant under the Supplemental
Executive Retirement Plan of Avon Products, Inc., the annual
compensation limitations under Code Section 401(a)(17) were not
applicable, and (iii) the definition ofcompensation under the
Retirement Plan included compensation electively deferred by the
Member for the plan year (as deferred compensation plan or
program maintained by the Company; less

(b) the Retirement Allowance that is actually payable
to the Member.

For purposes of this Plan Section 3.1, if any benefit under
Section 3.1(b) is payable in a form other than a single life
annuity or at a time other than the time Supplemental Benefits
are payable under this Plan, such benefit shall be converted to a
single life annuity of Equivalent Actuarial Value effective as of
the day Supplemental Benefits would commence under this Plan.

3.2 Normal and Optional Forms of Payment

(a) Except as otherwise provided for married Members
pursuant to paragraph (b) below, or unless an optional form
of Supplemental Benefit has been requested by the Member
under paragraph (c) and approved by the Retirement Board,
the annual supplemental benefit provided pursuant to Section
3.1 shall be payable in monthly installments for the life of
the Member only, ending with the last monthly payment during
the month of the Member's death.

(b) Unless an optional form of benefit has been
requested by the Member under paragraph (c) and has been
approved by the Retirement Board, the automatic form of
payment of a Supplemental Benefit to a Member who is married
at the date the applicable benefit begins shall be a joint
and 50% survivor benefit. Such benefit shall be of
Equivalent Actuarial Value of a single life annuity payable
for the life of the Member and payable during the lifetime
of the Member with the provision that after the Member's
death an annual Supplemental Benefit shall be paid to the
surviving spouse to whom the Member was married at the date
the Member's benefits commenced, but only if such person is
also married to the Member at the time of the Member's
death, equal to one-half the annual Supplemental Benefit
payable during the Member's life.
<PAGE 4>

(c) Any Member may, by written notice received by a
member of the Retirement Board at least six months prior to
the date that his Supplemental Benefit would commence,
request that such benefit be converted into an optional form
of benefit of Equivalent Actuarial Value in accordance with
any optional form of payment as may be permitted under the
Retirement Plan, including a lump sum benefit. Such request
shall be subject to approval of the Retirement Board which
approval may be evidenced by the written consent of any two
members of the Retirement Board. The six month notice
requirement may be reduced with the consent of the
Retirement Board.

(d) The optional form of Supplemental Benefit
requested and approved under paragraph (c) shall become
effective on the first day of the month for which the
Member's Supplemental Benefit otherwise would be payable.
If the Member dies, or the designated beneficiary dies
before the first day of the month for which the Member's
Supplemental Benefit is payable under a contingent annuitant
option, such option shall thereby be revoked.

(e) A Member's Supplemental Benefit shall commence or
be payable on the date payment of his Retirement Allowance
commences or is payable.

3.3 Benefit Payable to the Surviving Spouse of a Member

If a Member's surviving spouse becomes entitled to a
spouse's benefit pursuant to Section 4 of the Retirement Plan and
such benefit is reduced by reason of the limitations of Section
415 or 401(a)(17) of the Code, a Supplemental Benefit shall be
payable under this Plan to such spouse. The Supplemental Benefit
payable to such spouse shall be determined in the manner
described in Section 3.1 by substituting the benefits payable to
the spouse in lieu of the benefits payable to the Member
thereunder.

3.4 Restoration to Service

If a Member who retired or otherwise terminated employment
with the Company is restored to service, any payment of his
Supplemental Benefit shall cease. Upon his subsequent retirement
or termination, his Supplemental Benefit shall be recomputed in
accordance with the provisions of this Article 3 and shall be
reduced by the Equivalent Actuarial Value of the Supplemental
Benefit payments he received prior to the resumption of
participation in the Plan, if any.

ARTICLE 4
General Provisions

4.1 Administration

The Administration of the Plan, including but not limited to
the exclusive and discretionary power to interpret and carry out
its provisions, is the responsibility of the Retirement Board,
and the provisions of Section 8 of the Retirement Plan are hereby
incorporated by reference.

4.2 Funding

All amounts payable in accordance with this Plan shall
constitute a general unsecured obligation of the Company. Such
amounts, as well as any administrative costs relating to the
Plan, shall be paid out of the general assets of the Company,
unless the Company establishes, in its sole discretion, a trust
the assets of which will be used as a source of payment for some
or all benefits due hereunder. In the event a trust is
established for some or all the benefits payable hereunder, the
trust shall not be considered to fund, within the meaning of
ERISA, the benefits under this Plan.

4.3 No Contract of Employment

The establishment of the Plan shall not be construed as
conferring any legal rights upon any person for a continuation of
employment, nor shall it interfere with the rights of the Company
to discharge any employee and to treat him without regard to the
effect which such treatment might have upon him as a Member of
the Plan.

4.4 Facility of Payment

In the event that the Retirement Board shall find that a
Member is unable to care for his affairs because of illness or
accident, the Retirement Board may direct that any benefit
payment due him under this Plan, unless claim shall have been
made therefor by a duly appointed legal representative, be paid
to his spouse, a child, a parent or other blood relative, or to a
person with whom he resides, and any such payment so made shall
be a complete discharge of the liabilities of the Company
therefor.

4.5 Withholding Taxes

The Company shall have the right to deduct from each payment
to be made under the Plan any required withholding taxes.

4.6 Nonalienation

Subject to any applicable law, no benefit payable under the
Plan shall be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance or charge, and
any attempt so to do shall be void, nor shall any such benefit be
in any manner liable for or subject to garnishment, attachment,
execution or levy, or liable for or subject to the debts,
contracts, liabilities, engagement or torts of the Member.

4.7 Forfeiture for Cause

In the event that a Member shall at any time be convicted of
a crime involving dishonesty or fraud on the part of such Member
in his relationship with the Company, all benefits that would
otherwise be payable to him under the Plan shall be forfeited.

4.8 Claims Procedure

In the event that a Member or his beneficiary claims that he
has improperly been denied an appropriate Supplemental Benefit
under this Plan he shall be entitled to the Claim Review
Procedure set forth in the Retirement Plan following any denial
of his claims by the Company.

4.9 Construction

(a) Except as otherwise provided by applicable law,
all rights hereunder shall be governed by and construed in
accordance with the laws of the State of New York and,
except to the extent otherwise herein provided, consistent
with the provisions of the Retirement Plan.

(b) The masculine pronoun shall mean the feminine
wherever appropriate.

ARTICLE 5
Amendment or Termination

The Compensation Committee reserves the right to modify or
amend, in whole or in part, or to terminate this Plan at any
time. However, no modification, amendment or termination of the
Plan shall adversely affect the right of any Member, his
surviving spouse or his beneficiary to receive the benefits
accrued under the Plan in respect of such Member as of the date
of modification, amendment or termination.

IN WITNESS WHEREOF, the Company has executed this Plan as of
the day of March, 1995.

AVON PRODUCTS, INC.

By:
James E. Preston

Title: Chairman and Chief Executive
Officer

ATTEST:

Ward M. Miller, Jr.

Title: Secretary

[CORPORATE SEAL]

EXHIBIT 11.1

<PAGE>

EXHIBIT 11.1

AVON PRODUCTS, INC.
COMPUTATION OF PRIMARY INCOME (LOSS) PER SHARE
(In millions, except per share data)

Years ended December 31
------------------------
1994 1993 1992
---- ---- ----

Weighted average shares of common stock
Weighted average shares outstanding during
the year................................. 70.59 72.06 71.99

Common stock equivalents................... * * *
------- ------- ------
Weighted average shares for primary income
per share computation.................... 70.59 72.06 71.99
======= ======= ======

Income applicable to common stock:
Income from continuing operations.......... $ 264.8 $ 236.9 $164.2
Discontinued operations, net............... (23.8) 2.7 10.8
Cumulative effect of accounting changes,
net of taxes............................. (45.2) (107.5) --
------- ------- ------
Net income................................. $ 195.8 $ 132.1 $175.0
======= ======= ======

Primary income (loss) per share:
Continuing operations...................... $ 3.75 $ 3.28 $ 2.28
Discontinued operations.................... (.34) .04 .15
Cumulative effect of accounting changes.... (.64) (1.49) --
------- ------- ------
Net income................................. $ 2.77 $ 1.83 $ 2.43
======= ======= ======

------------
*Common stock equivalents are not reported because they result in less than
three percent dilution.

<PAGE>

EXHIBIT 11.2

<PAGE>

EXHIBIT 11.2

AVON PRODUCTS, INC.
COMPUTATION OF FULLY DILUTED INCOME (LOSS) PER SHARE
(In millions, except per share data)

Years ended December 31
-----------------------
1994 1993 1992
---- ---- ----
Weighted average shares of common stock
Weighted average shares outstanding during
the year................................. 70.59 72.06 71.99

Common stock equivalents................... .19 .08 .11
------- ------- ------
Weighted average shares for fully diluted
income per share computation............. 70.78 72.14 72.10
======= ======= ======

Income applicable to common stock:
Income from continuing operations.......... $ 264.8 $236.9 $164.2
Discontinued operations, net............... (23.8) 2.7 10.8
Cumulative effect of accounting changes,
net of taxes............................. (45.2) (107.5) --
------- ------- ------
Net income................................. $ 195.8 $ 132.1 $175.0
======= ======= ======

Fully diluted income (loss) per share:
Continuing operations...................... $ 3.75 $ 3.28 $ 2.28
Discontinued operations.................... (.34) .04 .15
Cumulative effect of accounting changes.... (.64) (1.49) --
------- ------- ------
Net income................................. $ 2.77 $ 1.83 $ 2.43
======= ======= ======

<PAGE>

EXHIBIT 13

<PAGE>24
Management's Discussion and Analysis Avon Products, Inc.

The following discussion of the results of operations and financial condition
of Avon should be read in conjunction with the information contained in the
Consolidated Financial Statements and Notes thereto.

Results of Operations

Consolidated - Net income in 1994 was $195.8 million, or $2.77 per share,
compared with $132.1 million, or $1.83 per share, in 1993. The 1994 results
include a charge for accounting changes of $45.2 million, or $.64 per share,
and a charge to discontinued operations of $23.8 million, or $.34 per share.
The charge for accounting changes is for the cumulative effect of changes in
accounting principles for the following: Statement of Financial Accounting
Standards ("FAS") No. 112, "Employers' Accounting for Postemployment
Benefits", for all applicable operations of $28.9 million; FAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions", for
foreign plans of $8.0 million; and costs related to the development of
information systems of $8.3 million. Effective in the first quarter of 1994,
internal information systems development costs are being expensed as incurred,
rather than deferred and amortized over future periods. The 1994 loss from
discontinued operations relates to the sale of Giorgio Beverly Hills, Inc.
("Giorgio") completed in the third quarter of 1994. See Note 3 of the Notes
to the Consolidated Financial Statements.

The 1993 results include a net charge for the cumulative effect of changes
in accounting principles of $107.5 million after tax, or $1.49 per share, for
postretirement benefits (FAS No. 106) for U.S. benefit plans and income taxes
(FAS No. 109, "Accounting for Income Taxes"). The 1993 results also include a
charge to discontinued operations for the final settlement and related
expenses in an arbitration proceeding related to a business previously sold of
$10.0 million and net income from discontinued operations related to Giorgio
of $12.7 million. Net income per share from discontinued operations was $.04.
Net income for 1992 was $175.0 million, or $2.43 per share, which includes a
restructuring charge of $64.4 million after tax, or $.90 per share, and net
income from Giorgio of $10.8 million, or $.15 per share, in discontinued
operations.

Continuing Operations - Income from continuing operations before cumulative
effect of accounting changes was $264.8 million, or 12 percent, above 1993.
Income per share from continuing operations increased 14 percent to $3.75 from
$3.28 in the prior year. The 14 percent increase over prior year for income
per share exceeds the 12 percent increase in income from continuing operations
because of the lower average shares outstanding for 1994 compared with 1993.
The Company initiated a stock repurchase program in 1994 which reduced the
number of shares outstanding. See Note 9 of the Notes to the Consolidated
Financial Statements for further discussion of this program. Pretax income
was $433.8 million, a 10 percent, or $39.2 million, increase over prior year.
This increase was primarily due to higher sales and a favorable operating
expense ratio. These favorable results were partially offset by higher net
interest expense, a lower gross margin and higher non-operating expenses. Net
income was further improved by a lower effective tax rate (37.7 percent versus
38.2 percent in 1993) resulting primarily from the mix of earnings and tax
rates of international subsidiaries. Income from continuing operations in
1993 increased $8.3 million, or $.11 per share from 1992, excluding the
restructuring charge in 1992.

Consolidated net sales of $4.27 billion increased 11 percent from $3.84
billion in 1993. Sales in international increased 12 percent to $2.73 billion
from $2.45 billion in 1993 due to strong growth in the Americas Region and the
Pacific Rim and the favorable impact of the weaker U.S. Dollar in relation to
the currencies in Japan and most European countries. These improvements were
partially offset by operational declines in most Western European markets and
Japan. Sales in U.S. increased 10 percent to $1.54 billion primarily due to
an increase in average order size and an increase in Representative orders.
In 1993, consolidated net sales of $3.84 billion increased 5 percent over 1992
reflecting higher sales in international, primarily due to strong growth in
the Americas Region and the Pacific Rim, and the favorable impact of exchange
rate fluctuations in Japan. These increases were partially offset by lower
sales in Europe due to the unfavorable impact of a stronger dollar against
most European currencies and operational declines,
24

<PAGE>25
mainly in Germany. 1993
sales in U.S. declined 1 percent to $1.40 billion primarily due to a decrease
in the number of orders.

Cost of sales as a percentage of sales was 39.2 percent in 1994, compared
with 38.9 percent in 1993. The decline in gross margin was primarily due to
the 1994 introduction of the apparel line in the U.S., increased sales of the
lower margin fashion, apparel and home product categories in Mexico and
declines throughout most European markets. The decline was partially offset
by margin improvements in Brazil and Argentina due to a shift in the sales mix
to higher margin items. In 1993, cost of sales as a percentage of sales was
38.9 percent, compared to 39.3 percent in 1992. The improved cost ratio
resulted primarily from margin improvements in the Americas Region, primarily
Mexico and Brazil, and in the U.S. reflecting a shift in product mix to the
higher margin cosmetics, fragrances and toiletries ("CFT") product category.

Marketing, distribution and administrative expenses of $2.1 billion
increased 10 percent from 1993 but decreased as a percentage of sales to 49.2
percent from 49.8 percent in 1993. The higher expense level reflects sales
related increases in the U.S., Brazil, Argentina, Mexico and the Pacific Rim
markets and higher expenses related to market expansion in the Eastern
European markets and the Pacific Rim, most significantly China. The
improvement in the operating expense ratio was due to sales increases in the
U.S., Brazil and Argentina partially offset by increased expenses in relation
to sales in Mexico and China and lower sales in Venezuela and Germany. In
1993, marketing, distribution and administrative expenses of $1.9 billion
increased 7 percent from 1992 and increased as a percentage of sales to 49.8
percent compared with 48.7 percent in 1992. The dollar increase reflects
higher expenses associated with increased sales volume in the Americas Region,
significantly higher advertising and marketing expenses and the incremental
effect of FAS No. 106 in the U.S., and higher expenses in the Pacific Region
partially offset by lower expenses in Europe. The increase in the operating
expense ratio was primarily due to the impact of lower sales and higher
expenses in the U.S. and an unfavorable operating expense ratio in Europe,
primarily due to lower sales in Germany and Spain. These increases were
partially offset by an improved operating expense ratio in the Americas
Region, mainly Venezuela and Argentina.

A provision of $96.0 million ($64.4 million after tax, or $.90 per share)
was recorded in 1992 for the restructuring and reconfiguration of Avon's
worldwide manufacturing and distribution facilities. The restructuring
program included closing the manufacturing facility in Spain in 1992 and the
distribution facility in Springdale, Ohio in July 1993, as well as the
reconfiguring of several other international operations. The restructuring
program was substantially completed by December 31, 1993 and was fully
completed by December 31, 1994 and has resulted in annual expense savings of
approximately $50.0 million in 1994. The program has eliminated approximately
1,200 positions worldwide and has increased operating efficiency in
distribution, eliminated redundancies in manufacturing by rationalizing
product mix, and reduced operating expenses in certain regions. Of the total
restructuring charge, approximately $71.0 million was operating-cash related
of which $4.0 million, $27.0 million and $40.0 million impacted cash flow in
1994, 1993 and 1992, respectively.

Interest expense in 1994 of $50.8 million increased $5.6 million, or 12
percent, over last year due to higher borrowings to fund working capital needs
and hyperinflationary interest rates in Brazil and higher borrowings in the
Eastern European markets and China as part of Avon's growth strategy. The
increase was partially offset by lower interest expense in Japan and the
United Kingdom reflecting lower borrowing levels in 1994. In 1993, interest
expense of $45.2 million was $1.5 million, or 3 percent, higher than 1992.
The increase was primarily due to hyperinflationary interest rates and higher
debt levels in Brazil, partially offset by lower average debt levels in the
U.S. and lower borrowings and interest rates in Japan.

Interest income in 1994 of $22.1 million decreased $3.2 million, or 13
percent, compared to last year due to lower average cash balances in Brazil in
1994. In 1993, interest income of $25.3 million decreased $12.2 million from
1992 primarily due to significantly lower levels of short-term investments in
Brazil in 1993.

Other expense, net, of $33.1 million was $14.4 million higher than 1993.
The increase was primarily due to gains related to the sales of a
non-operating investment and land in 1993 and higher non-operating expenses in
1994. Other expense, net, was $18.7 million in 1993, a $30.3 million decrease
from 1992. The decrease was due to the gains recorded in 1993, noted above,
and lower non-operating expenses in 1993 compared to 1992.

Income taxes were $163.5 million in 1994 and the effective tax rate was
37.7 percent compared with $150.8 million and an effective tax rate of 38.2
percent in 1993. The lower effective tax rate in 1994 resulted primarily from
the mix of earnings and tax rates of international subsidiaries. The 1994
effective tax rate reflects the
25

<PAGE>26
utilization of foreign net operating loss carryforwards. Of the remaining net
operating loss carryforwards, a significant portion is not expected to be
utilizable in 1995, and therefore, it is expected that the 1995 effective tax
rate will be somewhat higher. It is difficult to predict what the 1995
effective tax rate will be due to various factors, primarily the mix of
international earnings. In 1993, the effective tax rate was 38.2 percent,
compared with 41.6 percent in 1992. Excluding the effect of the 1992
restructuring charge, the effective tax rate was 39.4 percent. The lower
effective tax rate in 1993 resulted primarily from the use of capital loss
carryforwards to offset the gain on the sale of a non-operating investment,
the mix of international and domestic income and a favorable adjustment to net
deferred tax assets resulting from the increase in the U.S. statutory tax rate
in 1993.

Inflation in the United States has remained at a relatively low level
during the last three years, and has not had a major effect on Avon's results
of operations. Many countries in which Avon has operations have experienced
higher rates of inflation than the United States. Among the countries in
which Avon has significant operations, extremely high rates of inflation have
been experienced in Brazil for a number of years.

Below is an analysis of the key factors affecting net sales and pretax income
from continuing operations by geographic area for each of the years in the
three-year period ended December 31, 1994. Prior year data has been restated
to reflect Giorgio as discontinued operations.

In millions
Years ended
December 31 1994 1993 1992
----------------- ----------------- -----------------
Net Pretax Net Pretax Net Pretax
Sales Income Sales Income Sales Income
----- ------ ----- ------ ----- ------

United States $1,535.1 $201.2 $1,395.6 $152.8 $1,408.1 $140.8(1)
-------- ------ -------- ------ -------- ------
International
Americas 1,415.3 273.9 1,175.2 196.4 980.6 168.4(1)
Pacific 664.3 89.7 625.6 90.9 542.8 84.0
Europe 651.8 15.3 647.7 53.5 729.0 31.5(1)
-------- ------ -------- ------ -------- ------
Total
Inter-
national 2,731.4 378.9 2,448.5 340.8 2,252.4 283.9(1)
-------- ------ -------- ------ -------- ------
Total from
operations $4,266.5 580.1 $3,844.1 493.6 $3,660.5 424.7
======== ======== ========

Corporate expenses (84.9) (69.0) (73.1)(1)
Interest expense (50.8) (45.2) (43.7)
Other income (expense) (10.6) 15.2 (17.9)
------ ------ ------
Total $433.8 $394.6 $290.0(1)
====== ====== ======

(1)Pretax income for geographic area data in 1992 includes the charge for
restructuring costs of $96.0. The effect of this charge was to reduce the
pretax income of U.S., Europe and the Americas by $54.4, $28.6 and $3.5,
respectively, and to increase corporate expenses by $9.5.

U.S. - U.S. sales increased 10 percent to $1.54 billion and pretax income
increased 32 percent to $201.2 million in 1994.

The increase in sales reflects a 6 percent increase in average order size
and a 4 percent increase in the number of Representative orders. Units sold
increased 5 percent over 1993. The sales improvement was driven by the
introduction of the new apparel line in 1994, a strong increase in sales of
color cosmetics and increases in most other major product categories. The
increase in pretax income was primarily due to the sales increase and an
improved operating expense ratio. The improved operating expense ratio
reflects the sales increase, lower marketing-related expenses, primarily
advertising, and expense savings resulting from the 1992 restructuring
program. The increase was partially offset by a lower gross margin due to a
shift in the sales mix to the lower margin apparel line.

In 1993, U.S. sales decreased 1 percent to $1.40 billion and pretax income
was $152.8 million as compared with $140.8 million in 1992. Excluding the
impact of the 1992 restructuring charge, pretax income in 1993 decreased 22
percent from the prior year. The decrease in sales reflects a 2 percent
decline in the number of Representative orders partially offset by a 1 percent
increase in average order size. The improvement in
26

<PAGE 27>
average order size was partially driven by an increase in sales of higher-
priced products while total units sold declined 5 percent in 1993. Marketing
emphasis on the beauty categories, which began in late 1992 and continued
throughout 1993, yielded positive results as sales in both the jewelry and CFT
categories, particularly in the Anew and other skin care brands, increased
over 1992. However, these increases were more than offset by a decline in the
gift category as consumer buying patterns shifted and a low level of consumer
confidence prevailed throughout the year. The decrease in pretax income in
1993 from 1992, excluding the restructuring charge, was due primarily to
higher operating expenses as the sales decline was offset by an improved gross
margin reflecting the shift in sales mix from gifts to the higher margin CFT
and jewelry categories. The increase in operating expenses reflects higher
spending on advertising and marketing programs designed to stimulate sales and
enhance methods of customer access and the ongoing incremental expense of FAS
No. 106.

International - International sales increased 12 percent to $2.73 billion and
pretax income increased 11 percent to $378.9 million from $340.8 million in
1993. The sales increase reflects strong unit growth in the Americas Region,
most significantly Brazil, and in the Pacific Rim and the favorable impact of
the weaker U.S. Dollar in Japan and most European countries. These
improvements were partially offset by unit declines in Europe, especially the
United Kingdom and Germany, Venezuela and Japan.

In the Americas Region, sales increased 20 percent to $1.42 billion and
pretax income increased 39 percent to $273.9 million from $196.4 million in
1993. The sales increase was due to growth in all markets, except Venezuela,
primarily in Brazil, Argentina and Mexico. The significant increase in Brazil
was due to the solid growth in the higher-priced categories of fashions and
home products and higher-priced CFT items such as Renew, a skin care product,
and the benefits of the new economic stabilization package implemented in July
which lowered inflation and improved consumer purchasing confidence. In
addition, the number of Representatives in Brazil at the end of 1994 increased
38 percent from the end of 1993 which enabled the Company to take advantage of
the improved economic environment. Argentina's strong sales growth was driven
by its image enhancement strategies and product line expansion, especially in
the CFT and fashions lines. Mexico's improvement reflects strong unit growth
following successful market penetration and image building strategies. The
large devaluation of the Peso in late December did not have a material impact
on Mexico's results for the year. The sales decline in Venezuela reflects the
significant currency devaluation and unsettled economic climate, which
depressed consumer demand and negatively affected sales in all product
categories. The improvement in pretax income reflects strong operating
results in Brazil and Argentina due to the sales growth and improved gross
margins resulting from the shift in sales to higher margin items and lower
foreign exchange losses in Brazil. The improvement was partially offset by a
lower gross margin due to increased sales in the lower margin fashion, apparel
and home products categories and higher salary and field recognition expenses
in Mexico and lower interest income in Brazil due to a lower cash position in
1994 compared with 1993. In addition, pretax profit was lower in Venezuela as
a result of the sales decline, higher exchange losses and lower interest
income reflecting the unstable economic climate.

In the Pacific Region, sales increased 6 percent to $664.3 million and
pretax income decreased 1 percent to $89.7 million from $90.9 million in 1993.
The increase in sales was due to unit growth in all Pacific Rim markets and
the favorable impact of a weaker U.S. Dollar in Japan. These improvements
were partially offset by lower units sold in Japan, which was impacted by a
significant field reconfiguration program implemented at the end of the first
quarter. The decrease in pretax income was primarily due to higher operating
expenses primarily for expansion in China as part of a long-term growth
strategy, partially offset by the sales growth in the Pacific Rim.

In the Europe Region, sales increased 1 percent to $651.8 million and
pretax income declined 71 percent to $15.3 million from $53.5 million in 1993.
The sales increase was due to the favorable impact of the weaker U.S. Dollar
against most European currencies, mainly in the fourth quarter, and unit
growth in the developing Eastern European markets, Spain and Italy. These
improvements were partially offset by unit declines in the United Kingdom and
Germany reflecting weak economies in the retail and consumer non-durable
segments and sales of lower-priced products in France. The decline in pretax
income was primarily due to operational sales declines in Germany, the United
Kingdom and France, a high fixed expense base in the Region and higher
operating expenses related to the expansion of Eastern European markets.
27

<PAGE>28
In 1993, international sales increased 9 percent to $2.45 billion and
pretax income, excluding 1992 restructuring charges, increased 8 percent to
$340.8 million from $316.0 million in 1992. The sales growth reflects strong
unit growth in most markets in the Americas Region and the Pacific Rim, and
the favorable impact of the weaker U.S. Dollar in Japan. These improvements
were partially offset by sales declines in most European markets primarily due
to the strengthening of the U.S. Dollar in Europe and operational declines,
most significantly in Germany, reflecting a recessionary economy.

In the Americas Region, 1993 sales increased 20 percent to $1.18 billion
and pretax income, excluding 1992 restructuring charges, increased 14 percent
to $196.4 million from $171.9 million in 1992. The sales increase reflects
increased units sold in most markets, primarily Brazil due to new product
introductions and Argentina due to higher volume in the CFT and home product
lines. In addition, the successful launch of higher-priced skin care products
and inflation-related increases in Mexico, and higher average order size in
Venezuela due to further expansion of the fashion apparel and home product
lines also contributed to the increase. The improvement in pretax income
reflects strong operating results in Argentina and Mexico due to the sales
growth in both markets coupled with a shift to higher margin CFT products in
Mexico and a favorable operating expense ratio in Argentina resulting from an
effective cost containment program. These improvements were partially offset
by profit declines in Brazil. Although Brazil's sales increased and the cost
ratio improved due to a favorable product mix and aggressive price
negotiations with vendors, pretax income declined significantly from the prior
year due to higher monetary correction expense and lower interest income,
partially offset by lower foreign exchange losses. The decline in interest
income reflects lower average short-term investments in 1993 due to higher
dividend remittances than in 1992.

Sales in the Pacific Region increased 15 percent over 1992 due to the
favorable impact of a weaker U.S. Dollar in Japan and increased units sold in
the Pacific Rim countries. Pretax income for the Region increased 8 percent
over 1992 reflecting the sales improvement, partially offset by increased
expenses for enhanced field training and marketing programs in Japan and
higher costs in the Pacific Rim markets relating to additional initiatives to
accelerate growth in the area.

In the Europe Region, sales decreased 11 percent and pretax income,
excluding 1992 restructuring charges, decreased 11 percent to $53.5 million
from $60.1 million in 1992. The sales decline was primarily due to the
unfavorable impact of the stronger U.S. Dollar against most of the European
currencies and operational declines throughout the Region, most significantly
in Germany reflecting a recessionary economy. The decrease in pretax income
was primarily due to the sales decline, an unfavorable gross margin in
Portugal and Italy due to aggressive pricing strategies to stimulate sales,
and an unfavorable operating expense ratio. The higher operating expense
ratio was primarily in Germany due to the sales softness and increased
expenses relating to service enhancements, and in Spain due to the sales
softness and salary increases mandated by labor regulations.

See Foreign Operations section under Liquidity and Capital Resources for
additional discussion.

Corporate Expenses - Corporate expenses were $84.9 million in 1994 compared
with $69.0 million in 1993. The $15.9 million increase over 1993 reflects
higher expenses for incentive compensation programs primarily due to the
improved operating results in 1994 and a change in the long-term compensation
program. In 1993, corporate expenses increased $5.4 million from 1992,
excluding the restructuring charge in 1992. The increase reflects higher
pension expense caused by changes in actuarial assumptions and the incremental
expense of FAS No. 106.

Other Income (Expense) - Other income (expense) includes corporate non-
operating income and expense items and corporate interest income. Other
expense, net, was $10.6 million in 1994 compared with other income, net, of
$15.2 million in 1993. The increase in the net expense reflects higher
non-operating expenses in 1994 combined with the gains relating to the sales
of a non-operating investment and land in 1993. Other income, net, increased
$33.1 million from 1992 reflecting the gains on the investment and land, noted
above, and lower non-operating expenses in 1993.

Income Taxes - Effective January 1, 1993, Avon adopted FAS No. 109, whereby,
among other things, the criteria for recognizing deferred tax assets was
revised to permit recognition of such assets when future realization is more
likely than not. The cumulative effect of this accounting change was an
increase to income in 1993 of $2.5 million ($.04 per share).

Net deferred tax assets, net of valuation allowance, were $77.9 million at
December 31, 1994, an increase of $21.3 million from a net deferred tax asset
of $56.6 million at December 31, 1993, primarily as a result of
28

<PAGE>29
the adoption of FAS No. 112 and FAS No. 106 for foreign plans, effective as of
January 1, 1994. A valuation allowance, as required under FAS No. 109, is
recorded primarily for foreign operating loss and capital loss carryforwards.
The basis used for recognition of deferred tax assets included the
profitability of the operations and related deferred tax liabilities.

Accounting Changes - Effective January 1, 1994, Avon adopted FAS No. 112 for
all applicable operations and FAS No. 106 for its foreign plans. In addition,
effective January 1, 1994, Avon changed its method of accounting for internal
systems development costs. These internal costs, which were previously
deferred and amortized over future periods, are now being expensed as
incurred.

As a result of these accounting changes, Avon recorded an aggregate
non-cash charge in the first quarter of 1994 of $45.2 million, or $.64 per
share. This amount reflects the cumulative effect of adjustments for FAS No.
112 of $28.9 million, or $.41 per share, FAS No. 106 of $8.0 million, or $.11
per share, and systems development costs of $8.3 million, or $.12 per share.
The proforma effect for the change in accounting for the deferred internal
systems development costs for the years ended December 31, 1993 and 1992, had
the accounting change been adopted effective January 1, 1992, would not have
been significant.

Effective January 1, 1993, Avon adopted FAS No. 106, for its U.S. retiree
health care and life insurance benefit plans. FAS No. 106 resulted in the
recognition of an additional liability and expense for postretirement
benefits. Avon recorded the entire previously unrecognized obligation of
$183.3 million ($110.0 million after tax, or $1.53 per share) at the time of
adoption as a cumulative effect adjustment. The additional after-tax expense
in 1993 was $6.5 million.

During 1992, costs of health care and life insurance benefits, for the
U.S. and certain foreign countries, which were expensed when paid, amounted to
$4.7 million, on an after-tax basis. During 1993, the after-tax cost for
certain foreign countries was $.3 million.

Discontinued Operations - During 1994, the Company sold Giorgio, its remaining
retail business, for cash of $150.0 million. The Company recorded a loss of
$25.0 million on the sale. Since the Company has excess capital loss
carryforwards, no tax benefits have been recognized on the loss. Giorgio's
operating results are segregated and reported as discontinued operations
through the date of sale.

During 1993, Avon recorded a discontinued operations provision of $10.0
million after tax, or $.14 per share, for the final settlement and related
expenses in an arbitration proceeding related to a business previously sold.

Although Avon has completed its divestiture of all discontinued
operations, it may be liable for various contingencies relating to, among
other things, indemnifications given to the purchasers of certain discontinued
operations. An indemnification, currently being litigated, covers a patent
dispute, various environmental claims and numerous other lawsuits and claims.
Due to the complex nature of these contingencies, the ultimate outcome and
related total costs to Avon cannot currently be determined.

In June 1988, Mallinckrodt, Inc. ("Mallinckrodt") and International
Minerals & Chemical Corporation ("IMC"), now known as Mallinckrodt Group Inc.,
filed a lawsuit against Avon in the St. Louis Missouri City Circuit Court
arising from Avon's sale of Mallinckrodt to IMC in 1986. The suit alleged
that a certain patent dispute and a settlement, referred to as the DuPont
patent case, various environmental claims and numerous other lawsuits and
claims are contingent liabilities covered by an indemnification given by Avon
in connection with the sale of Mallinckrodt. In October 1991, the Missouri
Supreme Court affirmed the Circuit Court's decision that Avon has the
obligation to indemnify IMC and Mallinckrodt in connection with the DuPont
patent case, but remanded the matter for a trial on the damages, if any,
suffered by the parties. On July 27, 1992, a jury returned a verdict in the
DuPont patent case for $16.0 million, and a judgment for that amount plus
approximately $6.5 million interest was entered. On August 11, 1992, IMC and
Mallinckrodt filed post-trial motions, including a motion for a judgment
notwithstanding the verdict or, in the alternative, a motion for a new trial.
On November 5, 1992, the St. Louis Missouri City Circuit Court granted IMC's
and Mallinckrodt's motion for a judgment notwithstanding the verdict and
directed a verdict for plaintiffs in the amount of $27.1 million plus
interest. As of November 5, 1992, the interest amounted to approximately
$11.7 million. Avon, IMC and Mallinckrodt have appealed this decision. This
issue was argued before the Missouri Court of Appeals, Eastern District on May
11, 1994. On November 8, 1994, the Court of Appeals overturned the judgment
notwithstanding the verdict and ordered a new trial. All possible further
judicial review has now been exhausted and a retrial is expected during 1995.
Pre-trial proceedings and discovery activities are
29

<PAGE>30
ongoing with respect to the environmental and general litigation portions of
the case.

Liquidity and Capital Resources

Cash Flows - Net cash provided by continuing operations was $298.3 million in
1994 compared to $299.8 million in 1993. 1994 net cash provided by continuing
operations principally reflects, among other things, an increase in net income
of $63.7 million and an increase in accounts payable and accrued expenses
resulting from the Company's cash management practices, offset by a reduced
cumulative effect of accounting changes and increased receivables due to
higher sales levels. 1994 net cash provided by continuing operations of
$298.3 million was more than adequate to fully fund capital expenditures of
$99.9 million, cash dividends of $141.1 million and all required long-term
debt payments of $18.4 million. The $61.3 million decrease in net cash
provided by continuing operations in 1993 compared to 1992 was primarily due
to lower cash provided by operations in the U.S. and Europe, mainly Germany,
caused by higher working capital levels and lower net income. A more detailed
analysis of the individual items contributing to the 1994 and 1993 amounts is
included in the Consolidated Statement of Cash Flows.

Cash used by discontinued operations was $6.0 million in 1994, compared
with $2.3 million in 1993 and cash provided by discontinued operations of
$24.7 million in 1992. The $3.7 million increase in cash used in 1994
compared to 1993 reflects costs associated with the sale of Giorgio and lower
cash provided by Giorgio operations in 1994, partially offset by the 1993
payment of an arbitration settlement and related expenses. The $27.0 million
decrease in 1993 compared to 1992 reflects the final settlement of the
arbitration proceeding in 1993 and cash received in 1992 from previously
written-off notes and securities that Avon received in connection with the
sale of health care and other businesses in prior years.

Excluding changes in debt, net cash flow of $7.7 million in 1994 decreased
$96.0 million from $103.7 million in 1993. This variance reflects an increase
in cash used for the repurchase of common stock, an increase in capital
expenditures, higher dividend payments and the proceeds received in 1993 from
the sale of a non-operating investment. These declines were partially offset
by $150.0 million of proceeds received from the sale of Giorgio and cash used
for the acquisition of minority interests in two foreign subsidiaries in 1993.
As of December 31, 1994, 3.2 million shares of common stock have been
purchased for $188.2 million under the stock repurchase program begun in 1994.

In 1993, excluding changes in debt, net cash flow of $103.7 million
decreased $54.7 million from $158.4 million in 1992. This decrease was
primarily due to the decrease in cash provided by all operating activities and
higher dividend payments in 1993. This decrease was partially offset by the
proceeds received from the sale of a non-operating investment in 1993 and
lower cash used for the acquisition of minority interests in two foreign
subsidiaries in 1993 compared with the cost of acquiring additional shares of
the Japanese subsidiary in 1992.

Working Capital - As of December 31, 1994, working capital was $9.3 million
compared with $4.3 million at the end of 1993, excluding net assets of
discontinued
30

<PAGE>31
operations. The increase was primarily due to higher investments
in working assets (current assets excluding cash and equivalents and net
assets of discontinued operations), primarily accounts receivable, due to a
higher 1994 sales level, and inventory, as discussed in the Inventories
section. The increase was partially offset by increases in accounts payable
and accrued compensation.

Avon's liquidity results from its ability to generate significant cash flows
from operations and its ample unused borrowing capacity. Avon's credit
agreements do not contain any provisions or requirements with respect to
working capital.

Capital Resources - Total debt decreased $16.4 million to $177.7 million at
December 31, 1994 from $194.1 million at December 31, 1993 compared with a
reduction of $20.9 million from December 31, 1992. During 1994, cash flow
from operations and proceeds from the sale of Giorgio, which more than offset
cash used for the stock repurchase program, dividends and capital
expenditures, were used to reduce debt. During 1993 and 1992, cash flows from
operations were used to reduce debt.

Debt maturing within one year consists of borrowings from banks of $32.0
million and the current maturities of long-term debt of $29.2 million.
Management believes that cash from operations and available sources of
financing are adequate to meet anticipated requirements for working capital,
dividends, capital expenditures, the stock repurchase program and other cash
needs. It is also currently anticipated that existing debt maturing over the
next five years will be paid without refinancing.

Avon has a $600.0 million revolving credit and competitive advance
facility with various banks which can be used to finance working capital, to
provide support for the issuance of commercial paper and to support the stock
repurchase program. There were no borrowings under this facility at December
31, 1994. This facility has an annual facility fee of $.6 million as well as
a utilization fee if more than 50 percent of the total commitment is
outstanding. The agreement contains a financial covenant related to interest
coverage, as defined. The Company is in compliance with this covenant.

Avon has a $300.0 million commercial paper facility supported by the
revolving credit and competitive advance facility. The Company also has
bankers' acceptance facilities and uncommitted lines of credit available of
$235.0 million with various banks which have no compensating balances or fees.
As of December 31, 1994 and 1993, there were no borrowings under these
facilities. In addition, there are international lines of credit totalling
$276.4 million of which $32.0 million was outstanding at December 31, 1994.
There are no compensating balances or fees under these facilities.

Inventories - Avon's products are marketed during twelve to twenty-six
individual sales campaigns each year. Each campaign is conducted using a
brochure offering a wide assortment of products, many of which change from
campaign to campaign. It is necessary for Avon to maintain relatively high
inventory levels as a result of the nature of its business, including the
number of campaigns conducted annually and the large number of products
marketed. Avon's operations have a seasonal pattern characteristic of many
companies selling CFT, fashion jewelry, gift items and apparel. Christmas
sales cause a peak in the fourth quarter which results in the build up of
inventory at the end of the third quarter. Inventory levels are then sharply
reduced by the end of the fourth quarter. Net inventories of $412.8 million
at December 31, 1994 were $52.3 million higher than 1993 due to the
introduction of the apparel line in the U.S., sales growth in the Americas
Region, most significantly Brazil and Argentina, and expansion into new
markets, primarily Poland, Hungary and China. In addition, higher inventory
levels resulted from lower fourth quarter sales in the United Kingdom. It is
Avon's objective to continue to manage purchases and inventory levels
maintaining the focus of operating the business at efficient inventory levels.
However, the addition or expansion of product lines such as apparel, jewelry
and impulse gift items, products that are subject to changing fashion trends
and consumer tastes, as well as planned expansion in high growth markets may
cause the inventory levels to grow periodically.

Capital Expenditures - Capital expenditures during 1994 of $99.9 million
(1993 - $58.1 million) were made for capacity expansion in high growth
markets, most significantly in the Pacific Rim, and to maintain worldwide
facilities. Numerous construction and information systems projects were in
progress at December 31, 1994 with an estimated cost to complete of
approximately $24.0 million. Capital expenditures in 1995 are currently
expected to increase approximately $25.0 million over 1994 levels as a result
of continued investments for capacity expansion in high growth markets, most
significantly in the Pacific Rim, and for facility modernization, information
systems and equipment replacement projects.

Foreign Operations - The Company derived approximately 64 percent and 65
percent of its 1994 consolidated net sales and consolidated pretax income from
operations,
31

<PAGE>32
respectively, from its international subsidiaries. In addition,
as of December 31, 1994, international subsidiaries comprised approximately 56
percent of the Company's consolidated total assets.

Avon's operations in many countries utilize numerous currencies. Avon has
significant net assets in Japan, Germany, Mexico, Philippines, Canada and the
United Kingdom. Changes in the value of these countries' currencies relative
to the U.S. Dollar result in direct charges or credits to equity. Avon also
has substantial operations in Brazil and Argentina, countries with economies
designated as highly inflationary whose functional currency is the U.S.
Dollar, whereby changes in exchange rates result in charges or credits to
income and may significantly impact the results of operations. In July 1994,
Brazil implemented a new economic stabilization package which lowered
inflation and improved consumer purchasing confidence during the second half
of the year. As a result of the sharply reduced rate of inflation in
Argentina during the past three years, effective January 1, 1995, the country
is no longer designated as having a highly inflationary economy. Also,
effective January 1, 1995, because of the trend of higher inflation rates,
Venezuela is designated as a country with a highly inflationary economy.

The Mexican Peso devalued significantly in December 1994. However,
because the devaluation occurred late in the year, there was no material
impact on the 1994 results of operations. This devaluation resulted in an
$18.0 million charge to Translation Adjustments on the Consolidated Balance
Sheet. In 1994, Mexico contributed approximately 9 percent of Avon's
consolidated net sales. It is expected that a continued weak Peso will have
some impact on 1995 results; however, management cannot at this time project
what this impact will be. Management has formulated plans to mitigate the
effect of the unstable economic conditions. Flexibility in pricing and
reliance on locally-purchased and manufactured goods in Mexico will also help
minimize the impact. In addition, Avon's well diversified global portfolio of
businesses has demonstrated that the effects of weak economies and currency
fluctuations in certain countries may be offset by strong results in others.

Fluctuations in the value of foreign currencies cause U.S. Dollar-
translated amounts to change in comparison with previous periods.
Accordingly, Avon cannot project in any meaningful way the possible effect of
such fluctuations upon translated amounts or future earnings. This is due to
the large number of currencies involved, the constantly changing exposure in
these currencies, the complexity of intercompany relationships, the hedging
activity entered into in an attempt to minimize certain of the effects of
exchange rate changes where economically feasible and the fact that all
foreign currencies do not react in the same manner against the U.S. Dollar.

Certain of the Company's financial instruments, which are discussed below
under Risk Management Strategies and in Note 8 of the Notes to the
Consolidated Financial Statements, are used to hedge various amounts relating
to certain international subsidiaries. However, the Company's foreign
currency hedging activities are not significant when compared to the Company's
international financial position or results of operations.

With the exception of Avon Japan, no foreign subsidiary relies, to any
material extent, on long-term financing. Many subsidiaries have short-term
borrowings from local commercial banks during the first nine months of the
year to fund working capital needs created by Avon's highly seasonal sales
pattern. From time to time, when tax and other cost considerations dictate,
Avon will finance subsidiary working capital needs. At December 31, 1994, the
total indebtedness of foreign subsidiaries was $77.7 million.

It is Avon's policy to remit all the available cash (cash in excess of
working capital requirements, having no legal restrictions and not considered
permanently reinvested) of foreign subsidiaries as rapidly as is practical.
During 1994, these subsidiaries remitted, net of taxes, $187.3 million in
dividends and royalties. This sum is a substantial portion of the 1994
consolidated net earnings of Avon's foreign subsidiaries.

Risk Management Strategies - The Company operates internationally, with
manufacturing and distribution facilities in various locations around the
world. The Company reduces its exposure to fluctuations in interest rates and
foreign exchange rates by creating offsetting positions through the use of
derivative financial instruments. The Company currently does not use
derivative financial instruments for trading or speculative purposes, nor is
the Company a party to leveraged derivatives.

The Company may use interest rate swaps to hedge portions of its interest
expense thereby allowing the Company to establish fixed or variable interest
rates on its outstanding debt. During most of 1994 and over the recent past,
the Company has elected to use interest rate swaps to establish fixed rates on
its long-term debt. The Company closely monitors market conditions and, if in
a variable position, may also use interest rate caps whereby its net interest
expense is limited if interest rates rise above a defined level. In November
1994, one of the Company's fixed rate swap contracts expired and
32

<PAGE 33>
the interest rate on the long-term Deutsche Mark debt became variable.
Effective January 1995, the Company has interest rate caps on its long-term
Deutsche Mark debt through its maturity date.

Avon had two interest rate swap agreements at December 31, 1994 (three at
December 31, 1993), each such agreement having a notional principal amount of
$100.0 million (1993 - $100.0 million), yielding an aggregate notional
principal amount at December 31, 1994 of $200.0 million (1993 - $300.0
million). These agreements have converted the interest rate on the 170
million 6 1/8 percent Deutsche Mark notes to a variable rate established at
1.4 percentage points above one-month LIBOR (6 percent at December 31, 1994)
for November 1994 through May 1998, when the notes mature. At December 31,
1994, the Company also had three interest rate cap contracts, one of which
expired in early January 1995. One contract is for the calendar year 1995 and
places a ceiling on one-month LIBOR at 6 percent. The other contract is for
the period January 1996 to the maturity of the notes and places a ceiling on
one-month LIBOR at 9 percent. The unamortized cost of these contracts was
approximately $1.4 million at December 31, 1994 and is included in Other
Assets.

The interest rate on the long-term 6 1/8 percent Deutsche Mark notes was
fixed at approximately 10 percent from January 1992 to November 1994 through
the use of a currency exchange swap contract and several interest rate swaps.
With the expiration of one interest rate swap in November 1994, the Company's
interest rate on this $100.0 million debt was converted from a fixed to a
floating rate determined at one-month LIBOR plus 1.4 percent. At December 31,
1994 one-month LIBOR was 6 percent, resulting in an effective borrowing rate
of 7.4 percent. As a floating rate payor, the Company will have to pay higher
rates in 1995, should one-month LIBOR rise. In order to protect the Company
from possible rising rates in calendar year 1995, the Company has purchased an
interest rate cap which places a ceiling on one-month LIBOR at 6 percent. The
notional principal on this cap is $100.0 million. Another $100.0 million
notional cap was purchased for the period beginning January 1996 through May
1998, which places a ceiling on one-month LIBOR at 9 percent.

The 5 3/8 percent Swiss Franc debt, which was outstanding from January
1992 through December 1, 1994, was effectively hedged into fixed U.S. Dollar
debt through the use of a currency exchange swap contract, which also fixed
the interest rate at approximately 9 percent for that period. The currency
exchange swap agreement provided for the Company to pay in U.S. Dollars and
receive the required Swiss Francs from the counterparty to pay the principal
and interest owed to the bondholders at the required payment dates. These
bonds were repaid on December 1, 1994.

The only other significant long-term debt outstanding for the period
January 1, 1992 to December 31, 1994 was a Yen note obligation of Avon's
Japanese subsidiary, which has a fixed interest rate of 8.5 percent. The loan
agreement required periodic principal payments throughout the term of the
loan. As of December 31, 1994, the loan balance was $25.1 million, which is
payable in full during 1995 in four equal installments.

The Company may periodically hedge foreign currency royalties, net
investments in foreign subsidiaries, firm purchase commitments, contractual
foreign currency cash flows or obligations, including debt, and other third-
party or intercompany foreign currency transactions. The Company regularly
monitors its foreign currency exposures and ensures that hedge contract
amounts do not exceed the amounts of the underlying exposures.

At December 31, 1994, the Company held foreign currency forward contracts
with notional amounts totalling $184.1 million and option contracts with
notional amounts totalling $31.2 million to hedge foreign currency items.

The Company attempts to minimize its credit exposure to counterparties by
entering into interest rate swap and cap contracts only with major
international financial institutions with "A" or higher credit ratings as
issued by Standard & Poor's Corporation. The Company's foreign currency and
interest rate derivatives are comprised of over-the-counter forward contracts
or options with major international financial institutions to buy or sell
foreign currencies. Although the Company's theoretical credit risk is the
replacement cost at the then estimated fair value of these instruments,
management believes that the risk of incurring losses is remote and that such
losses, if any, would not be material.

Non-performance of the counterparties to the balance of all the currency
and interest rate swap agreements in a net receivable position would not
result in a significant write-off at December 31, 1994. In addition, there
are other swap agreements in a net payable position of an insignificant amount
at December 31, 1994. Each agreement provides for the right of offset between
counterparties to the agreement. In addition, Avon may be exposed to market
risk on its foreign exchange and interest rate swap and cap agreements as a
result of changes in foreign exchange and interest rates. The market risk
related to the foreign exchange agreements should be substantially offset by
changes in the valuation of the underlying items being hedged.
33

<PAGE>34
Results of Operations by Quarter Avon Products, Inc.

In millions, except per share data

First Second Third Fourth Year
----- ------ ----- ------ ----
1994
Net sales $886.0 $1,007.2 $1,009.8 $1,363.5 $4,266.5
Gross profit 533.6 618.1 616.9 825.8 2,594.4
Income
from continuing
operations before
taxes, minority
interest and
cumulative effect
of accounting changes 51.1 120.0 80.6 182.1 433.8
Income from continuing
operations before
minority interest
and cumulative effect
of accounting changes 31.2 73.2 51.9 114.0 270.3
Discontinued operations,
net (1) (1.6) (22.2) - - (23.8)
Cumulative effect of
accounting changes (2) (45.2) - - - (45.2)
Net income (loss) (15.7) 50.1 51.3 110.1 195.8
Income (loss) per share:
Income from continuing
operations before
cumulative effect of
accounting changes $ .43 $ 1.02 $ .73 $ 1.59 $ 3.75
Discontinued operations (.02) (.31) - - (.34)
Cumulative effect of
accounting changes (.63) - - - (.64)
------ -------- -------- -------- --------
Net income (loss) $ (.22) $ .71 $ .73 $ 1.59 $ 2.77(3)
====== ======== ======== ======== ========

First Second Third Fourth Year
----- ------ ----- ------ ----
1993
Net sales $808.1 $920.2 $911.3 $1,204.5 $3,844.1
Gross profit 494.5 570.0 555.8 726.8 2,347.1
Income
from continuing
operations before
taxes, minority
interest and
cumulative effect
of accounting changes 40.7 113.0 73.6 167.3 394.6
Income from continuing
operations before
minority interest
and cumulative effect
of accounting changes 24.4 67.8 47.8 103.8 243.8
Discontinued operations,
net (1) (10.1) (.3) 6.4 6.7 2.7
Cumulative effect of
accounting changes (2) (107.5) - - - (107.5)
Net income (loss) (92.9) 65.6 54.0 105.4 132.1
Income (loss) per share:
Income from continuing
operations before
cumulative effect of
accounting changes $ .34 $ .91 $ .66 $ 1.37 $ 3.28
Discontinued operations (.14) - .09 .09 .04
Cumulative effect of
accounting changes (1.49) - - - (1.49)
------ ------ ------ -------- --------
Net income (loss) $(1.29) $ .91 $ .75 $ 1.46 $ 1.83(3)
====== ====== ====== ======== ========

(1)See Note 3 to the Consolidated Financial Statements regarding discontinued
operations.
(2)See Note 2 to the Consolidated Financial Statements regarding cumulative
effect of accounting changes.
(3)The sum of per share amounts for the quarters does not necessarily equal
that for the year because the computations are made independently.

Market Prices of Common Stock by Quarter

1994 1993
------------ -------------
Quarter High Low High Low
---- --- ---- ---

First $58 $48-3/8 $64-3/8 $51-7/8
Second 61-1/4 55-5/8 61-3/4 52-1/8
Third 62-7/8 56 59-1/2 49-7/8
Fourth 63-5/8 58-5/8 53-5/8 47-7/8

Avon common stock is listed on the New York Stock Exchange. At December 31,
1994, there were approximately 26,100 shareholders of record. Dividends
declared for the last two quarters of 1994 were $.50 per share and for the
first two quarters of 1994 and last two quarters of 1993 were $.45 per share
and for the first two quarters of 1993 were $.40 per share.
34

<PAGE>35
Consolidated Statement of Income Avon Products, Inc.

In millions, except per share data
Years ended December 31 1994 1993 1992
-------- -------- --------
Net sales $4,266.5 $3,844.1 $3,660.5
-------- -------- --------
Costs, expenses and other
Cost of sales 1,672.1 1,497.0 1,438.2
Marketing, distribution and administrative
expenses 2,098.8 1,913.9 1,781.1
Provision for restructuring costs - - 96.0
Interest expense 50.8 45.2 43.7
Interest income (22.1) (25.3) (37.5)
Other expense, net 33.1 18.7 49.0
-------- -------- --------
Total costs, expenses and other 3,832.7 3,449.5 3,370.5
-------- -------- --------
Income from continuing operations before
taxes, minority interest and cumulative
effect of accounting changes 433.8 394.6 290.0
Income taxes 163.5 150.8 120.6
-------- -------- --------
Income from continuing operations before
minority interest and cumulative effect
of accounting changes 270.3 243.8 169.4
Minority interest (5.5) (6.9) (5.2)
-------- -------- --------
Income from continuing operations before
cumulative effect of accounting changes 264.8 236.9 164.2
Discontinued operations
Income, net of taxes 1.2 12.7 10.8
Loss on sale, net of taxes in 1993 (25.0) (10.0) -
Cumulative effect of accounting changes,
net of taxes (45.2) (107.5) -
-------- -------- --------
Net income $ 195.8 $ 132.1 $ 175.0
======== ======== ========

Income (loss) per share:
Continuing operations $ 3.75 $ 3.28 $ 2.28
Discontinued operations (.34) .04 .15
Cumulative effect of accounting changes (.64) (1.49) -
-------- -------- --------
Net income $ 2.77 $ 1.83 $ 2.43
======== ======== ========

Average shares outstanding 70.59 72.06 71.99

The accompanying notes are an integral part of these statements.
35

<PAGE>36
Consolidated Balance Sheet Avon Products, Inc.

In millions, except share data
December 31 1994 1993
---- ----
Assets
Current assets
Cash, including cash equivalents of $132.5 and $159.7 $ 214.8 $ 223.9
Accounts receivable (less allowance for doubtful
accounts of $27.3 and $22.0) 373.7 306.0
Inventories 412.8 360.5
Prepaid expenses and other 149.0 135.9
Net assets of discontinued operations - 18.8
-------- --------
Total current assets 1,150.3 1,045.1
-------- --------
Property, plant and equipment, at cost
Land 54.3 41.7
Buildings and improvements 531.5 495.1
Equipment 560.9 524.7
-------- --------
1,146.7 1,061.5
Less accumulated depreciation 618.3 585.3
-------- --------
528.4 476.2
-------- --------

Net assets of discontinued operations - 136.2
Other assets 299.6 261.2
-------- --------
Total assets $1,978.3 $1,918.7
======== ========
Liabilities and Shareholders' Equity
Current liabilities
Debt maturing within one year $ 61.2 $ 70.4
Accounts payable 408.0 365.4
Accrued compensation 100.0 62.7
Other accrued liabilities 222.3 203.3
Sales and other taxes 95.7 94.9
Income taxes 253.8 225.3
-------- --------
Total current liabilities 1,141.0 1,022.0
-------- --------
Long-term debt 116.5 123.7
Employee benefit plans 366.6 295.1
Deferred income taxes 32.2 30.5
Other liabilities (including minority interest
of $48.9 and $43.2) 136.4 133.4

Commitments and contingencies

Shareholders' equity
Common stock, par value $.50 - authorized:
200,000,000 shares; issued - 86,663,874 and
86,528,692 shares 43.3 43.3
Additional paid-in capital 660.5 652.3
Retained earnings 212.4 150.6
Translation adjustments (187.1) (175.3)

Treasury stock, at cost - 17,589,639 and
14,430,073 shares (543.5) (356.9)
-------- --------
Total shareholders' equity 185.6 314.0
-------- --------
Total liabilities and shareholders' equity $1,978.3 $1,918.7
======== ========

The accompanying notes are an integral part of these statements.
36

<PAGE>37
Consolidated Statement of Cash Flows Avon Products, Inc.

In millions
Years ended December 31 1994 1993 1992
---- ---- ----
Cash flows from operating activities
Net income $195.8 $132.1 $175.0
Adjustments to reconcile income to net cash
provided by continuing operations:
Cumulative effect of accounting changes, net 45.2 107.5 -
Discontinued operations, net 23.8 (2.7) (10.8)
(Payments) provision for restructuring costs (3.5) (27.0) 56.3
Depreciation and amortization 55.7 57.2 56.7
Provision for doubtful accounts 64.9 51.4 45.3
Translation (gains) losses (9.0) 14.7 12.8
Deferred income taxes 2.2 (12.1) (29.8)
Other 26.9 17.5 27.5
Changes in assets and liabilities:
Accounts receivable (179.4) (140.8) (122.3)
Inventories (61.3) (60.9) 14.9
Prepaid expenses and other (12.1) (2.1) 4.5
Accounts payable and accrued liabilities 145.9 79.5 86.7
Income and other taxes 45.4 75.8 46.3
Noncurrent assets and liabilities (42.2) 9.7 (2.0)
------ ------ ------
Net cash provided by continuing operations 298.3 299.8 361.1
Net cash (used) provided by discontinued
operations (6.0) (2.3) 24.7
------ ------ ------
Net cash provided by operating activities 292.3 297.5 385.8
------ ------ ------
Cash flows from investing activities
Capital expenditures (99.9) (58.1) (62.7)
Disposal of assets 4.5 19.1 2.9
Acquisitions of subsidiary stock - (6.4) (28.5)
Proceeds from sale of Giorgio Beverly Hills, Inc. 150.0 - -
------ ------ ------
Net cash provided (used) by investing activities 54.6 (45.4) (88.3)
------ ------ ------
Cash flows from financing activities
Cash dividends (141.1) (124.9) (109.9)
Debt, net (maturities of three months or less) (23.3) 14.8 (5.4)
Proceeds from short-term debt 35.0 26.8 24.2
Retirement of short-term debt (16.2) (24.8) (112.7)
Proceeds from long-term debt 6.1 - -
Retirement of long-term debt (18.4) (38.2) (37.4)
Proceeds from exercise of stock options,
net of taxes .7 .9 4.2
Repurchase of common stock (188.2) (.4) (7.4)
------ ------ ------
Net cash (used) by financing activities (345.4) (145.8) (244.4)
------ ------ ------
Effect of exchange rate changes on cash and
equivalents (10.6) (24.0) (26.0)
------ ------ ------
Net (decrease) increase in cash and equivalents (9.1) 82.3 27.1
Cash and equivalents at beginning of year 223.9 141.6 114.5
------ ------ ------
Cash and equivalents at end of year $214.8 $223.9 $141.6
====== ====== ======

Cash paid for
Interest $ 47.8 $ 37.6 $ 37.3

Income taxes, net of refunds received 130.0 132.7 125.8

The accompanying notes are an integral part of these statements.
37

<PAGE>38
<TABLE>
<CAPTION>
Consolidated Statement of Changes in
Shareholders' Equity Avon Products, Inc.

Additional
Common Stock Paid-In Retained Translation Treasury
In millions, except share data Shares Amount Capital Earnings Adjustments Stock Total
------------------- ---------- -------- ----------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1991 86,168,007 $43.1 $633.0 $ 59.0 $(131.7) $(351.8) $251.6
Net income 175.0 175.0
Dividends - $1.50 per share (107.5) (107.5)
Translation adjustments (23.9) (23.9)
Exercise of stock options,
including tax benefits 150,380 .1 10.3 10.4
Grant, cancellation and
amortization of restricted stock 127,295 9.6 9.6
Repurchase of common stock (7.4) (7.4)
Benefit plan contributions 1.4 1.3 2.7
---------- ----- ------ ------ ------- ------- ------
Balance at December 31, 1992 86,445,682 43.2 654.3 126.5 (155.6) (357.9) 310.5
Net income 132.1 132.1
Dividends - $1.70 per share (14.5) (108.0) (122.5)
Translation adjustments (19.7) (19.7)
Exercise of stock options,
including tax benefits 24,920 .1 1.3 1.4
Grant, cancellation and
amortization of restricted stock 58,090 9.4 9.4
Repurchase of common stock (.4) (.4)
Benefit plan contributions 1.8 1.4 3.2
---------- ----- ------ ------ ------- ------- ------
Balance at December 31, 1993 86,528,692 43.3 652.3 150.6 (175.3) (356.9) 314.0
Net income 195.8 195.8
Dividends - $1.90 per share (134.0) (134.0)
Translation adjustments (11.8) (11.8)
Exercise of stock options,
including tax benefits 24,068 1.6 1.6
Grant, cancellation and
amortization of restricted stock 111,114 4.8 4.8
Repurchase of common stock (188.2) (188.2)
Benefit plan contributions 1.8 1.6 3.4
---------- ----- ------ ------ ------- ------- ------
Balance at December 31, 1994 86,663,874 $43.3 $660.5 $212.4 $(187.1) $(543.5) $185.6
========== ===== ====== ====== ======= ======= ======
The accompanying notes are an integral part of these statements.
</TABLE>
38

<PAGE>39
Notes to Consolidated Financial Statements Avon Products, Inc.

In millions, except share data

1. Significant Accounting Policies

Principles of Consolidation - The consolidated financial statements include
the accounts of Avon Products, Inc. and its subsidiaries. Intercompany
balances and transactions are eliminated.

Foreign Currency Translation - Financial statements of foreign subsidiaries
operating in other than highly inflationary economies are translated at
year-end exchange rates for assets and liabilities and average exchange rates
prevailing during the year for income and expense accounts. Translation
adjustments of these subsidiaries are recorded as a separate component of
shareholders' equity.

For financial statements of subsidiaries operating in highly inflationary
economies, nonmonetary assets (principally inventories and fixed assets) and
the related expenses (principally cost of sales and depreciation) are
translated at the respective historical exchange rates in effect when the
assets were acquired or when the subsidiary was designated as operating in a
highly inflationary economy. Monetary assets and liabilities are translated
at year-end exchange rates. All other income and expense accounts are
translated at average exchange rates prevailing during the year. Adjustments
resulting from the translation of the financial statements of these
subsidiaries are included in income.

Revenue Recognition - Avon recognizes revenue as shipments are made and title
passes to independent Representatives, who are Avon's customers.

Cash and Equivalents - Cash equivalents are stated at cost plus accrued
interest, which approximates fair value. Cash equivalents are highly liquid
debt instruments with an original maturity of three months or less and consist
of time deposits with a number of commercial banks with high credit ratings in
the U.S. and abroad. In accordance with Avon's policy, the maximum amount
invested in any one bank is limited. Avon does not believe it is exposed to
any significant credit risk on cash and equivalents.

Inventories - Inventories are stated at the lower of cost or market. Cost is
determined using the last-in, first-out (LIFO) method for substantially all
U.S. inventories except apparel and the first-in, first-out method for all
other inventories.

Depreciation - Substantially all buildings, improvements and equipment are
depreciated using the straight-line method over estimated useful lives.
Estimated useful lives for buildings and improvements range from 20 to 45
years and equipment ranges from 5 to 15 years.

Other Assets - Effective January 1, 1994, Avon changed its method of
accounting for internal systems development costs. Previously, Avon deferred
certain internal costs related to the development of major information and
accounting systems and amortized them over future periods. These internal
development costs are now being expensed as incurred.

Financial Instruments - Derivative financial instruments are used by the
Company in the management of its interest rate and foreign currency exposures
and are accounted for on an accrual basis. Income and expense are recorded in
the same category as that arising from the related asset or liability being
hedged. Gains and losses resulting from effective hedges of existing assets,
liabilities or firm commitments are deferred and recognized when the
offsetting gains and losses are recognized on the related hedged items. Gains
realized on termination of interest rate swap contracts are deferred and
amortized over the remaining terms of the original swap agreements. Costs of
interest rate cap contracts are amortized over the effective lives of the
contracts.

Research and Development - Research and development costs are expensed as
incurred and aggregated $27.9 (1993 - $28.5; 1992 - $27.9).

Advertising - Advertising costs are expensed as incurred and aggregated $42.6
(1993 - $49.4; 1992 - $23.6).

Income Taxes - Effective January 1, 1993, Avon accounts for income taxes under
the provisions of Statement of Financial Accounting Standards ("FAS") No. 109,
"Accounting for Income Taxes", which requires that
39

<PAGE>40
deferred income taxes be provided on items recognized for financial reporting
purposes in different periods than for income tax purposes at future enacted
rates. See Note 7 for the cumulative effect of the adoption of FAS No. 109.

U.S. income taxes have not been provided on approximately $222.0 of
undistributed income of subsidiaries that has been or is intended to be
permanently reinvested outside the United States or is expected to be remitted
free of U.S. income taxes. If such undistributed income was remitted, foreign
withholding taxes of approximately $27.0 would be payable.

Income per Share - Primary income per share of common stock is based on the
weighted average number of shares outstanding. The decrease in average shares
outstanding for 1994 compared to 1993 is primarily due to the shares acquired
under the stock repurchase program.

Reclassifications - To conform to the 1994 presentation, certain reclass-
ifications were made to the prior years' consolidated financial statements.
See Note 3 regarding discontinued operations.

2. Accounting Changes

Effective January 1, 1994, Avon adopted FAS No. 112, "Employers' Accounting
for Postemployment Benefits", for all applicable operations and FAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions", for
its foreign benefit plans. In addition, effective January 1, 1994, Avon
changed its method of accounting for internal systems development costs.

As a result of these accounting changes, Avon recorded an aggregate
non-cash charge in the first quarter of 1994 of $45.2, or $.64 per share.
This amount reflects the cumulative effect of adjustments for FAS No. 112 of
$28.9, or $.41 per share, FAS No. 106 of $8.0, or $.11 per share, and systems
development costs of $8.3, or $.12 per share. The proforma effect for the
change in accounting for the deferred internal systems development costs for
the years ended December 31, 1993 and 1992, had the accounting change been
adopted effective January 1, 1992, would not have been significant.

Effective January 1, 1993, Avon adopted FAS No. 106, for its U.S. retiree
health care and life insurance benefit plans. FAS No. 106 requires the
accrual of the cost of these postretirement benefits over the estimated
service lives of the employees receiving such benefits, rather than
recognizing these expenses when paid. Avon recorded the entire previously
unrecognized obligation of $183.3 ($110.0 after tax, or $1.53 per share), at
the time of adoption as a cumulative effect adjustment.

3. Discontinued Operations

During 1994, the Company sold Giorgio Beverly Hills, Inc. ("Giorgio"), its
remaining retail business for cash of $150.0. The Company recorded a loss of
$25.0 on the sale. Since the Company has excess capital loss carryforwards,
no tax benefits have been recognized on the loss.

Giorgio's operating results are segregated and reported as discontinued
operations through the date of sale in the accompanying consolidated financial
statements. Prior period financial statements have been reclassified to
conform to the current year presentation.

Amounts included in income from discontinued operations for Giorgio for
the years ended December 31, were as follows:

1994(1) 1993 1992
---- ---- ----

Net sales $58.1 $163.5 $149.4
Income before taxes 2.0 23.8 21.7
Net income 1.2 12.7 10.8

(1) Represents the net sales and income through the measurement date of June
30, 1994.

Assets and liabilities of Giorgio, reported as net assets of discontinued
operations as of December 31, were as follows:

1993
----

Current assets $ 55.5
Goodwill, net of accumulated amortization of $25.9 134.4
Other noncurrent assets 4.4
------
Total assets 194.3
------
Current liabilities 36.7
Long-term liabilities 2.6
------
Total liabilities 39.3
------
Net assets of discontinued operations $155.0
======

During 1993, Avon recorded a discontinued operations provision of $10.0
after tax, or $.14 per share, for the final settlement and related expenses in
an arbitration proceeding related to a business previously sold.

During 1992, Avon recorded a discontinued operations provision of
approximately $10.0 principally for
40

<PAGE>41
claims and litigation relating to businesses previously sold, which was offset
by amounts recovered for notes and securities previously written off.

Other current and noncurrent liabilities include $66.0 relating to
discontinued operations. These liabilities represent the estimated cost
relating to legal contingencies discussed in Note 13, and other costs related
to businesses previously sold, including Giorgio.

4. Provision for Restructuring Costs

A provision of $96.0 ($64.4 after tax, or $.90 per share) was recorded in 1992
for the restructuring and reconfiguration of Avon's worldwide manufacturing
and distribution facilities. The restructuring program included closing the
manufacturing facility in Spain in 1992 and the distribution facility in
Springdale, Ohio in July 1993, as well as the reconfiguring of several other
international operations. The restructuring program was substantially
completed by December 31, 1993 and was fully completed by December 31, 1994.

5. Inventories

Inventories at December 31, consisted of the following:

1994 1993
---- ----

Raw materials $118.4 $117.8
Finished goods 294.4 242.7
------ ------
Total $412.8 $360.5
====== ======

LIFO-based inventories totaled $88.0 (1993--$89.3), with the current
estimated replacement cost exceeding the carrying value by approximately $20.4
(1993 - $25.7).

6. Debt

Debt at December 31, consisted of the following:

1994 1993
---- ----
Maturing within one year:
Notes payable $ 32.0 $ 16.1
Current portion of long-term debt 29.2 54.3
------ ------

Total $ 61.2 $ 70.4
====== ======

Long-term debt:
170 million 6 1/8% Deutsche Mark notes, due 1998 (1) $100.0 $100.0
10 billion 8 1/2% Yen notes, due 1994 and 1995 (2) 25.1 39.1
5 3/8% Swiss Franc bonds, due 1994 - 35.2
Other, payable to 2004 with interest from 6% to 24% 20.6 3.7
Less current portion (29.2) (54.3)
------ ------
Total $116.5 $123.7
====== ======

(1)The Deutsche Mark notes have been effectively converted into U.S. Dollar
debt through the use of a currency exchange swap contract which includes
both the principal and the interest. Reflected in the carrying value of
the debt was a swap contract receivable (payable) at December 31, 1994 of
$9.0 (1993 - ($2.0)).

(2)The Yen notes are the obligation of the Japanese subsidiary and are
collateralized by its property and plant having a net book value of $67.6
at December 31, 1994. The 10 billion Yen notes were issued in 1990. As
of December 31, 1993, the balance of the notes was 4.4 billion Yen of which
1.9 billion Yen were paid during 1994 and 2.5 billion Yen are payable
during 1995.

(3)See Note 8 regarding financial instruments.

Annual maturities of long-term debt for each of the next five years are:
1995 - $29.2; 1996 - $4.3; 1997 - $2.5; 1998 - $102.0; and 1999 - $1.7.

In October 1994, the Company entered into a five year, $600.0 revolving
credit and competitive advance facility agreement with various banks. This
facility replaces the two previously existing revolving credit facilities
which totalled $600.0. At December 31, 1994 and 1993, there were no
borrowings under the respective credit facilities. Within this new facility,
the Company is able to borrow, on an uncommitted basis, up to $200.0 in
various foreign currencies. The facility is primarily to be used to finance
working capital, provide support for the issuance of commercial paper and
support the stock repurchase program. At the Company's option, the interest
rate on borrowings under the new facility is based on LIBOR, prime, federal
funds or money market auction rates. This facility has an annual facility fee
of $.6, as well as a utilization fee if more than 50% of the total commitment
41

<PAGE>42
is outstanding. The facility contains a covenant for interest coverage, as
defined. The Company is in compliance with this covenant.

Avon has a $300.0 commercial paper facility supported by the revolving
credit and competitive advance facility. In addition, the Company has
bankers' acceptance facilities and uncommitted lines of credit available of
$235.0 with various banks which have no compensating balances or fees. As of
December 31, 1994 and 1993, there were no borrowings under these facilities.
The maximum borrowing under these facilities during 1994 and 1993 was $219.1
and $238.8, respectively, and the annual average borrowing during the year
was approximately $127.2 and $143.5, respectively, at average annual interest
rates of approximately 4.6% and 3.4%, respectively.

International lines of credit total $276.4 of which $32.0 was outstanding
at December 31, 1994. The maximum borrowing under these facilities during
1994 and 1993 was $50.5 and $73.1, respectively, and the annual average
borrowing during the years was $38.9 and $46.8, respectively, at average
annual interest rates of approximately 10.8% and 6.6%, respectively. Such
lines have no compensating balances or fees.

Avon also has letters of credit outstanding totalling $21.5 (1993 -
$21.3), which guarantee various insurance activities. In addition, Avon has
outstanding letters of credit for various trade activities.

Interest Expense - The components of interest expense for the years ended
December 31, were as follows:
1994 1993 1992
---- ---- ----
Interest on debt $41.3 $35.0 $32.6
Other 9.5 10.2 11.1
----- ----- -----
Total $50.8 $45.2 $43.7
===== ===== =====

7. Income Taxes

Effective January 1, 1993, Avon adopted FAS No. 109, whereby, among other
things, the criteria for recognizing deferred tax assets was revised to permit
recognition of such assets when future realization is more likely than not.
The cumulative effect of this accounting change was an increase to income in
1993 of $2.5 ($.04 per share).

Deferred tax assets (liabilities) resulting from temporary differences in
the recognition of income and expense for tax and financial reporting purposes
at December 31, consisted of the following:

1994 1993
---- ----
Deferred tax assets:
Postretirement benefits $ 82.6 $ 78.0
Accrued expenses and reserves 67.5 57.8
Foreign operating loss carryforwards 29.5 41.2
Capital loss carryforwards 24.9 12.2
Postemployment benefits 12.6 -
All other 55.2 63.3
Valuation allowance (69.5) (66.9)
------- -------
Total deferred tax assets 202.8 185.6
------- -------

Deferred tax liabilities:
Depreciation (46.6) (44.0)
Prepaid retirement plan cost (35.9) (35.4)
Capitalized interest (17.7) (19.0)
Unremitted foreign earnings (10.6) (7.9)
All other (14.1) (22.7)
------- -------
Total deferred tax liabilities (124.9) (129.0)
------- -------

Net deferred tax assets $ 77.9 $ 56.6
======= =======

Deferred tax assets (liabilities) at December 31, were classified as
follows:

1994 1993
---- ----
Deferred tax assets:
Prepaid expenses and other $ 45.5 $ 43.3
Other assets 69.3 50.6
------- ------
Total deferred tax assets 114.8 93.9
------- ------
Deferred tax liabilities:
Income taxes (4.7) (6.8)
Deferred income taxes (32.2) (30.5)
------- ------
Total deferred tax liabilities (36.9) (37.3)
------- ------

Net deferred tax assets $ 77.9 $ 56.6
======= ======
42

<PAGE>43
The valuation allowance required under FAS No. 109 primarily represents
reserves for foreign operating loss and capital loss carryforwards. The basis
used for recognition of deferred tax assets included the profitability of the
operations and related deferred tax liabilities.

Income from continuing operations before taxes and minority interest for
the years ended December 31, was as follows:
1994 1993 1992
---- ---- ----

United States $127.3 $109.6 $ 96.6
Foreign 306.5 285.0 193.4
------ ------ ------
Total $433.8 $394.6 $290.0
====== ====== ======

The provision for income taxes for the years ended December 31, was as
follows:
1994 1993 1992
---- ---- ----
Federal:
Current $ 34.0 $ 14.9 $ 30.8
Deferred (4.1) (3.5) (16.8)
------ ------ ------
29.9 11.4 14.0
------ ------ ------
Foreign:
Current 119.8 141.0 110.7
Deferred 6.1 (9.2) (10.4)
------ ------ ------
125.9 131.8 100.3
------ ------ ------
State and other:
Current 7.5 8.5 9.1
Deferred .2 (.9) (2.8)
------ ------ ------
7.7 7.6 6.3
------ ------ ------
Total $163.5 $150.8 $120.6
====== ====== ======

The effective tax rate for the years ended December 31, was as follows:

1994 1993 1992
---- ---- ----

Statutory federal rate 35.0% 35.0% 34.0%
State and local taxes, net of federal tax benefit 1.2 1.3 1.5
Tax-exempt operations (1.4) (1.8) (1.5)
Taxes on foreign income, including translation 9.3 8.3 12.1
Utilization of net operating loss carryforwards (5.0) (.2) (.2)
Other (1.4) (4.4) (4.3)
----- ----- -----
Effective tax rate 37.7% 38.2% 41.6%
===== ===== =====

At December 31, 1994, Avon had foreign operating loss carryforwards of
$82.9. The loss carryforwards expiring between 1995 and 2003 were $61.8 and
the loss carryforwards which do not expire were $21.1. Capital loss
carryforwards, which expire between 1997 and 1999 and may be used to offset
capital gains, if any, approximated $71.0 at December 31, 1994.

8. Financial Instruments and
Risk Management

Risk Management - The Company operates internationally, with manufacturing and
distribution facilities in various locations around the world. The Company
may reduce its exposure to fluctuations in interest rates and foreign exchange
rates by creating offsetting positions through the use of derivative financial
instruments. The Company currently does not use derivative financial
instruments for trading or speculative purposes, nor is the Company a party to
leveraged derivatives.

The notional amount of forward exchange contracts and options is the
amount of foreign currency bought or sold at maturity. The notional amount of
interest rate swaps is the underlying principal amount used in determining the
interest payments exchanged over the life of the swap. The notional amounts
are not a measure of the Company's exposure through its use of derivatives.

Interest Rates - The Company may use interest rate swaps to hedge portions of
its interest expense thereby allowing the Company to establish fixed or
variable interest rates on its outstanding debt. During most of 1994 and over
the recent past, the Company elected to use interest rate swaps to establish
fixed rates on its long-term debt. The Company closely monitors market
conditions and, if in a variable position, may also use interest rate caps
which limit net interest expense if interest rates rise above a defined level.
In November 1994, one of the Company's fixed rate swap contracts expired and
the interest rate on the long-term Deutsche Mark debt became variable.
Effective January 1995, the Company has interest rate caps on its long-term
Deutsche Mark debt through its maturity date.
43

<PAGE>44
Avon had two interest rate swap agreements at December 31, 1994 (three at
December 31, 1993), each such agreement having a notional principal amount of
$100.0 (1993 - $100.0), yielding an aggregate notional principal amount at
December 31, 1994 of $200.0 (1993 - $300.0). These agreements have converted
the interest rate on the 170 million 6 1/8% Deutsche Mark notes to a variable
rate established at 1.4 percentage points above one-month LIBOR (6% at
December 31, 1994) for November 1994 through May 1998, when the notes mature.
At December 31, 1994, the Company also had three interest rate cap contracts,
one of which expired in early January 1995. One contract is for the calendar
year 1995 and places a ceiling on one-month LIBOR at 6%. The other contract
is for the period January 1996 to the maturity of the notes and places a
ceiling on one-month LIBOR at 9%. The unamortized cost of these contracts was
approximately $1.4 at December 31, 1994 and is included in Other Assets.

During 1993, Avon had a gain of $16.6 from the sale of interest rate swap
contracts on the Deutsche Mark notes, which is being amortized over the
remaining term of the original swap agreements. As of December 31, 1994, the
unamortized balance was $11.7 (1993 - $15.9). In addition, a gain on the
sale, in 1990, of certain interest rate swap agreements related to the Swiss
Franc bonds was amortized over the life of the original swap agreements, which
expired in December 1994.

Foreign Currencies - The Company may periodically hedge foreign currency
royalties, net investments in foreign subsidiaries, firm purchase commitments,
contractual foreign currency cash flows or obligations, including debt, and
other third-party or intercompany foreign currency transactions. The Company
regularly monitors its foreign currency exposures and ensures that hedge
contract amounts do not exceed the amounts of the underlying exposures.

At December 31, 1994, the Company held foreign currency forward contracts
with notional amounts totalling $184.1 and option contracts with notional
amounts totalling $31.2 to hedge foreign currency items. These contracts all
have maturities prior to December 31, 1995.

These forward and option contracts to purchase and sell foreign
currencies, including cross-currency contracts to sell one foreign currency
for another currency at December 31, are summarized below:

1994
--------------
Buy Sell
--- ----

Deutsche Marks $ 72.1 $ 10.4
Japanese Yen 40.0 -
Pound Sterling - 53.2
Canadian Dollar - 26.1
Other currencies 2.2 11.3
------ ------
$114.3 $101.0
====== ======

Credit and Market Risk - The Company attempts to minimize its credit exposure
to counterparties by entering into interest rate swap and cap contracts only
with major international financial institutions with "A" or higher credit
ratings as issued by Standard & Poor's Corporation. The Company's foreign
currency and interest rate derivatives are comprised of over-the-counter
forward contracts or options with major international financial institutions.
Although the Company's theoretical credit risk is the replacement cost at the
then estimated fair value of these instruments, management believes that the
risk of incurring losses is remote and that such losses, if any, would not be
material.

Fair Value of Financial Instruments - FAS No. 107, "Disclosures about Fair
Value of Financial Instruments", requires disclosure of the following
information about the fair value of certain financial instruments for which it
is practicable to estimate that value. For purposes of the following
disclosure, the fair value of a financial
44

<PAGE>45
instrument is the amount at which the instrument could be exchanged in a
current transaction between willing parties, other than in a forced sale or
liquidation.

The amounts disclosed represent management's best estimates of fair value.
In accordance with FAS No. 107, Avon has excluded certain financial
instruments and all other assets and liabilities from its disclosure.
Accordingly, the aggregate fair value amounts presented are not intended to,
and do not, represent the underlying fair value of Avon.

The methods and assumptions used to estimate fair value are as follows:

Grantor trust - The fair value of these investments, principally money market
funds, is based on the quoted market prices for issues listed on exchanges.
The carrying amount of money market funds approximates fair value.

Debt maturing within one year and long-term debt - The fair value of all debt
has been estimated based on the quoted market prices for issues listed on
exchanges and the current rates offered to Avon Japan for debt of the same
remaining maturities.

Forward exchange and currency option contracts - The fair value of forward
exchange and currency option contracts is estimated based on quoted market
prices from banks.

Interest rate swap, currency swap and interest rate cap agreements - The fair
value of interest rate swap, currency swap and interest rate cap agreements is
estimated based on quotes from the market makers of these instruments and
represents the estimated amounts that Avon would expect to receive or pay to
terminate the agreements.

The asset and (liability) amounts recorded in the balance sheet (carrying
amount) and the estimated fair values of financial instruments at December 31,
consisted of the following:

1994 1993
------------------ ------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- -------- -----

Cash and equivalents $ 214.8 $ 214.8 $ 223.9 $ 223.9
Grantor trust 50.8 50.8 20.8 20.8
Debt maturing within one year (61.2) (62.1) (97.2) (96.5)
Currency swap contract on debt
maturing within one year - - 26.8 25.0
Long-term debt (125.5) (128.8) (121.7) (120.8)
Currency swap contract on long-term
debt 9.0 9.4 (2.0) (3.3)
Other forward exchange and option
contracts .5 2.1 2.7 2.9
Interest rate cap contracts 1.4 2.5 .6 .6
Interest rate swap receivable - - .2 .2
Interest rate swaps payable (.7) (13.7) (1.7) (23.7)

9. Shareholders' Equity

Stock Plans - Under various plans, options have been granted to key employees
to purchase stock at the fair market value on the date of grant.

A summary of changes in stock options, is as follows:

Outstanding
Options Price
----------- -----

December 31, 1992 237,917 $23-$52
Granted 25,000 63
Exercised (24,920) 23- 33
Cancelled (14,000) 23- 33
-------- -------
December 31, 1993 223,997 23- 63
Granted 413,000 53
Exercised (24,068) 23- 33
Cancelled (80,827) 23- 63
-------- -------
December 31, 1994 532,102 $23-$53
======== =======
45

<PAGE>46
At December 31, 1994, options for 108,263 shares were exercisable at
prices ranging from $23 to $52 per share.

The 1993 Stock Incentive Plan ("1993 Plan"), which replaced the 1970 Stock
Option Incentive Plan, provides for several types of equity-based incentive
compensation awards. Under the 1993 Plan, the maximum number of shares that
may be awarded is 3,525,000 shares of which no more than 2,000,000 shares may
be used for restricted share and stock bonus grants. Awards, when made, may
also be in the form of stock options, stock appreciation rights, dividend
equivalent rights or performance unit awards. Stock options granted to
officers and key employees shall be at a price no less than fair market value
on the date the option is granted. During 1993, 10,000 restricted shares were
granted under the 1993 Plan, with an aggregate value of approximately $.5,
which is being amortized over a 7.6 year vesting period. During 1994, 133,985
restricted shares were granted under the 1993 Plan with an aggregate value of
$7.6 and vest over a two to five year period.

Effective January 1, 1994, the 1994 Long-Term Incentive Plan ("1994 LTIP")
was authorized under the 1993 Plan. The 1994 LTIP provides for the grant of
two forms of incentive awards; performance units consisting of potential cash
incentives and 10 year stock options. Performance units are earned out over
the three-year performance period 1994-1996, based on the degree of attainment
of performance objectives. The cash target value of all performance units is
approximately $29.0. One third of such options issued in 1994 vest each year
over a three-year period following the grant date; no such options were
exercisable as of December 31, 1994.

As of December 31, 1993, required performance goals under the prior
long-term incentive plan were achieved and accordingly fifty percent of
previously issued restricted shares were vested and issued in early 1994. An
additional thirty percent of such shares vested and were issued in early 1995
while the remaining twenty percent will vest as of January 3, 1996. During
1993, 48,090 restricted shares were issued under that plan (1992 - 127,295),
with an aggregate value on the date of grant of $3.5 (1992 - $6.9). Expense
is recorded as the restricted shares vest over the periods established for
each grant.

Compensation expense under all plans was $14.4 (1993 - $9.4; 1992 - $9.8).
The unamortized cost as of December 31, 1994 was $7.2 (1993 - $5.3). The
accrued cost of the performance units at December 31, 1994 was $9.6.

In 1994, Avon contributed 59,520 shares (1993 - 57,501) of treasury stock
to an employees' savings plan and recognized expense for its fair value on the
dates of the contributions to the plan. An estimated additional contribution
of 52,000 shares, for which the expense has been accrued at December 31, 1994,
will be made to the plan in 1995 since the Company met its performance goal,
as defined in the plan. The expense recognized for the plan in 1994 was $6.5
(1993 - $4.3; 1992 - $4.4).

Share Rights Plan - Avon has a 1987 Share Rights Plan under which one right
has been declared as a dividend for each outstanding share of its common
stock. Each right, which is redeemable at $.01 at any time at Avon's option,
entitles the shareholder, among other things, to purchase one share of Avon
common stock at a price equal to one-half the then current market price, if
certain events have occurred. The right is exercisable if, among other
events, one party obtains a beneficial ownership of 20% or more of Avon's
voting stock.

Dividends - On August 2, 1994, Avon increased the regular dividend on common
shares to an annual rate of $2.00 per share from an annual rate of $1.80. The
first quarterly dividend at the new rate of $.50 per share was paid on
September 1, 1994.

On August 9, 1993, Avon increased the regular dividend on common shares to
an annual rate of $1.80 per share from an annual rate of $1.60. The first
quarterly dividend at the new rate of $.45 per share was paid on September 1,
1993.

On August 3, 1992, Avon increased the regular dividend on common shares to
an annual rate of $1.60 per share from an annual rate of $1.40. The first
quarterly dividend at the new rate of $.40 per share was paid on September 1,
1992.

Stock Repurchase Program - During 1994, Avon's Board of Directors authorized a
stock repurchase program under which Avon may buyback up to 10% of its
outstanding common stock, or approximately 7,000,000 shares. The shares will
be purchased in the open market over a period of up to three years. As of
December 31, 1994, 3.2 million shares have been purchased for $188.2 which is
included in Treasury Stock.
46

<PAGE>47
10. Employee Benefit Plans

Retirement Plans - Avon and certain subsidiaries have noncontributory
retirement plans for substantially all employees. Benefits under these plans
are generally based on an employee's years of service and average compensation
near retirement. Plans are funded on a current basis except where funding is
not required. During 1992, as a result of an enhanced early retirement
program in the United States, an additional liability of $15.9 was recognized
and included in the 1992 Provision for Restructuring Costs.

Net retirement plan expense for the years ended December 31, was
determined as follows:
1994 1993 1992
---- ---- ----

Service cost $33.7 $33.6 $31.2
Interest cost 54.2 55.3 51.5
Actual return on plan assets 19.9 (77.4) (48.3)
Net amortization (deferral) (72.5) 19.8 (14.0)
----- ----- -----
Net retirement plan expense $35.3 $31.3 $20.4
===== ===== =====

The funded status of retirement plans at December 31, consisted of the
following:

Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
------------- -------------

1994 1993 1994 1993
---- ---- ---- ----

Plan assets at fair value (primarily
listed stocks and bonds) $519.4 $567.1 $ 42.7 $ 38.8
------ ------ ------- -------
Present value of projected benefit
obligation
Accumulated benefit obligation
Vested (385.1) (374.9) (133.6) (129.7)
Nonvested (54.5) (59.4) (29.5) (25.0)
Projected compensation increases (81.6) (87.5) (41.1) (34.9)
------ ------ ------- -------

Projected benefit obligation (521.2) (521.8) (204.2) (189.6)
------ ------ ------- -------
Plan assets (less than) in excess
of projected benefit obligation (1.8) 45.3 (161.5) (150.8)

Unrecognized net loss 97.4 69.0 22.3 22.5
Urecognized prior service cost 15.4 12.5 8.9 8.8
Unrecognized transition (gain) loss (26.7) (45.0) 10.6 18.3
Adjustment for additional liability - - (7.3) (13.0)
------ ------ ------- -------
Prepaid (accrued) retirement
plan cost $ 84.3 $ 81.8 $(127.0) $(114.2)
====== ====== ======= =======

Prepaid retirement plan cost shown above is included in Other Assets. The
accrued retirement plan cost shown above is primarily included in Employee
Benefit Plans.

The weighted average assumptions used to determine the data above for the
years ended December 31, are as follows:

1994 1993 1992
---- ---- ----

Discount rate 7.7% 7.7% 8.1%
Rate of compensation increase 4.7 5.5 6.1
Rate of return on assets 9.2 9.5 10.3
47

<PAGE>48
Retirement plan expense is determined using assumptions as of the
beginning of the year. The funded status is determined using assumptions as
of the end of the year.

Supplemental Executive Retirement and Life Insurance Plans - Avon has a
Supplemental Executive Retirement Plan ("SERP") which is a defined benefit
plan under which Avon will pay supplemental pension benefits to key executives
in addition to amounts received under Avon's retirement plan. The annual cost
of this plan has been included in the determination of the net retirement plan
expense shown above and amounted to $3.9 (1993 - $4.3; 1992 - $6.4). Such
benefits will be paid from Avon's assets. The unfunded accumulated benefit
obligation under this plan at December 31, 1994 was $15.5 (1993 - $16.9) and
is primarily included in Employee Benefit Plans.

Avon also maintains a Supplemental Life Insurance Plan ("SLIP") under
which additional death benefits ranging from $.35 to $2.0 are provided to
certain active and retired officers. Avon has acquired corporate-owned life
insurance policies to provide partial funding of the benefits. The cash
surrender value of these policies at December 31, 1994 was $24.8
(1993 - $21.9) and is held in the grantor trust.

Avon has established a grantor trust to provide funding for the benefits
payable under the SERP and SLIP. The trust is irrevocable and assets
contributed to the trust can only be used to pay such benefits with certain
exceptions. During 1994, the Company contributed an additional $32.2 to fund
these benefit plans. The assets held in the trust at December 31, 1994,
amounted to $75.6 (1993 - $42.7), consisting of a money market fund, a managed
portfolio of equity securities and corporate-owned life insurance policies.
These assets are included in Other Assets.

Postretirement Benefits - Avon provides health care, in excess of Medicare
coverage, and life insurance benefits for the majority of employees who retire
under Avon's retirement plans in the United States and certain foreign
countries. The cost of such health care benefits is shared by Avon and its
retirees. See Note 2 regarding the adoption of FAS No. 106.

Net postretirement benefit cost for the years ended December 31, included
the following components:

1994 1993
---- ----
Service cost $ 3.3 $ 3.3
Interest cost 15.2 14.2
----- -----

Total postretirement benefit cost $18.5 $17.5
===== =====

During 1992, costs of health care and life insurance benefits for the U.S.
and certain foreign countries, which were expensed when incurred, amounted to
$4.7, on an after-tax basis. During 1993, the after-tax cost for certain
foreign countries was $.3.

The accumulated postretirement benefits obligation at December 31, which
is unfunded, for the U.S. plan, and certain foreign plans for which the
obligation was not significant, consisted of the following:

1994 1993
---- ----

Retirees $143.5 $112.9
Other fully eligible participants 11.6 29.3
Other active participants 51.3 47.1
Unrealized gains 3.4 3.1
------ ------
Accumulated postretirement benefits
obligation $209.8 $192.4
====== ======

The assumptions used to determine the data above for the years ended
December 31, are as follows:

1994 1993
---- ----

Discount rate 8.5% 7.5%
Rate of assumed compensation increases 5.0 4.5

The assumed rate of future increases in the per capita cost of health care
benefits (the health care cost trend rate) was 12.0% for 1994 and will
gradually decrease each year thereafter to 5.8% in 2005 and beyond.
Increasing the health care cost trend rate by one percentage point would
increase the accumulated postretirement benefits obligation at December 31,
1994 by $23.5 and would increase the 1994 annual postretirement benefits
expense by $2.5.

Postemployment Benefits - Effective January 1, 1994, the Company adopted FAS
No. 112, as discussed in Note 2. FAS No. 112 requires the accrual of the cost
of postemployment benefits rather than expensing the costs when paid. These
benefits include salary continuation, severance benefits, disability benefits
and continuation of health care benefits and life insurance coverage to former
48

<PAGE>49
employees after employment but before retirement. At December 31, 1994, the
accrual for postemployment benefits was $38.8 and is included in Employee
Benefit Plans.

11. Geographic Information

Avon's business is comprised of one business segment, direct selling of
products to consumers primarily through independent sales Representatives.

Operations by Geographic Area - Direct selling operations are conducted in the
United States, the Americas, the Pacific and Europe. Sales and pretax income
by geographic area are presented on page 26. Identifiable assets by
geographic area at December 31, were as follows:

1994 1993 1992
---- ---- ----

United States $ 414.2 $ 379.6 $ 375.2
-------- -------- --------
International
Americas 463.9 366.6 338.2
Pacific 329.2 279.8 232.0
Europe 308.6 275.5 263.4
-------- -------- --------
Total International 1,101.7 921.9 833.6
-------- -------- --------
Corporate and other* 462.4 617.2 483.8
-------- -------- --------
Total $1,978.3 $1,918.7 $1,692.6
======== ======== ========

*Includes Cash Equivalents of $132.5 (1993 - $159.7; 1992 - $95.5).

Foreign Exchange - Financial statement translation of subsidiaries operating
in highly inflationary economies and foreign currency transactions resulted in
losses netting to $6.8 (1993 - $5.2; 1992 - $16.9), which are included in
Other Expense, net and Income Taxes. In addition, cost of sales and expenses
include the unfavorable impact of the translation of inventories and prepaid
expenses at historical rates in countries with highly inflationary economies
of $23.9 (1993 - $34.7; 1992 - $28.6).

12. Leases and Commitments

Minimum rental commitments under noncancellable operating leases primarily for
equipment and office space at December 31, 1994, consisted of the following:

Year
1995 $ 53.0
1996 38.2
1997 20.9
1998 7.3
1999 4.2
Later years 1.9
Sublease rental income (17.5)
------
Total $108.0
======

Rent expense related to continuing operations was $94.0 (1993 - $90.9;
1992 - $86.9). Various construction and information systems projects were in
progress at December 31, 1994 with an estimated cost to complete of
approximately $24.0.

13. Contingencies

Various lawsuits and claims (asserted and unasserted), arising in the ordinary
course of business or related to businesses previously sold, are pending or
threatened against Avon. The most significant of these are described below.

<PAGE>50
Mallinckrodt. In October 1991, the Missouri Supreme Court affirmed the
Circuit Court's decision that Avon has the obligation to indemnify IMC and
Mallinckrodt in connection with the DuPont patent case, but remanded the
matter for a trial on the damages, if any, suffered by the parties. On July
27, 1992, a jury returned a verdict in the DuPont patent case for $16.0, and a
judgment for that amount plus approximately $6.5 interest was entered. On
August 11, 1992, IMC and Mallinckrodt filed post-trial motions, including a
motion for a judgment notwithstanding the verdict or, in the alternative, a
motion for a new trial. On November 5, 1992, the St. Louis Missouri City
Circuit Court granted IMC's and Mallinckrodt's motion for a judgment
notwithstanding the verdict and directed a verdict for plaintiffs in the
amount of $27.1 plus interest. As of November 5, 1992, the interest amounted
to approximately $11.7. Avon, IMC and Mallinckrodt appealed this decision.
This issue was argued before the Missouri Court of Appeals, Eastern District
on May 11, 1994. On November 8, 1994, the Court of Appeals overturned the
judgment notwithstanding the verdict and ordered a new trial. All possible
further judicial review has now been exhausted and a retrial is expected
during 1995. Pre-trial proceedings and discovery activities are ongoing with
respect to the environmental and general litigation portions of the case.

<PAGE>51
Report of Management

The accompanying consolidated financial statements of Avon Products, Inc. have
been prepared by management in conformity with generally accepted accounting
principles and necessarily include amounts that are based on judgments and
estimates. The audit report of Coopers & Lybrand L.L.P., independent
accountants, on these financial statements is the result of their audits of
these consolidated financial statements, which were performed in accordance
with generally accepted auditing standards.

Avon maintains an internal control structure and related systems, policies
and procedures designed to provide reasonable assurance that assets are
safeguarded, transactions are executed in accordance with appropriate
authorization and accounting records may be relied upon for the preparation of
financial information. Avon also maintains an internal audit department that
evaluates and formally reports to management on the adequacy and effectiveness
of controls, policies and procedures.

The audit committee of the board of directors, comprised solely of outside
directors, has an oversight role in the area of financial reporting and
internal controls. This committee meets several times during the year with
management, Coopers & Lybrand L.L.P. and the internal auditors to monitor the
proper discharge of each of their respective responsibilities. Coopers &
Lybrand L.L.P. and the internal auditors have free access to management and to
the audit committee to discuss the results of their activities and the
adequacy of controls.

It is management's opinion that Avon's policies and procedures, reinforced
by the internal control structure, provide reasonable assurance that
operations are managed in a responsible and professional manner with a
commitment to the highest standard of business conduct.

/s/James E. Preston /s/Edwina D. Woodbury
James E. Preston Edwina D. Woodbury
Chairman of the Board and Senior Vice President and
Chief Executive Officer Chief Financial Officer

Report of Independent Accountants

To the Shareholders of Avon Products, Inc.

We have audited the accompanying consolidated balance sheet of Avon Products,
Inc. and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1994.
These financial statements are the responsibility of Avon'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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Avon
Products, Inc. and subsidiaries at December 31, 1994 and 1993, and the results
of its operations and its cash flows for each of the years in the three-year
period ended December 31, 1994, in conformity with generally accepted
accounting principles.

In 1994, Avon changed its methods of accounting for postemployment
benefits, for postretirement benefits other than pensions for its foreign
benefit plans, and for internal systems development costs. In addition, in
1993 Avon changed its methods of accounting for income taxes and
postretirement benefits other than pensions for its United States benefit
plans. These changes are discussed in Notes 1 and 2 to the consolidated
financial statements.

/s/Coopers & Lybrand L.L.P.
New York, New York
February 1, 1995
51

<PAGE>52
<TABLE>
<CAPTION>
Eleven-Year Review
In millions, except per
share and employee data 1994 1993 1992 1991
---- ---- ---- ----
Income data
<S> <C> <C> <C> <C>
Net sales $4,266.5 $3,844.1 $3,660.5 $3,441.0
Interest expense 50.8 45.2 43.7 75.4
Income from continuing
operations before taxes,
minority interest and
cumulative effect of
accounting changes 433.8 394.6 290.0(2) 352.9
Income from continuing
operations before
minority interest and
cumulative effect of
accounting changes 270.3 243.8 169.4(2) 209.3
Income from continuing
operations 264.8 236.9 164.2(2) 204.8
Income (loss) from
discontinued operations,
net (23.8) 2.7 10.8 (69.1)
Cumulative effect of
accounting changes,
net (1) (45.2) (107.5) - -
Net income (loss) 195.8 132.1 175.0(2) 135.7
-------- -------- -------- --------
Income (loss) per
share of common
stock - assuming
full dilution(4)
Continuing operations $ 3.75 $ 3.28 $ 2.28(2) $ 2.86
Discontinued operations (.34) .04 .15 (.97)
Cumulative effect of
accounting changes (.64) (1.49) - -
Net income (loss) 2.77 1.83 2.43(2) 1.89
-------- -------- -------- --------
Cash dividends per share
Common $ 1.90 $ 1.70 $ 1.50 $ 4.40(6)
Preferred - - - 1.011

Balance sheet data
Working capital $ 9.3 $ 23.1 $ (99.5) $ (135.3)
Capital expenditures 99.9 58.1 62.7 61.2
Property, plant and
equipment, net 528.4 476.2 476.7 468.5
Total assets 1,978.3 1,918.7 1,692.6 1,693.3
Debt maturing within
one year 61.2 70.4 37.3 143.8
Long-term debt 116.5 123.7 177.7 208.1
Total debt 177.7 194.1 215.0 351.9
Shareholders' equity 185.6 314.0 310.5 251.6
-------- -------- -------- --------

Number of employees
United States 7,900 8,000 8,700 9,200
International 22,500 21,500 20,700 20,900
-------- -------- -------- --------
Total employees 30,400 29,500 29,400 30,100
======== ======== ======== ========
<FN>
Note: The data in the Eleven-Year Review has been restated to reflect the
retail businesses, Giorgio (1987-1994) and Parfums Stern (1987-1989),
as discontinued operations.

(1)Effective January 1, 1994, Avon adopted Statement of Financial Accounting
Standards Board ("FAS") No. 112, "Employer's Accounting for Postemployment
Benefits", for all applicable operations and FAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions", for its foreign
benefit plans. In addition, effective January 1, 1994, Avon changed its
method of accounting for internal systems development costs. These
development costs are being expensed as incurred, rather than deferred and
amortized over future periods. Effective January 1, 1993, Avon adopted FAS
No. 106, for its U.S. retiree health care and life insurance benefit plans and
FAS No. 109, "Accounting for Income Taxes". See Notes 2 and 7 of the Notes to
the Consolidated Financial Statements. Effective January 1, 1988 Avon adopted
FAS No. 96, "Accounting for Income Taxes".
(2)In 1992, Avon began the restructuring of its worldwide manufacturing and
distribution facilities and recorded a provision of $96.0 ($64.4 after tax, or
$.90 per share) as described in Note 4 of the Notes to the Consolidated
Financial Statements. Income from continuing operations in 1993 increased 4%
from $228.6, or $3.17 per share, excluding the 1992 restructuring charge.
(3)The following nonrecurring transactions were recorded during 1987: a pretax
gain of $191.0 ($121.1 after tax, or $1.72 per share) resulting from the sale
of subsidiary stock and a special provision for restructure of $47.5 ($29.4
after tax, or $.42 per share).
(4)In management's opinion, per share amounts assuming full dilution provide
the most meaningful comparison of per share data because they show the full
effect of the conversion of 18.0 preferred shares into approximately 12.96
common shares on June 3, 1991.
(5)In 1989 and 1988, the calculation of income per share assuming full
dilution is antidilutive and, accordingly, the primary income per share amount
is reported as "income per share of common stock assuming full dilution."
(6)Includes special dividend of $3.00 paid in 1991.
</TABLE>
52

<PAGE>53
ELEVEN-YEAR REVIEW (CONTINUED)
<TABLE>
<CAPTION>
Avon Products, Inc.

1990 1989 1988 1987 1986 1985 1984
---- ---- ---- ---- ---- ---- ----
<C> <C> <C> <C> <C> <C> <C>
$3,291.6 $2,998.3 $2,835.2 $2,506.2 $2,235.1 $2,003.7 $2,260.3
77.5 118.0 112.9 77.5 45.5 49.1 45.0

305.6 252.9 208.3 359.6(3) 205.0 171.2 253.9

180.3 134.1 121.1 224.8(3) 127.1 104.9 141.2

174.1 126.5 112.3 222.8(3) 126.7 105.0 141.4

21.2 (71.9) (536.8) (63.7) 32.0 (164.9) 40.3

- - 20.0 - - - -
195.3 54.6 (404.5) 159.1(3) 158.7 (59.9) 181.7
-------- -------- -------- -------- -------- -------- --------

$ 2.32 $ 1.63(5) $ 1.51(5) $ 3.16(3) $ 1.78 $ 1.31 $ 1.68
.28 (1.29)(5) (8.62)(5) (.90) .45 (2.07) .48

- - .32(5) - - - -
2.60 .34(5) (6.79)(5) 2.26(3) 2.23 (.76) 2.16
-------- -------- -------- -------- -------- -------- --------
$ 1.00 $ 1.00 $ 1.50 $ 2.00 $ 2.00 $ 2.00 $ 2.00
2.00 2.00 1.00 - - - -

$ 71.6 $ 56.3 $ 51.0 $ 122.2 $ 129.1 $ 186.6 $ 191.7
36.3 33.3 46.0 45.9 57.5 47.2 73.6

467.2 472.5 529.1 561.3 536.2 544.6 526.6
2,010.1 1,994.1 2,362.6 2,419.6 2,143.0 2,188.0 2,188.7

207.1 151.7 205.6 62.8 104.6 54.5 56.8
334.8 673.2 917.9 801.8 671.2 592.2 392.0
541.9 824.9 1,123.5 864.6 775.8 646.7 448.8
393.4 228.3 239.3 758.6 681.3 926.4 1,157.1
-------- -------- -------- -------- -------- -------- --------

9,500 9,400 9,700 10,500 10,800 10,000 11,400
20,300 19,900 18,400 18,100 17,700 18,200 18.300
-------- -------- -------- -------- -------- -------- --------
29,800 29,300 28,100 28,600 28,500 28,200 29,700
======== ======== ======== ======== ======== ======== ========
</TABLE>
53

<PAGE>

EXHIBIT 21

<PAGE>

EXHIBIT 21

AVON PRODUCTS, INC. AND SUBSIDIARIES

Subsidiaries of the Registrant

Avon Products, Inc. ("Avon"), a New York corporation, consolidates all
majority owned subsidiaries. The principal consolidated subsidiaries, all of
which are wholly owned by Avon or its wholly owned subsidiaries, except as
indicated, are listed below. Included on the list below are subsidiaries
which individually are not significant subsidiaries but primarily represent
subsidiaries in countries in which the Company has direct selling operations.
The names of Avon's other consolidated subsidiaries, which are primarily
wholly owned by Avon or its wholly owned subsidiaries, are not listed because
all such subsidiaries, considered in the aggregate as a single subsidiary,
would not constitute a significant subsidiary.

Incorporation -
Company Country or State
------- ----------------

Cosmeticos Avon S.A.C.I...................... Argentina
Avon Cosmetics Australia Proprietary Limited. Australia
Avon Products Pty. Limited................... Australia
Avon Cosmetics Vertriebsgesellschaft m.b.h... Austria
Arlington Limited............................ Bermuda
Stratford Insurance Company, Ltd. ........... Bermuda
Productos Avon Bolivia Ltda.................. Bolivia
Avon Cosmeticos, Ltda........................ Brazil
Avon Canada, Inc............................. Canada
Avon Direct Inc.............................. Canada
Cosmeticos Avon S.A.......................... Chile
Compagnia de Venta Directa Seller Chile S.A.. Chile
Avon Products (Guangzhou) Ltd (60%).......... China
CS Avon Cosmetics, Spol. sr.o................ Czech Republic
Avon Capital Corporation..................... Delaware
Avon Diversified Services, Inc............... Delaware
Avon International Operations, Inc........... Delaware
Avon-Lomalinda, Inc.......................... Delaware
Avon-Mirabella, Inc.......................... Delaware
Giorgio Beverly Hills, Inc................... Delaware
Marbella Dominicana.......................... Delaware
Manila Manufacturing Company................. Delaware
Productos Avon S.A........................... Dominican
Republic
Productos Avon Ecuador S.A................... Ecuador
Productos Avon, S.A.......................... El Salvador
Avon S.A..................................... France
Avon Cosmetics GmbH.......................... Germany
Productos Avon de Guatemala, S.A............. Guatemala
Productos Avon, S.A.......................... Honduras
Avon Cosmetics (FEBO) Limited................ Hong Kong
Avon Cosmetics Hungary KFT................... Hungary

<PAGE>

Avon Service Center, Inc..................... Illinois
P.T. Avon Indonesia (49%).................... Indonesia
Albee Dublin Finance Company................. Ireland
Avon Limited................................. Ireland
Avon Cosmetics S.p.A......................... Italy
Avon Products Company Limited (66%).......... Japan
Live and Life Company Limited................ Japan
Avon Cosmetics (Malaysia) Sendirian Berhad... Malaysia
Avon Cosmetics, S.A. de C.V.................. Mexico
Avonova, S.A. de C.V. (49%).................. Mexico
M.I. Holdings, Inc........................... Missouri
Avon International Finance N.V............... Netherlands
Antilles
Avon Americas, Ltd........................... New York
Avon Overseas Capital Corporation............ New York
Avon Cosmetics Limited....................... New Zealand
Productos Avon S.A........................... Panama
Productos Avon S.A........................... Peru
Productos De Belleza, S.A.................... Peru
Avon Cosmetics, Inc.......................... Philippines
Avon Products Mfg., Inc...................... Philippines
Beautifont Products, Inc..................... Philippines
Avon Cosmetics Polska Sp. z o.o.............. Poland
Avon Cosmeticos, Lda......................... Portugal
Avon Cosmetics Spol s r.o.................... Slovak
Republic
Avon Beauty Products Company................. Russia
Avon Cosmetics, S.A.......................... Spain
Avon Cosmetics (Taiwan) Ltd.................. Taiwan
Avon Products Limited........................ Taiwan
Avon Cosmetics (Thailand) Ltd................ Thailand
California Manufacturing Company Ltd......... Thailand
Eczacibasi Avon Kosmetik Urunleri Sanayi
ve Ticaret A.S. (50%)...................... Turkey
Avon Cosmetics Limited....................... United Kingdom
Avon European Holdings Ltd................... United Kingdom
Avon Cosmetics de Venezuela, C.A............. Venezuela

<PAGE>

EXHIBIT 24

<PAGE>

FORM 10-K

POWER OF ATTORNEY
-----------------

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints, WARD M. MILLER, JR. and MARTIN H.
MICHAEL and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign the 1994 Annual Report on
Form 10-K of Avon Products, Inc. and any and all amendments thereto, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto such
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as they might or could do in
person, thereby ratifying and confirming all that such attorneys-in-fact and
agents, or any of them, or their substitutes, may lawfully do or cause to be
done by virtue hereof.

IN WITNESS WHEREOF, the undersigned have executed this power of attorney
as of March 2, 1995.

Signature Title
--------- -----

/s/James E. Preston Chairman of the Board and Chief
------------------------------ Executive Officer - Principal
James E. Preston Executive Officer and Director

/s/Edward J. Robinson President, Chief Operating
------------------------------ Officer and Director
Edward J. Robinson

/s/Edwina D. Woodbury Senior Vice President,
------------------------------ Chief Financial Officer -
Edwina D. Woodbury Principal Financial Officer

/s/Robert J. Conologue Group Vice President,
------------------------------ Controller - Principal Accounting
Robert J. Conologue Officer

Director
------------------------------
Brenda Barnes

/s/Richard S. Barton Director
------------------------------
Richard S. Barton

<PAGE>

Signature Title
--------- -----

/s/Daniel B. Burke Director
------------------------------
Daniel B. Burke

/s/Remedios Diaz Oliver Director
------------------------------
Remedios Diaz Oliver

------------------------------ Director
Stanley C. Gault

/s/George V. Grune Director
------------------------------
George V. Grune

/s/Charles S. Locke Director
------------------------------
Charles S. Locke

/s/Ann S. Moore Director
------------------------------
Ann S. Moore

/s/John J. Phelan, Jr. Director
------------------------------
John J. Phelan, Jr.

/s/Joseph A. Rice Director
------------------------------
Joseph A. Rice

/s/Cecily C. Selby Director
------------------------------
Cecily C. Selby

-2-

Exhibit 27

Avon Products, Inc.
Financial Data Schedule

This schedule contains summary financial information extracted from the
Avon Products, Inc. financial statements as of December 31, 1994 and for
the twelve months then ended included in the Form 10-K as of December 31, 1994
and is qualified in its entirety by reference to such financial statements.

<MULTIPLIER> 1,000,000
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<PERIOD-TYPE> YEAR

<S> <C>
<CASH> 214
<SECURITIES> 0
<RECEIVABLES> 401
<ALLOWANCES> (27)
<INVENTORY> 412
<CURRENT-ASSETS> 1,150
<PP&E> 1,146
<DEPRECIATION> (618)
<TOTAL-ASSETS> 1,978
<CURRENT-LIABILITIES> 1,141
<BONDS> 116
0
0
<COMMON> 43
<OTHER-SE> 142
<TOTAL-LIABILITY-AND-EQUITY> 1,978
<SALES> 4,266
<TOTAL-REVENUES> 4,266
<CGS> 1,672
<TOTAL-COSTS> 3,706
<OTHER-EXPENSES> 33
<LOSS-PROVISION> 64
<INTEREST-EXPENSE> 50
<INCOME-PRETAX> 433
<INCOME-TAX> 163
<INCOME-CONTINUING> 264
<DISCONTINUED> (23)
<EXTRAORDINARY> 0
<CHANGES> (45)
<NET-INCOME> 195
<EPS-PRIMARY> 2.77
<EPS-DILUTED> 2.77

</TABLE>