AVON PRODUCTS INC, 10-K, 1997-03-31

AVON PRODUCTS INC
10-K, 1997-03-31
PERFUMES, COSMETICS & OTHER TOILET PREPARATIONS

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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, 1996

[ ] 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.)

1345 Avenue of the Americas, New York, N.Y. 10105-0196
-------------------------------------------------------
(New address of principal executive offices)
(212) 282-5000
--------------
(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 $.25) 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 ___
---

<PAGE>

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 $.25) held by non-
affiliates at February 28, 1997 was $7.8 billion.

The number of shares of Common Stock (par value $.25) outstanding at
February 28, 1997 was 133,032,198.

Documents Incorporated by Reference

Parts I and II Portions of the 1996 Annual Report to Shareholders.
Part III Portions of the Proxy Statement for the 1997 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
cosmetics, fragrance and toiletries; 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 31 in Avon's 1996 Annual Report to Shareholders.

Distribution

Avon's products are sold worldwide by approximately 2.3 million
Representatives, 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.

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 and make-up color charts 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
the distribution center. The cost of merchandise to the Representative varies
according to the product category and/or 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 Representative support in the United States and
allow them to run their business more efficiently as well as to improve order
processing accuracy,

<PAGE>2

Avon employs 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 the
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 the increase over the prior year's sales 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

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Representatives through the use of special incentive programs that reward
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 and apparel
industries 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.

<PAGE>4

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

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.

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

Years ended December 31
------------------------
1996 1995 1994
---- ---- ----
(In millions)

Cosmetics, fragrance and toiletries............. $2,946.8 $2,797.2 $2,604.2
Gift and decorative............................. 934.1 780.6 769.2
Apparel......................................... 556.3 500.5 480.3
Fashion jewelry and accessories................. 377.0 413.8 412.8
-------- -------- --------
$4,814.2 $4,492.1 $4,266.5
======== ======== ========

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 41 countries and Avon's products are distributed in some 89
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.

<PAGE>5

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 nineteen 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. 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.

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.

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 Company is also 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. In the opinion of Avon's management,
based on its review of the 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, 1996 should not have a material adverse
impact on Avon's consolidated financial position, results of operations, or
cash flows.

SEASONAL NATURE OF BUSINESS

Avon's sales and earnings have a marked seasonal pattern characteristic
of many companies selling cosmetics, fragrance and toiletries; gift and
decorative products; apparel; and fashion jewelry. Christmas sales cause a
sales peak in the fourth quarter of the year. Fourth quarter net sales were 31

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percent of total net sales in 1996 and 1995 and fourth quarter pretax income
from continuing operations was 42 percent and 40 percent in 1996 and 1995,
respectively.

RESEARCH ACTIVITIES

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

A team of researchers and technicians apply the disciplines of science to
the practical aspects of bringing products to market around the world.
Relationships with well known dermatologists and other specialists extends
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 cosmetic use in
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 $30.2 million in
1996, $27.8 million in 1995 and $27.9 million in 1994. 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.

EMPLOYEES

At December 31, 1996, Avon employed approximately 33,700 people. Of

<PAGE>7

these, approximately 7,800 were employed in the United States and
approximately 25,900 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 centers where offices are located and where finished 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 four manufacturing laboratories, including a fashion
jewelry manufacturing laboratory in Ireland, and ten 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 ten distribution centers in the Pacific.
During 1996, the Company added one manufacturing and two distribution centers
in Europe and one distribution center 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. During 1995, the Company signed new
leases, commencing in 1997, for office facilities for the U.S. and global
operations, which will be relocated within New York City.

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.

In 1991, a class action lawsuit was initiated against Avon on behalf of
certain classes of holders of Avon's Preferred Equity-Redemption Cumulative
Stock ("PERCS"). This lawsuit alleges 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.

<PAGE>8

31, 1996 should not have a material adverse impact on Avon's consolidated
financial position, results of operations, or cash flows.

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 the 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, results of operations, or cash flows.

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, 1996.
______________
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.

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 1997 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 63 1971
President, Chief Operating Officer
and Director......................... Edward J. Robinson 56 1989
Senior Vice President, General Counsel
and Secretary........................ Ward M. Miller, Jr. 64 1993(1)
Senior Vice President, Chief
Financial and Administrative Officer. Edwina D. Woodbury 45 1990
Senior Vice Presidents.................. Christina A. Gold 49 1993
Marcia L. Worthing 54 1988
Group Vice President, Finance........... Robert J. Corti 47 1988
Vice President and Controller........... Michael R. Mathieson 44 1995(2)

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(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.

(2) Michael R. Mathieson was elected Vice President and Controller in April
1995. Mr. Mathieson joined Avon in May 1990 as Assistant Corporate
Controller. Prior to joining Avon, he was Vice President and Director of
Accounting Research for Chase Manhattan Bank.

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 41 of Avon's 1996 Annual Report to Shareholders.

ITEM 6. SELECTED FINANCIAL DATA

The information for the five-year period 1992 through 1996 is
incorporated by reference to the "Eleven-Year Review" on pages 58 and 59 of
Avon's 1996 Annual Report to Shareholders.

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 29 through 40 of Avon's 1996 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 42 through 56, together with the
report thereon of Coopers & Lybrand L.L.P., on page 57, and "Results of
Operations by Quarter" on page 41 of Avon's 1996 Annual Report to
Shareholders.

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

Not applicable.

<PAGE>10

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 1997 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 1997 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 1997 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 1997 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, 1996........ 42
Consolidated balance sheet at
December 31, 1996 and 1995............. 43
Consolidated statement of cash flows
for each of the years in the three-year
period ended December 31, 1996......... 44
Consolidated statement of changes in
shareholders' equity for each of
the years in the three-year period
ended December 31, 1996................ 45
Notes to consolidated financial
statements............................. 46-56
Report of Independent Accountants
Coopers & Lybrand L.L.P................ 57

(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, 1996................
II.--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.

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(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 May 13, 1996 (incorporated by
reference to Exhibit 3.1 to Avon's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996).

3.2 By-laws of Avon, as restated, effective June 6, 1996 (incorporated by
reference to Exhibit 3.2 to Avon's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996).

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 and refiled under Form SE as of December 31, 1996).

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 and refiled under Form SE as of December
31, 1996).

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 and refiled under Form SE as of December
31, 1996).

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 and refiled under Form SE as of December
31, 1996).

4.6 Amended and Restated Revolving Credit and Competitive Advance Facility
Agreement, dated as of August 8, 1996, 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, 1996).

<PAGE>13

10.1* Avon Products, Inc. 1993 Stock Incentive Plan, approved by stockholders
on 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).

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
(incorporated by reference to Exhibit 10.6 to Avon's Annual Report on
Form 10-K for the year ended December 31, 1994).

10.7* Benefit Restoration Pension Plan of Avon Products, Inc., effective as
of January 1, 1994 (incorporated by reference to Exhibit 10.7 to Avon's
Annual Report on Form 10-K for the year ended December 31, 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 and refiled under Form SE for the year ended December
31, 1996).

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).

<PAGE>14

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 January 1, 1996.

10.13* Trust Agreement, dated as of April 21, 1995, between Avon and Chemical
Bank, amending and restating the Trust Agreement as of August 3, 1989
between Avon and Manufacturers Hanover Trust Company (incorporated by
reference to Exhibit 10.14 to Avon's Annual Report on Form 10-K for the
year ended December 31, 1995).

10.14* 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 and refiled under Form SE as of December 31, 1996).

10.15* Employment Agreement, dated as of November 1, 1995, between Avon and
James E. Preston (incorporated by reference to Exhibit 10.16 to Avon's
Annual Report on Form 10-K for the year ended December 31, 1995).

10.16* Stock Option Agreement between Avon and James E. Preston dated
October 30, 1995 (incorporated by reference to Exhibit 10.17 to Avon's
Annual Report on Form 10-K for the year ended December 31, 1995).

10.17* 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).

10.18* 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).

10.19* 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).

10.20* 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 and
refiled under Form SE for the year ended December 31, 1996).

<PAGE>15

10.21* 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).

10.22* 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 and refiled under Form SE for the year ended December
31, 1996).

10.23* 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, 1996 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, 1996 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 was no Form 8-K filed during the fourth quarter of 1996.

(c) Avon's Annual Report on Form 10-K for the year ended December 31, 1996,
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 27th day
of March 1997.

Avon Products, Inc.

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

<PAGE>17

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
- --------- ----- ----

*
___________________________
James E. Preston Chairman of the Board and
Chief Executive Officer -
Principal Executive
Officer and Director March 6, 1997
*
___________________________
Edward J. Robinson President, Chief Operating
Officer and Director March 6, 1997
*
___________________________
Edwina D. Woodbury Senior Vice President,
Chief Financial Officer -
Principal Financial Officer March 6, 1997
*
___________________________
Michael R. Mathieson Vice President and
Controller - Principal
Accounting Officer March 6, 1997
BRENDA BARNES* )
RICHARD S. BARTON* )
REMEDIOS DIAZ OLIVER* )
EDWARD T. FOGARTY* )
STANLEY C. GAULT )
GEORGE V. GRUNE* ) Directors March 6, 1997
CHARLES S. LOCKE* )
ANN S. MOORE* )
CHARLES R. PERRIN* )
JOSEPH A. RICE* )
CECILY C. SELBY* )

/s/WARD M. MILLER, JR.
____________________________________ March 6, 1997
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, 1996 and 1995 and for each of the years in
the three-year period ended December 31, 1996 has been incorporated by
reference in this Form 10-K from page 57 of the 1996 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
schedule for each of the years in the three-year period ended December 31,
1996, 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, 1996 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 6, 1997

<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), and Pre-Effective Amendment No. 1 to Form S-8 (Reg. No. 33-22099), of
our reports dated February 6, 1997 on our audits of (i) the consolidated
financial statements of Avon Products, Inc. as of December 31, 1996 and 1995
and for each of the years in the three-year period ended December 31, 1996,
which report is included in the 1996 Annual Report to Shareholders and
incorporated by reference in this Annual Report on Form 10-K and (ii) the
1996, 1995 and 1994 financial statement schedule of Avon Products, Inc., which
report is included in this Annual Report on Form 10-K.

New York, New York
March 27, 1997

AVON PRODUCTS, INC. AND SUBSIDIARIES
SCHEDULE II -- 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
---------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
1996
Allowance for
doubtful
accounts
receivable $32.6 $79.0 $ -- $75.2(a) $36.4
===== ===== ======= ===== =====
1995
Allowance for doubtful
accounts receivable $27.3 $78.0 $ -- $72.7(a) $32.6
===== ===== ======= ===== =====
1994
Allowance for doubtful
accounts receivable $22.0 $64.9 $ -- $59.6(a) $27.3
===== ===== ======= ===== =====

</TABLE>

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

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, 1996 Commission file number 1-4881

____________

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

____________

EXHIBITS

<PAGE>

(a)3. Exhibits

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

3.2 By-laws of Avon, as restated, effective June 6, 1996 (incorporated by
reference to Exhibit 3.2 to Avon's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996).

<PAGE>

10.12* The Avon Products, Inc. Deferred Compensation Plan, as amended and
restated as of January 1, 1996.

<PAGE>

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, 1996 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.

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.
Edwina Woodbury
Marcia Worthing

EXHIBIT 10.12

<PAGE>

THE AVON PRODUCTS, INC.

DEFERRED COMPENSATION PLAN

(as amended and restated as of January 1, 1996)

<PAGE>
THE AVON PRODUCTS, INC. DEFERRED COMPENSATION PLAN

1. Purpose: Under the terms of the Plan, a director or an
elected or appointed officer of Avon Products, Inc. (the "Company") may
defer receipt of all or part of his or her award payable under the
Management Incentive Plan, or other annual incentive award for a
particular calendar year (collectively referred to as "Annual Bonus").
In addition, a director or officer may defer receipt of all or part of
his or her cash award otherwise payable in 1997 under the 1994 Long Term
Incentive Plan or otherwise payable in future years under the 1997 Long
Term Incentive Plan or other Long Term Incentive Plans (collectively
referred to as "LTIP Bonus"). In addition, if an eligible officer or
director is a participant in the Avon Employees' Savings and Stock
Ownership Plan or its successor (the "Savings Plan"), he (i) may elect
to defer receipt of all or a portion of those before-tax contributions,
and (ii) shall be credited with those matching contributions, which
would have been made to the Savings Plan had his compensation not been
reduced by the deferral of compensation, or limited by maximum
contribution levels or the limitation on annual compensation set forth
under Code Section 401(a)(17).

2. Eligibility: All Officers and directors of the Company may
participate in the Plan (collectively referred to as the
"Participants"). Notwithstanding the foregoing, the continued Plan
participation of a Participant may be suspended in accordance with
Section 14.

3. Deferral of Annual Bonus: Each Participant may elect to defer
all or a portion of his Annual Bonus for each calendar year. The amount
or percentage of the Annual Bonus to be deferred for a calendar year is
at the discretion of the Participant, except that the elected amount or
percentage must be at least equal to the lesser of $1,000 or 100% of the
cash portion of such Bonus. An election by a Participant to defer all
or part of such Bonus must be made prior to the end of the calendar year
for which the Annual Bonus is paid. (For example, the Annual Bonus for
1996 will be paid in 1997, but the election to defer has to be made in
1996.) Each such election is only valid for the calendar year in which
it is made and a new election must be made for each subsequent calendar
year in which the Participant chooses to participate. The election must
include an election of the method of payment as specified in Section 9
or 9A.

3A. LTIP Bonus The amount or percentage of an LTIP Bonus to be
deferred will be elected at the discretion of the Participant in the
same manner as described in Section 3, with separate elections required
for each Long Term Incentive Plan, and in each instance to include an
election as to the method of payment as specified in either Sections 9
or Section 9A.

<PAGE>
4. Deferral of Savings Plan Contributions: Each Participant (I)
may elect to defer receipt of all or a portion of the Before-Tax
Participant Contributions (as defined in the Savings Plan) which would
have been permitted to be made under the Savings Plan for a Plan year,
as if subsections (a) through (d) below applied, in excess of the
Before-Tax Participant Contributions actually made by such Participant
to the Savings Plan for such Plan Year, and (ii) shall be credited with
those matching contributions which would have been made under Section
3.3 of the Savings Plan for a Plan Year in excess of those matching
contributions actually made to the Savings Plan for such Plan Year, as
if

(a) the limitations of Code Section 415 were not applicable, and

(b) the limitations of Code Section 401(a)(17) were not
applicable, and

(d) the definition of compensation under the Savings Plan included
any compensation electively deferred by a member for the Plan Year (as
that term is defined in the Savings Plan) to a deferred compensation
plan or program maintained by the Company.

The election to defer pursuant to this Section 4 must be made
independently from any bonus deferral election pursuant to Sections 3 or
3A, and prior to the performance of the services to which the
compensation deferral relates. Each such election is valid only for the
present calendar year, and a new election must be made for each
subsequent year in which the officer or director chooses to participate
in the Plan.

5. Crediting of Deferred Amounts: The Company shall establish
and maintain individual accounts under the name of each Participant who
elects to defer compensation under Sections 3, 3A or 4 above. Bonus
deferrals under either Section 3 or Section 3A will be credited to a
Participant's account as of the date the Annual Bonus or LTIP Bonus,
whichever is applicable, would otherwise be payable. Deferred
compensation under Section 4 will be credited to a Participant's account
as of the date of withholding, along with associated matching
contributions.

6. Interest: Interest will be accrued from the date in which the
funds are credited to a Participant's account. Except as provided
below, interest on amounts deferred with respect to calendar years
before 1990 will be compounded annually at an interest rate equal to
Moody's Composite Bond Average (determined as of the date of deferral
and on each anniversary thereof) plus four percentage points, or such
higher rates as the Company may deem appropriate. Amounts deferred with

<PAGE>
respect to calendar years after 1989 shall bear interest at a rate
determined by the Company, but in no event shall such interest rate be
less than equal to the average annual yield on long term (30 years) U.S.
treasury bonds (the "T-Bill Rate") as reported in the Federal Reserve
Bulletin (determined as of the date of deferral and on each anniversary
thereof). The Company shall have the right to lower any interest rate
payable on a prospective basis, but not below the T-Bill Rate. Interest
will continue to be credited and compounded until the Valuation Date (as
defined below) preceding the final payment made to a Participant or a
Participant's beneficiary.

7. Valuation of Accounts: The value of each Participant's
account, including accrued interest will be calculated on December 31 of
each year (the "Valuation Date").

8. Hardship Withdrawals: At any time prior to commencement of
benefits pursuant to Sections 9 or 9A, a Participant may request a
withdrawal of all or a portion of the amounts he has previously deferred
under the Plan. Such a request shall be approved by the Company only
upon a finding that the Participant has suffered a hardship as defined
under the Savings Plan, or as defined by any regulations promulgated
under Code Section 401(k). In the event such a withdrawal is approved,
payment of all or a portion of the amounts deferred by a Participant,
together with annual interest compounded as of the date such withdrawal
is approved, shall be made as soon as practicable to the Participant.
Any benefits otherwise payable hereunder shall be adjusted for such
financial hardship payment.

9. Payment of Deferred Compensation: Except as modified by
Sections 9A, 10 or 11 below, a Participant's account shall be payable in
cash in a single payment on January 15 of the first full calendar year
following severance of employment or, if so elected, in annual
installments commencing on January 15 of the first full calendar year
following severance of employment and continuing on each subsequent
January 15 for the period elected. For purposes of this Plan, severance
of employment means severance for any reason including, but not limited
to, death, retirement, resignation or disability under the Company's
Long Term Disability Plan. If severance is due to disability, as
defined under the Company's Long Term Disability Plan, the Participant,
with the Company's consent, may elect to receive all or a portion of the
accrued account upon such Disability; otherwise, the Participant's
account will continue to accrue interest on the deferred amounts and
will not become payable until final separation from the Company.

A Participant shall elect prior to retirement or termination
of employment to receive his or her account in a single payment or in
annual installments up to a maximum of 15 annual installments. A
Participant may change his or her payout election at any time up to the
effective date of retirement or termination of employment but may not
make any change thereafter, with no payment to be made prior to the date
indicated by the preceding paragraph.

<PAGE>
Should a participant elect installment payments, the amount of
the first installment payment will be a fraction of the value of the
Participant's deferred compensation account on the preceding Valuation
Date, the numerator of which is one (1) and the denominator of which is
the total number of annual installments elected. (If a Participant
elects one installment, the Participant's entire account balance will be
distributed in a single sum on the distribution date.) The amount of
each subsequent payment will be a fraction of the remaining value of the
Participant's deferred compensation account on the Valuation Date
preceding each subsequent installment date, the numerator of which is
one (1) and the denominator of which is the total number of installments
elected minus the number of installments previously paid. Interest
shall continue to accrue on the unpaid balance of the account.

9A. In-Service Payment Option Effective with respect to any
deferral of Annual Bonus, or LTIP Bonus otherwise payable in 1997 or
subsequent years, and/or any Savings Plan Contributions Deferral for
1997 or subsequent years, a Participant can elect prior to the year in
which the payment(s) would otherwise be made, to have payment of a
specified portion of his or her deferred account (allocated solely to
such compensation) payable on January 15th of an irrevocably designated
subsequent year. Such "In-Service" deferred compensation payment will
be made at such time notwithstanding that the Participant may not have
by then terminated employment. If, however, a Participant in fact
terminates employment for any reason prior to such designated date,
including death, such In-Service deferred amount will in all cases be
distributed in a lump sum as of the January 15th next following such
termination.

10. Death of a Participant In the event of a Participant's death
prior to termination of employment, the Participant's designated
beneficiary will receive payment of the account as of the January 15th
of the year next following, in the payout manner which the Participant
had elected, i.e. either in a lump sum or in annual installment payments
commencing as of such January 15th. The unpaid portion of an account
allocated to an In-Service payout election, however, will in all cases
be distributed in a lump sum as of the January 15th next following the
Participant's death.

In the event that a Participant dies after severance of
employment, the balance of the Participant's unpaid account shall
continue to be paid to the Participant's designated beneficiary in the
manner of payment previously elected by the Participant.

In the event that a Participant is not survived by a
designated beneficiary, or such designated beneficiary subsequently dies
before all installment payments have been made, remaining account
payments will be made to the Participant's surviving spouse, if any,
otherwise to the Participant's estate.

<PAGE>
11. Change of Control: Notwithstanding the foregoing, upon the
occurrence of a Change of Control (as defined below), the Plan shall
automatically terminate and the total deferred amount, plus interest,
then standing to the credit of each Participant under the Plan
(including a Participant who has terminated employment with the Company
and elected to receive distributions in installments) shall be paid to
such Participant in a single lump sum as soon as practicable but in no
event later than fifteen (15) business days following such Change of
Control. Any payment made after such fifteenth business day shall bear
additional interest from the date of such Change of Control until the
date of payment at the highest rate of interest applicable to any
deferral in effect under the Plan at the time of such Change of Control.

(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
Corporation 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 Corporation Voting Securities reaches or exceeds 20% as a
result of a transaction described in clause (i) or (ii) above, and
Person subsequently acquires beneficial ownership of additional voting
such 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 Corporation Voting Securities; or

(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 effective date of this
provision 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

<PAGE>
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 Corporation 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 Corporation 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 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 an individual by reason of any
actions or events in which such individual participates in a capacity
other than in his capacity as officer or employee of the Company (or as
a member of the Board of Directors of the Company or a Subsidiary, where
applicable).

12. Administration of the Plan: The Company shall be the
administrator of the Plan and shall have the discretionary authority to
determine all questions arising in connection with the Plan including
its interpretation, and may adopt procedural rules and may employ and
rely on such legal counsel, accountants, and agents as it may deem
advisable to assist in the administration of the Plan. Decisions of the
Company shall be conclusive and binding on all persons.

13. Amendment or Termination of the Plan: The Company reserves
the right, at any time, and from time to time, and retroactively as

<PAGE>
deemed necessary or appropriate, to amend or modify in whole or in part
any or all of the provisions of the Plan, including the right to
discontinue contributions, provided that no such amendment or
modification shall adversely affect the benefits accrued under the Plan
prior to the effective date of such amendment or modification. The
Company may terminate the Plan for any reason at any time, provided that
such termination shall not adversely affect the benefits accrued under
the Plan prior to such effective date of such termination.

14. Suspension of Deferrals: Notwithstanding any other provision
of this Plan, a Participant shall be suspended from continued
participation under this Plan for the twelve (12) month period
immediately following the date on which the Participant receives any
hardship distribution from any Company Savings Plan qualified under Code
Section 401(k).

15. No Employment Rights: The existence of the Plan or of a
deferral agreement does not constitute a contract for continued
employment between a Participant and the Company. The Company reserves
the right to modify a Participant's compensation and to terminate a
Participant for any reason at any time, notwithstanding the existence of
this program or of a deferral agreement. The Company reserves the right
not to grant awards to Participants for any reason.

16. Segregation of Monies Not Required: Nothing contained in
this Plan or in a deferral agreement shall require the Company to
segregate any monies from their general funds, or to create any trusts,
or to make any special deposits for any amounts to be paid to any
Participant, beneficiary or contingent beneficiary. Neither the
Participant, his beneficiary, contingent beneficiary, heirs or personal
representatives shall have any right, title or interest in or to any
funds of the Company on account of this program or on account of having
completed a deferral agreement.

17. Restriction on Transfer: The right to receive any benefits
under this Plan may not be transferred, assigned, subject to
garnishment, attachment or other legal equitable process without the
prior written consent of the Company.

18. Application of Law: The provisions of this Plan shall be
construed in accordance with the Employee Retirement Income Security Act
of 1974, as amended, and to the extent not superseded thereby, in
accordance with the laws of the State of New York.

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
-----------------------
1996 1995 1994
---- ---- ----

Weighted average shares of common stock:
Weighted average shares outstanding,
during the year.............................. 133.70 136.48 141.18
Common stock equivalents........................ * * *
------ ------ ------
Weighted average shares for primary
income per share computation................. 133.70 136.48 141.18
====== ====== ======

Income applicable to common stock:
Income from continuing operations............... $317.9 $286.1 $264.8
Discontinued operations, net.................... -- (29.6) (23.8)
Cumulative effect of accounting
changes, net of taxes........................ -- -- (45.2)
------ ------ ------

Net income...................................... $317.9 $256.5 $195.8
====== ====== ======

Primary income(loss) per share:
Continuing operations........................ $ 2.38 $ 2.10 $ 1.88
Discontinued operations...................... -- (.22) (.17)
Cumulative effect of accounting changes...... -- -- (.32)
------ ------ ------
Net income...................................... $ 2.38 $ 1.88 $ 1.39
====== ====== ======

________________
*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
-----------------------
1996 1995 1994
---- ---- ----

Weighted average shares of common stock:
Weighted averge shares outstanding
during the year............................ 133.70 136.48 141.18
Common stock equivalents...................... 1.28 .59 .39
------ ------ ------

Weighted average shares for fully diluted
income per share computation............... 134.98 137.07 141.57
====== ====== ======
Income applicable to common stock:
Income from continuing operations............. $317.9 $286.1 $264.8
Discontinued operations, net.................. -- (29.6) (23.8)
Cumulative effect of accounting
changes, net of taxes...................... -- -- (45.2)
------ ------ ------
Net Income.................................... $317.9 $256.5 $195.8
====== ====== ======

Fully diluted income (loss) per share:
Continuing operations...................... $ 2.36 $ 2.09 $ 1.87
Discontinued operations....................... -- (.22) (.17)
Cumulative effect of accounting changes.... -- -- (.32)
------ ------ ------

Net income.................................... $ 2.36 $ 1.87 $ 1.38
====== ====== ======

EXHIBIT 13

<PAGE>29
Management's Discussion and Analysis
Avon Products, Inc.
Dollars in millions, except share data

The following discussion of the results of operations and financial condition
of Avon Products, Inc. ("Avon" or "Company") should be read in conjunction
with the information contained in the Consolidated Financial Statements and
Notes thereto. These statements have been prepared in conformity with
generally accepted accounting principles and require management to make
estimates and assumptions that affect amounts reported and disclosed in the
financial statements and related notes. Actual results could differ from
these estimates.

All share and per share data included in this report have been restated
to reflect a two-for-one stock split distributed in June 1996.

Results of Operations

Consolidated - Net income in 1996 was $317.9, or $2.38 per share, compared
with $256.5, or $1.88 per share, in 1995. The 1995 results include a $29.6, or
$.22 per share, after-tax charge to discontinued operations relating to a
litigation settlement with Mallinckrodt Group, Inc. ("Mallinckrodt"). See Note
3 of the Notes to the Consolidated Financial Statements for further discussion
of this settlement. In addition, the following one-time pretax items are
included in the 1995 results: a gain of $25.0, net of related costs, from a
cash settlement of a lease dispute and a $7.0 gain, net of related expenses,
due to a value-added tax refund in the United Kingdom. Partially offsetting
these gains were charges of $12.0 related to an early retirement program
implemented in Japan and $11.0 for severance costs, primarily in
Europe, as part of Avon's program to reduce fixed expenses in certain markets.
The gain in the United Kingdom and expenses in Japan and Europe are included
in marketing, distribution and administrative expenses. The lease dispute
related to prior year rent charges for the Company's headquarters building.
The $25.0 gain represents a $14.0 recovery of disputed rent, which is included
in marketing, distribution and administrative expenses, and $11.0 of interest,
net of related costs, which is included in other expense, net. The net effect
of these one-time items was to increase income from continuing operations and
net income by $7.6, or $.06 per share. The Japan and Europe expense reduction
programs, which were substantially completed at December 31, 1995, generated
approximately $6.0 and $5.0, respectively, of pretax savings in 1995 and $9.0
and $8.0, respectively, of pretax savings in 1996. Net income for 1994 was
$195.8, or $1.39 per share, which included a loss of $23.8, or $.17 per share,
for discontinued operations relating to the sale of Giorgio Beverly Hills,
Inc. ("Giorgio") and a non-cash charge for accounting changes of $45.2 after
tax, or $.32 per share.

Continuing Operations - Income from continuing operations was $317.9, or 11%
over 1995. Income per share from continuing operations increased 13% to $2.38
from $2.10 in the prior year. This 13% increase in income per share exceeded
the 11% increase in income from continuing operations reflecting the impact of
lower average shares outstanding in 1996 compared with the prior year due to
the stock repurchase program begun in 1994. See Note 9 of the Notes to the
Consolidated Financial Statements for further discussion of this program.
Pretax income was $510.4, a 10%, or $45.4, increase over prior year. The
increase was due to higher sales, an improved operating expense ratio, lower
non-operating expenses and lower net foreign exchange losses in 1996. These
favorable results were partially offset by a decline in the gross margin,
lower interest income in 1996 and the favorable net effect of the one-
time items in 1995, previously discussed. Income from continuing operations
before the cumulative effect of accounting changes in 1995 increased $21.3, or
$.22 per share, from 1994.

On a consolidated basis, Avon's net sales of $4.81 billion increased 7%
from $4.49 billion in 1995. International sales increased 8% to $3.14 billion
from $2.91 billion in 1995 due to strong growth in most markets in the
Americas, the Pacific Rim, Russia, the United Kingdom and the Central European
markets. These improvements were partially offset by sales declines in Japan
and, to a lesser extent, Venezuela and Germany. Sales in the U.S. increased
6% to $1.67 billion due to an increase in both average order size and number
of Representative orders. Excluding the impact of foreign currency exchange,
consolidated net sales rose 14% over the prior year. In 1995, consolidated
net sales of $4.49 billion increased 5% over 1994 reflecting a 6% increase in

<PAGE 30>
international due to the favorable impact of a weaker U.S. dollar in relation
to the currencies in the Europe and Pacific Regions and strong growth in the
Americas Region, primarily Brazil, and to a lesser extent, in the United
Kingdom, Central European markets and the Pacific Rim. These
improvements were partially offset by lower sales in Mexico due to the
significant peso devaluation and operational declines in Japan. 1995 sales
in the U.S. increased 3% to $1.58 billion due to an increase in Representative
orders and an increase in average order size.

Cost of sales as a percentage of sales was 39.9% in 1996, compared with
39.4% in 1995. The decline in gross margin was primarily due to an
unfavorable cost ratio in Venezuela reflecting the impact of the bolivar
devaluations, a shift to sales of lower-priced products in Japan and
investments made to reduce excess inventory in Brazil. These declines were
partially offset by margin improvements in Mexico, Argentina and the United
Kingdom. In 1995, cost of sales as a percentage of sales was 39.4%, compared
with 39.2% in 1994. The decline in gross margin was primarily due to a shift
in sales mix to the lower margin apparel line and investments made to
reduce inventory levels in the U.S., margin investments in the United Kingdom
to drive sales and a shift in the sales mix to lower margin products in Japan
and the United Kingdom. The decline was partially offset by margin
improvements in Brazil reflecting the favorable impact of the government's
economic stabilization program implemented in July 1994, a shift in sales mix
to higher margin items in Argentina and improvements in most Pacific Rim
markets.

Marketing, distribution and administrative expenses of $2.35 billion
increased $132.6, or 6%, from 1995 and decreased as a percentage of sales to
48.8% from 49.3% in 1995. Excluding the 1995 one-time items previously
mentioned, operating expenses increased $134.6. The increase in operating
expenses reflects sales volume-related increases in most markets in the
Americas, Pacific Rim and in the U.S. and higher marketing and distribution
expenses in Brazil. These increases were partially offset by lower expenses
in Japan reflecting the sales decline and the impact of a stronger U.S. dollar
in 1996. In addition, expense levels were lower in Germany due to a continued
active focus on expense reduction and in Venezuela due to the impact
of the bolivar devaluations. The decrease in the operating expense ratio
reflects improvements in most European markets due to continued fixed expense
reduction efforts, in Venezuela due to the impact of the bolivar devaluations
and in Mexico and China due primarily to the significant sales growth. These
improvements were partially offset by an unfavorable expense ratio in Japan
due to the sales decline. In 1995, marketing, distribution and administrative
expenses of $2.2 billion increased $116.8, or 6%, from 1994 and increased as a
percentage of sales to 49.3% from 49.2% in 1994. Excluding the one-time items
previously mentioned, operating expenses increased $114.8. The increase in
operating expenses reflects sales-related increases throughout most markets in
the Americas Region, most significantly Brazil, and higher expense levels in
the Pacific Rim, Japan and most European markets. These increases were
partially offset by lower expenses in Mexico due to the significant peso
devaluation. The increase in the operating expense ratio reflects increased
expenses in relation to sales in Brazil and Venezuela, lower sales in Mexico
and higher expenses in Japan mainly due to expanded marketing programs in
1995. These increases were partially offset by improved operating
expense ratios in the U.S., throughout Europe, most significantly in the
United Kingdom and Germany, and in China due to the sales increase.

Interest expense in 1996 of $40.0 decreased $1.3 compared to the prior
year as a result of lower interest rates partially offset by slightly higher
debt levels. Interest expense in 1995 of $41.3 decreased $9.5 from 1994 due to
lower interest rates on borrowings in Brazil and in the U.S. and lower debt
levels in Japan. These decreases were partially offset by higher borrowings
in the Central European markets reflecting Avon's continued global expansion
strategy.

Interest income in 1996 of $14.5 decreased $4.9 compared to last year due
to lower interest rates in Brazil and Mexico and lower cash investment levels
in Brazil and in the U.S. Interest income in 1995 of $19.4 decreased $2.7
compared to 1994 due to lower interest rates and lower average cash balances
in Brazil.

<PAGE>31
Other expense, net, was $8.9, an $11.7 decrease from 1995. The decrease
primarily reflects favorable corporate non-operating items and lower foreign
exchange losses in 1996, partially offset by the $11.0 portion of the
previously discussed favorable lease settlement in 1995. Other expense, net,
was $20.6 in 1995, a $12.5 decrease from 1994, or $1.5, excluding the
previously discussed lease settlement. The $1.5 decrease is primarily due
to lower monetary correction expense in Brazil, partially offset by higher
non-operating expenses and unfavorable net foreign exchange in 1995.

Income taxes were $191.4 in 1996 and the effective tax rate was 37.5%
compared with $176.4 and an effective tax rate of 37.9% in 1995. The
effective tax rate was lower in 1996 due to the mix of earnings and income tax
rates of international subsidiaries, including a decrease in Brazil's
statutory corporate tax rate. In 1995, the effective tax rate was 37.9%,
compared with 37.7% in 1994. The higher effective tax rate in 1995 resulted
from the mix of earnings and income tax rates of international subsidiaries.

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. The annual inflation rate in
Brazil, however, has decreased significantly in 1995 and 1996 as the economic
environment has improved as a result of the government's economic
stabilization program implemented in mid-1994. While it is not possible to
forecast with certainty, it is currently expected that Brazil's inflation rate
will continue to remain relatively stable throughout 1997. Venezuela and
Mexico experienced high rates of inflation in 1996.

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, 1996.

Years ended December 31 1996 1995 1994
---- ---- ----

Net Pretax Net Pretax Net Pretax
Sales Income Sales Income Sales Income
----- ------ ----- ------ ----- ------

United States $1,672.5 $227.3 $1,584.8 $211.6 $1,535.1 $201.2
-------- ------ -------- ------ -------- ------

International
Americas 1,609.9 291.9 1,466.9 265.8 1,415.3 273.9
Pacific 751.1 73.6 712.0 67.5 664.3 89.7
Europe 780.7 54.4 728.4 41.7 651.8 15.3
-------- ------ -------- ------ -------- ------

Total International 3,141.7 419.9 2,907.3 375.0 2,731.4 378.9
-------- ------ -------- ------ -------- ------

Total from
operations $4,814.2 647.2 $4,492.1 586.6 $4,266.5 580.1
======== ======== ========

Corporate expenses (95.4) (74.6) (84.9)
Interest expense (40.0) (41.3) (50.8)
Other expense, net (1.4) (5.7) (10.6)
------ ------ ------

Total $510.4 $465.0 $433.8
====== ====== ======

<PAGE>32

U.S. - U.S. sales increased 6% to $1.67 billion and pretax income increased 7%
to $227.3 in 1996. The sales growth reflects a 4% increase in average order
size and a 2% increase in the number of Representative orders. The sales
improvement was driven by significant increases in the gift and decorative,
apparel and cosmetics, fragrance and toiletries ("CFT") categories. These
improvements were partially offset by a decline in sales of the fashion
jewelry and accessories category. The growth in the gift and decorative
category resulted mainly from the success of both the Spring Blossom and
Winter Velvet Barbie dolls introduced in 1996. The Winter Velvet Barbie doll
was the most successful new product introduction in Avon's history. The
success of the Diane Von Furstenberg spring and summer collections,
novelty and children's lines and the launch of Legwear in 1996 contributed to
the increase in apparel sales. The growth in the CFT category consisted
primarily of increases in sales of personal care and fragrance products. The
growth of personal care products was driven by the specialty bath segment
which in 1996 reflected an aggressive new products program and a heightened
promotional focus. Sales of fragrance products rose due to the introduction
of several new fragrances including Millennia, Sunny Sky and Butterfly. Units
sold decreased 2% over 1995. Despite strong sales growth in the gift and
decorative category, units sold in this category decreased due to increased
sales of higher-priced items such as the collectible Barbie dolls. Lower
sales of fashion jewelry and accessories also resulted in unit declines. In
addition, units decreased due to a shift in emphasis to higher quality
premium-priced global brands, such as Avon Color, and away from promotional
products and commodity items such as roll-ons, mini-colognes, bubble bath and
talc. Despite increased expenses in 1996 due to investments in both
advertising and direct access strategies, the operating expense ratio remained
level with the prior year. The increase in pretax income was primarily due to
the sales increase and a slightly improved gross margin.

In 1995, U.S. sales increased 3% to $1.58 billion and pretax income
increased 5% to $211.6. The increase in sales reflected a 2% increase in the
number of Representative orders and a 1% increase in average order size.
Units sold increased 3% over 1994. The sales improvement was driven by
increases in the apparel and fragrance and color cosmetics categories,
partially offset by declines in the jewelry and gift categories. A full year
of apparel sales in 1995, a category originally launched in March 1994, the
fall introduction of the Diane Von Furstenberg collections and the success of
the children's and novelty lines all contributed to the increase in apparel
sales. The increase in the fragrance and color cosmetics category was driven
by the successful launch of Avon's global fragrance, Rare Gold, in the fourth
quarter and the introductions of Incredible Lengths Mascara and Perfect Wear
for Eyes in 1995. The increase in pretax income was primarily due to the
sales increase and lower overall operating expenses, despite a significant
increase in the price of paper in 1995. These improvements were partially
offset by a lower gross margin resulting from higher sales of the lower margin
apparel line and margin investments, including clearance sales, to reduce
inventory levels. In addition, the margin was impacted by an increase in the
demand for new and attractively-priced holiday products as well as some
incremental costs incurred in meeting the exceptional demand for several of
these products.

International - International sales increased 8% to $3.14 billion and pretax
income increased 12% to $419.9. Excluding the 1995 one-time items previously
mentioned, pretax income increased 8%. The sales increase reflects strong
unit growth in most markets in the Americas Region, the Pacific Rim, the
United Kingdom, Russia and Central Europe. These improvements were partially
offset by sales declines in Japan attributable to both operational and
economic factors, discussed below, and to a lesser extent in Venezuela due to
the impact of the bolivar devaluations and in Germany due to both operational
declines as well as a negative foreign currency impact in 1996. Excluding the
impact of foreign currency exchange, international sales were up 18% over
1995.

In the Americas Region, sales increased 10% to $1.61 billion and pretax
income increased 10%, or $26.1, to $291.9 from $265.8 in 1995. The sales

<PAGE>33
increase was driven by growth in almost every market in the region, most
significantly in Mexico and Brazil. Higher sales in Mexico reflect increases
in prices at a rate below the inflation level, as well as increases in average
order size and unit growth. The number of active Representatives in Mexico
has continued to grow from the prior year due to the implementation of
incentive programs focused on retention and increasing the number of orders.
Brazil's sales growth was due to double-digit increases in unit volume and
customers. The growth in Brazil's number of customers resulted from
a revision of pricing strategies and new product launches aimed at increasing
customer orders in response to an increasingly intense competitive environment
in 1996. The sales increase in the region also reflects strong unit growth in
Chile, Argentina and Central America. These improvements were partially
offset by the decline in Venezuela resulting mainly from the negative impact
of two maxi-devaluations of the bolivar. Venezuela did, however, have double-
digit increases in both local currency sales and in active Representatives in
1996 attributable to a focus on building market share and Representative
growth. The increase in the region's pretax income was primarily due to
favorable results in Mexico reflecting the strong sales increase combined with
a lower rate of increase in operating expenses, an improved gross margin and
foreign exchange gains in 1996 compared to losses in 1995. The operating
expense ratio in Mexico improved significantly as a result of an expense
control program implemented in 1996. In addition, pretax profit was higher in
Chile due mainly to sales growth. These improvements were partially offset by
a lower pretax profit in Venezuela, as a result of the bolivar devaluations,
and in Brazil reflecting a lower gross margin and an unfavorable operating
expense ratio. The gross margin decline in Brazil resulted from investments
to reduce excess inventory as well as an aggressive pricing policy to
respond to intensified competitive pressures. The unfavorable operating
expense ratio reflects increased investments in marketing and higher
facilities expenses related to a new distribution center. In addition, a
higher volume of lower-priced units in 1996 resulted in increased distribution
expenses.

In the Pacific Region, sales increased 6% to $751.1 and pretax income,
excluding Japan's early retirement program costs in 1995 mentioned previously,
decreased 7% to $73.6 from $79.5 in 1995. The increase in sales was driven by
strong operational improvements in the Philippines and China, and, to a lesser
extent, in Taiwan, Malaysia and Australia. Sales growth in virtually all of
these markets was accompanied by strong increases in units sold, customers
served and active Representatives. These improvements were partially offset
by a significant sales decline in Japan resulting from the unfavorable
exchange impact of a stronger U.S. dollar in 1996, a shift in pricing
strategy to sales of lower-priced products and a decrease in average order
size. These shortfalls resulted from both internal operational factors,
including changes made to the Representative commission structure at the
beginning of 1996, and external conditions such as the relaxation of cosmetic
import regulations which led to accelerated retail pricing competition.
To address these challenges, organizational changes were made in July 1996 to
better integrate the sales and marketing functions. In addition, national
recruiting drives among sales managers and Representatives were conducted and
product offerings in the gift and decorative and CFT categories were enhanced.
In late December 1996, aggressive actions to align price levels more closely
to the market were taken in Japan. These actions resulted in a 20% reduction
in CFT prices. The decrease in the region's pretax income resulted from
operational difficulties in Japan including a decline in the gross margin due
to a continuous focus on lower-priced impulse items in an attempt to increase
consumer appeal, as well as an unfavorable expense ratio caused by the
significant sales decline, despite a decrease in operating expenses. In
addition, pretax profits declined in Thailand due to an unfavorable operating
expense ratio caused by lower sales combined with higher spending for
incentive awards in 1996. These decreases were partially offset by favorable
results in the Philippines due to the significant sales growth and in China
due mainly to higher sales and an improved operating expense ratio. In
addition, pretax profits were higher in Malaysia, Australia and Taiwan.

In the Europe Region, sales increased 7% to $780.7. Excluding the 1995
one-time items, pretax income increased $10.3, or 24%, to $54.4 in 1996. The
sales increase was due to unit growth in Russia, the United Kingdom and
Central Europe. The Representative base in Russia and Central Europe has

<PAGE>34
grown significantly in 1996 due to a continuous focus on expansion of
operations in these markets. Sales also rose in Italy mainly due to a
favorable impact of a weaker U.S. dollar in 1996. These improvements were
partially offset by sales shortfalls in Germany reflecting a shift to lower-
priced items and weak economic conditions, including increased unemployment,
which resulted in a general decline in consumer confidence and spending in
1996. Aggressive discounting from competitors and a negative currency
impact also contributed to the sales decline in Germany. New initiatives have
been launched in Germany to improve market coverage, enhance Avon's image and
stimulate customer growth. The increase in pretax income was mainly due to
the overall sales increase and favorable operating expense ratios in most
markets due to the continued effect of fixed expense reduction efforts.
Central European markets posted strong pretax profits reflecting double-digit
increases in units, customers served and active Representatives despite gross
margin declines from targeted pricing investments to accelerate market
penetration in 1996.

In 1995, international sales increased 6% to $2.91 billion and pretax
income of $375.0 was slightly below 1994. Excluding the one-time items
previously mentioned, pretax income increased 3%. The increase in sales
reflects the favorable impact of the weaker U.S. dollar in the Europe and
Pacific Regions and strong unit growth in the Americas Region, especially
Brazil, most Pacific Rim markets and the United Kingdom. These improvements
were partially offset by a significant sales decline in Mexico due to the
negative impact of the peso devaluation and reduced consumer spending due to
the weak economy. In addition, there were operational sales declines in
Japan.

In the Americas Region, 1995 sales increased 4% to $1.47 billion and
pretax income decreased 3% to $265.8 from $273.9 in 1994. The sales increase
was mainly due to significant growth in Brazil. The economic stabilization
program implemented in Brazil in July 1994 has produced significantly lower
levels of annual inflation generating improved consumer confidence. In
addition, in 1995, the implementation of a new distribution center, the
introduction of new higher-priced products such as Rare Gold Parfum and Renew
(Anew) Intensive Treatment, strong unit growth and an increase in number of
orders contributed to the sales increase in Brazil. The sales increase in the
region also reflected strong unit growth in Venezuela and Chile. These
improvements were partially offset by a significant sales decline in Mexico
resulting from the negative impact of the peso devaluation which began in
late December 1994. As a result, the purchasing power of the Mexican
consumer, who was struggling with one of the worst recessions on record,
decreased in 1995. This deep recession has resulted in a shift in sales to
lower-priced products with purchases directed toward essential products and
away from luxury items such as jewelry. Mexico, however, had double-digit
increases in local currency sales reflecting an increase in the number of
active Representatives. The decrease in pretax income was primarily due to
the unfavorable results in Mexico as well as higher operating expenses in
Brazil associated with the sales increase, including bad debt and
transportation expenses, and the implementation of a new distribution center
in 1995. In addition, higher field recognition and marketing expenses in
Venezuela in 1995 and unfavorable net foreign exchange in Brazil also
contributed to the decrease in pretax income. Brazil's net asset position and
slight devaluation generated translation losses in 1995 as compared to a net
liability position and significant devaluation which generated gains in 1994.
These declines were partially offset by the overall sales increase and lower
monetary correction expense in Brazil reflecting the more economically stable
environment. In addition, pretax profit was higher in Argentina due to an
improved gross margin, resulting from a shift in sales to higher margin items,
and lower operating expenses, and in Venezuela due to higher sales and lower
foreign exchange losses. The significant devaluation of the bolivar,
approximately 40%, in December 1995 did not have a material impact on
Venezuela's results for the year.

In the Pacific Region, 1995 sales increased 7% to $712.0 and pretax
income, excluding Japan's early retirement program costs mentioned previously,
decreased 11% to $79.5 from $89.7 in 1994. The increase in sales was due to
the favorable impact of a weaker U.S. dollar throughout the region, most
significantly in Japan, and strong unit growth in the Pacific Rim, most

<PAGE>35
significantly in China and the Philippines. These improvements were partially
offset by operational sales declines in Japan reflecting a shift in pricing
strategy to sales of lower-priced products as a result of a decline in
consumer spending due to a weak economic climate. In addition, sales were
lower in Taiwan due to a shift to lower-priced products, and in
Australia, reflecting declines in number of units sold. The results in Japan
have been impacted by the economy, which has suffered in 1995 from significant
exchange fluctuations, political instability, aggressive competition from
discounters and a major earthquake. Sales of CFT have declined significantly
in Japan. In response to these difficult conditions, Japan has taken numerous
actions, including expanded marketing activities, an early retirement program,
previously discussed, and other cost-cutting measures. The decrease in
pretax income was due to the unfavorable operating results in Japan,
reflecting a decline in gross margin due to a brochure focus on lower-priced
impulse items and higher advertising expenses to enhance product awareness and
increase consumer appeal. In addition, operating expenses were higher in the
Pacific Rim markets due to continued business expansion, mainly in China, and
increased investments to respond to heightened competition in several
markets as well as high fixed expenses in Australia. These decreases were
partially offset by the overall sales increase and improved gross margins in
China and the Philippines.

In the Europe Region, 1995 sales increased 12% to $728.4. Excluding the
one-time items, pretax income increased $28.8 to $44.1 from 1994. The sales
increase was due to the favorable impact of a weaker U.S. dollar throughout
Europe, most significantly in Germany and the United Kingdom, as well as unit
growth in the United Kingdom, the Central European markets and Spain. The
developing Central European markets have had solid operational growth as
demonstrated by their double-digit increases in units sold in both 1995 and
1994. These improvements were partially offset by shortfalls in Germany
reflecting decreased units sold as a result of the economic downturn in the
second half of the year. The increase in pretax income was primarily due to
the overall sales increase as well as the effect of continued expense
reduction efforts throughout Europe. These improvements were partially offset
by a gross margin decline in the United Kingdom resulting from margin
investments made to support sales with low margin special offers and also to
reduce inventory levels.

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

Corporate Expenses - Corporate expenses were $95.4 in 1996 compared with $74.6
in 1995. The $20.8 increase is primarily due to the favorable lease
settlement in 1995 and higher expenses in 1996 for information systems
upgrades and enhancements. In 1995, corporate expenses decreased $10.3 from
1994. The $10.3 decrease is primarily due to the lease settlement in 1995,
partially offset by higher non-recurring expenses.

Other Expense, Net - Other expense, net, includes corporate non-operating
income and expense items and corporate interest income. Other expense, net,
was $1.4 in 1996 compared with $5.7 in 1995, a decrease of $4.3 due to lower
non-operating expenses partially offset by the $11.0 portion of the 1995 lease
settlement. Other expense, net, was $5.7 in 1995 compared with $10.6 in 1994,
a decrease of $4.9, due to the $11.0 portion of the lease settlement partially
offset by higher non-operating expenses in 1995.

Accounting Changes - Effective January 1, 1996, the Company adopted Statement
of Financial Accounting Standards ("FAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of".
This statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of assets may not be recoverable. There was no impact on the Company's
results of operations or financial position.

Also, effective January 1, 1996, the Company adopted the fair value
disclosure requirements of FAS No. 123, "Accounting for Stock-Based
Compensation". As permitted by the statement, the Company did not change the
method of accounting for its employee stock compensation plans. See Note 8
for the fair value disclosures required under FAS No. 123.

<PAGE>36
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. 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.

As a result of the accounting changes that were effective January 1, 1994,
Avon recorded an aggregate non-cash charge in the first quarter of 1994 of
$45.2, or $.32 per share. This amount reflects the cumulative effect of
adjustments for FAS No. 112 of $28.9, or $.20 per share, FAS No. 106 of $8.0,
or $.06 per share, and systems development costs of $8.3, or $.06 per share.

Discontinued Operations - In December 1995, the Company entered into an
agreement with Mallinckrodt, which fully settled the litigation initiated by
Mallinckrodt. The settlement covers all indemnity obligations related to
Avon's sale of Mallinckrodt, including environmental clean-up claims and
litigation concerning Mallinckrodt's settlement of a DuPont patent claim.

During 1994, the Company sold Giorgio, its remaining retail business, for
cash of $150.0. The Company recorded a loss of $25.0 on the sale. Giorgio's
operating results are segregated and reported as discontinued operations
through the date of sale.

Since the Company had capital loss carryforwards, no tax benefits were
recognized on the above losses in 1995 and 1994.

Contingencies - Although Avon has completed its divestiture of all
discontinued operations, various lawsuits and claims (asserted and unasserted)
are pending or threatened against Avon. The Company is also 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. In the opinion of Avon's
management, based on its review of the 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, 1996 should not have a material
adverse impact on Avon's consolidated financial position, results of
operations, or cash flows.

Liquidity and Capital Resources

Cash Flows - Net cash provided by continuing operations was $425.1 in 1996
compared to $328.6 in 1995. The 1996 increase in net cash provided by
continuing operations principally reflects, among other things, an increase
in net income of $61.4 and a lower funding of working capital. The lower
funding of working capital reflects improvements in both prepaid expenses and
accounts payable and accrued liabilities. A more detailed analysis of the
individual items contributing to the 1996 and 1995 amounts is included in the
Consolidated Statement of Cash Flows.

Cash used by discontinued operations was $38.2 in 1996, compared to $49.6
in 1995 and $6.0 in 1994. The $38.2 cash used in 1996 primarily reflects final
payment of the Mallinckrodt settlement in January 1996. The $43.6 increase in
cash used in 1995 compared to 1994 primarily reflects the initial payment of
the Mallinckrodt settlement. See discussion above in the Discontinued
Operations section regarding this settlement.

Excluding changes in debt, net cash usage of $6.6 in 1996 was $38.1
favorable compared to net cash usage of $44.7 in 1995. This improvement
reflects higher cash provided by continuing operations, described above, as
well as lower cash used in 1996 for discontinued operations, partially offset
by higher capital expenditures, higher cash used for the repurchase of common
stock, an unfavorable exchange rate impact on cash and higher dividend
payments in 1996. Excluding changes in debt, net cash usage of $44.7 in 1995
was $52.4 unfavorable to net cash flow of $7.7 in 1994. This variance
reflects higher cash provided by continuing operations, as well as lower cash
used in 1995 for the repurchase of common stock, lower capital expenditures
and a favorable exchange rate impact on cash. This was more than offset by the

<PAGE>37
proceeds in 1994 from the sale of Giorgio, the Mallinckrodt settlement payment
and higher dividends paid in 1995. As of December 31, 1996, 12.6 million
shares of common stock have been purchased for $422.9 under the stock
repurchase program begun in 1994.

Working Capital - As of December 31, 1996, current liabilities exceeded
current assets by $41.7 compared with $30.3 at the end of 1995. The variance
was primarily due to an increase in accounts payable and net debt (debt less
cash and equivalents) partially offset by higher inventory levels, as
discussed in the Inventories section, and accounts receivable, due to a higher
1996 sales level. The increase in net debt is primarily due to the final
payment of the Mallinckrodt litigation settlement and the ongoing share
repurchase program, and the increase in accounts payable resulted from higher
inventory levels.

Avon's liquidity results from its ability to generate significant cash
flows from operations and its ample unused borrowing capacity. Management does
not presently plan any actions that would eliminate the working capital
deficit at this time. Avon's credit agreements do not contain any provisions
or requirements with respect to working capital.

Capital Resources - Total debt of $201.6 at December 31, 1996, increased $40.1
from $161.5 at December 31, 1995, compared with a reduction of $16.2 from
December 31,1994. During 1996, cash flows from continuing operations and
higher debt levels, partially offset by higher cash and equivalents, were used
for dividends, the stock repurchase program, capital expenditures, a payment
made related to discontinued operations and the purchase of a company in South
Africa. During 1995, cash flows from continuing operations as well as cash on
hand were used for dividends, the stock repurchase program, capital
expenditures, a payment made related to discontinued operations and the
reduction of debt. During 1994, cash flows 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.

Debt maturing within one year consists of borrowings from banks of $94.0
and the current maturities of long-term debt of $3.1. 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.

During 1996, the Company entered into an agreement, which expires in
2001, with various banks to amend and restate the five-year, $600.0 revolving
credit and competitive advance facility agreement, which was entered into in
1994. Within this facility, the Company is able to borrow, on an uncommitted
basis, various foreign currencies. The new agreement and the prior agreement
are referred to, collectively, as the credit facility.

The credit 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 credit facility is based on LIBOR, prime, or federal fund rates.
The credit facility has an annual facility fee of $.4. The credit facility
contains a covenant for interest coverage, as defined. The Company is in
compliance with this covenant. At December 31, 1996, borrowings of $29.7 were
outstanding under the credit facility. There were no borrowings outstanding
at December 31, 1995.

At December 31, 1996, Avon has $34.1 outstanding under a $500.0
commercial paper program supported by the credit facility. There were no
borrowings outstanding as of December 31, 1995. In addition, the Company has
bankers' acceptance facilities and uncommitted lines of credit available of
$230.0 with various banks which have no compensating balances or fees. As of
December 31, 1996 and 1995, there were no borrowings under these facilities.
In addition, as of December 31, 1996 and 1995, there were international lines
of credit totaling $357.0 and $320.0, respectively, of which $30.2 and $42.3,
respectively, were outstanding. 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

<PAGE>38
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 and accessories, gift and decorative
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
Inventories of $530.0 at December 31, 1996 were $63.7 higher than 1995 due to
higher CFT levels in the U.S. to support the launch of new skin care products
in the first quarter of 1997 and business growth and continued expansion into
Central Europe, Russia and the Pacific Rim markets. 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 1996 were $103.6
(1995 - $72.7). These expenditures were made for capacity expansion in high
growth markets and for facility modernization, information systems upgrades
and enhancements, equipment replacement projects and leasehold improvements
related to office facilities for U.S. and global operations. Numerous
construction and information systems projects were in progress at December
31, 1996 with an estimated cost to complete of approximately $74.9. Capital
expenditures in 1997 are currently expected to be in the range of
$150.0 - $175.0. These expenditures will include continued investments for
capacity expansion in high growth markets, most significantly in the Pacific
Rim, to maintain worldwide facilities, for contemporization and replacement
of information systems and for expenditures related to the relocation of
office facilities for the U.S. and global operations.

Foreign Operations - The Company derived approximately 65% of both its 1996
consolidated net sales and consolidated pretax income from operations from its
international subsidiaries. In addition, as of December 31, 1996, international
subsidiaries comprised approximately 59% of the Company's consolidated total
assets.

Avon's operations in many countries utilize numerous currencies. Avon has
significant net assets in Japan, Argentina, Mexico, the United Kingdom,
Germany and the Philippines. 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, a country with an
economy 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. Effective
January 1, 1997, Mexico was designated as a country with a highly inflationary
economy due to the cumulative inflation rates over the past three years.

The Venezuelan bolivar devalued significantly in December 1995. However,
because the devaluation occurred late in the year, there was no material impact
on the 1995 results of operations. Following the December 1995 devaluation,
another devaluation occurred in late April 1996. As previously mentioned,
these devaluations negatively affected Venezuela's U.S. dollar results in
1996. Venezuela's 1996 and 1995 sales represent approximately 2% of Avon's
consolidated net sales. Efforts have been focused on building market share
and Representative growth in Venezuela. It is expected that a continued weak
bolivar will have some impact on 1997 results; however, management cannot at
this time project what this impact will be. 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

<PAGE>39
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 7 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.

Some foreign subsidiaries rely primarily on short-term borrowings from
local commercial banks to fund working capital needs created by their highly
seasonal sales pattern. From time to time, when tax and other considerations
dictate, Avon will finance subsidiary working capital needs or borrow foreign
currencies. At December 31, 1996, the total indebtedness of foreign
subsidiaries was $37.4. In addition, Avon borrowed $29.7 which represented a
3.45 billion yen loan, due November 1997, used to hedge the Company's net
investment in Japan.

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 1996, these subsidiaries remitted, net of taxes, $251.1 in dividends
and royalties. This sum is a substantial portion of the 1996 consolidated net
earnings of Avon's foreign subsidiaries.

Risk Management Strategies - The Company operates globally, 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 Company periodically uses interest rate swaps to hedge portions of
interest payable on its debt. In addition, the Company may periodically employ
interest rate caps to reduce exposure, if any, to increases in variable
interest rates.

During a substantial portion of the three-year period ended December 31
1996, the Company utilized interest rate swaps to effectively convert variable
interest on its long-term debt to a fixed interest rate. From November 1994
through July 10, 1995, due to the expiration of an interest rate swap, the
interest payable on the 6 1/8% deutsche mark notes ("Notes") became variable
at a rate of one-month LIBOR plus 1.4%. During this period, the Company had an
interest rate cap in place to reduce its exposure to increases in that variable
interest rate above a specified level. On July 11, 1995, the Company entered
into a new interest rate swap agreement, which effectively reconverted the
interest payable on the Notes to a fixed rate basis of approximately 7.2%
through maturity.

Avon has three interest rate swap agreements on the Notes at December 31,
1996 and 1995, each such agreement having a notional amount of $100.0,
yielding an aggregate notional amount at December 31, 1996 and 1995 of $300.0.
Effective January 1995, the Company had two interest rate caps on the Notes,
each with a notional amount of $100.0, one of which expired in 1996 and the
other expires when the Notes mature. Subsequent to the interest rate on the
Notes becoming fixed, these caps have been marked to market with an
insignificant mark-to-market adjustment.

In December 1995, the Company entered into an interest rate cap contract
with a notional amount of $100.0, which expired in early 1997, in order to
hedge a portion of the Company's anticipated short-term variable interest rate
working capital debt. This cap has been marked to market with an
insignificant mark-to-market adjustment.

The interest rate on the Notes was fixed at approximately 10% for most of
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 debt was converted from a fixed to a
floating rate determined at one-month LIBOR plus 1.4%. The effective rate of
interest paid for the Notes in 1996 and 1995 was approximately 7.2% and 7.5%,
respectively.

The Company may periodically hedge foreign currency royalties, net
investments in foreign subsidiaries, firm purchase commitments, contractual
foreign currency cash flows or obligations, including third-party and

<PAGE>40
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, 1996, the Company held foreign currency forward contracts
with notional amounts totaling $203.1 and option contracts with notional
amounts totaling $61.2 to hedge foreign currency items. These contracts all
have maturities prior to December 31, 1997. The Company also entered into
certain option contracts with notional amounts totaling $46.4 and foreign
currency forward contracts totaling $99.0, which do not qualify as hedging
transactions under the current accounting definitions and, accordingly, have
been marked to market. The mark-to-market adjustment on these option
contracts at December 31, 1996, was insignificant. The Company's risk of loss
on these options in the future is limited to premiums paid, which are
insignificant.

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.

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, 1996. In addition, there
are other swap agreements in a net payable position of an insignificant
amount at December 31, 1996. 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.

<PAGE>41
Results of Operations by Quarter Avon Products, Inc.

During 1996, the Board of Directors authorized a two-for-one stock split which
was distributed in June 1996. All share data shown below have been restated
to reflect the split.

In millions, except
per share data First Second Third Fourth Year
----- ------ ----- ------ ----
1996

Net sales $1,016.1 $1,128.7 $1,177.3 $1,492.1 $4,814.2
Gross profit 614.5 691.6 702.5 884.4 2,893.0
Income before taxes and
minority interest 59.8 138.7 98.9 213.0 510.4
Income before
minority interest 37.1 86.0 62.8 133.1 319.0
Net income $ 37.7 $ 85.7 $ 62.5 $ 132.0 $ 317.9
========= ======== ======== ======== ========

Income per share $ .28 $ .64 $ .47 $ .99 $ 2.38(1)
======== ======== ======== ======== ========

1995

Net sales $ 976.2 $1,064.0 $1,067.8 $1,384.1 $4,492.1
Gross profit 588.9 659.1 648.4 826.7 2,723.1
Income from
continuing operations
before taxes and
minority interest 56.5 133.7 87.2 187.6 465.0
Income from continuing
operations before
minority interest 34.0 80.3 55.8 118.5 288.6
Discontinued operations,
net(2) - - - (29.6) (29.6)
Net income $ 34.4 $ 80.4 $ 55.2 $ 86.5 $ 256.5
======== ======== ======== ======== ========

Income (loss) per share:
Continuing operations $ .25 $ .59 $ .41 $ .86 $ 2.10
Discontinued operations - - - (.22) (.22)
-------- -------- -------- -------- --------

Income per share $ .25 $ .59 $ .41 $ .64 $ 1.88(1)
======== ======== ======== ======== ========

(1) The sum of per share amounts for the quarters does not necessarily equal
that for the year because the computations are made independently.

(2) See Note 3 to the Consolidated Financial Statements regarding
discontinued operations.

Market Prices of Common Stock by Quarter

1996 1995
Quarter High Low High Low
---- --- ---- ---
First $44.38 $36.31 $30.69 $27.00
Second 47.56 42.56 34.88 29.81
Third 50.25 39.00 37.69 32.81
Fourth 59.50 48.50 39.19 34.25

Avon common stock is listed on the New York Stock Exchange. At December 31,
1996, there were approximately 24,200 shareholders of record. Dividends of
$1.16 per share, or $.29 per share each quarter, were declared and paid in
1996. Dividends declared and paid in 1995 of $1.05 per share include $.275
per share for the last two quarters and $.25 per share for the first two
quarters.

<PAGE>42
Consolidated Statement of Income Avon Products, Inc.

In millions, except per share data

Years ended December 31 1996 1995 1994
---- ---- ----

Net sales $4,814.2 $4,492.1 $4,266.5
-------- -------- --------

Costs, expenses and other
Cost of sales 1,921.2 1,769.0 1,672.1
Marketing, distribution and
administrative expenses 2,348.2 2,215.6 2,098.8
Interest expense 40.0 41.3 50.8
Interest income (14.5) (19.4) (22.1)
Other expense, net 8.9 20.6 33.1
-------- -------- --------
Total costs, expenses and other 4,303.8 4,027.1 3,832.7
-------- -------- --------
Income from continuing operations before
taxes, minority interest and cumulative
effect of accounting changes 510.4 465.0 433.8
Income taxes 191.4 176.4 163.5
-------- -------- --------
Income from continuing operations before
minority interest and cumulative
effect of accounting changes 319.0 288.6 270.3
Minority interest (1.1) (2.5) (5.5)
-------- -------- --------
Income from continuing operations before
cumulative effect of accounting changes 317.9 286.1 264.8
Discontinued operations
Income, net of taxes - - 1.2
Loss on disposals, net of taxes - (29.6) (25.0)
Cumulative effect of accounting changes,
net of taxes - - (45.2)
-------- -------- --------
Net income $ 317.9 $ 256.5 $ 195.8
======== ======== ========

Income (loss) per share:
Continuing operations $ 2.38 $ 2.10 $ 1.88
Discontinued operations - (.22) (.17)
Cumulative effect of accounting changes - - (.32)
-------- -------- --------
Income per share $ 2.38 $ 1.88 $ 1.39
======== ======== ========

Average shares outstanding 133.70 136.48 141.18

The accompanying notes are an integral part of these statements.

<PAGE>43
Consolidated Balance Sheet Avon Products, Inc.

In millions, except share data

December 31 1996 1995
---- ----

Assets

Current assets
Cash, including cash equivalents of $87.9 and $60.5 $ 184.5 $ 151.4
Accounts receivable (less allowance for doubtful
accounts of $36.4 and $32.6) 437.0 402.0
Inventories 530.0 466.3
Prepaid expenses and other 198.1 195.3
-------- --------
Total current assets 1,349.6 1,215.0
-------- --------

Property, plant and equipment, at cost
Land 51.5 53.5
Buildings and improvements 564.5 546.1
Equipment 608.9 569.9
-------- --------
1,224.9 1,169.5
Less accumulated depreciation 658.3 631.7
-------- --------
566.6 537.8
-------- --------

Other assets 306.2 300.0
-------- --------
Total assets $2,222.4 $2,052.8
======== ========

Liabilities and Shareholders' Equity

Current liabilities
Debt maturing within one year $ 97.1 $ 47.3
Accounts payable 469.3 419.7
Accrued compensation 142.4 109.3
Other accrued liabilities 238.7 277.3
Sales and other taxes 124.6 101.8
Income taxes 319.2 289.9
-------- --------
Total current liabilities 1,391.3 1,245.3
-------- --------

Long-term debt 104.5 114.2
Employee benefit plans 384.8 390.8
Deferred income taxes 33.9 33.6
Other liabilities (including minority interest
of $41.1 and $46.5) 66.2 76.2

Commitments and contingencies

Shareholders' equity
Common stock, par value $.25 - authorized:
400,000,000 shares; issued
173,957,379 and 173,498,112 shares 43.5 43.4
Additional paid-in capital 693.6 672.9
Retained earnings 488.8 325.8
Translation adjustments (210.7) (202.1)
Treasury stock, at cost - 41,137,297 and
38,263,644 shares (773.5) (647.3)
-------- --------
Total shareholders' equity 241.7 192.7
-------- --------
Total liabilities and shareholders' equity $2,222.4 $2,052.8
======== ========

The accompanying notes are an integral part of these statements.

<PAGE>44
Consolidated Statement of Cash Flows Avon Products, Inc.

In millions

Years ended December 31 1996 1995 1994
---- ---- ----

Cash flows from operating activities
Net income $ 317.9 $ 256.5 $ 195.8
Adjustments to reconcile income to net cash
provided by continuing operations:
Depreciation and amortization 64.5 58.3 55.7
Provision for doubtful accounts 79.0 78.0 64.9
Translation gains (.2) (.4) (9.0)
Deferred income taxes (.7) (.6) 2.2
Cumulative effect of accounting changes, net - - 45.2
Discontinued operations, net - 29.6 23.8
Other 9.9 13.3 10.7
Changes in assets and liabilities:
Accounts receivable (125.5) (132.5) (179.4)
Inventories (65.4) (54.6) (61.3)
Prepaid expenses and other 13.7 (41.8) (12.7)
Accounts payable and accrued liabilities 97.8 59.6 147.4
Income and other taxes 57.7 57.5 45.4
Noncurrent assets and liabilities (23.6) 5.7 (30.4)
------- ------- -------
Net cash provided by continuing operations 425.1 328.6 298.3
Net cash used by discontinued operations (38.2) (49.6) (6.0)
------- ------- -------
Net cash provided by operating activities 386.9 279.0 292.3
------- ------- -------
Cash flows from investing activities
Capital expenditures (103.6) (72.7) (99.9)
Disposal of assets 3.3 2.8 4.5
Acquisitions of subsidiary stock (6.3) (3.4) -
Proceeds from sale of Giorgio Beverly Hills, Inc. - - 150.0
------- ------- -------
Net cash (used) provided by investing activities (106.6) (73.3) 54.6
------- ------- -------
Cash flows from financing activities
Cash dividends (158.1) (147.8) (141.1)
Debt, net (maturities of three months or less) 17.8 8.8 (23.3)
Proceeds from short-term debt 37.5 32.7 35.0
Retirement of short-term debt (14.1) (30.6) (16.2)
Proceeds from long-term debt - - 6.1
Retirement of long-term debt (1.5) (29.6) (18.4)
Proceeds from exercise of stock options,
net of taxes 10.0 1.4 .7
Repurchase of common stock (127.8) (106.9) (188.2)
------- ------- -------
Net cash used by financing activities (236.2) (272.0) (345.4)
------- ------- -------
Effect of exchange rate changes on cash and
equivalents (11.0) 2.9 (10.6)
------- ------- -------
Net increase (decrease) in cash and equivalents 33.1 (63.4) (9.1)
Cash and equivalents at beginning of year 151.4 214.8 223.9
------- ------- -------
Cash and equivalents at end of year $ 184.5 $ 151.4 $ 214.8
======= ======= =======
Cash paid for
Interest $ 35.2 $ 36.4 $ 47.8
Income taxes, net of refunds received 158.9 133.5 130.4

The accompanying notes are an integral part of these statements.

Consolidated Statement of Changes Avon Products, Inc.
in Shareholders' Equity

<S> <C> <C> <C> <C> <C> <C>
Additional
Common Stock Paid-In Retained Translation Treasury
In millions, except share data Shares Amount Capital Earnings Adjustments Stock Total
------ ------ ------- -------- ----------- -------- -----

Balance at December 31, 1993 173,057,384 $43.3 $652.3 $ 150.6 $(175.3) $(356.9) $ 314.0
Net income 195.8 195.8
Dividends - $.95 per share (134.0) (134.0)
Translation adjustments (11.8) (11.8)
Exercise of stock options,
including tax benefits 48,136 1.6 1.6
Grant, cancellation and amorti-
zation of restricted stock 222,228 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 173,327,748 43.3 660.5 212.4 (187.1) (543.5) 185.6
Net income 256.5 256.5
Dividends - $1.05 per share (143.1) (143.1)
Translation adjustments (15.0) (15.0)
Exercise of stock options,
including tax benefits 79,254 .1 1.5 1.6
Grant, cancellation and amorti-
zation of restricted stock 91,110 8.2 8.2
Repurchase of common stock (106.9) (106.9)
Benefit plan contributions 2.7 3.1 5.8
----------- ----- ------ ------- ------- ------- -------
Balance at December 31, 1995 173,498,112 43.4 672.9 325.8 (202.1) (647.3) 192.7
Net income 317.9 317.9
Dividends - $1.16 per share (154.9) (154.9)
Translation adjustments (8.6) (8.6)
Exercise of stock options,
including tax benefits 423,267 .1 15.6 15.7
Grant, cancellation and amorti-
zation of restricted stock 36,000 2.7 2.7
Repurchase of common stock (127.8) (127.8)
Benefit plan contributions 2.4 1.6 4.0
----------- ----- ------ ------- ------- ------- -------
Balance at December 31, 1996 173,957,379 $43.5 $693.6 $ 488.8 $(210.7) $(773.5) $ 241.7
=========== ===== ====== ======= ======= ======= =======

The accompanying notes are an integral part of these statements.

</TABLE>

<PAGE>46
Notes to Consolidated Financial Statements
Avon Products, Inc.
In millions, except share data

1. Description of the Business and Summary of Significant Accounting
Policies

Business
Avon Products, Inc. ("Avon" or "Company") is a global manufacturer and
marketer of beauty and related products. The product categories include
cosmetics, fragrance and toiletries; gift and decorative; apparel; and
fashion jewelry and accessories. Avon's business is comprised of one
industry segment, direct selling, which is conducted in the U.S., the
Americas, the Pacific and Europe. Sales are made to the ultimate customers
principally by Avon Representatives.

Significant Accounting Policies
Principles of Consolidation - The consolidated financial statements include
the accounts of Avon and its subsidiaries. Intercompany balances and
transactions are eliminated. These statements have been prepared in conformity
with generally accepted accounting principles and require management to make
estimates and assumptions that affect amounts reported and disclosed in the
financial statements and related notes. Actual results could differ from these
estimates.

Foreign Currency - The Company has operations in various countries around the
world. Fluctuations in the value of foreign currencies cause U.S. dollar-
translated amounts to change in comparison with previous periods. Accordingly,
the Company 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.

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 believes it is not exposed to any
significant credit risk regarding 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 3 to 15 years.

Other Assets - Internal system development costs related to the development of
major information and accounting systems are expensed as incurred.

Stock Options - Compensation cost is recognized for fixed price options using
the intrinsic value method. Under this method, compensation cost is the
excess, if any, of the quoted market price of the stock at the grant date or
other measurement date over the amount an employee must pay to acquire the
stock.

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. 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. Income and expense are recorded in the same
category as that arising from the related asset or liability being hedged.

<PAGE>47
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 if considered to be economic hedges; otherwise, they are marked to
market.

Research and Development - Research and development costs are expensed as
incurred and aggregated in 1996 $30.2 (1995 - $27.8; 1994 - $27.9).

Advertising - Advertising costs are expensed as incurred and aggregated in
1996 $69.6 (1995 - $52.8; 1994 - $42.6).

Income Taxes - Deferred income taxes have been provided on items recognized
for financial reporting purposes in different periods than for income tax
purposes at future enacted rates.

U.S. income taxes have not been provided on approximately $260.0 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 $26.0 would be payable.

Income per Share - Income per share of common stock is based on the weighted
average number of shares outstanding. The decrease in average shares
outstanding during the period 1994 to 1996 is primarily due to the shares
acquired under the stock repurchase program. All share and per share data
included in this report have been restated to reflect a two-for-one stock
split distributed in June 1996.

Reclassifications - To conform to the 1996 presentation, certain
reclassifications were made to the prior years' consolidated financial
statements.

2. Accounting Changes

Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards ("FAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of".
This statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of assets may not be recoverable. There was no impact on the
Company's results of operations or financial position.

Also, effective January 1, 1996, the Company adopted the fair value
disclosure requirements of FAS No. 123, "Accounting for Stock-Based
Compensation". As permitted by the statement, the Company did not change
the method of accounting for its employee stock compensation plans. See Note
8 for the fair value disclosures required under FAS No. 123.

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. 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.

As a result of these accounting changes, Avon recorded an aggregate non-
cash charge in the first quarter of 1994 of $45.2, or $.32 per share. This
amount reflects the cumulative effect of adjustments for FAS No. 112 of $28.9,
or $.20 per share, FAS No. 106 of $8.0, or $.06 per share, and systems
development costs of $8.3, or $.06 per share.

3. Discontinued Operations

In December 1995, the Company entered into an agreement with Mallinckrodt
Group, Inc. ("Mallinckrodt"), which fully settled the litigation initiated
by Mallinckrodt. The settlement covers all indemnity obligations related to
Avon's sale of Mallinckrodt, including environmental clean-up claims and
litigation concerning Mallinckrodt's settlement of a DuPont patent claim.

The settlement payments made by Avon to Mallinckrodt, and related costs,
resulted in an after-tax charge to discontinued operations in the fourth
quarter of 1995, net of existing reserves, of $29.6, or $.22 per share. The
remaining reserve relating to discontinued operations, which is not
significant, relates to other businesses previously sold.

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. Giorgio's operating results are segregated and reported
as discontinued operations through the date of sale.

Since the Company had capital loss carryforwards, no tax benefits were
recognized on the above losses in 1995 and 1994.

<PAGE>48
Amounts included in income from discontinued operations for Giorgio
through the measurement date of June 30, 1994: net sales of $58.1; income
before taxes of $2.0; and net income of $1.2.

4. Inventories

Inventories at December 31 consisted of the following:

1996 1995
---- ----

Raw materials $136.7 $133.2
Finished goods 393.3 333.1
------ ------

Total $530.0 $466.3
====== ======

LIFO-based inventories totaled at December 31, 1996 $120.3
(1995 - $107.1), with the current estimated replacement cost exceeding the
carrying value by approximately $20.0 (1995 - $20.4).

5. Debt

Debt at December 31 consisted of the following:

1996 1995
---- ----

Maturing within one year:
Notes payable $ 94.0 $ 42.3
Current portion of long-term debt 3.1 5.0
------ ------

Total $ 97.1 $ 47.3
====== ======

Long-term debt:
170 million 6-1/8% deutsche mark notes, due 1998 (1) $100.0 $100.0
Other, payable to 2002 with interest from 7% to 27% 7.6 19.2
Less current portion (3.1) (5.0)
------ ------

Total $104.5 $114.2
====== ======

(1) The deutsche mark notes ("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 currency swap contract receivable at December 31, 1996 of
$9.7 (1995 - $18.7).

(2) See Note 7 regarding financial instruments.

Annual maturities of long-term debt for each of the next five years are:
1997 - $3.1; 1998 - $102.7; 1999 - $1.2; 2000 - $.4; and 2001 - $.1.

During 1996, the Company entered into an agreement, which expires in 2001,
with various banks to amend and restate the five-year, $600.0 revolving credit
and competitive advance facility agreement, which was entered into in 1994.
Within this facility, the Company is able to borrow, on an uncommitted basis,
various foreign currencies. The new agreement and the prior agreement are
referred to, collectively, as the credit facility.

At December 31, 1996, borrowings of $29.7 were outstanding under the
credit facility. There were no borrowings outstanding at December 31, 1995.
The borrowings of $29.7 represented a 3.45 billion yen loan, due November
1997, used to hedge the Company's net investment in Japan. The annual
interest rate is .78%.

At December 31, 1996, Avon has $34.1 outstanding under a $500.0 commercial
paper program supported by the credit facility. In addition, the Company has
bankers' acceptance facilities and uncommitted lines of credit available of
$230.0 (1995 - $215.0) with various banks which have no compensating balances
or fees. As of December 31, 1996 and 1995, there were no borrowings under the
bankers' acceptance facilities and uncommitted lines.

The maximum borrowings under these combined facilities during 1996 and
1995 were $361.9 and $230.5, respectively, and the annual average borrowings
during each year were approximately $271.3 and $151.7, respectively, at
average annual interest rates of approximately 5.5% and 6.0%, respectively.

At December 31, 1996 and 1995, international lines of credit totaled
$357.0 and $320.0, respectively, of which $30.2 and $42.3 were outstanding,
respectively. The maximum borrowings under these facilities during 1996 and
1995 were $58.3 and $55.7, respectively, and the annual average borrowings
during each year were $47.2 and $43.9, respectively, at average annual
interest rates of approximately 6.3% and 10.5%, respectively. Such lines have
no compensating balances or fees.

At December 31, 1996 and 1995, Avon also has letters of credit outstanding
totaling $18.7 which guarantee various insurance activities. In addition, Avon
has outstanding letters of credit for various trade activities.

6. Income Taxes

Deferred tax assets (liabilities) resulting from temporary differences in the
recognition of income and expense for tax and financial reporting purposes at

<PAGE>49
December 31 consisted of the following:
1996 1995
---- ----

Deferred tax assets:
Postretirement benefits $ 83.5 $ 86.8
Accrued expenses and reserves 53.2 54.5
Employee benefit plans 46.8 40.1
Foreign operating loss carryforwards 30.1 37.5
Capital loss carryforwards 36.3 34.8
Postemployment benefits 10.9 12.2
All other 25.8 22.0
Valuation allowance (70.0) (77.6)
------- -------
Total deferred tax assets 216.6 210.3
------- -------
Deferred tax liabilities:
Depreciation (44.0) (45.5)
Prepaid retirement plan costs (54.6) (48.1)
Capitalized interest (15.0) (16.3)
Unremitted foreign earnings (11.6) (11.0)
All other (14.8) (13.1)
------- -------
Total deferred tax liabilities (140.0) (134.0)
------- -------
Net deferred tax assets $ 76.6 $ 76.3
======= =======

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

1996 1995
---- ----
Deferred tax assets:
Prepaid expenses and other $ 67.4 $ 50.8
Other assets 46.6 62.0
------ ------
Total deferred tax assets 114.0 112.8
------ ------
Deferred tax liabilities:
Income taxes (3.5) (2.9)
Deferred income taxes (33.9) (33.6)
------ ------
Total deferred tax liabilities (37.4) (36.5)
------ ------
Net deferred tax assets $ 76.6 $ 76.3
====== ======

The valuation allowance 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:

1996 1995 1994
---- ---- ----

United States $171.3 $149.7 $127.3
Foreign 339.1 315.3 306.5
------ ------ ------
Total $510.4 $465.0 $433.8
====== ====== ======

The provision for income taxes for the years ended December 31 was
as follows:

1996 1995 1994
---- ---- ----
Federal:
Current $ 30.9 $ 23.3 $ 34.0
Deferred 1.0 .9 (4.1)
------ ------ ------
31.9 24.2 29.9
------ ------ ------

Foreign:
Current 152.4 146.2 119.8
Deferred (1.5) (1.4) 6.1
------ ------ ------
150.9 144.8 125.9
------ ------ ------

State and other:
Current 8.8 7.5 7.5
Deferred (.2) (.1) .2
------ ------ ------
8.6 7.4 7.7
------ ------ ------

Total $191.4 $176.4 $163.5
====== ====== ======

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

1996 1995 1994
---- ---- ----

Statutory federal rate 35.0% 35.0% 35.0%
State and local taxes, net of federal tax benefit 1.1 1.0 1.2
Tax-exempt operations (.7) (.7) (1.4)
Taxes on foreign income, including translation 6.8 7.5 9.3
Utilization of net operating loss carryforwards (.5) (.1) (5.0)
Other (4.2) (4.8) (1.4)
---- ---- ----

Effective tax rate 37.5% 37.9% 37.7%
==== ==== ====

At December 31, 1996, Avon had foreign operating loss carryforwards
of approximately $88.9. The loss carryforwards expiring between 1997 and
2004 were $64.3 and the loss carryforwards which do not expire were $24.6.
Capital loss carryforwards, which expire between 1997 and 2000 and may be
used to offset capital gains, if any, were approximately $103.7 at December
31, 1996.

7. Financial Instruments and Risk Management

Risk Management - The Company operates globally, 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

<PAGE>50
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 direct measure of the Company's exposure through its use of
derivatives.

Interest Rates - The Company periodically uses interest rate swaps to hedge
portions of interest payable on its debt. In addition, the Company may
periodically employ interest rate caps to reduce exposure, if any, to increases
in variable interest rates.

During a substantial portion of the three-year period ended December 31,
1996, the Company utilized interest rate swaps to effectively convert variable
interest on its long-term debt to a fixed interest rate. From November 1994
through July 10, 1995, due to the expiration of an interest rate swap, the
interest payable on the Notes became variable at a rate of one-month LIBOR
plus 1.4%. During this period, the Company had an interest rate cap in place
to reduce its exposure to increases in that variable interest rate above a
specified level. On July 11, 1995, the Company entered into a new interest
rate swap agreement, which effectively reconverted the interest payable on
the Notes to a fixed rate basis of approximately 7.2% through maturity.

Avon has three interest rate swap agreements on the Notes at December
31, 1996 and 1995, each such agreement having a notional amount of $100.0,
yielding an aggregate notional amount at December 31, 1996 and 1995 of $300.0.
Effective January 1995, the Company had two interest rate caps on the Notes,
each with a notional amount of $100.0, one of which expired in 1996 and the
other expires when the Notes mature. Subsequent to the interest rate on the
Notes becoming fixed, these caps have been marked to market with an
insignificant mark-to-market adjustment.

During 1993, Avon had a gain of $16.6 from the sale of interest rate
swap contracts on the Notes, which is being amortized over the remaining term
of the original swap agreements. As of December 31, 1996, the unamortized
balance was $4.7 (1995 - $8.2).

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 third-party
and 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, 1996, the Company held foreign currency forward contracts
with notional amounts totaling $203.1 (1995 - $182.2) and option contracts
with notional amounts totaling $61.2 (1995 - $90.4) to hedge foreign currency
items. These contracts all have maturities prior to December 31, 1997. The
Company also entered into certain option contracts with notional amounts
totaling $46.4, including the yen borrowing (1995 - $8.2) and, during 1996,
foreign currency forward contracts totaling $99.0 which do not qualify as
hedging transactions under the current accounting definitions and,
accordingly, have been marked to market. The mark-to-market adjustments on
these option and forward contracts at December 31, 1996 and 1995, were
insignificant. The Company's risk of loss on the options in the future is
limited to premiums paid, which are insignificant.

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:

1996 1995
---------------- ----------------
Buy Sell Buy Sell
--- ---- --- ----

Argentine peso $ - $ 15.0 $ - $ -
Brazilian real - 84.0 - -
British pound 1.5 33.9 4.4 44.9
Canadian dollar - 44.1 4.5 23.6
Chinese renminbi - 10.0 - -
French franc 1.0 14.4 - 5.1
German mark 59.5 16.2 88.4 19.8
Irish punt 13.6 1.6 2.1 -
Italian lira 12.7 1.8 1.2 -
Japanese yen 57.2 28.1 35.6 45.0
Spanish peseta - 10.1 - 1.6
Other currencies .9 4.1 .1 4.5
------ ------ ------ ------
Total $146.4 $263.3 $136.3 $144.5
====== ====== ====== ======

<PAGE>51
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.

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, 1996. In addition, there are
other swap agreements in a net payable position of an insignificant amount at
December 31, 1996. 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.

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 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 and equity securities, is based on the quoted market prices for issues
listed on exchanges.

Debt maturing within one year and long-term debt - The fair value of all
debt is estimated based on the quoted market prices for issues listed on
exchanges.

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:

1996 1995
----------------- -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----

Cash and equivalents $184.5 $184.5 $151.4 $151.4
Grantor trust 49.4 57.2 49.5 52.2
Debt maturing within one year (97.1) (97.1) (47.3) (47.3)
Long-term debt (114.2) (117.2) (132.9) (135.9)
Currency swap contract on
long-term debt 9.7 16.2 18.7 26.9
Other forward exchange and
option contracts .3 1.0 4.6 5.0
Interest rate cap contracts - - .1 .1
Interest rate swap receivable - .1 .1 .1
Interest rate swaps payable (.7) (6.4) (.7) (11.3)

<PAGE>52
8. Stock Option Plans

A summary of the Company's stock option activity, weighted average exercise
price and related information for the years ended December 31 is as follows:

1994 1995 1996
--------------------- ------------------------ ---------------------
Weighted Weighted Weighted
Shares Average Shares Average Shares Average
(in 000's) Price (in 000's) Price (in 000's) Price
---------- -------- ---------- -------- ---------- --------

Outstanding-
beginning
of year 448 $19.79 1,064 $24.22 2,409 $28.45
Granted 826 26.25 1,430 30.96 894 39.62
Exercised (48) 14.46 (79) 17.46 (423) 24.16
Forfeited (162) 25.21 (6) 23.20 (5) 24.93
----- ------ ----- ------ ----- ------
Outstanding-
end of
year 1,064 $24.22 2,409 $28.45 2,875 $32.56
===== ====== ===== ====== ===== ======

Options exer-
cisable -
end of
year 217 $17.45 449 $24.21 575 $26.03
===== ====== ===== ====== ===== ======

Exercise prices for options outstanding as of December 31, 1996, consisted
of 45,000 options at a price range of $12 to $20; 1,935,000 options at a price
range of $26 to $36 and 895,000 at a price range of $40 to $46, with weighted-
average remaining contractual lives of approximately three years, eight years
and nine years, respectively.

The 1993 Stock Incentive Plan ("1993 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 7,050,000 shares, of which no more
than 4,000,000 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 1996,
1995 and 1994, restricted shares with aggregate value and vesting and related
amortization periods were granted as follows: 1996 - 39,000 shares valued at
$1.7 vesting over two to four years; 1995 - 96,000 shares valued at $2.8
vesting over two to four years; and 1994 - 267,970 shares valued at $7.6
vesting over one to five years.

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 for potential cash incentives
and ten-year stock options. Performance units are earned over the three-year
performance period (1994-1996), based on the degree of attainment of
performance objectives. Options were awarded annually over the three-year
performance period and vest in thirds over the three-year period following
each option grant date. As discussed above, these options are granted at the
fair market value on the date the option is granted.

As of December 31, 1996, required performance goals under the 1994 LTIP
were achieved and, accordingly, the cash incentives totaling $31.0 are
payable. Payment will be made in early 1997. Effective January 1, 1997, a
new 1997 Long-Term Incentive Plan was authorized under the 1993 Plan
authorizing the grant of two forms of incentive awards, performance units
for potential cash incentives and ten-year stock options.

As of December 31, 1993, required performance goals under the prior
long-term incentive plan were achieved and, accordingly, 50% of previously
issued restricted shares were vested and issued in early 1994. An additional
30% of such shares vested and were issued in early 1995 while the remaining
20% vested and were issued in early 1996. During 1993, 96,180 restricted
shares were issued under that plan, with an aggregate value on the date of
grant of $3.5. Expense is recorded as the restricted shares vest over the
periods established for each grant.

Compensation expense under all plans in 1996 was $14.7 (1995 - $13.7;
1994 - $14.4). The unamortized cost as of December 31, 1996 was $4.0
(1995 - $5.0). The accrued cost of the performance units in 1996 was $12.0
(1995 - $9.4; 1994 - $9.6).

<PAGE>53
The Company has adopted the disclosure provisions of FAS No. 123, but,
as permitted by the statement, has continued to apply Accounting Principles
Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees" and
related interpretations in accounting for its employee stock option plans.
Under APB 25, because the exercise price of the Company's employee stock
options equals the market price of the underlying stock on the date of grant,
no compensation expense is recognized.

If the Company had elected to recognize compensation cost for the plans
based on the fair value at the grant dates, consistent with the method
prescribed by FAS No. 123, net income and income per share would have been
changed to the pro forma amounts indicated below (in millions, except for
income per share information):

1996 1995
---- ----

Pro forma net income $314.9 $255.3
Pro forma income per share $ 2.36 $ 1.87

Pro forma information regarding net income and income per share is
required by FAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of FAS
No. 123. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model which was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option pricing models require the
input of highly subjective assumptions including the expected stock price
volatility. The weighted-average assumptions used for both 1995 and 1996
were the risk-free interest rate of approximately 5.5%; dividend yield
of 3%; expected volatility of the market price of the Company's common stock
of 20%; and a weighted-average expected life of the option of approximately
three years.

9. Shareholders' Equity

Stock Split - At the 1996 Annual Meeting, the shareholders approved an
amendment to the Company's Certificate of Incorporation to increase the
number of shares of common stock authorized from 200 million to 400 million
shares and decrease the par value per share from $.50 to $.25. Subsequently,
the Company's Board of Directors authorized a two-for-one stock split which
was distributed in June 1996 to shareholders of record after the close of
business on May 15, 1996.

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 $.005 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 February 1, 1996, Avon increased the regular dividend on
common shares to an annual rate of $1.16 per share from an annual rate of
$1.10. The first quarterly dividend at the new rate of $.29 per share was
paid on March 1, 1996.

On August 2, 1995, Avon increased the regular dividend on common shares to
an annual rate of $1.10 per share from an annual rate of $1.00. The first
quarterly dividend at the new rate of $.275 per share was paid on
September 1, 1995.

On August 2, 1994, Avon increased the regular dividend on common shares
to an annual rate of $1.00 per share from an annual rate of $.90. The first
quarterly dividend at the new rate of $.25 per share was paid on September
1, 1994.

Stock Repurchase Program - During 1994, Avon's Board of Directors authorized
a stock repurchase program under which Avon would buy back up to 10% of its
then outstanding common stock, or approximately 14,000,000 shares. The shares
would be purchased in the open market over a period of up to three years.
As of December 31, 1996, 12.6 million shares have been purchased for $422.9
which are included in Treasury Stock.

Savings Plan - In 1996, Avon contributed 86,186 (1995 - 92,356) shares of
treasury stock to an employees' savings plan and recognized expense for its
fair value. An estimated additional contribution of 60,000 shares, for which
the expense has been accrued at December 31, 1996, will be made to the plan
since the Company met its performance goal, as defined in the plan.
The expense recognized for the plan in 1996 was $7.0 (1995 - $3.7;
1994 - $6.5).

<PAGE>54
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. Net retirement plan expense for the years ended December 31 was
determined as follows:

1996 1995 1994
---- ---- ----

Service cost $ 36.6 $ 33.4 $ 33.7
Interest cost 61.4 58.5 54.2
Actual return on plan assets (72.8) (121.1) 19.9
Net amortization (deferral) 21.2 66.4 (72.5)
------ ------- ------

Net retirement plan expense $ 46.4 $ 37.2 $ 35.3
====== ======= =======

Retirement plan expense is determined using assumptions as of the
beginning of the year. The weighted average assumptions used to determine
the data for the years ended December 31 are as follows:

1996 1995 1994
---- ---- ----

Discount rate 7.3% 8.2% 7.7%
Rate of compensation increase 4.5 4.8 4.7
Rate of return on assets 9.3 9.3 9.2

The funded status of retirement plans at December 31, using assumptions
as of the end of the year, consisted of the following:

Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
1996 1995 1996 1995
---- ---- ---- ----

Plan assets at fair value (primarily
listed stocks and bonds) $ 657.5 $ 623.7 $ 33.2 $ 34.4
------- ------- ------- -------

Present value of projected benefit
obligation
Accumulated benefit obligation
Vested (496.8) (475.2) (151.1) (148.0)
Nonvested (73.1) (72.3) (24.8) (30.4)
Projected compensation increases (91.8) (88.3) (37.0) (38.9)
------- ------- ------- -------

Projected benefit obligation (661.7) (635.8) (212.9) (217.3)
------- ------- ------- -------

Plan assets less than
projected benefit obligation (4.2) (12.1) (179.7) (182.9)
Unrecognized net loss 111.5 123.1 25.2 28.4
Unrecognized prior service cost 16.5 19.0 8.1 8.4
Unrecognized transition (gain) loss (21.3) (29.0) 9.1 11.6
Adjustment for additional liability - - (11.2) (14.5)
------- ------- ------- -------

Prepaid (accrued) retirement
plan cost $ 102.5 $ 101.0 $(148.5) $(149.0)
======= ======= ======= =======

At December 31, 1996 and 1995, the weighted average discount rates used
in determining the projected benefit obligations were 7.6% and 7.2%,
respectively.

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.

<PAGE>55
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 in 1996 amounted to $5.5 (1995 - $4.4; 1994 - $3.9).
Such benefits will be paid from Avon's assets. The accumulated benefit
obligation under this plan at December 31, 1996 was $21.8 (1995 - $21.5) 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, 1996 was $29.3
(1995 - $27.1) and is held in a 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. The assets held in the trust at December 31, 1996, amounted to
$78.7 (1995 - $76.6), 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.

Net postretirement benefit cost for the years ended December 31 included
the following components:
1996 1995 1994
----- ---- ----

Service cost $ 3.3 $ 4.0 $ 3.3
Interest cost 14.0 16.3 15.2
----- ----- -----

Total postretirement benefit cost $17.3 $20.3 $18.5
===== ===== =====

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

1996 1995 1994
---- ---- ----

Discount rate 7.2% 8.5% 8.5%
Rate of assumed compensation increases 4.5 4.5 5.0

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:

1996 1995
---- ----

Retirees $139.2 $158.3
Other fully eligible participants 3.7 14.9
Other active participants 53.1 63.4
Unrealized gain (loss) 10.8 (17.8)
------ ------

Accumulated postretirement benefits
obligation $206.8 $218.8
====== ======

At December 31, 1996 and 1995, the weighted average discount rates used
in determining the accumulated benefits obligation were 7.7% and 7.2%,
respectively.

The assumed rate of future increases in the per capita cost of health care
benefits (the health care cost trend rate) was 10.0% for 1996 and will
gradually decrease each year thereafter to 5.0% in 2005 and beyond. Increasing
the health care cost trend rate by one percentage point would have increased
the accumulated postretirement benefits obligation at December 31, 1996 by
$24.0 and would have increased the 1996 annual postretirement benefits expense
by $2.6.

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 employees after employment but before retirement. At December 31,
1996, the accrued cost for postemployment benefits was $32.2 (1995 - $35.8)
and is included in Employee Benefit Plans.

<PAGE>56
11. Geographic Information

Sales and pretax income by geographic area are presented on page 31.
Identifiable assets by geographic area at December 31 were as follows:

1996 1995 1994
---- ---- ----

United States $ 470.2 $ 449.2 $ 414.2
-------- -------- --------

International
Americas 548.8 498.4 463.9
Pacific 383.5 375.5 329.2
Europe 377.4 339.7 308.6
-------- -------- --------

Total International 1,309.7 1,213.6 1,101.7
-------- -------- --------

Corporate and other* 442.5 390.0 462.4
-------- -------- --------

Total $2,222.4 $2,052.8 $1,978.3
======== ======== ========

*Includes Cash Equivalents in 1996 of $87.9 (1995 - $60.5; 1994 - $132.5).

Foreign Exchange - Financial statement translation of subsidiaries operating
in highly inflationary economies and foreign currency transactions resulted in
losses in 1996 netting to $3.1 (1995 - $6.9; 1994 - $6.8), 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 in 1996 of $12.6 (1995 - $4.7; 1994 - $23.9).

12. Leases and Commitments

Minimum rental commitments under noncancellable operating leases primarily
for equipment and office facilities at December 31, 1996, consisted of the
following:

Year
----
1997 $ 56.1
1998 45.8
1999 32.3
2000 24.5
2001 18.9
Later years 221.0
Sublease rental income (13.4)
-------
Total $ 385.2(1)
=======

(1) Includes leases for office facilities entered into in 1995 for U.S.
and global operations commencing in 1997.

Rent expense related to continuing operations in 1996 was $89.7
(1995 - $78.0; 1994 - $94.0). Various construction and information systems
projects were in progress at December 31, 1996 with an estimated cost to
complete of approximately $74.9.

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.

In the opinion of Avon's management, based on its review of the
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, 1996 should not have a material adverse impact on Avon's consolidated
financial position, results of operations, or cash flows.

14. Subsequent Event

On February 6, 1997, Avon's Board of Directors authorized a new stock
repurchase program under which Avon may buy back up to $500.0 of its currently
outstanding common stock. The shares would be purchased in the open market
over a period of up to three to five years, beginning in 1997.

Also, on February 6, 1997, Avon's Board of Directors approved an increase
in the quarterly cash dividend to $.315 per share from $.29. The first
dividend at the new rate will be paid on March 3, 1997 to shareholders of
record on February 18, 1997. On an annualized basis, the new dividend rate
will be $1.26 per share.

<PAGE>57
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.

James E. Preston Edwina D. Woodbury
Chairman of the Board and Senior Vice President,
Chief Executive Officer Chief Financial and
Administrative 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, 1996 and 1995, 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, 1996.
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, 1996 and 1995, and the results
of its operations and its cash flows for each of the years in the three-year
period ended December 31, 1996, 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 internal systems development costs. These changes are
discussed in Note 2 to the consolidated financial statements.

Coopers & Lybrand L.L.P.
New York, New York
February 6, 1997

<PAGE>58
Eleven-Year Review
In millions, except per share and employee data

1996 1995 1994 1993
---- ---- ---- ----
Income data
Net sales $4,814.2 $4,492.1 $4,266.5 $3,844.1
Interest expense 40.0 41.3 50.8 45.2
Income from continuing
operations before taxes,
minority interest and
cumulative effect of
accounting changes 510.4 465.0 433.8 394.6
Income from continuing
operations before
minority interest and
cumulative effect of
accounting changes 319.0 288.6 270.3 243.8
Income from
continuing operations 317.9 286.1 264.8 236.9
Income (loss) from
discontinued
operations, net - (29.6) (23.8) 2.7
Cumulative effect
of accounting
changes, net - - (45.2)(1) (107.5)(1)
Net income (loss) 317.9 256.5 195.8 132.1

Income (loss) per share of
common stock - assuming
full dilution (4)
Continuing operations $ 2.38 $ 2.10 $ 1.88 $ 1.64
Discontinued operations - (.22) (.17) .02
Cumulative effect of
accounting changes - - (.32) (.74)
Net income (loss) 2.38 1.88 1.39 .92
Cash dividends per share
Common $ 1.16 $ 1.05 $ .95 $ .85
Preferred - - - -
Balance sheet data
Working capital $ (41.7) $ (30.3) $ 9.3 $ 23.1
Capital expenditures 103.6 72.7 99.9 58.1
Property, plant and
equipment, net 566.6 537.8 528.4 476.2
Total assets 2,222.4 2,052.8 1,978.3 1,918.7
Debt maturing within one year 97.1 47.3 61.2 70.4
Long-term debt 104.5 114.2 116.5 123.7
Total debt 201.6 161.5 177.7 194.1
Shareholders' equity 241.7 192.7 185.6 314.0

Number of employees
United States 7,800 8,000 7,900 8,000
International 25,900 23,800 22,500 21,500
-------- -------- -------- --------
Total employees 33,700 31,800 30,400 29,500
======== ======== ======== ========

<PAGE>59
1992 1991 1990 1989
---- ---- ---- ----

$3,660.5 $3,441.0 $3,291.6 $2,998.3
43.7 75.4 77.5 118.0

290.0(2) 352.9 305.6 252.9

169.4(2) 209.3 180.3 134.1

164.2(2) 204.8 174.1 126.5

10.8 (69.1) 21.2 (71.9)

- - - -
175.0(2) 135.7 195.3 54.6

$ 1.14(2) $ 1.43 $ 1.16 $ .82(5)
.08 (.48) .14 (.65)(5)

- - - -
1.22(2) .95 1.30 .17(5)

$ .75 $ 2.20(6) $ .50 $ .50
- .505 1.00 1.00

$ (99.5) $ (135.3) $ 71.6 $ 56.3
62.7 61.2 36.3 33.3

476.7 468.5 467.2 472.5
1,692.6 1,693.3 2,010.1 1,994.1
37.3 143.8 207.1 151.7
177.7 208.1 334.8 673.2
215.0 351.9 541.9 824.9
310.5 251.6 393.4 228.3

8,700 9,200 9,500 9,400
20,700 20,900 20,300 19,900
------ ------ ------ ------

29,400 30,100 29,800 29,300
====== ====== ====== ======

Avon Products, Inc.

1988 1987 1986
---- ---- ----

$2,835.2 $2,506.2 $2,235.1
112.9 77.5 45.5

208.3 359.6(3) 205.0

121.1 224.8(3) 127.1

112.3 222.8(3) 126.7

(536.8) (63.7) 32.0

20.0(1) - -
(404.5) 159.1(3) 158.7

$ .76(5) $ 1.58(3) $ .89
(4.31)(5) (.45) .22

.16(5) - -
(3.39)(5) 1.13(3) 1.11

$ .75 $ 1.00 $ 1.00
.50 - -

$ 51.0 $ 122.2 $ 129.1
46.0 45.9 57.5

529.1 561.3 536.2
2,362.6 2,419.6 2,143.0
205.6 62.8 104.6
917.9 801.8 671.2
1,123.5 864.6 775.8
239.3 758.6 681.3

9,700 10,500 10,800
18,400 18,100 17,700
- -------- ------- -------

28,100 28,600 28,500
======== ======= =======

(1) Effective January 1, 1994, Avon adopted Statement of Financial
Accounting Standards ("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. 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". 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
$.45 per share). Income from continuing operations in 1993 increased 4% from
$228.6, or $1.59 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 $.86 per share) resulting from the
sale of subsidiary stock and a special provision for restructuring of $47.5
($29.4 after tax, or $.21 per share).

(4) A two-for-one stock split was distributed in June 1996. All per share
data in this report, unless indicated, have been restated to reflect the
split. 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 36.0 preferred shares into approximately
25.92 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 $1.50 paid in 1991.

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
Marbella Dominicana Delaware
Manila Manufacturing Company Delaware
Productos Avon S.A. Dominican Republic
Productos Avon Ecuador S.A. Ecuador

<PAGE>
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
Avon Service Center, Inc. Illinois
P.T. Avon Indonesia (85%) 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 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 Spal 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 Turkey
Sanayi ve Ticaret A.S. (50%)
Avon Cosmetics Limited United Kingdom
Avon European Holdings Ltd. United Kingdom
Avon Cosmetics de Venezuela, C.A. Venezuela

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 1996 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 6, 1997.

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

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

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

Vice President and Controller -
/s/Michael R. Mathieson Principal Accounting Officer
- -----------------------
Michael R. Mathieson

Signature Title

/s/Brenda C. Barnes
- --------------------
Brenda C. Barnes Director

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

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

/s/Edward T. Fogarty
- --------------------
Edward T. Fogarty Director

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

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

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

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

/s/Charles R. Perrin
- --------------------
Charles R. Perrin Director

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

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

EXHIBIT 27

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, 1996 and for the
year then ended included in the Form 10-K as of December 31, 1996 and is
qualified in its entirety by reference to such financial statements.

<MULTIPLIER> 1000000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996

<CASH> 185
<SECURITIES> 0
<RECEIVABLES> 473
<ALLOWANCES> (36)
<INVENTORY> 530
<CURRENT-ASSETS> 1,350
<PP&E> 1,225
<DEPRECIATION> (658)
<TOTAL-ASSETS> 2,222
<CURRENT-LIABILITIES> 1,391
<BONDS> 105
0
0
<COMMON> 44
<OTHER-SE> 198
<TOTAL-LIABILITY-AND-EQUITY> 2,222
<SALES> 4,814
<TOTAL-REVENUES> 4,814
<CGS> 1,921
<TOTAL-COSTS> 4,190
<OTHER-EXPENSES> 9
<LOSS-PROVISION> 79
<INTEREST-EXPENSE> 40
<INCOME-PRETAX> 510
<INCOME-TAX> 191
<INCOME-CONTINUING> 318
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 318
<EPS-PRIMARY> 2.38
<EPS-DILUTED> 2.38

</TABLE>