SEC Filing | Avery Dennison Corporation

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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 29, 2001
OR
[_] 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 1-7685

AVERY DENNISON CORPORATION
(Exact name of registrant as specified in its charter)

Delaware 95-1492269
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

150 North Orange Grove Boulevard
Pasadena, California 91103
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (626) 304-2000

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

Name of each
Title of Each Class exchange on which registered
------------------- ----------------------------

Common stock, $1 par value New York Stock Exchange
Pacific Exchange

Preferred Share Purchase Rights New York Stock Exchange
Pacific Exchange

Securities registered pursuant to Section 12(g) of the Act:
Not applicable.

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_].

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The aggregate market value of voting stock held by non-affiliates as of
February 25, 2002 was approximately $6,161,846,457.

Number of shares of common stock, $1 par value, outstanding as of February
25, 2002: 109,864,032.

The following documents are incorporated by reference into the Parts of
this report below indicated:

Document Incorporated by reference into:
-------- ------------------------------

Annual Report to Shareholders for fiscal year ended
December 29, 2001 (the "2001 Annual Report")...................... Parts I, II
Definitive Proxy Statement for Annual Meeting of Stockholders to
be held April 25, 2002 (the "2002 Proxy Statement")............... Parts III, IV

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PART I

Item 1. BUSINESS

Avery Dennison Corporation ("Registrant") was incorporated in 1977 in the
state of Delaware as Avery International Corporation, the successor corporation
to a California corporation of the same name which was incorporated in 1946. In
1990, Registrant merged one of its subsidiaries into Dennison Manufacturing
Company ("Dennison"), as a result of which Dennison became a wholly owned
subsidiary of Registrant, and in connection with which Registrant's name was
changed to Avery Dennison Corporation.

The business of Registrant and its subsidiaries (Registrant and its
subsidiaries are sometimes hereinafter referred to as the "Company") includes
the production of pressure-sensitive adhesives and materials and the production
of consumer and converted products. Some pressure-sensitive adhesives and
materials are "converted" into labels and other products through embossing,
printing, stamping and die-cutting, and some are sold in unconverted form as
base materials, tapes and reflective sheeting. The Company also manufactures and
sells a variety of consumer and converted products and other items not involving
pressure-sensitive components, such as notebooks, three-ring binders, organizing
systems, markers, fasteners, business forms, reflective highway safety products,
tickets, tags, and imprinting equipment.

A pressure-sensitive, or self-adhesive, material is one that adheres to a
surface by mere press-on contact. It generally consists of four elements--a face
material, which may include paper, metal foil, plastic film or fabric; an
adhesive, which may be permanent or removable; a release coating; and a backing
material to protect the adhesive against premature contact with other surfaces,
and which can also serve as the carrier for supporting and dispensing individual
labels. When the products are to be used, the release coating and protective
backing are removed, exposing the adhesive, and the label or other face material
is pressed or rolled into place.

Self-adhesive materials may initially cost more than materials using heat
or moisture activated adhesives, but the use of self-adhesive materials often
effects cost savings because of their easy and instant application, without the
need for adhesive activation. They also provide consistent and versatile
adhesion, minimum adhesive deterioration and are available in a large selection
of materials in nearly any size, shape or color.

International operations, principally in Western Europe, constitute a
significant portion of the Company's business. In addition, the Company is
currently expanding its operations in Asia Pacific, Latin America and Eastern
Europe. As of December 29, 2001, the Company manufactured and sold its products
from approximately 200 manufacturing facilities and sales offices located in 42
countries, and employed a total of approximately 17,300 persons worldwide.

On September 7, 2001, the Company announced an agreement to acquire the
Jackstadt GmbH pressure-sensitive adhesive materials business. Jackstadt is a
privately-held manufacturer of pressure-sensitive adhesive materials based in
Germany. Jackstadt, with consolidated revenues of approximately $400 million in
2000, has a global customer base and generates approximately 80 percent of its
sales outside of Germany. The transaction is subject to a number of closing
conditions, including regulatory approvals. Completion of the acquisition had
been delayed pending further review by the German Federal Cartel Office, which
has raised specific issues with respect to market definition and market share in
that country. The Company is responding to the concerns, but the timing and
ultimate outcome of the final regulatory review remain uncertain. As of year end
2001, the Company had capitalized approximately $9 million for direct costs
related to this pending acquisition. If these issues cannot be overcome, the
proposed transaction may be renegotiated or terminated, in which case some or
all of these costs may be expensed depending on the outcome of the regulatory
review.

In the fourth quarter of 2001, the Company recorded a pretax charge of
approximately $2.6 million related to the currency devaluation in Argentina.
Operations in Argentina are not significant to the Company's financial results,
and represented less than $25 million in sales in 2001. The majority of the
Company's operations in Argentina are reported in the Pressure-sensitive
Adhesives and Materials segment.

The Company wishes to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, and is subject to certain
risks referred to in Exhibit 99 hereto, including those normally attending
international and

domestic operations, such as changes in economic or political conditions,
currency fluctuation, exchange control regulations and the effect of
international relations and domestic affairs of foreign countries on the conduct
of business, legal proceedings, and the availability and pricing of raw
materials.

Except as set forth below, no material part of the Company's business is
dependent upon a single customer or a few customers. However, sales and related
accounts receivable of the Company's U.S. consumer products business are
concentrated in a small number of major customers, principally discount office
products superstores and distributors (see Note 4 of Notes to Consolidated
Financial Statements on page 41 of the 2001 Annual Report, which is incorporated
by reference). United States export sales are not a significant part of the
Company's business. Backlogs are not considered material in the industries in
which the Company competes.

Pressure-sensitive Adhesives and Materials Segment

The Pressure-sensitive Adhesives and Materials segment manufactures and
sells Fasson- and Avery Dennison-brand pressure-sensitive base materials,
specialty tapes, graphic films, reflective highway safety products, and
chemicals. Base materials consist primarily of papers, plastic films, metal
foils and fabrics, which are primed and coated with Company-developed and
purchased adhesives, and then laminated with specially coated backing papers and
films for protection. They are sold in roll or sheet form with either solid or
patterned adhesive coatings, and are available in a wide range of face
materials, sizes, thicknesses and adhesive properties. Except for certain
highway safety products, the business of this segment is generally not seasonal.

Base material products, which consist of a wide range of pressure-sensitive
coated papers, films and foils, are sold to label printers and converters for
labeling, decorating, fastening, electronic data processing and special
applications. Other product offerings include paper and film stock for use in a
variety of industrial, commercial and consumer applications. The Company also
manufactures and sells proprietary film face stocks.

Specialty tape products are single- and double-coated tapes and transfer
adhesives for use in non-mechanical fastening systems in various industries and
are sold to industrial and medical converters, original equipment manufacturers
and disposable-diaper producers worldwide.

Graphic products consist of a variety of films and other products sold to
the worldwide automotive, architectural, commercial sign, digital printing, and
other related markets. The Company also sells durable cast and reflective films
to the construction, automotive, fleet transportation, sign and industrial
equipment markets, and reflective films and highway safety products for traffic
and safety applications. In addition, the Company sells specialty print-
receptive films to the industrial label market, metallic dispersion products to
the packaging industry and proprietary woodgrain film laminates for housing
exteriors and automotive applications. The Company's graphics businesses are
organized on a worldwide basis to serve the expanding commercial graphic arts
market, including wide-format digital printing applications.

Chemical products include a range of solvent- and emulsion-based acrylic
polymer adhesives, top coats, protective coatings and binders for internal uses
as well as for sale to other companies.

In the first quarter of 2001, the Company acquired Dunsirn Industries,
Inc., based in Wisconsin, a leading supplier of non-adhesive materials to the
narrow web-printing industry as well as a provider of customized slitting and
distributing services for roll pressure-sensitive materials manufacturers.

In the fourth quarter of 2001, the Company sold its non-strategic specialty
coatings business (see Item 7. Management's Discussion and Analysis, Results of
Operations by Operating Segment under Pressure-sensitive Adhesives and Materials
page 9).

In this segment, the Company competes, both domestically and
internationally, with a number of medium to large firms. Entry of competitors
into the field of pressure-sensitive adhesives and materials is limited by high
capital requirements and a need for sophisticated technical know-how. The
Company believes that its ability to serve its customers with a broad product
line of quality products and the development and commercialization of new
products are among the more significant factors in developing and maintaining
its competitive position.

Consumer and Converted Products Segment

The Consumer and Converted Products segment manufactures and sells a wide
range of Avery-brand consumer products, custom label products, high performance
specialty films and labels, automotive applications and fasteners. The business
of this segment is generally not seasonal, except for certain consumer products
sold during the back-to-school season.

The Company's principal consumer products are generally sold worldwide
through wholesalers and dealers, mass market channels of distribution, and
discount superstores. The Company manufactures and sells a wide range of Avery-
brand products for home, school and office uses, including copier, laser and
ink-jet printer labels, related computer software, presentation and organizing
systems, laser-printer card and index products, data-processing labels,
notebooks, notebook and presentation dividers, three-ring binders, sheet
protectors, and various vinyl and heat-sealed products. A wide range of other
stationery products is offered, including writing instruments, markers,
adhesives and specialty products under brand names such as Avery, Stabilo,
Marks-A-Lot and HI-LITER, and accounting products, note pads and presentation
products under the National brand name. The extent of product offerings varies
by geographic market. Operations in Europe distribute a broad range of these
types of products under the Avery and Zweckform brands. Operations in Latin
America and Asia Pacific have been established to market and distribute the
Avery-brand line of stock self-adhesive products, including copier, laser and
ink-jet labels and related software, laser printed card products and other
unprinted labels.

Custom label products in North America primarily consist of custom
pressure-sensitive and heat-transfer labels for automotive and durable goods
industries and custom pressure-sensitive labels and specialty combination
products for the electronic data-processing market. These products are sold
directly to manufacturers and packagers and retailers, as well as through
international subsidiaries and distributors. Label products in Europe include
custom and stock labels, labeling machinery and data printing systems, which are
marketed to a wide range of industrial and retail users.

The Company designs, fabricates and sells a wide variety of tags and
labels, including bar-coded tags and labels, and a line of machines for
imprinting, dispensing and attaching preprinted roll tags and labels. The
machine products are generally designed for use with tags and labels as a
complete system. The Company also designs, assembles and sells labeling systems
for integration into a customer's shipping and receiving operations. Principal
markets include apparel, retail and industrial for identification, tracking and
control applications principally in North America, Europe and Asia Pacific.
Fastener products include plastic tying and attaching products for retail and
industrial users.

The Company also manufactures and sells self-adhesive battery labels to
battery manufacturers, and self-adhesive stamps to the U.S. and international
postal services. The Company is an integrated supplier of adhesive coating,
security printing and converting technologies for postage stamp production.
Specialty automotive films products are used for interior and exterior vehicle
finishes, striping decoration and identification. Other products include
pressure-sensitive sheeted and die-cut papers and films, which are sold through
distributors.

In the first quarter of 2001, the Company acquired CD Stomper, a leading
product line of CD and DVD labels, software and a label applicator, which
expands the Company's presence and distribution channels for these label
products.

In this segment, the Company competes, both domestically and
internationally, with a number of small to large firms (among the principal
competitors are Esselte AB, Fortune Brands, Inc., and Minnesota Mining and
Manufacturing Co.). The Company believes that its ability to serve its customers
with an extensive product line, its distribution strength, its ability to
develop and to commercialize new products, and its diverse technical foundation,
including a range of electronic imprinting and automatic labeling systems, are
among the more significant factors in developing and maintaining its competitive
position.

Research and Development

Many of the Company's current products are the result of its own research
and development efforts. The Company expended $69.9 million, $67.8 million and
$64.3 million, in 2001, 2000 and 1999, respectively, on research-related
activities by operating units and the Avery Research Center (the "Research
Center"), located in Pasadena, California. A substantial amount of the Company's
research and development activities are conducted at the Research Center. Much
of the effort of the Research Center applies to both of the Company's operating
segments.

The operating units' research efforts are directed primarily toward
developing new products and processing operating techniques and improving
product performance, often in close association with customers. The Research
Center supports the operating units' patent and product development work, and
focuses on research and development in new adhesives, materials and coating
processes, as well as new product applications and ventures. Research and
development generally focuses on

projects affecting more than one operating segment in such areas as printing and
coating technologies, and adhesive, release, coating and ink chemistries.

The loss of the Company's individual patents or licenses would not be
material to the business of the Company taken as a whole, nor to either one of
the Company's operating segments. The Company's principal trademarks are Avery,
Fasson and Avery Dennison. These trademarks are significant in the markets in
which the Company's products compete.

Three-Year Summary of Segment Information

The Business Segment Information and financial information by geographical
areas of the Company's operations for the three years ended December 29, 2001,
which appear in Note 11 of Notes to Consolidated Financial Statements on pages
46 and 47 of the 2001 Annual Report, are incorporated herein by reference.

Other Matters

The raw materials used by the Company are primarily paper, plastic and
chemicals, which are purchased from a variety of commercial and industrial
sources and are subject to pricing fluctuations. Although from time to time
shortages could occur, these raw materials are currently generally available.

At present, the Company produces a majority of its self-adhesive materials
using non-solvent technology. However, a significant portion of the Company's
manufacturing process for self-adhesive materials utilizes certain evaporative
organic solvents which, unless controlled, would be emitted into the atmosphere.
Emissions of these substances are regulated by agencies of federal, state, local
and foreign governments. During the past decade, the Company has made a
substantial investment in solvent capture and control units and solvent-free
systems. Installation of these units and systems have substantially reduced
atmospheric hydrocarbon emissions.

Efforts have been directed toward development of new adhesives and solvent-
free adhesive processing systems. Emulsion, hot-melt adhesives or solventless
silicone systems have been installed in the Company's facilities in Peachtree
City, Georgia; Fort Wayne and Greenfield, Indiana; Quakertown, Pennsylvania;
Rodange, Luxembourg; Turnhout, Belgium; Hazerswoude, The Netherlands;
Cramlington, England; and Gotha, Germany as well as other plants in the United
States, Argentina, Australia, Brazil, China, Colombia, France, Germany, India,
Korea, and Thailand.

Based on current information, the Company does not believe that the costs
of complying with applicable laws regulating the discharge of materials into the
environment, or otherwise relating to the protection of the environment, will
have a material effect upon the capital expenditures, earnings or competitive
position of the Company.

For information regarding the Company's potential responsibility for
cleanup costs at certain hazardous waste sites, see "Legal Proceedings" (Part I,
Item 3) and "Management's Discussion and Analysis of Results of Operations and
Financial Condition" (Part II, Item 7).

Item 2. PROPERTIES

At December 29, 2001, the Company operated approximately 34 principal
manufacturing facilities in excess of 100,000 square feet and totaling
approximately 5 million square feet. The following sets forth the locations of
such principal facilities and the operating segments for which they are
presently used:

Pressure-sensitive Adhesives and Materials Segment

Domestic--Peachtree City, Georgia; Greenfield, Fort Wayne, Lowell, and
Schererville, Indiana; Chicopee, Massachusetts (2 facilities);
Greensboro, North Carolina (2 facilities); Painesville and Fairport,
Ohio; Quakertown, Pennsylvania; and Neenah, Wisconsin.

Foreign--Turnhout, Belgium; Vinhedo, Brazil; Ajax, Canada; Kunshan, China;
Cramlington, England; Champ-sur-Drac, France; Gotha, Germany; Rodange,
Luxembourg; Rayong, Thailand; and Hazerswoude, The Netherlands.

Consumer and Converted Products Segment

Domestic--Gainesville, Georgia; Chicopee and Framingham, Massachusetts;
Meridian, Mississippi; Philadelphia, Pennsylvania; and Clinton, South
Carolina.

Foreign--Hong Kong, China; La Monnerie, France; Oberlaidern, Germany;
Juarez and Tijuana, Mexico; Utrecht, The Netherlands; and Maidenhead,
U.K.

In addition to the Company's principal manufacturing facilities described
above, the Company's other principal facilities include its corporate
headquarters facility and research center in Pasadena, California, and offices
located in Maidenhead, England; Leiden, The Netherlands; Concord, Ohio and
Framingham, Massachusetts.

All of the Company's principal properties identified above are owned in fee
except the facilities in Juarez, Mexico; and La Monnerie, France, which are
leased.

All of the buildings comprising the facilities identified above were
constructed after 1954, except parts of the Framingham, Massachusetts plant and
office complex. All buildings owned or leased are well maintained and of sound
construction, and are considered suitable and generally adequate for the
Company's present needs. The Company plans to expand capacity and provide
facilities to meet future increased demand as needed. Owned buildings and plant
equipment are insured against major losses from fire and other usual business
risks. The Company knows of no material defects in title to, or significant
encumbrances on its properties except for certain mortgage liens.

Item 3. LEGAL PROCEEDINGS

The Company, like other U.S. corporations, has periodically received
notices from the U.S. Environmental Protection Agency ("EPA") and state
environmental agencies alleging that the Company is a potentially responsible
party ("PRP") for past and future cleanup costs at hazardous waste sites. The
Company has been designated by the EPA and/or other responsible state agencies
as a PRP at nine waste disposal or waste recycling sites which are the subject
of separate investigations or proceedings concerning alleged soil and/or
groundwater contamination and for which no settlement of the Company's liability
has been agreed upon. Litigation has been initiated by a governmental authority
with respect to one of these sites, but the Company does not believe that any
such proceedings will result in the imposition of monetary sanctions. The
Company is participating with other PRPs at all such sites, and anticipates that
its share of cleanup costs will be determined pursuant to remedial agreements
entered into in the normal course of negotiations with the EPA or other
governmental authorities. The Company has accrued liabilities for all sites,
including sites in which governmental agencies have designated the Company as a
PRP, where it is probable that a loss will be incurred and the minimum cost or
amount of the loss can be reasonably estimated. However, because of the
uncertainties associated with environmental assessment and remediation
activities, future expense to remediate the currently identified sites, and
sites which could be identified in the future for cleanup, could be higher than
the liability currently accrued. Amounts currently accrued are not significant
to the consolidated financial position of the Company and, based upon current
information, management believes that it is unlikely that final resolution of
these matters will significantly impact the consolidated financial position and
operations of the Company.

The Registrant and its subsidiaries are involved in various other lawsuits,
claims and inquiries, most of which are routine to the nature of the business.
In the opinion of the Company's management, the resolution of these matters will
not materially affect the Company.

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

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.

EXECUTIVE OFFICERS OF THE REGISTRANT/(1)/

Served as
Executive Former Positions and
Name Age Officer since Offices with Registrant
---- --- ------------------- -----------------------------------------------------------------

Philip M. Neal..................... 61 January 1974 1990-1998 President and Chief Operating Officer
Chairman and Chief
Executive Officer 1998-2000 President and Chief Executive Officer
(also Director of Registrant)

Dean A. Scarborough................ 46 August 1997 1997-1999 Group V.P., Fasson Roll North America and Europe
President and Chief
Operating Officer 1999-2000 Group V.P., Fasson Roll Worldwide
(also Director of Registrant)

Robert G. van Schoonenberg......... 55 December 1981 1997-2000 S.V.P., General Counsel and Secretary
Executive Vice President,
General Counsel and Secretary

Daniel R. O'Bryant................. 44 January 2001 1997-1999 General Manager, Business Forms Division, Fasson
Senior Vice President, Finance Roll N.A.
and Chief Financial Officer 1999-2000 V.P. and General Manager, Product Identification
Division, Fasson Roll N.A.
2000-2001 V.P. and General Manager, Fasson Roll N.A.

Diane B. Dixon..................... 50 December 1985 1997-2000 V.P., Worldwide Communications and Advertising
Senior Vice President,
Worldwide Communications
and Advertising

Robert M. Malchione/(2)/........... 44 August 2000 1997-2000 V.P., Boston Consulting Group
Senior Vice President,
Corporate Strategy and 2000-2001 S.V.P., Corporate Strategy
Technology

Karyn E. Rodriguez................. 42 June 2001 1997-1999 Director, Corporate Finance and Investments
Vice President and Treasurer
1999-2001 Assistant Treasurer, Corporate Finance

Michael A. Skovran................. 43 January 2002 1997-1998 Director, Finance, Asia Pacific Group
Vice President and Controller
1998-2001 V.P., Finance, Worldwide Office Products

Christian A. Simcic................ 45 May 2000 1997-2000 V.P. and Managing Director, Asia Pacific
Group Vice President,
Fasson Roll Worldwide

Timothy S. Clyde................... 39 February 2001 1997-1998 General Manager, Binders Office Products N.A.
Group Vice President,
Worldwide Office Products 1998-1999 General Manager, OF&P Division, Office Products
N.A.
1999-2000 V.P. and General Manager OF&P Division, Office
Products N.A.
2000-2001 V.P. and General Manager Office Products N.A.

PART II

Item 5. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The information called for by this item appears on page 52 of Registrant's
2001 Annual Report and is incorporated herein by reference.

__________________________
/(1)/ All officers are elected to serve a one-year term and until their
successors are elected and qualify.
/(2)/ Business experience during past 5 years prior to service with
Registrant.

Item 6. SELECTED FINANCIAL DATA

Selected financial data for each of Registrant's last five fiscal years
appears on pages 22 and 23 of Registrant's 2001 Annual Report and is
incorporated herein by reference.

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

Results of Operations

(In millions) 2001 2000 1999
-------- -------- --------

Net sales.............................................................. $3,803.3 $3,893.5 $3,768.2
Cost of products sold.................................................. 2,563.1 2,561.3 2,486.8
-------- -------- --------
Gross profit........................................................... 1,240.2 1,332.2 1,281.4
Marketing, general and administrative expense.......................... 830.5 851.3 842.6
Other (income) and expense, net........................................ (.3) -- 65.0
-------- -------- --------
Earnings before interest, taxes and accounting change.................. $ 410.0 $ 480.9 $ 373.8

Sales decreased 2.3 percent to $3.8 billion in 2001, compared to $3.89
billion in 2000. Excluding changes in foreign currency exchange rates, sales
decreased .6 percent. In 2000, sales increased 3.3 percent over 1999 sales of
$3.77 billion. Excluding the impact of currency, sales increased 7.4 percent in
2000. Acquisitions contributed $84.3 million and $97.1 million in sales during
2001 and 2000, respectively. Sales from operations which were divested by the
end of 2001 were $48.5 million, $92.6 million and $92.3 million for 2001, 2000
and 1999, respectively.

Gross profit margins for the years ended 2001, 2000 and 1999 were 32.6
percent, 34.2 percent and 34 percent, respectively. The decrease in 2001 was due
to a negative change in business mix driven by lower sales in the higher-margin
office products business and product mix shift within the roll materials
business, as well as reduced leverage of fixed costs across most of the
Company's businesses. The improvement in 2000 was due to manufacturing cost
reductions and improved productivity related primarily to the 1999 cost
reduction program and other productivity improvement programs.

Marketing, general and administrative expense as a percent of sales was
21.8 percent in 2001, 21.9 percent in 2000 and 22.4 percent in 1999. The
improvement in 2001 was due to reduced spending driven by weak economic
conditions. Marketing, general and administrative expense was negatively
impacted by a $2.6 million charge late in 2001 related to the currency
devaluation in Argentina. The improvement in 2000 was due to increased sales and
spending controls.

In the fourth quarter of 2001, the Company sold its non-strategic specialty
coatings business, reported within the Pressure-sensitive Adhesives and
Materials segment. Cash proceeds and $11.5 million in notes and receivables were
received as part of the sale, which resulted in a pretax gain of approximately
$20.2 million. Net sales from this business were $26.7 million for ten months in
2001, $37.7 million in 2000 and $35.7 million in 1999.

The Company also recorded a charge in the fourth quarter of 2001 relating
to cost reduction actions. The 2001 charge involves cost reduction programs and
the reorganization of manufacturing and administrative facilities in both of the
Company's operating segments. The cost reduction efforts resulted in a pretax
charge of $19.9 million, which consisted of employee severance and related costs
of $13.1 million for approximately 400 positions worldwide, and asset write-
downs of $6.8 million. The positions to be eliminated include approximately 170
employees in the Pressure-sensitive Adhesives and Materials segment, 210
employees in the Consumer and Converted Products segment and 20 Corporate
employees. Severance and related costs represent cash paid or to be paid to
employees terminated under the program. Asset write-downs represent non-cash
charges required to reduce the carrying value of assets to be disposed of to net
realizable value as of the planned date of disposal. At year end 2001, $11
million remained accrued for severance and related costs (included in "Accrued
payroll and employee benefits") and $3.7 million remained accrued for asset
write-downs (included in "Other accrued liabilities") in the Consolidated
Balance Sheet. At the end of 2001, of the 400 positions under the actions,
approximately 145 employees had left the Company. The Company expects to
complete this cost reduction program in 2002. When fully implemented, the
Company estimates annualized pretax savings of approximately $15 million.

In the first quarter of 1999, the Company announced a major realignment of
its cost structure designed to increase operating efficiencies and improve
profitability. The realignment resulted in a pretax cost reduction charge of $65
million, or $.42 per diluted share on an after-tax basis. The cost reduction
program involved the consolidation of manufacturing and distribution capacity in
both of the Company's operating segments. The $65 million charge reflected the
costs to close manufacturing and distribution facilities, the elimination of
approximately 1,500 positions (principally in manufacturing), and

other initiatives to exit activities. The cost reduction charge consisted of
employee severance and related costs of $35.1 million and asset write-downs of
$29.9 million. Severance and related costs represented cash paid to employees
terminated under the program. Asset write-downs, principally related to
equipment, represented non-cash charges required to reduce the carrying value of
the assets to be disposed of to net realizable value as of the planned date of
disposal. During 2000, the Company completed the 1999 cost reduction program and
utilized amounts accrued for purposes identified in the realignment plan.
Cumulative pretax savings from the program were approximately $60 million in
2001.

Interest expense for the years ended 2001, 2000 and 1999 was $50.2 million,
$54.6 million and $43.4 million, respectively. The decrease in 2001 was due to
lower interest rates. The increase in 2000 was primarily due to increased debt
to fund acquisitions, capital expenditures and share repurchases.

Income before taxes, as a percent of sales, was 9.5 percent in 2001, 10.9
percent in 2000 and 8.8 percent in 1999. The decrease in 2001 was primarily due
to the lower gross profit margin. The improvement in 2000 reflects the benefits
of manufacturing cost reductions (some of which were associated with the cost
reduction charge recorded in 1999), improved profitability, and improvement in
the marketing, general and administrative expense ratio as a percent of sales.
The effective tax rate was 32.4 percent in 2001, 33.5 percent in 2000 and 34.8
percent in 1999. The decrease in 2001 reflects a more beneficial geographic mix
of profits, utilization of various tax credits worldwide and both structural and
operational changes that reduced taxes. The decrease in 2000 was primarily due
to improved profitability in the emerging markets, which have more favorable tax
rates. The Company estimates that the effective tax rate for 2002 will be in the
range of 31 percent to 32 percent.

(In millions, except per share amounts) 2001 2000 1999
------ ------ ------

Net income............................................................. $243.2 $283.5 $215.4
Net income per common share............................................ 2.49 2.88 2.17
Net income per common share, assuming dilution......................... 2.47 2.84 2.13

Net income totaled $243.2 million in 2001, $283.5 million in 2000 and
$215.4 million in 1999. Net income for 1999 included a $65 million pretax cost
reduction charge. Net income for 2001 decreased 14.2 percent from 2000. Net
income for 2000 increased 31.6 percent over 1999. Net income, as a percent of
sales, was 6.4 percent, 7.3 percent and 5.7 percent in 2001, 2000 and 1999,
respectively.

Net income per common share was $2.49 in 2001 compared to $2.88 in 2000 and
$2.17 in 1999. Net income per common share for 2001 decreased 13.5 percent from
2000. Net income per common share in 2000 increased 32.7 percent over 1999.

Net income per common share, assuming dilution, was $2.47 in 2001 compared
to $2.84 in 2000 and $2.13 in 1999. Net income per common share, assuming
dilution, for 2001 decreased 13 percent from 2000. Net income per common share,
assuming dilution, in 2000 increased 33.3 percent from 1999.

Results of Operations by Operating Segment

Pressure-sensitive Adhesives and Materials:

(In millions) 2001 2000 1999
-------- -------- --------

Net sales.............................................................. $2,189.4 $2,136.4 $2,025.0
Income from operations before interest and taxes....................... 191.8 212.4 180.0

The Pressure-sensitive Adhesives and Materials segment reported an increase
in sales and a decrease in income for 2001 compared to 2000. Sales increased 2.5
percent to $2.19 billion in 2001, compared to $2.14 billion in 2000, driven by
share gain in the U.S. and growth in international markets. Sales increased in
the U.S. operations primarily due to the Dunsirn acquisition, the benefit of new
business obtained from the closure of a competitor's plant and a new supply
agreement with a company that decided to outsource its manufacturing of certain
roll label materials. The domestic sales increase was partially offset by the
slowdown in the North American economy, and the resulting negative impact on
volume in the graphics and specialty tapes businesses. Sales increased
internationally, primarily as a result of the Adespan acquisition in 2000 and
unit volume growth in the roll materials business in Europe and Asia. This
increase was partially offset by a slowdown in certain European markets served
by the Company's graphics and specialty tapes businesses, sales declines in
Latin America, and the negative impact of foreign currency rates.

The segment's 2001 income decreased 9.7 percent to $191.8 million from
2000. Income for 2001 was impacted by three non-recurring items in the fourth
quarter: a pretax gain of approximately $20.2 million on the sale of a non-
strategic business in the U.S., a $7.6 million charge relating to cost reduction
actions ($3.9 million in the U.S. operations and $3.7 million in the
international operations), and a $2.3 million charge related to the currency
devaluation in Argentina. Income in the U.S. and international operations also
decreased due to the economic slowdown which has impacted sales across most of
the segment's businesses. In addition, integration costs associated with the
Dunsirn acquisition, reduced leverage of fixed costs, a more competitive pricing
environment and one-time costs associated with the start-up of a new coater in
the U.S. also contributed to the income reduction. Savings from cost reduction
actions taken throughout the year, as well as from Six Sigma (an effort designed
to improve productivity and quality, while reducing costs) partially offset the
negative effects of these factors.

In the first quarter of 2001, the Company acquired Dunsirn Industries,
Inc., a privately-held company based in Wisconsin. Dunsirn Industries is a
leading supplier of non-adhesive materials to the narrow-web printing industry,
as well as a provider of customized slitting and distribution services for roll
pressure-sensitive materials manufacturers. Sales in 2000 for Dunsirn Industries
were approximately $68 million, including sales to the Company. The excess of
the cost-basis over the fair value of net tangible assets acquired was $21.1
million.

The Pressure-sensitive Adhesives and Materials segment reported increased
sales and income for 2000 compared to 1999. Sales increased 5.5 percent to $2.14
billion in 2000, compared to $2.03 billion in 1999, driven primarily by growth
in international markets and the acquisition of Stimsonite in the U.S., and
offset by slow growth in the core domestic markets. Excluding changes in foreign
currency exchange rates, sales increased 10.7 percent. The segment's 1999 income
results include a pretax cost reduction charge of $25.1 million ($15.4 million
in the U.S. operations and $9.7 million in the international operations).
Increased sales in the U.S. operations were primarily driven by the acquisition
of Stimsonite in the third quarter of 1999. Domestic sales growth was negatively
impacted by the slowdown in the North American economy and by an increasingly
competitive environment for the Company's roll materials business. The slowdown
in the roll materials business began in the second quarter of 2000 and was
initially driven by packaging and graphics changes planned by consumer product
companies that buy labels from the Company's converting customers, as well as a
general reduction of inventory levels at some retailers and consumer product
companies that impacted demand for packaging labels. The slowdown in the North
American economy also negatively impacted demand for products manufactured by
the Company's graphics and specialty tapes businesses. Sales for the
international operations increased as a result of strong volume growth in Asia,
Latin America and Europe, as well as the acquisition of Adespan in Europe. Sales
growth in Europe was partially offset by changes in foreign currency rates.

The segment's 2000 income increased 18 percent to $212.4 million from 1999.
Income from U.S. operations was negatively impacted by the slowdown in the North
American economy and by an increasingly competitive environment for the
Company's roll materials, graphics and specialty tapes businesses. The negative
impact caused by the slowdown in the North American economy was partially offset
by productivity improvements from Six Sigma and other cost reduction programs.
Income from the international operations increased compared to 1999, excluding
the 1999 cost reduction charge, primarily due to volume growth and improved
profitability in the Asian and Latin American businesses. Income growth in the
segment's European operations was more than offset by changes in foreign
currency rates.

In the first quarter of 2000, the Company acquired the Adespan pressure-
sensitive materials operation of Panini S.p.A., a European printing and
publishing company based in Italy. Adespan had sales of approximately $75
million in 1999. The excess of the cost-basis over the fair value of net
tangible assets acquired was $24.1 million.

In the third quarter of 1999, the Company acquired Stimsonite, based in
Niles, Illinois, a leading manufacturer of reflective safety products for the
transportation and highway safety markets. The Company paid approximately $150
million (including the assumption of approximately $20 million in debt) for
Stimsonite, which was primarily funded with the issuance of debt. Stimsonite had
sales of $87 million in 1998. The excess of the cost-basis over the fair value
of net tangible assets acquired was $124.7 million.

In the fourth quarter of 1999, the Company acquired the remaining minority
stake in its Argentine business, the largest pressure-sensitive materials
operation in that country.

Consumer and Converted Products:

(In millions) 2001 2000 1999
-------- -------- --------

Net sales................................................................ $1,784.6 $1,898.3 $1,892.3
Income from operations before interest and taxes......................... 244.6 293.2 223.8

The Consumer and Converted Products segment reported decreased sales and
income for 2001 compared to 2000. Sales decreased 6 percent to $1.78 billion in
2001, compared to $1.9 billion in 2000. Sales in the U.S. operations were
negatively impacted by several factors. The slowdown in the North American
economy particularly affected the Company's office products business and the
industrial and automotive business. Customer inventory reductions, consolidation
of office product retail stores by the Company's customers and a weak retail
environment also negatively impacted sales in 2001. Domestic sales for the
office products business were also negatively impacted by several large
purchases made by major customers late in the fourth quarter of 2000, which
pulled sales that normally would have occurred in the first quarter of 2001. In
addition, domestic sales growth was negatively impacted by decreased volume and
an unfavorable product mix shift in the Company's converting businesses. Sales
in international operations decreased primarily due to the negative impact of
foreign currency exchange rates and the economic slowdown impacting some of the
Company's businesses in Europe.

The segment's 2001 income decreased 16.6 percent to $244.6 million. Income
for 2001 was impacted by a $9.4 million charge relating to cost reduction
actions ($5.4 million in the U.S. operations and $4 million in the international
operations). In addition to the impact from the cost reduction charge, the
segment's net income decreased compared to the prior year primarily due to the
overall decline in sales. Cost reduction actions and productivity initiatives
partially offset the negative impact of the sales decline.

In the first quarter of 2001, the Company acquired CD Stomper, a leading
product line of CD and DVD labels, software and a label applicator, from Stomp
Inc., a software developer and manufacturer based in California. Sales in 2000
for the CD Stomper product line were approximately $20 million. The excess of
the cost-basis over the fair value of net tangible assets acquired was $22.6
million.

The Consumer and Converted Products segment reported increased sales and
income for 2000 compared to 1999. Sales increased .3 percent to $1.9 billion in
2000 over 1999 sales of $1.89 billion. Excluding the impact of changes in
foreign currency rates, sales increased 3.4 percent. The segment's 1999 income
results include a pretax cost reduction charge of $37.6 million ($24.3 million
in the U.S. operations and $13.3 million in the international operations).
Increased sales in the U.S. operations were primarily driven by sales growth for
Avery-brand office products. Domestic sales growth was negatively impacted by
decreased volume and an unfavorable product mix shift in the Company's
converting businesses. The converting businesses experienced a slowdown
attributable to the slowing North American economy and customer actions to
reduce inventory levels. Strong volume growth in international businesses,
including the worldwide ticketing business in particular, was more than offset
by the unfavorable changes in foreign currency rates. As a result, total sales
from international operations decreased slightly compared to 1999.

The segment's 2000 income increased 31 percent to $293.2 million from 1999.
Income from U.S. operations increased in 2000 primarily due to sales growth in
the office products business, as well as manufacturing cost reductions and
improved productivity related to the 1999 cost reduction program. Income was
partially impacted by decreased volume and an unfavorable product mix shift in
the Company's converting businesses. Income from international operations
increased compared to 1999, primarily due to growth in the worldwide ticketing
business and improved profitability in the European and Asian office products
businesses.

In the first quarter of 1999, the Company completed a transaction with
Steinbeis Holding GmbH to combine substantially all of the Company's office
products businesses in Europe with Zweckform Buro-Produkte GmbH (Zweckform), a
German office products supplier. The Company's aggregate cost basis in this
venture was financed through available cash resources of approximately $23
million and the assumption of an obligation as reported in the "Other long-term
obligation" line on the Consolidated Balance Sheet. The obligation is guaranteed
by a standby letter of credit and it is the intention of the Company to pay the
entire obligation in 2004. The excess of the cost-basis over the fair value of
net tangible assets acquired was $104.6 million.

Financial Condition

Average working capital, excluding short-term debt, as a percent of sales
was 7.9 percent in 2001, 6.4 percent in 2000 and 5 percent in 1999. The increase
in 2001 reflects the increase in cash and the decrease in accounts payable and
other accrued

liabilities. The increase in 2000 reflects an increase in accounts receivable
and average inventory and a decrease in current liabilities related to the 1999
cost reduction program. Average inventory turnover was 8.8 turns in 2001 and
2000, and 9.5 turns in 1999. The decrease in inventory turns in 2000 was
primarily due to higher inventory levels associated with acquired companies, as
well as a temporary increase in certain office products inventories to maintain
service levels as production moved to new manufacturing facilities as a result
of the 1999 cost reduction program. The average number of days sales outstanding
in accounts receivable was 58 days in 2001, 56 days in 2000 and 52 days in 1999.
The increase in 2001 reflects longer payment terms associated with increased
international sales. The increase in 2000 reflects longer payment terms
associated with increased international sales, acquisitions and some year end
purchases by several of the Company's large office products customers.

Several of the Company's largest domestic customers operate in a highly
competitive retail business environment, which has been impacted by the slowing
economy in North America. As of year end 2001 and 2000, approximately 23
percent and 26 percent, respectively, of trade accounts receivable were from
nine of these domestic customers. The Company does not require its customers to
provide collateral, but the financial position and operations of these customers
are monitored on an ongoing basis. The Company may be exposed to losses in the
event of nonpayment.

The Company's "Other assets" balance increased during 2001 primarily due to
increases in software and other deferred charges, an increase in the cash
surrender value of corporate-owned life insurance contracts and capitalized
costs related to a pending acquisition.

Total debt increased $22.5 million to $849.7 million compared to year end
2000 primarily due to debt issuances to fund acquisitions and capital
expenditures. Total debt to total capital decreased to 47.8 percent at year end
2001 compared to 50 percent at year end 2000. Long-term debt as a percent of
total long-term capital decreased to 40.3 percent from 48.3 percent at year end
2000.

Shareholders' equity increased to $929.4 million from $828.1 million at
year end 2000. During 2001, the Company repurchased approximately 356,000 shares
of the Company's common stock at a cost of $17.9 million. As of year end 2001, a
cumulative 37.1 million shares of the Company's common stock had been
repurchased since 1991 and 3.3 million shares remained available for repurchase
under the Board of Directors' authorization. The market value of shares held in
the employee stock benefit trust decreased by $25.4 million to $674.5 million
from year end 2000, due to the effect of the change in the Company's share price
and the issuance of shares under the Company's stock and incentive plans.

Return on average shareholders' equity was 27.4 percent in 2001, 34.6
percent in 2000 and 27.1 percent in 1999. Return on average total capital for
those three years was 16.2 percent, 19.6 percent and 17 percent, respectively.
The decrease in these returns in 2001 was primarily due to the decrease in
profitability. Increases in these returns for 2000 compared to 1999 was
primarily due to an increase in profitability.

The Company, like other U.S. corporations, has periodically received
notices from the U.S. Environmental Protection Agency and state environmental
agencies alleging that the Company is a potentially responsible party for past
and future cleanup costs at hazardous waste sites. The Company has received
requests for information, notices and/or claims with respect to nine waste sites
in which the Company has no ownership interest. Litigation has been initiated by
a governmental authority with respect to one of these sites, but the Company
does not believe that any such proceedings will result in the imposition of
monetary sanctions. Environmental investigatory and remediation projects are
also being undertaken on property presently owned by the Company. The Company
has accrued liabilities for all sites where it is probable that a loss will be
incurred and the minimum cost or amount of the loss can be reasonably estimated.
However, because of the uncertainties associated with environmental assessments
and remediation activities, future expense to remediate the currently identified
sites, and sites which could be identified in the future for cleanup, could be
higher than the liability currently accrued. Amounts currently accrued are not
significant to the consolidated financial position of the Company and, based
upon current information, management believes that it is unlikely that final
resolution of these matters will significantly impact the consolidated financial
position and operations of the Company.

Liquidity and Capital Resources

Net cash flow from operating activities was $375.5 million in 2001, $409.9
million in 2000 and $426.9 million in 1999. The decrease in 2001 was primarily
due to the decrease in net income. The decrease in 2000 was due to changes in
working capital requirements.

In addition to cash flow from operations, the Company has more than
adequate financing arrangements, at competitive rates, to conduct its
operations. The Company finances its operations using commercial paper, bank
lines of credit, callable commercial notes and long-term debt, including medium-
term notes.

The Company had $52.6 million of borrowings outstanding under short-term
lines of credit with a weighted average interest rate of 8.3 percent at year end
2001. In December 2001, the Company issued $150 million of one-year callable
commercial notes at a weighted average interest rate of 2.1 percent.

As of December 29, 2001, the Company had additional available short-term
lines of credit totaling $523.7 million. These available lines of credit
included a 364-day revolving credit facility with five domestic banks to provide
up to $200 million in borrowings through December 12, 2002. The Company may
annually extend the revolving period and due date with the approval of the
banks. Financing available under this agreement will be used as a commercial
paper back-up facility and to finance other corporate requirements. There was no
debt outstanding under this agreement as of year end 2001.

The Company also has a revolving credit agreement with four domestic banks
to provide up to $250 million in borrowings through July 1, 2006. The Company
may annually extend the revolving period and due date with the approval of the
banks. Financing available under this agreement will be used, as needed, as a
commercial paper back-up facility and to finance other corporate requirements.
There was no debt outstanding under this agreement as of year end 2001.

The Company's long-term debt, including medium-term notes, was $626.7
million and $772.9 million at the end of 2001 and 2000, respectively. Maturities
of long-term debt during the years 2002 through 2006 are $20.4 million
(classified as current), $73 million, $85.7 million, $73 million and $235
million, respectively, with $160 million maturing thereafter.

The Company had medium-term notes of $448 million at year end 2001 and
2000. Medium-term notes have maturities from 2002 through 2025 and accrue
interest at fixed and floating rates. The Company issued $40 million of medium-
term notes during 2000. The proceeds from this issuance were used to refinance
short-term debt and for other general corporate purposes.

The terms of various loan agreements in effect at year end require that the
Company maintain specified ratios on consolidated debt and consolidated interest
expense in relation to certain measures of income. Under the loan agreements,
consolidated debt as a ratio to consolidated earnings before interest, taxes,
depreciation and amortization may not exceed 3.5 to 1.0. The Company's ratio at
year end 2001 was 1.5 to 1.0. Consolidated earnings before interest and taxes,
as a ratio to consolidated interest may not be less than 3.5 to 1.0. The
Company's ratio at year end 2001 was 8.2 to 1.0. Assets pledged as collateral
and commitment fees relating to long-term financing arrangements are not
significant.

In the third quarter of 2001, the Company filed a shelf registration
statement with the Securities and Exchange Commission to permit the issuance of
up to $600 million in debt and equity securities. Proceeds from the shelf
offering may be used for general corporate purposes, including repaying,
redeeming or repurchasing existing debt, and for working capital, capital
expenditures and acquisitions. No securities have been issued since the filing.

Credit ratings are a significant factor in the Company's ability to raise
short-term and long-term financing. When determining a credit rating, the
rating agencies place significant weight on the Company's competitive position,
consistency of cash flows, geographic dispersion and management team.

The ratings assigned to the Company also impact the interest rates on its
commercial paper and other borrowings. In the event of a ratings downgrade
within the investment grade category, the Company expects to still have access
to the commercial paper market and bank facilities, but would be impacted by
higher interest costs. The Company believes that the likelihood of a downgrade
to its debt rating is not high. Moody's Investors Service and Standard and
Poor's issue ratings on the Company. Currently, these credit rating firms have
assigned short-term ratings of A1/P1 and long-term ratings of A/A2 for the
Company.

In the first quarter of 1999, the Company completed a transaction with
Steinbeis Holding GmbH to combine substantially all of the Company's office
products businesses in Europe with Zweckform, a German office products supplier.
The Company's aggregate cost basis in this venture was financed through
available cash resources of approximately $23 million and the assumption of an
obligation as reported in the "Other long-term obligation" line on the
Consolidated Balance Sheet. The obligation is guaranteed by a standby letter of
credit and it is the intention of the Company to pay the entire obligation in
2004.

The Company enters into operating leases primarily for office and warehouse
space, electronic data processing and transportation equipment. The terms of
these leases do not impose significant restrictions or unusual obligations.
Minimum annual rental commitments on operating leases having initial or
remaining noncancellable lease terms in excess of one year

during the years 2002 through 2006 are $36.5 million, $30.5 million, $26.2
million, $21.5 million and $19 million, respectively, with $26.5 million in
minimum commitments thereafter.

The Company's obligations relating to debt and leases at year end 2001 were
as follows:

(In millions)
- ----------------------------------------------------------------------------------------------------------------
Payments Due by Period
----------------------------------------------------------------
Contractual Obligations Total 2002 2003 2004 2005 2006 Thereafter
- ----------------------------------------------------------------------------------------------------------------

Current portion of long-term debt $ 20.4 $ 20.4 - - - - -
Short-term lines of credit 52.6 52.6 - - - - -
Callable commercial notes 150.0 150.0 - - - - -
Long-term debt 626.7 - $ 73.0 $ 85.7 $73.0 $235.0 $160.0
Operating leases 160.2 36.5 30.5 26.2 21.5 19.0 26.5
Other long-term obligation 74.6 - - 74.6 - - -
- ----------------------------------------------------------------------------------------------------------------
Total contractual cash obligations $1,084.5 $259.5 $103.5 $186.5 $94.5 $254.0 $186.5
================================================================================================================

The Company's committed credit availability at year end 2001 was as
follows:

(In millions)
- ---------------------------------------------------------------------------------------------------------------------------
Total Amounts Amount of Commitment Expiration
-------------------------------------------------------
Committed 2002 2003 2004 2005 2006
- ---------------------------------------------------------------------------------------------------------------------------

Lines of credit - committed, unused $450.0 $200.0 - - - $250.0
Standby letters of credit outstanding:
General 15.7 15.7 - - - -
Deferred compensation 127.6 - - $23.8 $103.8 -
Zweckform obligation 74.6 - - 74.6 - -
- ---------------------------------------------------------------------------------------------------------------------------
Total $667.9 $215.7 - $98.4 $103.8 $250.0
===========================================================================================================================

In addition, the Company had uncommitted lines of credit of approximately
$126.3 million at year end 2001. The Company's uncommitted lines of credit do
not have a commitment expiration date, and may be cancelled at any time by the
Company or the banks.

Capital expenditures were $135.4 million in 2001 and $198.3 million in
2000. Capital expenditures for 2002 are expected to be approximately $150
million.

The annual dividend per share increased to $1.23 in 2001 from $1.11 in 2000
and $.99 in 1999. This was the 26th consecutive year the Company increased
dividends per share.

The Company continues to expand its operations in Europe, Latin America and
Asia Pacific. The Company's future results are subject to changes in political
and economic conditions and the impact of fluctuations in foreign currency
exchange and interest rates. To reduce its exposure to these fluctuations, the
Company may enter into foreign exchange forward, option and swap contracts, and
interest rate contracts, where appropriate and available.

All translation gains and losses for operations in hyperinflationary
economies were included in net income. Operations are treated as being in a
hyperinflationary economy for accounting purposes, based on the cumulative
inflation rate over the past three years. Operations in hyperinflationary
economies consist of the Company's operations in Turkey for 2001, 2000 and 1999.
These operations were not significant to the Company's consolidated financial
position or results of operations.

Pending Acquisition

Cartel Office, which has raised specific issues with respect to market
definition and market share in that country. The Company is responding to the
concerns, but the timing and ultimate outcome of the final regulatory review
remain uncertain. As of year end 2001, the Company had capitalized approximately
$9 million for direct costs related to this pending acquisition. If these issues
cannot be overcome, the proposed transaction may be renegotiated or terminated,
in which case some or all of these costs may be expensed depending on the
outcome of the regulatory review.

Related Party Transactions

From time to time, the Company enters into transactions in the normal
course of business with related parties. The Company believes that such
transactions are at arm's-length and for terms that would have been obtained
from unaffiliated third parties. One of the Company's directors, Mr. Peter W.
Mullin, is the chairman and chief executive officer and a director of MC
Insurance Services, Inc. ("MC"), Mullin Insurance Services, Inc. ("MINC") and
PWM Insurance Services, Inc. ("PWM"), executive compensation and benefit
consultants and insurance agents. Mr. Mullin is also the largest stockholder of
MC and the majority stockholder of MINC and PWM. During 2001, the Company paid
insurance companies premiums for life insurance placed by MC, MINC and PWM in
2001 and prior years in connection with various Company employee benefit plans.
In 2001, 2000 and 1999, MC, MINC and PWM earned commissions from such insurance
companies in aggregate amounts of approximately $1.7 million, $1.6 million and
$1 million, respectively, for the placement and renewal of this insurance. Mr.
Mullin had direct and indirect interests related to these commissions of
approximately $1 million in 2001 and 2000 and $.7 million in 1999. None of these
transactions are significant to the financial position or results of operations
of the Company.

Critical Accounting Policies

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions for the reporting period and as of the financial statement date.
These estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent liabilities and the reported amounts
of revenues and expenses. Actual results could differ from those amounts.

Critical accounting policies are those that are important to the portrayal
of the Company's financial condition and results, and which require management
to make difficult, subjective and/or complex judgements. Critical accounting
policies cover accounting matters that are inherently uncertain because the
future resolution of such matters is unknown. The Company believes that critical
accounting policies include accounting for sales rebates, accounting for
allowances for doubtful accounts and accounting for inventory reserves.

Sales rebates and discounts are common practice in the industries in which
the Company operates. Volume, promotional, price, cash and other discounts and
customer incentives are accounted for as a reduction to gross sales. Rebates and
discounts are estimated and recorded when sales of products are made. These
rebates and discounts are adjusted, if necessary, when additional information
becomes available.

Management is required to make judgements, based on historical experience
and future expectations, as to the collectibility of accounts receivable. The
allowances for doubtful accounts and sales returns represent allowances for
customer trade accounts receivable that are estimated to be partially or
entirely uncollectible. These allowances are used to reduce gross trade
receivables to their net realizable value. The Company records these allowances
based on estimates related to the following factors: i) customer specific
allowances; ii) amounts based upon an aging schedule and iii) an estimated
amount, based on the Company's historical experience, for issues not yet
identified.

Inventories are stated at the lower of cost or market value and are
categorized as raw materials, work-in-progress or finished goods. Inventory
reserves are recorded for damaged, obsolete, excess and slow-moving inventory.
Management uses estimates to record these reserves. Slow-moving inventory is
reviewed by category and may be partially or fully reserved for depending on the
type of product and the length of time the product has been included in
inventory.

Future Accounting Requirements

In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations," which supersedes Accounting Principles Board (APB) Opinion No.
16, "Business Combinations." This Statement requires that all business
combinations be accounted for by the purchase method and establishes specific
criteria for the recognition of intangible assets separately from goodwill. The
provisions of the Statement apply to business combinations initiated after June
30, 2001. For business combinations accounted for using the purchase

method before July 1, 2001, the provisions of this Statement will be effective
in the first quarter of 2002. Upon adoption, the Company expects to separately
state goodwill and intangible assets, which are currently shown on the
Consolidated Balance Sheet as "Intangibles resulting from business acquisitions,
net."

In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets," which supersedes APB Opinion No. 17, "Intangible Assets." This
Statement addresses the accounting and reporting of goodwill and other
intangible assets subsequent to their acquisition. SFAS No. 142 provides that
(i) goodwill and indefinite-lived intangible assets will no longer be amortized,
(ii) impairment will be measured using various valuation techniques based on
discounted cash flows, (iii) goodwill will be tested for impairment at least
annually at the reporting unit level, (iv) intangible assets deemed to have an
indefinite life will be tested for impairment at least annually and (v)
intangible assets with finite lives will be amortized over their useful lives.
The Statement provides specific guidance on testing goodwill and intangible
assets for impairment, and requires that reporting units be identified for the
purpose of assessing potential future impairments. Goodwill and intangible
assets acquired after June 30, 2001 were subjected to the provisions of this
Statement. All provisions of this Statement will be effective in the first
quarter of 2002. Utilizing internal and external resources, the Company is in
the process of adopting SFAS No. 142 and is identifying its reporting units and
the amounts of goodwill, intangible assets, other assets and liabilities to be
allocated to those reporting units.

SFAS No. 142 requires that goodwill be tested annually for impairment using
a two-step process. The first step is to identify a potential impairment and, in
transition, this step must be measured as of the beginning of the fiscal year.
However, companies have six months from the date of adoption to complete the
first step. The Company expects to complete the first step of the goodwill
impairment test during the first quarter of 2002. The second step of the
goodwill impairment test measures the amount of impairment loss (measured as of
the beginning of the year of adoption), if any, and must be completed by the end
of 2002. Intangible assets deemed to have an indefinite life will be tested for
impairment using a one-step process which compares the fair value to the
carrying amount of the asset as of the beginning of the year. This process will
be completed during the first quarter of 2002. The Company is in the process of
completing these impairment tests for goodwill and other intangible assets and,
based on current information, does not anticipate transitional impairment
losses. The Company expects the adoption of SFAS No. 142 to benefit earnings per
share, assuming dilution, by approximately $.13 compared to 2001.

In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations," which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. This Statement requires that the fair value
of a liability for an asset retirement obligation be recognized in the period in
which it is incurred if a reasonable estimate of fair value can be made. The
associated asset retirement costs are capitalized as part of the carrying amount
of the long-lived asset. All provisions of this Statement will be effective at
the beginning of fiscal 2003. The Company is in the process of determining the
impact of this standard on the Company's financial results when effective.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This Statement supersedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" and amends APB Opinion No. 30, "Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions." This Statement requires that
long-lived assets that are to be disposed of by sale be measured at the lower of
book value or fair value less costs to sell. SFAS No. 144 retains the
fundamental provisions of SFAS No. 121 for (a) recognition and measurement of
the impairment of long-lived assets to be held and used and (b) measurement of
long-lived assets to be disposed of by sale. This Statement also retains APB
Opinion No. 30's requirement that companies report discontinued operations
separately from continuing operations. All provisions of this Statement will be
effective in the first quarter of 2002. The adoption of this standard is not
expected to have a significant impact on the Company's financial results.

The Company is currently reviewing the requirements of Emerging Issues Task
Force (EITF) Issue No. 00-14, "Accounting for Certain Sales Incentives." This
EITF consensus addresses the recognition, measurement, and income statement
classification for sales incentives offered by a vendor without charge to a
customer as a result of a single exchange transaction. The provisions of this
consensus will be effective in the first quarter of 2002. The application of
the consensus is not expected to have a significant impact on the Company's
financial results.

The Company is currently reviewing the requirements of EITF Issue No. 00-
25, "Vendor Income Statement Characterization of Consideration Paid to a
Reseller of the Vendor's Products." This EITF consensus addresses whether
certain consideration from a vendor to a reseller of the vendor's products is an
adjustment to selling prices or cost. The provisions of this consensus will be
effective in the first quarter of 2002. The application of the consensus is not
expected to have a significant impact on the Company's financial results.

Outlook

The Company's results for 2001 reflect the challenging economic environment
in the U.S. and international markets. The events of September 11, 2001
compounded the negative impact of the economic slowdown already experienced
during the first half of the year. This slowdown has affected sales volume and
profitability for both segments and may continue if current national and global
economic conditions continue. The Company's revenue and net income are impacted
by both economic and market conditions.

In the third and fourth quarters of 2001, the Company experienced positive
sales trends in the Pressure-sensitive Adhesives and Materials segment that may
continue during 2002. Encouraging volume trends were seen in certain core
operations, including an improvement in the Fasson Roll materials business in
North America during the second half of 2001, which resulted in stronger volume
growth in the fourth quarter. Internationally, certain businesses, such as the
pressure-sensitive business in Asia, continued to see volume growth. The
Company currently has plans to open new facilities and expand its operations in
Asia in the near future. The Company continued to experience weak sales trends,
however, in the graphics and specialty tapes businesses.

In 2001, sales for the Consumer and Converted Products segment were
negatively impacted by inventory reductions among the Company's large office
products customers, partially reflecting a slowdown in new retail store
openings. Decreased sales for the segment were also due to the general economic
weakness that impacted the Company's businesses serving automotive and other
industrial markets, and later impacted office products and ticketing for retail
apparel. Currently, the Company does not expect significant disruptions in sales
due to inventory reductions in 2002.

In the fourth quarter of 2001, the Company recorded a pretax charge of
approximately $2.6 million related to the currency devaluation in Argentina.
The Argentine peso will no longer be pegged to the U.S. dollar on a one-to-one
basis. Instead, the peso will be floated in the foreign exchange market,
allowing for fluctuations in currency exchange rates with the U.S. dollar.
Transactions denominated in U.S. dollars will now be subject to gains and losses
from changes in currency exchange rates. Political, regulatory, economic and
other business conditions in Argentina (including the country's current
recession, availability of cash and consumer spending) are likely to negatively
impact revenue and earnings in Argentina for 2002 compared to 2001. Operations
in Argentina are not significant to the Company's financial results, and
represented less than $25 million in sales in 2001. The majority of the
Company's operations in Argentina are reported in the Pressure-sensitive
Adhesives and Materials segment.

Other international operations, principally in Western Europe, constitute a
significant portion of the Company's business. The Company is exposed to
foreign currency exchange rate risk, and changes to foreign exchange rates will
impact the Company's financial results.

Recent accounting pronouncements will also impact the Company's earnings in
2002. The Company expects the adoption of SFAS No. 142 to benefit earnings per
share, assuming dilution, by approximately $.13 compared to 2001. Under this
new accounting standard, the Company will no longer amortize goodwill or
indefinite-lived intangible assets.

In this uncertain global economic environment, the Company remains focused
on cost management efforts and believes it is well-positioned to resume previous
growth trends once economic conditions improve. While 2002 is expected to be
another challenging year, the Company has reduced costs and expects to continue
to benefit from the implementation of productivity improvement initiatives. In
addition to driving down costs, the Company continues to pursue long-term growth
initiatives. These initiatives include acquisitions, entry into new markets,
development of new products and geographic expansion.

Safe Harbor Statement

Except for historical information contained herein, the matters discussed
in the Management's Discussion and Analysis of Results of Operations and
Financial Condition and other sections of this annual report contain "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements, which are not statements of historical
fact, may contain estimates, assumptions, projections and/or expectations
regarding future events. Words such as "anticipate," "assume," "believe,"
"estimate," "expect," "plan," "project," "will," and other expressions, which
refer to future events and trends, identify forward-looking statements. Such
forward-looking statements, and financial or other business targets, are subject
to certain risks and uncertainties which could cause actual results to differ
materially from future results, performance or achievements of the Company
expressed or implied by such forward-looking statements. Certain of such risks
and uncertainties are described in Exhibit 99 to the Company's Annual Report on
Form 10-K for the year ended December 29, 2001. Any forward-looking statements
should be considered in light of the factors referred to in Exhibit 99, which
are incorporated herein by reference.

The Company's forward-looking statements represent its judgment only on the
dates such statements were made. By making any forward-looking statements, the
Company assumes no duty to update them to reflect new, changed or unanticipated
events or circumstances, other than as may be required by law.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market-sensitive Instruments and Risk Management

The Company is exposed to the impact of interest rate and foreign currency
exchange rate changes.

The Company generally does not hold or purchase any foreign currency or
interest rate contracts for trading purposes.

The Company's objective in managing the exposure to foreign currency
changes is to reduce the risk on earnings and cash flow associated with foreign
exchange rate changes. As a result, the Company enters into foreign exchange
forward, option and swap contracts to reduce risks associated with the value of
its existing foreign currency assets, liabilities, firm commitments and
anticipated foreign revenues and costs. The gains and losses on these contracts
are intended to offset changes in the related exposures. The Company does not
hedge its foreign currency exposure in a manner that would entirely eliminate
the effects of changes in foreign exchange rates on the Company's consolidated
net income.

The Company's objective in managing its exposure to interest rate changes
is to limit the impact of interest rate changes on earnings and cash flows and
to lower its overall borrowing costs. To achieve its objectives, the Company
will periodically use interest rate contracts to manage net exposure to interest
rate changes related to its borrowings. The Company had no significant interest
rate contracts outstanding at year end 2001.

In the normal course of operations, the Company also faces other risks that
are either nonfinancial or nonquantifiable. Such risks principally include
changes in economic or political conditions, other risks associated with foreign
operations, commodity price risk and litigation risks, which are not represented
in the analyses that follow.

Foreign Exchange Value-at-Risk

The Company uses a "Value-at-Risk" (VAR) model to determine the estimated
maximum potential one-day loss in earnings associated with both its foreign
exchange positions and contracts. This approach assumes that market rates or
prices for foreign exchange positions and contracts are normally distributed.
The VAR model estimates were made assuming normal market conditions. Firm
commitments, receivables and accounts payable denominated in foreign currencies,
which certain of these instruments are intended to hedge, were included in the
model. Forecasted transactions, which certain of these instruments are intended
to hedge, were excluded from the model. The VAR was estimated using a variance-
covariance methodology based on historical volatility for each currency. The
volatility and correlation used in the calculation were based on two-year
historical data obtained from one of the Company's domestic banks. A 95 percent
confidence level was used for a one-day time horizon.

The VAR model is a risk analysis tool and does not purport to represent
actual losses in fair value that could be incurred by the Company, nor does it
consider the potential effect of favorable changes in market factors.

The estimated maximum potential one-day loss in earnings for the Company's
foreign exchange positions and contracts was $2.6 million at year end 2001.

Interest Rate Sensitivity

An assumed 40 basis point move in interest rates (10 percent of the
Company's weighted-average floating rate interest rate) affecting the Company's
variable-rate borrowings would have had an immaterial effect on the Company's
2001 earnings.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information called for by this item is contained in Registrant's
Consolidated Financial Statements and the Notes thereto appearing on pages 32
through 47, and in the Report of Independent Accountants on page 49 of
Registrant's 2001 Annual Report and is incorporated herein by reference.

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

None.

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information concerning directors called for by this item is
incorporated by reference from pages 2, 3 and 4 of the 2002 Proxy Statement,
which will be filed with the Securities and Exchange Commission pursuant to
Regulation 14A within 120 days of the end of the fiscal year covered by this
report. Information concerning executive officers called for by this item
appears in Part I of this report. The information concerning late filings under
Section 16(a) of the Securities Exchange Act of 1934, as amended, is
incorporated by reference from page 13 of the 2002 Proxy Statement.

Item 11. EXECUTIVE COMPENSATION

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information called for by items 11, 12 and 13 is incorporated by
reference from pages 5 through 19 of the 2002 Proxy Statement, which will be
filed with the Securities and Exchange Commission pursuant to Regulation 14A
within 120 days of the end of the fiscal year covered by this report.

PART IV

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

(a) Financial Statements, Financial Statement Schedules and Exhibits

(1) (2) Financial statements and financial statement schedules filed
as part of this report are listed in the accompanying Index to Financial
Statements and Financial Statement Schedules.

(3) Exhibits filed as a part of this report are listed in the Exhibit
Index, which follows the financial statements and schedules referred to
above. Each management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Form 10-K pursuant to Item 14(c)
is identified in the Exhibit Index.

(b) Reports on Form 8-K: Registrant did not file any Reports on Form 8-K
for the three months ended December 29, 2001.

(d) Those financial statement schedules required by Regulation S-X which
are excluded from Registrant's 2001 Annual Report by Rule 14a-3(b)(1), and which
are required to be filed as financial statement schedules to this report, are
indicated in the accompanying Index to Financial Statements and Financial
Statement Schedules.

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.

Avery Dennison Corporation

By /s/ Daniel R. O'Bryant
----------------------------------
Daniel R. O'Bryant
Senior Vice President, Finance
and Chief Financial Officer

Dated: February 28, 2002

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 as of the dates indicated.

Signature Title Date
--------- ----- ----

/s/ Philip M. Neal Chairman and Chief Executive February 28, 2002
- ------------------------------------- Officer, Director
Philip M. Neal

/s/ Dean A. Scarborough President and Chief Operating February 28, 2002
- ------------------------------------- Officer, Director
Dean A. Scarborough

/s/ Daniel R. O'Bryant Senior Vice President, Finance February 28, 2002
- ------------------------------------- and Chief Financial Officer
Daniel R. O'Bryant (Principal Financial Officer)

/s/ Michael A. Skovran Vice President and Controller February 28, 2002
- ------------------------------------- (Principal Accounting Officer)
Michael A. Skovran

Signature Title Date
--------- ----- ----

/s/ Dwight L. Allison, Jr. Director February 28, 2002
- -------------------------------------
Dwight L. Allison, Jr.

/s/ John C. Argue Director February 28, 2002
- -------------------------------------
John C. Argue

/s/ Joan T. Bok Director February 28, 2002
- -------------------------------------
Joan T. Bok

/s/ Frank V. Cahouet Director February 28, 2002
- -------------------------------------
Frank V. Cahouet

/s/ Richard M. Ferry Director February 28, 2002
- -------------------------------------
Richard M. Ferry

/s/ Bruce E. Karatz Director February 28, 2002
- -------------------------------------
Bruce E. Karatz

/s/ Kent Kresa Director February 28, 2002
- -------------------------------------
Kent Kresa

/s/ Charles D. Miller Director February 28, 2002
- -------------------------------------
Charles D. Miller

/s/ Peter W. Mullin Director February 28, 2002
- -------------------------------------
Peter W. Mullin

/s/ Sidney R. Petersen Director February 28, 2002
- -------------------------------------
Sidney R. Petersen

/s/ David E. I. Pyott Director February 28, 2002
- -------------------------------------
David E. I. Pyott

AVERY DENNISON CORPORATION

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULES

Reference (page)
---------------------------
Form
10-K Annual
Annual Report to
Report Shareholders
------------ -------------

Data incorporated by reference from the attached portions of the 2001 Annual
Report to Shareholders of Avery Dennison Corporation:
Report of Independent Accountants................................................. -- 49
Consolidated Balance Sheet at December 29, 2001 and December 30, 2000............. -- 32
Consolidated Statement of Income for 2001, 2000 and 1999.......................... -- 33
Consolidated Statement of Shareholders' Equity for 2001, 2000 and 1999............ -- 34
Consolidated Statement of Cash Flows for 2001, 2000 and 1999...................... -- 35
Notes to Consolidated Financial Statements........................................ -- 36-47

Individual financial statements of 50% or less owned entities accounted for
by the equity method have been omitted because, considered in the aggregate or
as a single subsidiary, they do not constitute a significant subsidiary.

With the exception of the consolidated financial statements and the
accountants' report thereon listed in the above index, and certain information
referred to in Items 1, 5 and 6, which information is included in the 2001
Annual Report and is incorporated herein by reference, the 2001 Annual Report is
not to be deemed "filed" as part of this report.

Data submitted herewith:
Report of Independent Accountants on Financial Statement Schedule................. S-2 --
Financial Statement Schedules (for 2001, 2000 and 1999):
II--Valuation and Qualifying Accounts and Reserves........................... S-3 --
Consent of Independent Accountants................................................ S-4 --

All other schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements and notes thereto.

S-1

REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Shareholders
of Avery Dennison Corporation:

Our audits of the consolidated financial statements referred to in our
report dated January 21, 2002 appearing in the 2001 Annual Report to
Shareholders of Avery Dennison Corporation (which report and consolidated
financial statements are incorporated by reference in this Annual Report on Form
10-K) also included an audit of the financial statement schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.

PricewaterhouseCoopers LLP
Los Angeles, California
January 21, 2002

S-2

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

(In millions)

Additions
--------------------------------
Balance at Charged to Balance
Beginning Costs and From Deductions at End
of Year Expenses Acquisitions From Reserves of Year
-------------- -------------- -------------- --------------- --------------

2001
Allowance for doubtful accounts $19.4 $11.3 $.03 $(13.1) $17.9
Allowance for sales returns 18.0 9.8 -- (8.2) 19.6
Inventory reserve 30.4 15.5 1.0 (12.0) 34.9
2000
Allowance for doubtful accounts $19.5 $ 7.6 $0.2 $ (7.9) $19.4
Allowance for sales returns 21.6 8.6 0.7 (12.9) 18.0
Inventory reserve 28.6 10.9 0.8 (9.9) 30.4
1999
Allowance for doubtful accounts $16.5 $ 8.7 $2.4 $ (8.1) $19.5
Allowance for sales returns 19.5 10.9 0.1 (8.9) 21.6
Inventory reserve 24.5 11.3 2.3 (9.5) 28.6

S-3

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (File Nos. 333-38905 and 333-64558) and Form S-8 (File
Nos. 33-1132, 33-3645, 33-27275, 33-41238, 33-45376, 33-54411, 33-58921, 33-
63979, 333-38707 and 333-38709) of Avery Dennison Corporation of our report
dated January 21, 2002 relating to the financial statements, which appears in
the 2001 Annual Report to Shareholders, which is incorporated in this Annual
Report on Form 10-K. We also consent to the incorporation by reference of our
report dated January 21, 2002 relating to the financial statement schedule,
which appears in this Form 10-K.

PricewaterhouseCoopers LLP
Los Angeles, California
February 28, 2002

S-4

AVERY DENNISON CORPORATION

EXHIBIT INDEX

For the Year Ended December 29, 2001

INCORPORATED BY REFERENCE:

Originally
Exhibit Filed as
No. Item Exhibit No. Document
- -------- ---- ----------- --------

(3.1) Restated Articles of Incorporation B Proxy Statement dated February 28, 1977
for Annual Meeting of Stockholders March 30, 1977;
located in File No. 0-225 at Securities and Exchange
Commission, 450 5th St., N.W., Washington, D.C.

(3.1.1) Amendment to Certificate of Incorporation, 3.1.1 1983 Annual Report on Form 10-K
filed April 10, 1984 with Office of Delaware
Secretary of State

(3.1.2) Amendment to Certificate of Incorporation, 3.1.2 1984 Annual Report on Form 10-K
filed April 11, 1985 with Office of Delaware
Secretary of State

(3.1.3) Amendment to Certificate of Incorporation 3.1.3 1986 Annual Report on Form 10-K
filed April 6, 1987 with Office of
Delaware Secretary of State

(3.1.4) Amendment to Certificate of Incorporation Current Report on Form 8-K filed October 31, 1990
filed October 17, 1990 with Office of
Delaware Secretary of State

(3.1.5) Amendment to Certificate of Incorporation 3 First Quarterly report for 1997 on Form 10-Q
filed April 28, 1997 with Office of
Delaware Secretary of State

(3.2) By-laws, as amended 3(ii) Third Quarterly report for 2001 on Form 10-Q

(4.1) Rights Agreement dated as of October 23, Current Report on Form 8-K filed October 24, 1997
1997

(4.2) Indenture, dated as of March 15, 1991, Registration Statement on Form S-3
between Registrant and Security Pacific (File No. 33-39491)
National Bank, as Trustee (the "Indenture")

(4.2.1) Officers' Certificate establishing a series of 4.3 Current Report on Form 8-K filed March 25, 1991
Securities entitled "Medium-Term
Notes" under the Indenture

(4.2.2) First Supplemental Indenture, dated as of 4.4 Registration Statement on Form S-3
March 16, 1993, between Registrant and (File No. 33-59642)
BankAmerica National Trust Company,
as successor Trustee (the "Supplemental
Indenture")

(4.2.3) Officers' Certificate establishing a series of 4.5 Current Report on Form 8-K filed April 7, 1993
Securities entitled "Medium-Term
Notes" under the Indenture, as amended
by the Supplemental Indenture

(4.2.4) Officers' Certificate establishing a series of 4.6 Current Report on Form 8-K filed March 29, 1994
series of Securities entitled
"Medium-Term Notes, Series B" under the
Indenture, as amended by the Supplemental
Indenture

(4.2.5) Officers' Certificate establishing a series of 4.7 Current Report on Form 8-K filed May 12, 1995
Securities entitled "Medium-Term Notes,
Series C" under the Indenture, as amended
by the Supplemental Indenture

Originally
Exhibit Filed as
No. Item Exhibit No. Document
- -------- ---- ----------- --------

(4.2.6) Officers' Certificate establishing a series of 4.8 Current Report on Form 8-K filed December 16, 1996
Securities entitled "Medium-Term Notes,
Series D" under the Indenture, as amended
by the Supplemental Indenture

(4.3) Indenture dated July 3, 2001 between 4.1 Registration Statement on Form S-3
Registrant and Chase Manhattan Bank and (File No. 333-64558)
Trust Company, N.A., as Trustee ("2001
Indenture")

(10.3) *Deferred Compensation Plan for Directors 10.3 1981 Annual Report on Form 10-K

(10.5) *Executive Medical and Dental Plan 10.5 1981 Annual Report on Form 10-K
(description)

(10.6) *Executive Financial Counseling Service 10.6 1981 Annual Report on Form 10-K
(description)

(10.8.2) *Agreement with P.M. Neal 10.8.2 1998 Annual Report on Form 10-K

(10.8.3) *Agreement with R.G. van Schoonenberg 10.8.3 1996 Annual Report on Form 10-K

(10.8.4) *Form of Employment Agreement 10.8.4 1997 Annual Report on Form 10-K

(10.9) *Executive Group Life Insurance Plan 10.9 1982 Annual Report on Form 10-K

(10.10) *Form of Indemnity Agreement between 10.10 1986 Annual Report on Form 10-K
Registrant and certain directors and
officers

(10.10.1) *Form of Indemnity Agreement between 10.10.1 1993 Annual Report on Form 10-K
Registrant and certain directors and
officers

(10.11) *Amended and Restated Supplemental 10.11.1 1998 Annual Report on From 10-K
Executive Retirement Plan ("SERP")

(10.11.2) *Letter of Grant to Philip M. Neal 10.11.2 1998 Annual Report on From 10-K
under SERP

(10.12) *Complete Restatement and Amendment of 10.12 1994 Annual Report on Form 10-K
Executive Deferred Compensation Plan

(10.13) *Fourth Amended Avery Dennison 10.13.2 1992 Annual Report on Form 10-K
Retirement Plan for Directors

(10.15) *1988 Stock Option Plan for Non- 10.15 1987 Annual Report on Form 10-K
Employee Directors ("Director Plan")

(10.15.1) *Amendment No. 1 to Director Plan 10.15.1 1994 Annual Report on Form 10-K

(10.15.2) *Form of Non-Employee Director Stock 10.15.2 1994 Annual Report on Form 10-K
Option Agreement under Director Plan

(10.15.3) *Amendment No. 2 to Director Plan 10.15.3 2000 Annual Report on Form 10-K

(10.16) *Complete Restatement and Amendment of 10.16 1994 Annual Report on Form 10-K
Executive Variable Deferred Compensation
Plan ("EVDCP")

(10.16.1) *Amendment No. 1 to EVDCP 10.16.1 1999 Annual Report on Form 10-K

(10.17) *Complete Restatement and Amendment of 10.17 1994 Annual Report on Form 10-K
Directors Deferred Compensation Plan

(10.18) *Complete Restatement and Amendment of 10.18 1994 Annual Report on Form 10-K
Directors Variable Deferred Compensation
Plan ("DVDCP")

(10.18.1) *Amendment No. 1 to DVDCP 10.18.1 1999 Annual Report on Form 10-K

Originally
Exhibit Filed as
No. Item Exhibit No. Document
- -------- ---- ----------- --------

(10.19) *1990 Stock Option and Incentive Plan 10.19 1989 Annual Report on Form 10-K
("1990 Plan")

(10.19.1) *Amendment No. 1 to 1990 Plan 10.19.1 1993 Annual Report on Form 10-K

(10.19.2) *Form of Incentive Stock Option Agreement 10.19.2 1991 Annual Report on Form 10-K
for use under 1990 Plan

(10.19.3) *Form of Non-Qualified Stock Option 10.19.3 1994 Annual Report on Form 10-K
("NSO") Agreement under 1990 Plan

(10.19.4) *Form of NQSO Agreement under 1990 Plan 10.19.4 1999 Annual Report on Form 10-K

(10.19.5) *Amendment No. 2 to 1990 Plan 10.19.5 1996 Annual Report on Form 10-K

(10.21) *Amended and Restated 1996 Stock 10.21 1999 Annual Report on Form 10-K
Incentive Plan

(10.21.1) *Form of NQSO Agreement under 1996 Plan 10.21.1 1999 Annual Report on Form 10-K

(10.27) *Executive Long-Term Incentive Plan 10.27 1999 Annual Report on Form 10-K

(10.28) *Complete Restatement and Amendment of 10.28 1994 Annual Report on Form 10-K
Executive Deferred Retirement Plan
("EDRP")

(10.28.1) *Amendment No. 1 to EDRP 10.28.1 1999 Annual Report on Form 10-K

(10.29) *Executive Leadership Compensation Plan 10.29 1999 Annual Report on Form 10-K
("ELCP")

(10.30) *Senior Executive Leadership Compensation 10.30 1999 Annual Report on Form 10-K
Plan ("SELCP")

(10.31) *Executive Variable Deferred Retirement 10.31 Registration Statement on Form S-8
Plan ("EVDRP") (File No. 33-63979)

(10.31.1) *Amended and Restated EVDRP 10.31.1 1997 Annual Report on Form 10-K

(10.31.2) *Amendment No. 1 to EVDRP 10.31.2 1999 Annual Report on Form 10-K

(10.32) *Benefit Restoration Plan ("BRP") 10.32 1995 Annual Report on Form 10-K

(10.33) *Restated Trust Agreement for Employee 10.33.1 1997 Annual Report on Form 10-K
Stock Benefit Trust

(10.33.1) *Common Stock Purchase Agreement 10.2 Current Report on Form 8-K filed October 24, 1996

(10.33.2) *Restated Promissory Note 10.33.3 1997 Annual Report on Form 10-K

(10.34) *Amended and Restated Capital 10.34 1999 Annual Report on Form 10-K
Accumulation Plan ("CAP")

(10.34.1) *Trust under CAP 4.2 Registration Statement on Form S-8
(File No. 333-38707)

(10.34.2) *Amendment No. 1 to CAP 10.34.2 1999 Annual Report on Form 10-K

_________________
* Management contract or compensatory plan or arrangement required to be filed
as an Exhibit to this Form 10-K pursuant to Item 14(c).

SUBMITTED HEREWITH:

Exhibit No. Item
- ----------- ----

3.2 Bylaws, as amended on October 25, 2001

10.28.2 *Amendment No. 2 to EDRP

10.29.1 *Amendment No. 1 to ELCP

10.30.1 *Amendment No. 1 to SELCP

10.31.3 *Amendment No. 2 to EVDRP

10.32.1 *Amended and Restated BRP

10.34.3 *Amendment No. 2 to CAP

12 Computation of Ratio of Earnings to Fixed Changes

13 Portions of Annual Report to Shareholders for fiscal year ended
December 29, 2001

21 List of Subsidiaries

23 Consent of Independent Accountants (see page S-4)

99 Cautionary Statement for Purposes of the "Safe Harbor" Provisions of
the Private Securities Litigation Reform Act of 1995
______________
* Management contract or compensatory plan or arrangement required to be filed
as an Exhibit to this Form 10-K pursuant to Item 14(c).

STATEMENT AND AGREEMENT REGARDING
LONG-TERM DEBT OF REGISTRANT

Except as indicated above, Registrant has no instrument with respect to long-
term debt under which securities authorized thereunder equal or exceed 10% of
the total assets of Registrant and its subsidiaries on a consolidated basis.
Registrant agrees to furnish a copy of its long-term debt instruments to the
Commission upon request.



                                                                     Exhibit 3.2

                                    BYLAWS

                                      OF

                          AVERY DENNISON CORPORATION


                                   ARTICLE I

                                    OFFICES

Section 1.   Registered Office.

     The registered office of Avery Dennison Corporation (hereinafter called the
"corporation") in the State of Delaware shall be at 2711 Centerville Road, Suite
400, City of Wilmington, County of New Castle, and the name of the registered
agent at that address shall be United States Corporation Company.

Section 2.   Principal Office.

     The principal executive office for the transaction of the business of the
corporation is hereby fixed and located in Los Angeles County, California. The
board of directors is hereby granted full power and authority to change said
principal executive office from one location to another within or without the
State of California.

Section 3.   Other Offices.

     The corporation may also have offices at such other places within or
without the State of Delaware as the board of directors may from time to time
determine, or the business of the corporation may require.


                                   ARTICLE II

                                  STOCKHOLDERS

Section 1.   Place of Meetings.

     Meetings of stockholders shall be held at any place within or outside the
State of Delaware designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.


Section 2.   Annual Meetings of Stockholders.

     The annual meeting of stockholders shall be held on the last Thursday in
April of each year at 1:30 p.m. of said day, or on such other day, which shall
not be a legal holiday, as shall be determined by the board of directors. Any
previously scheduled annual meeting of stockholders may be postponed by
resolution of the board of directors upon public notice given prior to the date
previously scheduled for such annual meeting of stockholders.

Section 3.   Special Meetings.

     A special meeting of the stockholders may be called at any time by the
board of directors, or by a majority of the directors or by a committee
authorized by the board to do so. Any previously scheduled


special meeting of the stockholders may be postponed by resolution of the board
of directors upon public notice given prior to the date previously scheduled for
such special meeting of the stockholders.

Section 4.   Notice of Stockholders' Meetings.

     All notices of meetings of stockholders shall be sent or otherwise given in
accordance with Section 5 of this Article II not less than ten (10) nor more
than sixty (60) days before the date of the meeting being noticed. The notice
shall specify the place, date and hour of the meeting and (i) in case of a
special meeting, the general nature of the business to be transacted, or (ii) in
the case of the annual meeting, those matters which the board of directors, at
the time of giving the notice, intends to present for action by the
stockholders. The notice of any meeting at which directors are to be elected
shall include the name of any nominee or nominees who, at the time of the
notice, management intends to present for election.

Section 5.   Manner of Giving Notice; Affidavit of Notice.

     Notice of any meeting of stockholders shall be given either personally or
by mail or telegraphic or other written communication, charges prepaid,
addressed to the stockholder at the address of such stockholder appearing on the
books of the corporation or given by the stockholder to the corporation for the
purpose of notice. If no such address appears on the corporation's books or has
been so given, notice shall be deemed to have been given if sent by mail or
telegraphic or other written communication to the corporation's principal
executive office, or if published at least once in a newspaper of general
circulation in the county where such office is located. Notice shall be deemed
to have been given at the time when delivered personally or deposited in the
mail or sent by telegram or other means of written communication.

     An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting shall be executed by the secretary, assistant secretary or
any transfer agent of the corporation giving such notice, and shall be filed and
maintained in the minute book of the corporation.

Section 6.   Quorum.

     The presence in person or by proxy of the holders of a majority of the
shares entitled to vote at any meeting of stockholders shall constitute a quorum
for the transaction of business. The stockholders present at a duly called or
held meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum, if any action taken (other than adjournment) is approved by at
least a majority of the shares required to constitute a quorum.

Section 7.   Adjourned Meeting and Notice Thereof.

     Any stockholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the Chairman of the meeting, but
in the absence of a quorum, no other business may be transacted at such meeting,
except as provided in Section 6 of this Article II.

     When any meeting of stockholders, either annual or special, is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place thereof are announced at a meeting at which the adjournment is
taken, unless a new record date for the adjourned meeting is fixed, or unless
the adjournment is for more than thirty (30) days from the date set for the
original meeting. Notice of any such adjourned meeting, if required, shall be
given to each stockholder of record entitled to vote at the adjourned meeting in
accordance with the provisions of Sections 4 and 5 of this Article II. At any
adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting.

Section 8.   Voting.

     The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 11 of this Article II.
Such vote may be by voice vote or by ballot, at the discretion of the Chairman
of the meeting. Any stockholder entitled to vote on any matter (other than the

                                      -2-


election of directors) may vote part of the shares in favor of the proposal and
refrain from voting the remaining shares or vote them against the proposal; but,
if the stockholder fails to specify the number of shares such stockholder is
voting affirmatively, it will be conclusively presumed that the stockholder's
approving vote is with respect to all shares such stockholder is entitled to
vote.  If a quorum is present, the affirmative vote of the majority of the
shares represented at the meeting and entitled to vote on any matter shall be
the act of the stockholders, unless the vote of a greater number or voting by
classes is required by the Delaware General Corporation Law or the certificate
of incorporation or the certificate of determination of preferences as to any
preferred stock.

     At a stockholders' meeting involving the election of directors, no
stockholder shall be entitled to cumulate (i.e., cast for any one or more
candidates a number of votes greater than the number of the stockholder's
shares). The candidates receiving the highest number of votes, up to the number
of directors to be elected, shall be elected.

Section 9.   Waiver of Notice or Consent by Absent Stockholders.

     The transactions of any meeting of stockholders, either annual or special,
however called and noticed, and wherever held, shall be as valid as though had
at a meeting duly held after regular call and notice, if a quorum be present
either in person or by proxy, and if, either before or after the meeting, each
person entitled to vote, not present in person or by proxy, signs a written
waiver of notice or a consent to the holding of the meeting, or an approval of
the minutes thereof. The waiver of notice or consent need not specify either the
business to be transacted or the purpose of any annual or special meeting of
stockholders. All such waivers, consents or approvals shall be filed with the
corporate records or made part of the minutes of the meeting.

     Attendance of a person at a meeting shall also constitute a waiver of
notice of such meeting, except when the person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if such objection is expressly made at the meeting.

Section 10.  No Stockholder Action by Written Consent Without a Meeting.

     Stockholders may take action only at a regular or special meeting of
stockholders.

Section 11.  Record Date for Stockholder Notice and Voting.

     For purposes of determining the holders entitled to notice of any meeting
or to vote, the board of directors may fix, in advance, a record date, which
shall not be more than sixty (60) days nor less than ten (10) days prior to the
date of any such meeting, and in such case only stockholders of record on the
date so fixed are entitled to notice and to vote, notwithstanding any transfer
of any shares on the books of the corporation after the record date fixed as
aforesaid, except as otherwise provided in the Delaware General Corporation Law.

     If the board of directors does not so fix a record date, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the close
of business on the business day next preceding the day on which the meeting is
held.

Section 12.  Proxies.

     Every person entitled to vote for directors or on any other matter shall
have the right to do so either in person or by one or more agents authorized by
a written proxy signed by the person and filed with the secretary of the
corporation or by any other means permitted by the Delaware General Corporation
Code (Section 212). A proxy shall be deemed signed if the stockholder's name is
placed on the proxy (whether by

                                      -3-


manual signature, typewriting, telegraphic transmission or electronic
transmission or otherwise) by the stockholder or the stockholder's attorney in
fact. A validly executed proxy which does not state that it is irrevocable shall
continue in full force and effect unless (i) revoked by the person executing it,
prior to the vote pursuant thereto, by a writing delivered to the corporation
stating that the proxy is revoked or by a subsequent proxy executed by, or
attendance at the meeting and voting in person by, the person executing the
proxy, or (ii) written notice of the death or incapacity of the maker of such
proxy is received by the corporation before the vote pursuant thereto is
counted; provided, however, that no such proxy shall be valid after the
expiration of eleven (11) months from the date of such proxy, unless otherwise
provided in the proxy.

Section 13.  Inspectors of Election; Opening and Closing the Polls.

     The board of directors by resolution shall appoint one or more inspectors,
which inspector or inspectors may include individuals who serve the corporation
in other capacities, including, without limitation, as officers, employees,
agents or representatives, to act at the meetings of stockholders and make a
written report thereof. One or more persons may be designated as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate has been appointed to act or is able to act at a meeting of
stockholders, the chairman of the meeting shall appoint one or more inspectors
to act at the meeting. Each inspector, before discharging his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his or her ability. The
inspectors shall have the duties prescribed by law.

     The chairman of the meeting shall fix and announce at the meeting the date
and time of the opening and the closing of the polls for each matter upon which
the stockholders will vote at a meeting.

Section 14.  Nomination and Stockholder Business Bylaw.

     (A)  Annual Meetings of Stockholders.

          (1)  Nominations of persons for election to the board of directors of
               the corporation and the proposal of business to be considered by
               the stockholders may be made at an annual meeting of stockholders
               (a) pursuant to the corporation's notice of meeting, (b) by or at
               the direction of the board of directors or (c) by any stockholder
               of the corporation who was a stockholder of record at the time of
               giving of notice provided for in this Bylaw, who is entitled to
               vote at the meeting and who complies with the notice procedures
               set forth in this Bylaw.

          (2)  For nominations or other business to be properly brought before
               an annual meeting by a stockholder pursuant to clause (c) of
               paragraph (A) (1) of this Bylaw, the stockholder must have given
               timely notice thereof in writing to the secretary of the
               corporation and such other business must otherwise be a proper
               matter for stockholder action. To be timely, a stockholder's
               notice shall be delivered to the secretary at the principal
               executive offices of the corporation not later than the close of
               business on the 60th day nor earlier than the close of business
               on the 90th day prior to the first anniversary of the preceding
               year's annual meeting; provided, however, that in the event that
               the date of the annual meeting is more than 30 days before or
               more than 60 days after such anniversary date, notice by the
               stockholder to be timely must be so delivered not earlier than
               the close of business on the 90th day prior to such annual
               meeting and not later than the close of business on the later of
               the 60th day prior to such annual meeting or the 10th day
               following the day on which public announcement of the date of
               such meeting is first made by the corporation. In no event shall
               the public announcement of an adjournment of an annual meeting
               commence a new time period for the giving of a stockholder's
               notice as described above. Such stockholder's notice shall set
               forth (a) as to each person whom the stockholder proposes to

                                      -4-


               nominate for election or reelection as a director all information
               relating to such person that is required to be disclosed in
               solicitations of proxies for election of directors in an election
               contest, or is otherwise required, in each case pursuant to
               Regulation 14A under the Securities Exchange Act of 1934, as
               amended (the "Exchange Act") and Rule 14a-11 thereunder
               (including such person's written consent to being named in the
               proxy statement as a nominee and to serving as a director if
               elected); (b) as to any other business that the stockholder
               proposes to bring before the meeting, a brief description of the
               business desired to be brought before the meeting, the reasons
               for conducting such business at the meeting and any material
               interest in such business of such stockholder and the beneficial
               owner, if any, on whose behalf the proposal is made; and (c) as
               to the stockholder giving the notice and the beneficial owner, if
               any, on whose behalf the nomination or proposal is made (i) the
               name and address of such stockholder, as they appear on the
               corporation's books, and of such beneficial owner and (ii) the
               class and number of shares of the corporation which are owned
               beneficially and of record by such stockholder and such
               beneficial owner.

          (3)  Notwithstanding anything in the second sentence of paragraph
               (A)(2) of this Bylaw to the contrary, in the event that the
               number of directors to be elected to the board of directors of
               the corporation is increased and there is no public announcement
               by the corporation naming all of the nominees for director or
               specifying the size of the increased board of directors at least
               70 days prior to the first anniversary of the preceding year's
               annual meeting, a stockholder's notice required by this Bylaw
               shall also be considered timely, but only with respect to
               nominees for any new positions created by such increase, if it
               shall be delivered to the secretary at the principal executive
               offices of the corporation not later than the close of business
               on the 10th day following the day on which such public
               announcement is first made by the corporation.

      (B) Special Meetings of Stockholders. Only such business shall be
          conducted at a special meeting of stockholders as shall have been
          brought before the meeting pursuant to the corporation's notice of
          meeting. Nominations of persons for election to the board of directors
          may be made at a special meeting of stockholders at which directors
          are to be elected pursuant to the corporation's notice of meeting (a)
          by or at the direction of the board of directors or (b) provided that
          the board of directors has determined that directors shall be elected
          at such meeting, by any stockholder of the corporation who is a
          stockholder of record at the time of giving of notice provided for in
          this Bylaw, who shall be entitled to vote at the meeting and who
          complies with the notice procedures set forth in this Bylaw. In the
          event the corporation calls a special meeting of stockholders for the
          purpose of electing one or more directors to the board of directors,
          any such stockholder may nominate a person or persons (as the case may
          be), for election to such position(s) as specified in the
          corporation's notice of meeting, if the stockholder's notice required
          by paragraph (A) (2) of this Bylaw shall be delivered to the secretary
          at the principal executive offices of the corporation not earlier than
          the close of business on the 90th day prior to such special meeting
          and not later than the close of business on the later of the 60th day
          prior to such special meeting or the 10th day following the day on
          which public announcement is first made of the date of the special
          meeting and of the nominees proposed by the board of directors to be
          elected at such meeting. In no event shall the public announcement of
          an adjournment of a special meeting commence a new time period for the
          giving of a stockholder's notice as described above.

      (C) General.

          (1)  Only such persons who are nominated in accordance with the
               procedures set forth in this Bylaw shall be eligible to serve as
               directors and only such business shall be conducted at a

                                      -5-


               meeting of stockholders as shall have been brought before the
               meeting in accordance with the procedures set forth in this
               Bylaw. Except as otherwise provided by law, the Certificate of
               Incorporation or these Bylaws, the chairman of the meeting shall
               have the power and duty to determine whether a nomination or any
               business proposed to be brought before the meeting was made or
               proposed, as the case may be, in accordance with the procedures
               set forth in this Bylaw and, if any proposed nomination or
               business is not in compliance with this Bylaw, to declare that
               such defective proposal or nomination shall be disregarded.

        (2)    For purposes of this Bylaw, "public announcement" shall mean
               disclosure in a press release reported by the Dow Jones News
               Service, Associated Press or comparable national news service or
               in a document publicly filed by the corporation with the
               Securities and Exchange Commission pursuant to Section 13, 14 or
               15(d) of the Exchange Act.

          (3)  Notwithstanding the foregoing provisions of this Bylaw, a
               stockholder shall also comply with all applicable requirements of
               the Exchange Act and the rules and regulations thereunder with
               respect to the matters set forth in this Bylaw. Nothing in this
               Bylaw shall be deemed to affect any rights (i) of stockholders to
               request inclusion of proposals in the corporation's proxy
               statement pursuant to Rule 14a-8 under the Exchange Act or (ii)
               of the holders of any series of Preferred Stock, if any, to elect
               directors under certain circumstances.

                                  ARTICLE III

                                   DIRECTORS

Section 1.   Powers.

        Subject to the provisions of the Delaware General Corporation Law and
any limitations in the certificate of incorporation and these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.

        Without prejudice to such general powers, but subject to the same
limitations, it is hereby expressly declared that the directors shall have the
power and authority to:

        (a)    Select and remove all officers, agents and employees of the
        corporation, prescribe such powers and duties for them as may not be
        inconsistent with law, the certificate of incorporation or these bylaws,
        fix their compensation, and require from them security for faithful
        service.

        (b)    Change the principal executive office or the principal business
        office in the State of California from one location to another; cause
        the corporation to be qualified to do business in any other state,
        territory, dependency, or foreign country and conduct business within or
        outside the State of California; designate any place within or without
        the State of California for the holding of any stockholders' meeting or
        meetings, including annual meetings; adopt, make and use a corporate
        seal, and prescribe the forms of certificates of stock, and alter the
        form of such seal and of such certificates from time to time as in their
        judgment they may deem best, provided that such forms shall at all times
        comply with the provisions of law.

        (c)    Authorize the issuance of shares of stock of the corporation from
        time to time, upon such terms as may be lawful, in consideration of
        money paid, labor done or services actually rendered, debts or
        securities canceled or tangible or intangible property actually
        received.

                                      -6-


     (d) Borrow money and incur indebtedness for the purpose of the corporation,
     and cause to be executed and delivered therefor, in the corporate name,
     promissory notes, bonds, debentures, deeds of trust, mortgages, pledges,
     hypothecations, or other evidences of debt and securities therefor.

Section 2.   Number and Qualification of Directors.

     The number of directors of the corporation shall be thirteen (13) until
changed by a bylaw amending this Section 2, duly adopted by the board of
directors or by the stockholders.

Section 3.   Election and Term of Office of Directors.

     Subject to Section 15 below, one class of the directors shall be elected at
each annual meeting of the stockholders, but if any such annual meeting is not
held or the directors are not elected thereat, the directors may be elected at
any special meeting of stockholders held for that purpose.  All directors shall
hold office until their respective successors are elected. Irrespective of the
provisions of Section 15 of this Article III and of the preceding sentence, a
director shall automatically be retired on the date of the expiration of the
first annual meeting following his 72nd birthday.

Section 4.   Vacancies.

     Vacancies in the board of directors may be filled by a majority of the
remaining directors, though less than a quorum, or by a sole remaining director.
Each director elected to fill a vacancy shall hold office for the remainder of
the term of the person whom he or she succeeds, unless otherwise determined by
the board of directors, and until a successor has been elected and qualified.

     A vacancy or vacancies in the board of directors shall be deemed to exist
in the case of the death, retirement, resignation or removal of any director, or
if the board of directors by resolution declares vacant the office of a director
who has been declared of unsound mind by an order of court or convicted of a
felony, or if the authorized number of directors be increased, or if the
stockholders fail at any meeting of stockholders at which any director or
directors are elected, to elect the full authorized number of directors to be
voted for at that meeting.

     Any director may resign or voluntarily retire upon giving written notice to
the chairman of the board, the president, the secretary or the board of
directors.  Such retirement or resignation shall be effective upon the giving of
the notice, unless the notice specifies a later time for its effectiveness.  If
such retirement or resignation is effective at a future time, the board of
directors may elect a successor to take office when the retirement or
resignation becomes effective.

     No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of his term of office.  No
director may be removed during his term except for cause.

Section 5.   Place of Meetings and Telephonic Meetings.

     Regular meetings of the board of directors may be held at any place within
or without the State of Delaware that has been designated from time to time by
resolution of the board.  In the absence of such designation, regular meetings
shall be held at the principal executive office of the corporation.  Special
meetings of the board shall be held at any place within or without the State of
Delaware that has been designated in the notice of the meeting or, if not stated
in the notice or there is no notice, at the principal executive office of the
corporation.  Any meeting, regular or special, may be held by conference
telephone or similar communication equipment, so long as all directors
participating in such meeting can hear one another, and all such directors shall
be deemed to be present in person at such meeting.

                                      -7-


Section 6.   Annual Meetings.

     Immediately following each annual meeting of stockholders, the board of
directors shall hold a regular meeting for the purpose of organization, any
desired election of officers and transaction of other business.  Notice of this
meeting shall not be required.

Section 7.   Other Regular Meetings.

     Other regular meetings of the board of directors shall be held at such time
as shall from time to time be determined by the board of directors.  Such
regular meetings may be held without notice provided that notice of any change
in the determination of time of such meeting shall be sent to all of the
directors.  Notice of a change in the determination of the time shall be given
to each director in the same manner as for special meetings of the board of
directors.

Section 8.   Special Meetings.

     Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board or the president or any vice
president or the secretary or any two directors.

     Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at his or her address as
it is shown upon the records of the corporation.  In case such notice is mailed,
it shall be deposited in the United States mail at least four (4) days prior to
the time of the holding of the meeting.  In case such notice is delivered
personally, or by telephone or telegram, it shall be delivered personally, or by
telephone or to the telegraph company at least forty-eight (48) hours prior to
the time of the holding of the meeting.  Any oral notice given personally or by
telephone may be communicated to either the director or to a person at the
office of the director who the person giving the notice has reason to believe
will promptly communicate it to the director.  The notice need not specify the
purpose of the meeting nor the place if the meeting is to be held at the
principal executive office of the corporation.

Section 9.   Quorum.

     A majority of the authorized number of directors shall constitute a quorum
for the transaction of business, except to adjourn as hereinafter provided.
Every act or decision done or made by a majority of the directors present at a
meeting duly held at which a quorum is present shall be regarded as the act of
the board of directors.  A meeting at which a quorum is initially present may
continue to transact business notwithstanding the withdrawal of directors, if
any action taken is approved by at least a majority of the required quorum for
such meeting.

Section 10.  Waiver of Notice.

     The transactions of any meeting of the board of directors, however called
and noticed or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice if a quorum be present and if, either before
or after the meeting, each of the directors not present signs a written waiver
of notice, a consent to holding the meeting or an approval of the minutes
thereof.  The waiver of notice or consent need not specify the purpose of the
meeting.  All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.  Notice of a
meeting shall also be deemed given to any director who attends the meeting
without protesting, prior thereto or at its commencement, the lack of notice to
such director.

Section 11.  Adjournment.

     A majority of the directors present, whether or not constituting a quorum,
may adjourn any meeting to another time and place.

                                      -8-


Section 12.  Notice of Adjournment.

     Notice of the time and place of an adjourned meeting need not be given,
unless the meeting is adjourned for more than twenty-four (24) hours, in which
case notice of such time and place shall be given prior to the time of the
adjourned meeting, in the manner specified in Section 8 of this Article III, to
the directors who were not present at the time of the adjournment.

Section 13.  Action Without Meeting.

     Any action required or permitted to be taken by the board of directors may
be taken without a meeting, if all members of the board shall individually or
collectively consent in writing to such action.  Such action by written consent
shall have the same force and effect as a unanimous vote of the board of
directors.  Such written consent or consents shall be filed with the minutes of
the proceedings of the board.

Section 14.  Fees and Compensation of Directors.

     Directors and members of committees may receive such compensation, if any,
for their services and such reimbursement of expenses, as may be fixed or
determined by resolution of the board of directors.  Nothing herein contained
shall be construed to preclude any director from serving the corporation in any
other capacity as an officer, agent, employee, or otherwise, and receiving
compensation for such services.

Section 15.  Classification of Directors.

     The board of directors shall be and is divided into three classes, Class I,
Class II and Class III.  The number of directors in each class shall be the
whole number contained in the quotient arrived at by dividing the authorized
number of directors by three, and if a fraction is also contained in such
quotient then if such fraction is one-third (1/3) the extra director shall be a
member of Class III and if the fraction is two-thirds (2/3) one of the extra
directors shall be a member of Class III and the other shall be a member of
Class II.  Each director shall serve for a term ending on the date of the third
annual meeting following the annual meeting at which such director was elected.

     In the event of any increase or decrease in the authorized number of
directors, (a) each director then serving as such shall nevertheless continue as
a director of the class of which he is a member until the expiration of his
current term, or his prior death, resignation or removal, and (b) the newly
created or eliminated directorships resulting from such increase or decrease
shall be apportioned by the board of directors to such class or classes as
shall, so far as possible, bring the number of directors in the respective
classes into conformity with the formula in this Section 15, as applied to the
new authorized number of directors.

                                   ARTICLE IV

                                   COMMITTEES

Section 1.   Committees of Directors.

     The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one or more committees, including an
executive committee, each consisting of two or more directors, to serve at the
pleasure of the board.  The board may designate one or more directors as
alternate members of any committee, who may replace any absent member at any
meeting of the committee.  Any such committee, to the extent provided in the
resolution of the board, shall have all the authority of the board, except with
respect to:

     (a) the approval of any action which, under the General Corporation Law of
     Delaware, also requires stockholders' approval or approval of the
     outstanding shares;

     (b) the filling of vacancies on the board of directors or in any committee;

                                      -9-


     (c)  the fixing of compensation of the directors for serving on the board
     or on any committee;

     (d)  the amendment or repeal of bylaws or the adoption of new bylaws;

     (e)  the amendment or repeal of any resolution of the board of directors
     which by its express terms is not so amendable or repealable;

     (f)  a distribution to the stockholders of the corporation, except at a
     rate or in a periodic amount or within a price range determined by the
     board of directors; or

     (g)  the appointment of any other committees of the board of directors or
     the members thereof.

Section 2.   Meetings and Action of Committees.

     Meetings and action of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Sections 5
(place of meetings), 7 (regular meetings), 8 (special meetings and notice), 9
(quorum), 10 (waiver of notice), 11 (adjournment), 12 (notice of adjournment)
and 13 (action without meetings), with such changes in the context of those
bylaws as are necessary to substitute the committee and its members for the
board of directors and its members, except that the time of regular meetings of
committees may be determined by resolution of the board of directors as well as
the committee, special meetings of committees may also be called by resolution
of the board of directors, and notice of special meetings of committees shall
also be given to all alternate members, who shall have the right to attend all
meetings of the committee.  The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
bylaws.

                                   ARTICLE V

                                    OFFICERS

Section 1.   Officers.

     The officers of the corporation shall be the chairman of the board, the
president, a vice president, a secretary and a treasurer.  The corporation may
also have, at the discretion of the board of directors, one or more additional
vice presidents, one or more assistant secretaries, one or more assistant
treasurers, and such other officers as may be appointed in accordance with the
provisions of Section 3 of this Article V.  Any number of offices may be held by
the same person.

Section 2.   Election of Officers.

     The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Section 3 or Section 5 of this Article V,
shall be chosen annually by the board of directors, and each shall hold his
office until he shall resign or be removed or otherwise disqualified to serve or
his successor shall be elected and qualified.

Section 3.   Subordinate Officers, etc.

     The board of directors may appoint, and may empower the chairman of the
board to appoint, such other officers as the business of the corporation may
- -----
require, each of whom shall hold office for such period, have such authority and
perform such duties as are provided in the bylaws or as the board of directors
may from time to time determine.

Section 4.   Removal and Resignation of Officers.

     Any officer may be removed, either with or without cause, by the board of
directors, at any regular or special meeting thereof, or, except in case of an
officer chosen by the board of directors, by any officer upon whom such power of
removal may be conferred by the board of directors.

                                     -10-


     Any officer may resign at any time by giving written notice to the
corporation.  Any such resignation shall take effect at the date of the receipt
of such notice or at any later time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.

Section 5.   Vacancies in Office.

     A vacancy in any office because of death, resignation, removal,
disqualification, or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to such office.

Section 6.   Chairman of the Board.

     The chairman of the board shall be the chief executive officer of the
corporation and shall, subject to the control of the board of directors, have
general supervision, direction and control of the business and affairs of the
corporation.

Section 7.   President.

     The president shall be the chief operating officer of the corporation and
shall exercise and perform such powers and duties with respect to the
administration of the business and affairs of the corporation as may from time
to time be assigned to him by the chairman of the board or by the board of
directors, or as may be prescribed by the bylaws.

Section 8.   Vice Presidents.

     In the absence or disability of the president, a vice president designated
by the board of directors shall perform all the duties of the president, and
when so acting shall have all the powers of, and be subject to all the
restrictions upon, the president.  The vice presidents shall have such other
powers and perform such other duties as from time to time may be prescribed for
them respectively by the board of directors or the bylaws.

Section 9.   Secretary.

     The secretary shall keep or cause to be kept, at the principal executive
office or such other place as the board of directors may order, a book of
minutes of all meetings and actions of directors, committees of directors and
stockholders, with the time and place of holding, whether regular or special,
and, if special, how authorized, the notice thereof given, the names of those
present at directors' and committee meetings, the number of shares present or
represented at stockholders' meetings, and the proceedings thereof.

     The secretary shall keep, or cause to be kept, at the principal executive
office or at the office of the corporation's transfer agent or registrar, as
determined by resolution of the board of directors, a stock register, or a
duplicate register, showing the names of all stockholders and their addresses,
the number and classes of shares held by each, the number and date of
certificates issued for the same, and the number and date of cancellation of
every certificate surrendered for cancellation.

     The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required by the bylaws or by law
to be given, and he shall keep the seal of the corporation in safe custody, and
shall have such other powers and perform such other duties as may be prescribed
by the board of directors or by the bylaws.

Section 10.  Treasurer.

     The treasurer shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings
and shares.  The books of account shall be open at all reasonable times to
inspection by any director.

                                      -11-


     The treasurer shall deposit all monies and other valuables in the name and
to the credit of the corporation with such depositories as may be designated by
the board of directors.  He shall disburse the funds of the corporation as may
be ordered by the board of directors, shall render to the chairman of the board
and directors, whenever they request it, an account of all of his transactions
as treasurer and of the financial condition of the corporation, and shall have
other powers and perform such other duties as may be prescribed by the board of
directors or the bylaws.

Section 11.  Assistant Secretaries and Assistant Treasurers.

     Any assistant secretary may perform any act within the power of the
secretary, and any assistant treasurer may perform any act within the power of
the treasurer, subject to any limitations which may be imposed in these bylaws
or in board resolutions.


                                   ARTICLE VI

                    INDEMNIFICATION OF DIRECTORS, OFFICERS,
                           EMPLOYEES AND OTHER AGENTS

Section 1.   Indemnification and Insurance.

     (A)  Each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit, or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she or a person of whom he or she is the legal
representative is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans maintained
or sponsored by the Corporation, whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee or agent or in
any other capacity while serving as a director, officer, employee of agent,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the General Corporation Law of the State of Delaware as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), against all expenses, liability and loss (including
attorneys' fees, judgements, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by such person
in connection therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of his or her heirs, executors and administrators; provided,
however, that except as provided in paragraph (C) of this Bylaw, the Corporation
shall indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors.  The right to
indemnification conferred in this Bylaw shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition, such advances
to be paid by the Corporation within 20 days after the receipt by the
Corporation of a statement or statements from the claimant requesting such
advance or advances from time to time; provided, however, that if the General
Corporation Law of the State of Delaware requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Corporation of an
undertaking by or on behalf of such director or officer, to repay all amounts so
advanced if it shall ultimately be determined that such director or officer is
not entitled to be indemnified under this Bylaw or otherwise.

                                      -12-


     (B)  To obtain indemnification under this Bylaw, a claimant shall submit to
the Corporation a written request, including therein or therewith such
documentation and information as is reasonably available to the claimant and
reasonably necessary to determine whether and to what extent the claimant is
entitled to indemnification.  Upon written request by a claimant for
indemnification pursuant to the first sentence of this paragraph (B), a
determination, if required by applicable law, with respect to the claimant's
entitlement thereto shall be made as follows: (1) if requested by the claimant,
by Independent Counsel (as hereinafter defined), or (2) if no request is made by
the claimant for a determination by Independent Counsel, (i) by the Board of
Directors by a majority vote of a quorum consisting of Disinterested Directors
(as hereinafter defined), or (ii) if a quorum of the Board of Directors
consisting of Disinterested Directors is not obtained or even if obtainable,
such quorum of Disinterested Directors so directs, by Independent Counsel in a
written opinion to the Board of Directors, a copy of which shall be delivered to
the claimant, or (iii) if a quorum of Disinterested Directors so directs, by the
stockholders of the Corporation.  In the event the determination of entitlement
to indemnification is to be made by Independent Counsel at the request of the
claimant, the Independent Counsel shall be selected by the Board of Directors
unless there shall have occurred within two years prior to the date of the
commencement of the action, suit or proceeding for which indemnification is
claimed a "Change of Control" as defined in the 1996 Stock Incentive Plan, in
which case the Independent Counsel shall be selected by the claimant unless the
claimant shall request that such selection be made by the Board of Directors.
If it is so determined that the claimant is entitled to indemnification, payment
to the claimant shall be made within 10 days after such determination.

     (C)  If a claim under paragraph (A) of this Bylaw is not paid in full by
the Corporation within 30 days after a written claim pursuant to paragraph (B)
of this Bylaw has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim, including attorney's
fees. It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is required, has
been tendered to the Corporation) that the claimant has not met the standard of
conduct which makes it permissible under the General Corporation Law of the
State of Delaware for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors,
Independent Counsel or stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the General Corporation Law of the State of Delaware, nor an actual
determination by the Corporation (including its Board of Directors, Independent
Counsel or stockholders) that the claimant has not met such applicable standard
of conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.

     (D)  If a determination shall have been made pursuant to paragraph (B) of
this Bylaw that the claimant is entitled to indemnification, the Corporation
shall be bound by such determination in any judicial proceeding commenced
pursuant to paragraph (C) of this Bylaw.

     (E)  The Corporation shall be precluded from asserting in any judicial
proceeding commenced pursuant to paragraph (C) of this Bylaw that the procedures
and presumptions of this Bylaw are not valid, binding and enforceable and shall
stipulate in such proceeding that the Corporation is bound by all the provisions
of this Bylaw.

     (F)  The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Bylaw shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or Disinterested
Directors or otherwise.  No repeal or modification of this Bylaw shall in any
way diminish or adversely affect the rights of any director,

                                      -13-


officer, employee or agent of the Corporation hereunder in respect of any
occurrence or matter arising prior to any such repeal or modification.

     (G)  The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the General Corporation Law of the State of Delaware.  To the extent that
the Corporation maintains any policy or policies providing such insurance, each
such director or officer, and each such agent or employee to which rights to
indemnification have been granted as provided in paragraph (H) of this Bylaw,
shall be covered by such policy or policies in accordance with its or their
terms to the maximum extent of the coverage thereunder for any such director,
officer, employee or agent.

     (H)  The Corporation may, to the extent authorized from time to time by the
Board of Directors or the Chief Executive Officer, grant rights to
indemnification, and rights to be paid by the Corporation the expenses incurred
in defending any proceeding in advance of its final disposition, to any employee
or agent of the Corporation to the fullest extent of the provisions of this
Bylaw with respect to the indemnification and advancement of expenses of
directors and officers of the Corporation.

     (I)  If any provision or provisions of this Bylaw shall be held to  be
invalid, illegal or unenforceable for any reason whatsoever: (1) the validity,
legality and enforceability of the remaining provisions of this Bylaw
(including, without limitation, each portion of any paragraph of this Bylaw
containing any such provisions held to be invalid, illegal or unenforceable,
that is not itself held to be invalid, illegal or unenforceable) shall not in
any way be affected or impaired thereby; and (2) to the fullest extent possible,
the provisions of this Bylaw (including, without limitation, each such portion
of any paragraph of this Bylaw containing any such provision held to be invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.

     (J)  For purposes of this Bylaw:

          (1) "Disinterested Director" means a director of the Corporation who
is not and was not a party to the matter in respect of which indemnification is
sought by the claimant.

          (2) "Independent Counsel" means a law firm, a member of a law firm, or
an independent practitioner, that is experienced in matters of corporation law
and shall include any person who, under the applicable standards of professional
conduct then prevailing, would not have a conflict of interest in representing
either the Corporation or the claimant in an action to determine the claimant's
rights under this Bylaw.

     (K)  Any notice, request or other communication required or permitted to be
given to the Corporation under this Bylaw shall be in writing and either
delivered in person or sent by telecopy, telex, telegram, overnight mail or
courier service, or certified or registered mail, postage prepaid, return
receipt requested, to the Secretary of the Corporation and shall be effective
only upon receipt by the Secretary.

Section 2.   Fiduciaries of Corporate Employee Benefit Plan.

      This Article VI does not apply to any proceeding against any trustee,
investment manager or other fiduciary of an employee benefit plan in such
person's capacity as such, even though such person may also be an agent of the
corporation as defined in Section 1 of this Article VI.  Nothing contained in
this Article VI shall limit any right to indemnification to which such a
trustee, investment manager or other fiduciary may be entitled by contract or
otherwise, which shall be enforceable to the extent permitted by Section 410 of
the Employee Retirement Income Security Act of 1974, as amended, other than this
Article VI.

                                      -14-


                                  ARTICLE VII

                              RECORDS AND REPORTS

Section 1.   Maintenance and Inspection of Stock Register.

     The corporation shall keep at its principal executive office, or at the
office of its transfer agent or registrar, if either be appointed, and as
determined by resolution of the board of directors, a record of its
stockholders, giving the names and addresses of all stockholders and the number
and class of shares held by each stockholder.

     A stockholder or stockholders of the corporation holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation may (i) inspect and copy the records of stockholders' names and
addresses and stockholders during usual business hours upon five days prior
written demand upon the corporation, and/or (ii) obtain from the transfer agent
of the corporation, upon written demand and upon the tender of such transfer
agent's usual charges for such list, a list of the stockholders' names and
addresses, who are entitled to vote for the election of directors, and their
shareholdings as of the most recent record date for which such list has been
compiled or as of a date specified by the stockholder subsequent to the date of
demand.  Such list shall be made available to such stockholder or stockholders
by the transfer agent on or before the later of five (5) days after the demand
is received or the date specified therein as the date as of which the list is to
be compiled.

     The record of stockholders shall be open to inspection upon the written
demand of any stockholder or holder of a voting trust certificate, at any time
during usual business hours, for a purpose reasonably related to such holder's
interests as a stockholder or as the holder of a voting trust certificate.  Any
inspection and copying under this Section 1 may be made in person or by an agent
or attorney of the stockholder or holder of a voting trust certificate making
such demand.

Section 2.   Maintenance and Inspection of Bylaws.

     The corporation shall keep at its principal executive office the original
or a copy of the bylaws as amended to date, which shall be open to inspection by
the stockholders at all reasonable times during office hours.

Section 3.   Maintenance and Inspection of Other Corporate Records.

     The accounting books and records and minutes of proceedings of the
stockholders and the board of directors and any committee or committees of the
board of directors shall be kept at such place or places designated by the board
of directors, or, in the absence of such designation, at the principal executive
office of the corporation. The minutes shall be kept in written form and the
accounting books and records shall be kept either in written form or in any
other form capable of being converted into written form. Such minutes and
accounting books and records shall be open to inspection upon the written demand
of any stockholder or holder of a voting trust certificate, at any reasonable
time during usual business hours, for a purpose reasonably related to such
holder's interests as a stockholder or as a holder of a voting trust
certificate. Such inspection may be made in person or by an agent or attorney,
and shall include the right to copy and make extracts. The foregoing rights of
inspection shall extend to the records of each subsidiary corporation of the
corporation.

Section 4.   Inspection by Directors.

     Every director shall have the absolute right at any reasonable time to
inspect all books, records and documents of every kind and the physical
properties of the corporation and each of its subsidiary corporations. Such
inspection by a director may be made in person or by agent or attorney and the
right of inspection includes the right to copy and make extracts.

                                      -15-


Section 5.   Annual Report to Stockholders.

     The board of directors shall cause an annual report to be sent to the
stockholders not later than one hundred twenty (120) days after the close of the
fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days prior to the annual meeting of stockholders to be held during
the next fiscal year and in the manner specified in Section 5 of Article II of
these bylaws for giving notice to stockholders of the corporation. The annual
report shall contain a balance sheet and statement of changes in financial
position for such fiscal year, accompanied by any report thereon of independent
accountants.

Section 6.   Financial Statements.

     A copy of any annual financial statement and any income statement of the
corporation for each quarterly period of each fiscal year, and any accompanying
balance sheet for the corporation as of the end of each such period, that has
been prepared by the corporation shall be kept on file in the principal
executive office of the corporation for twelve (12) months and each such
statement shall be exhibited at all reasonable times to any stockholder
demanding an examination of any such statement or a copy shall be mailed to any
such stockholder.

     If a stockholder or stockholders holding at least five percent (5%) of the
outstanding shares of any class of stock of the corporation make a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the current fiscal year ended
more than thirty (30) days prior to the date of the request, and a balance sheet
of the corporation as of the end of such period, the treasurer shall cause such
statement to be prepared, if not already prepared, and shall deliver personally
or mail such statement or statements to the person making the request within
thirty (30) days after the receipt of such request. If the corporation has not
sent to the stockholders its annual report for the last fiscal year, this report
shall likewise be delivered or mailed to such stockholder or stockholders within
thirty (30) days after such request.

     The corporation also shall, upon the written request of any stockholder,
mail to the stockholder a copy of the last annual, semi-annual or quarterly
income statement which it has prepared and a balance sheet as of the end of such
period.

     The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report thereon, if any, of any independent
accountants engaged by the corporation, or the certificate of an authorized
officer of the corporation that such financial statements were prepared without
audit from the books and records of the corporation.

                                  ARTICLE VIII

                           GENERAL CORPORATE MATTERS

Section 1.   Record Date for Purposes Other Than Notice and Voting.

     For purposes of determining the stockholders entitled to receive payment of
any dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any other lawful action, the board of
directors may fix, in advance, a record date, which shall not be more than sixty
(60) days prior to any such action, and in such case only stockholders of record
on the date so fixed are entitled to receive the dividend, distribution or
allotment of rights or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date fixed as aforesaid, except as otherwise provided in the Delaware
General Corporation Law.

     If the board of directors does not so fix a record date, the record date
for determining stockholders for any such purpose shall be at the close of
business on the day on which the board adopts the resolution relating thereto,
or the sixtieth (60th) day prior to the date of such action, whichever is later.

                                      -16-


Section 2.   Checks, Drafts, Evidences of Indebtedness.

     All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness, issued in the name of or payable to the corporation
shall be signed or endorsed by such person or persons and in such manner as,
from time to time, shall be determined by resolution of the board of directors.

Section 3.   Corporate Contracts and Instruments; How Executed.

     The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the corporation, and
such authority may be general or confined to specific instances; and, unless so
authorized or ratified by the board of directors or within the agency power of
an officer, no officer, agent or employee shall have any power or authority to
bind the corporation by any contract or engagement or to pledge its credit or to
render it liable for any purpose or to any amount.

Section 4.   Stock Certificates.

     A certificate or certificates for shares of the capital stock of the
corporation shall be issued to each stockholder when any such shares are fully
paid. All certificates shall be signed in the name of the corporation by the
chairman of the board or the president or vice president and by the treasurer or
an assistant treasurer or the secretary or any assistant secretary, certifying
the number of shares and the class or series of shares owned by the stockholder.
Any or all of the signatures on the certificate may be facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the corporation with the same effect as if such person were an officer,
transfer agent or registrar at the date of issue.

Section 5.   Lost Certificates.

     Except as hereinafter in this Section 5 provided, no new stock certificate
shall be issued in lieu of an old certificate unless the latter is surrendered
to the corporation and canceled at the same time. The board of directors may in
case any stock certificate or certificate for any other security is lost, stolen
or destroyed, authorize the issuance of a new certificate in lieu thereof, upon
such terms and conditions as the board of directors may require, including
provision for indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of such certificate or the issuance of such
new certificate.

Section 6.   Representation of Stock of Other Corporations.

     The chairman of the board, the president, or any vice president, or any
other person authorized by resolution of the board of directors by any of the
foregoing designated officers, is authorized to vote on behalf of the
corporation any and all stock of any other corporation or corporations, foreign
or domestic, standing in the name of the corporation. The authority herein
granted to said officers to vote or represent on behalf of the corporation any
and all stock by the corporation in any other corporation or corporations may be
exercised by any such officer in person or by any person authorized to do so by
proxy duly executed by said officer.

Section 7.   Construction and Definitions.

     Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of the bylaws. Without limiting the generality of the
foregoing, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.

                                      -17-


Section 8.   Fiscal Year.

     The fiscal year of the corporation shall commence the first day of the
calendar year.

Section 9.   Seal.

     The seal of the corporation shall be round and shall bear the name of the
corporation and words and figures denoting its organization under the laws of
the State of Delaware and year thereof, and otherwise shall be in such form as
shall be approved from time to time by the board of directors.

                                   ARTICLE IX

                                   AMENDMENTS

Section 1.   Amendment by Stockholders.

     New bylaws may be adopted or these bylaws may be amended or repealed by the
vote of not less than 80% of the total voting power of all shares of stock of
the corporation entitled to vote in the election of directors, considered for
purposes of this Section 1 as one class.

Section 2.   Amendment by Directors.

     Subject to the rights of the stockholders as provided in Section 1 of this
Article IX, to adopt, amend or repeal bylaws, bylaws may be adopted, amended or
repealed by the board of directors.



     Amended :  10/25/01

                                      -18-



                                                                 Exhibit 10.28.2


                              AMENDMENT No. 2 to

                       EXECUTIVE DEFERRED RETIREMENT PLAN

The Executive Deferred Retirement Plan (the "Plan"), amended and restated as of
December 23, 1994, is hereby further amended effective December 1, 2001, as
follows:

1.   Section 5.1 "Retirement Benefit"  The second sentence of the second
                 ------------------
paragraph beginning with "This election ..." is deleted.

2.   Section 5.8 "Maximum Payout Period" is amended to read as follows:
                  ---------------------

     "Notwithstanding any Eligible Employee's election to the contrary, the
     maximum number of years over which retirement Benefits may be paid from the
     Plan shall be limited as follows:

          (i) Retirement ages 55-59 - lump sum or over five or ten years;
          (ii) Retirement ages 60-61 - lump sum or over five, ten or fifteen
          years; or
          (iii)  Retirement ages 62 and above - lump sum or over five, ten,
          fifteen or twenty years;

     provided that in cases of involuntary or mutual separation or termination
     the Chief Executive Officer or Senior Vice President, Human Resources shall
     have the right to extend the payment period, as elected by the Participant
     at least 13 months prior to retirement without regard to the limits in (i)
     or (ii) above, subject to the Participant being eligible for Early
     Retirement."

3.   All other terms and conditions of the Plan remain in full force and effect.



                                                                 Exhibit 10.29.1

                              AMENDMENT No. 1 to

                     EXECUTIVE LEADERSHIP COMPENSATION PLAN

The Executive Leadership Compensation Plan (the "Plan"), dated January 1, 1999,
is hereby amended effective March 1, 2001, as follows:

1.   Section 4e "Bonus Determination In Cases Of Termination" is amended to read
as follows:

     "Participants who terminate prior to payment of the award for any reason
     other than death, disability, or retirement are not eligible to receive
     awards under this Plan, unless approved by the Chief Executive Officer or
     the Senior Vice President, Human Resources."

2.   All other terms and conditions of the Plan remain in full force and effect.



                                                                 Exhibit 10.30.1

                              AMENDMENT No. 1 to

                 SENIOR EXECUTIVE LEADERSHIP COMPENSATION PLAN

The Senior Executive Leadership Compensation Plan (the "Plan"), dated January 1,
1999, is hereby amended effective March 1, 2001, as follows:

1.   Section 4e "Bonus Determination In Cases Of Termination" is amended to read
as follows:

     "Participants who terminate prior to payment of the award for any reason
     other than death, disability, or retirement are not eligible to receive
     awards under this Plan, unless approved by the Chief Executive Officer or
     the Senior Vice President, Human Resources."

2.   All other terms and conditions of the Plan remain in full force and effect.



                                                                 Exhibit 10.31.3

                              AMENDMENT No. 2 to

                  EXECUTIVE VARIABLE DEFERRED RETIREMENT PLAN

The Executive Variable Deferred Retirement Plan (the "Plan"), amended and
restated as of December 1, 1997, is hereby amended effective December 1, 2001,
as follows:

1.  Section 4.3 "Maximum Deferral" is amended to read as follows:
                 ----------------

     "The standard maximum amount of Annual Deferral that may be deferred shall
     be 10% of an Eligible Employee's Annual Base Salary and 20% of an Eligible
     Employee's Bonus; provided that officers of the Company may defer up to 50%
     of their Annual Base Salary, and up to 100% of their Bonus with the
     approval of the Administrator.  The maximum deferral amount is established
     at the discretion of the Administrator."

2.   Section 7.3 "Maximum Payout Period" is amended to read as follows:
                  ---------------------

     "Notwithstanding any Eligible Employee's election to the contrary, the
     maximum number of years over which retirement Benefits may be paid from the
     Plan shall be limited as follows:

          (i) Retirement ages 55-59 - lump sum or over five or ten years;
          (ii) Retirement ages 60-61 - lump sum or over five, ten or fifteen
          years; or
          (iii)  Retirement ages 62 and above - lump sum or over five, ten,
          fifteen or twenty years;

     provided that in cases of involuntary or mutual separation or termination
     the Chief Executive Officer or Senior Vice President, Human Resources shall
     have the right to extend the payment period, as elected by the Participant
     at least 13 months prior to retirement without regard to the limits in (i)
     or (ii) above, subject to the Participant being eligible for Early
     Retirement."

3.   All other terms and conditions of the Plan remain in full force and effect.



                                                                 Exhibit 10.32.1


                              AMENDED AND RESTATED

                          BENEFIT RESTORATION PLAN OF

                           AVERY DENNISON CORPORATION

Avery Dennison Corporation, a Delaware corporation, adopted the Benefit
Restoration Plan of Avery Dennison Corporation (the "Plan"), effective as of
December 1, 1994 (the "Effective Date"), for the benefit of its eligible
Employees.  The Plan is amended and restated effective as of June 1, 2001.

The Plan constitutes an unfunded "excess benefit plan" within the meaning of
Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA").  The Plan is maintained primarily for the purpose of providing
deferred Compensation for a select group of management or highly compensated
employees, within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(1).

                            ARTICLE I - DEFINITIONS

Whenever the following terms are used in the Plan with the first letter
capitalized, they shall have the meaning specified below unless the context
clearly indicates to the contrary.

"Actuarial Equivalent" shall mean the equivalent of a given Benefit or a given
amount payable in another manner or by other means, determined by or under the
direction of the Administrator in accordance with actuarial principles, methods
and assumptions which are found to be appropriate by the Enrolled Actuary,
acting independently of the Administrator or the Company and in the exercise of
his sole professional judgment.  Such principles, methods and assumptions,
however, shall be reasonable in the aggregate and shall constitute the Enrolled
Actuary's best estimate of anticipated experience under the Plan.  Such
assumptions shall include at any time, those assumptions then in effect under
the Qualified Plan.  For purposes of calculating lump sum amounts under Section
5.2, such assumptions shall be those set those set forth in Sections 1.2(a)(i)b
                                                                              -
and 1.2(a)(ii)b of the Qualified Plan.
              -

"Administrator" shall mean Avery Dennison Corporation, acting through its Board
or its delegates, except that if it appoints a Committee under Section 6.4, the
term "Administrator" shall mean the Committee as to those duties, powers and
responsibilities specifically conferred upon the Committee.  Avery Dennison
Corporation shall have all duties and responsibilities imposed by ERISA, except
as specifically assigned to, delegated to or reserved to the Board, and the
Committee under the Plan

"Beneficiary" shall mean a person or trust properly designated by a Participant
or Former Participant in the manner provided in the Qualified Plan.

"Benefit" of a Participant shall mean the benefit payable pursuant to Article
IV.

"Board" shall mean the Board of Directors of Avery Dennison Corporation.  The
Board may delegate any power or duty otherwise allocated to the Administrator to
any other person or persons, including a Committee appointed under Section 6.4.

"CEO" shall mean the Chief Executive Officer of Avery Dennison Corporation.


"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time.

"Committee" shall mean the BRP Committee of Avery Dennison Corporation, as
appointed pursuant to Section 6.4, if any.

"Company" shall mean Avery Dennison Corporation, any other company which
subsequently adopts the Plan as a whole or as to any one or more divisions, in
accordance with Section 7.3(b), and any successor company which continues the
Plan under Section 7.3(a).

"Company Affiliate" shall mean any employer which, at the time of reference,
was, with the Company, a member of a controlled group of corporations or trades
or businesses under common control, or a member of an affiliated service group,
as determined under regulations issued by the Secretary under Code Sections
414(b), (c), (m) and 415(h) and any other entity required to be aggregated with
the Company pursuant to regulations issued under Code Section 414(o).

"Compensation Committee" shall mean the Compensation and Executive Personnel
Committee of the Board.

"Effective Date" shall mean the effective date of the Plan, which shall be
December 1, 1994.

"Employee" shall mean any person who renders services to the Company in the
status of an employee as the term is defined in Code Section 3121(d), excluding:
(i) any person retained to render services as an independent contractor; (ii)
leased Employees treated as Employees of the Company pursuant to Code Sections
414(n) and 414(o); (iii) employees of a Company Affiliate or (iv) any person
whose services with the Company are performed pursuant to a contract or an
arrangement that purports to treat the individual as an independent contractor
even if such individual is later determined (by judicial action or otherwise) to
have been a common law employee of the Company rather than an independent
contractor; provided, however,  that "Employee" shall also mean any Included
Affiliate Employee.

For purposes of this Plan, a United States citizen shall be treated as an
employee of the Company if he is employed by a foreign subsidiary of the Company
or a Company Affiliate to which there applies an agreement under Section 3121(a)
of the Code and if no contributions to a funded plan of deferred compensation
(whether or not a plan described in Sections 401(a), 403(a) or 405(a) of the
Code) are provided by any other person with respect to the compensation paid to
such citizen by the foreign subsidiary, unless otherwise elected by the Vice
President, Compensation and Benefits of Avery Dennison Corporation

"Enrolled Actuary" shall mean the person enrolled by the Joint Board for the
Enrollment of Actuaries established under subtitle C of title III of ERISA who
has been engaged by the Administrator on behalf of all Participants to make and
render all necessary actuarial determinations, statements, opinions,
assumptions, reports and valuations under the Plan as required by law or
requested by the Administrator.

"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.

"Former Participant" shall mean a Participant who has had a Separation from the
Service.

                                       2


"Included Affiliate Employee" shall mean any person who is employed by a Company
Affiliate and would not be an Employee but for the fact that the Vice President,
Compensation and Benefits of Avery Dennison Corporation has determined that he
be so treated.

"Military Leave" shall mean leave subject to reemployment rights under the
Uniformed Services Employment and Reemployment Rights Act of 1994, as amended
from time to time.  Any Employee who leaves the Company or a Company Affiliate
directly to perform service in the Armed Forces of the United States or in the
United States Public Health Service under conditions entitling him to such
reemployment rights shall, solely for the purposes of the Plan and irrespective
of whether he is compensated by the Company or such Company Affiliate during
such period of service, be presumed an Employee on Military Leave.  An
Employee's Military Leave shall expire if such Employee voluntarily resigns from
the Company or such Company Affiliate during such period of service, or if he
fails to make application for reemployment within the period specified by such
laws for the preservation of his reemployment rights.  For purposes of computing
an Employee's service, no more than 365 days of service shall be credited for
any Military Leave except as required by Treas. Reg. Section 1.410(a) - 7(b) (6)
(iii).

"Participant" means any person included in the Plan as provided in Article II.

"Plan" shall mean the Benefit Restoration Plan of Avery Dennison Corporation.

"Plan Year" shall be the twelve month period from December 1 through the last
day of the following November, including all such years prior to the adoption of
the Plan.

"Qualified Benefit" of a Participant for a Plan Year shall mean the benefit
calculated pursuant to Article IV of the Qualified Plan (as applicable based
upon the circumstances of the Participant's Separation from the Service).

"Qualified Plan" shall mean The Retirement Plan for Employees of Avery Dennison
Corporation, as in effect on the date hereof and as may be amended from time to
time.

"Separation from the Service" of an Employee shall mean his resignation from or
discharge by the Company or a Company Affiliate, his death, or Early, Normal,
Late or Disability Retirement as defined under the Qualified Plan, but not his
transfer among the Company and Company Affiliates.  A leave of absence or sick
leave authorized by the Company or a Company Affiliate in accordance with
established policies, a vacation period, a temporary layoff for lack of work or
a Military Leave shall not constitute a Separation from the Service; provided,
however, that (i) continuation upon a temporary layoff for lack of work for a
period in excess of twelve months shall be considered a discharge effective as
of the expiration of the twelfth month of such period, and (ii) failure to
return to work upon expiration of any leave of absence, sick leave, Military
Leave or vacation or within three days after recall from a temporary layoff for
lack of work shall be considered a resignation effective as of the date of
expiration of such leave of absence, sick leave, Military Leave, vacation, or
the expiration of the third day after recall from any such temporary layoff.

"Vested Benefit" of a Participant on a given date shall mean the Benefit
provided hereunder if the Participant were to have a Separation from the Service
on such date with a "Vested Retirement Benefit" under the Qualified Plan.

                                       3


                            ARTICLE II -ELIGIBILITY

Section 2.1 - Requirements for Participation

Only those Employees of the Company who satisfy criteria set by the
Administrator from time to time, shall be Participants.  Such criteria are set
forth in Appendix A, which may be updated from time to time without formal
amendment of the Plan.  The Administrator shall have the power to change or
revoke such criteria hereunder in its sole discretion on a prospective basis,
and any change or revocation by the Board, the Compensation Committee, the CEO,
the Administrator or the Committee shall be binding and final on all Employees,
Beneficiaries and other interested persons.

                       ARTICLE III - FUNDING OF BENEFITS

Section 3.1 - Source of Benefits

The Plan shall be unfunded.  All benefits payable under the Plan shall be paid
from the Company' general assets, and nothing contained in the Plan shall
require the Company to set aside or hold in trust any funds for the benefit of a
Participant or his Beneficiary, each of whom shall have the status of a general
unsecured creditor with respect to the Company's obligation to make payments
under the Plan.  Any funds of the Company available to pay benefits under the
Plan shall be subject to the claims of general creditors of the Company and may
be used for any purpose by the Company.

                             ARTICLE IV - BENEFITS

Section 4.1 - Determination of Benefits

(a)  Unless otherwise described in Appendix B, a Participant's Benefit shall be
     the excess of

     (i)  the total, for each Plan Year which commenced on or after the
          Effective Date and for which the Participant was entitled to accrue a
          benefit hereunder, of the Qualified Benefit, but

          a    with "Compensation," as defined in the Qualified Plan,
          -

               1  determined without reference to the limitations of Code
               -
                  Section 401(a)(17) ($150,000 annual limit adjusted for
                  increases in the cost of living), and

               2  including the Participant's deferrals under the Company's non-
               -
                  qualified deferred compensation program earned on or after the
                  Effective Date, and

          b    without application of the limitation on benefits under Code
          -
               Section 415, over

     (ii) the total of the actual Qualified Benefits for such years, but not
          less than zero.

                                       4


                        ARTICLE V - PAYMENT OF BENEFITS

Section 5.1 - Beneficiary; Form of Benefits

Each Participant shall designate his Beneficiary and elect the form and the
timing of his Benefits hereunder in accordance with the procedures set forth in
the Qualified Plan; provided, however, that any designations and/or elections
made by Participant under Article IV of the Qualified Plan with respect to his
"Benefits" thereunder shall be equally applicable to his Benefits under this
Plan.  The intent of this Section is that each Participant shall make a single
set of elections applicable to both the Qualified Plan and this Plan.

Section 5.2 - Payment of Benefits

A Participant's Benefits shall be paid in accordance with Section 5.1, except
that a Participant will receive his Benefit in an Actuarially Equivalent lump
sum if it would otherwise have been paid in the form of an annuity with monthly
payments of less than $300.

Section 5.3 - Forfeitures

If a Participant has a Separation from the Service while all or any portion of
his Benefit is not a Vested Benefit, such portion of his Benefit shall
immediately be forfeited.

                     ARTICLE VI - ADMINISTRATIVE PROVISIONS

Section 6.1 - Administrator's Duties and Powers

(a)  The Administrator shall conduct the general administration of the Plan in
     accordance with the Plan and shall have all the necessary power and
     authority to carry out that function.  Among its necessary powers and
     duties are the following:

     (i)    To delegate all or part of its function as Administrator to others
            and to revoke any such delegation.

     (ii)   To determine questions of vesting of Participants and their
            entitlement to benefits, subject to the provisions of Section 6.11.

     (iii)  To select and engage attorneys, accountants, actuaries, appraisers,
            brokers, consultants, administrators, physicians, the Committee
            under Section 6.4, or other persons to render service or advice with
            regard to any responsibility the Administrator or the Board has
            under the Plan, or otherwise, to designate such persons to carry out
            fiduciary responsibilities under the Plan, and (with the Committee,
            the Companies, the Board and its officers, and Employees) to rely
            upon the advice, opinions or valuations of any such persons, to the
            extent permitted by law, being fully protected in acting or relying
            thereon in good faith.

     (iv)   To interpret the Plan for purpose of the administration and
            application of the Plan, in a manner not inconsistent with the Plan
            or applicable law and to amend or revoke any such interpretation.

     (v)    To conduct claims procedures as provided in Section 6.11

                                       5


(b)  Every finding, decision and determination made by the Administrator shall,
     to the full extent permitted by law, be final and binding upon all parties,
     except to the extent found by a court of competent jurisdiction to
     constitute an abuse of discretion.

Section 6.2 - Limitations Upon Power

The Plan shall be uniformly and consistently administered, interpreted and
applied with regard to all Participants in similar circumstances.  The Plan
shall be administered, interpreted and applied fairly and equitably and
accordance with the specified purposes of the Plan.

Section 6.3 - Final Effect of Administrator Action

Except as provided in Section 6.11, all actions taken and all determinations
made by the Administrator in good faith shall be final and binding upon all
Participants and any person interested in the Plan.

Section 6.4 - Committee

The Administrator may, but need not, appoint a BRP Committee consisting of three
or more members to hold office during the pleasure of the Administrator.  The
Committee shall have such powers and duties as are delegated to it by the
Administrator. Committee members shall not receive payment for their services as
such.

Section 6.5 - Resignation

A Committee member may resign at any time by delivering written notice to the
Administrator.

Section 6.6 - Vacancies

Vacancies in the Committee shall be filled by the Administrator.

Section 6.7 - Majority Rule

The Committee shall act by a majority of its members in office; provided,
however, that the Committee may appoint one of its members or a delegate to act
on behalf of the Committee on matters arising in the ordinary course of
administration of the Plan, or on specific matters.

Section 6.8 - Indemnification by the Company; Liability Insurance

(a)  The Company shall pay or reimburse any of the Company's officers,
     directors, Committee members or Employees who are fiduciaries with respect
     to the Plan for all expenses incurred by such persons in, and shall
     indemnify and hold them harmless from, all claims, liability and costs
     (including reasonable attorneys' fees) arising out of the good faith
     performance of their fiduciary functions.

(b)  The Company may obtain and provide for any such person, at the Company's
     expense, liability insurance against liabilities imposed on him by law.

Section 6.9 - Recordkeeping

(a)  The Administrator shall maintain suitable records as follows:

                                       6


     (i)    Records of each Participant's individual Benefit.

     (ii)   Records which show the operations of the Plan during each Plan Year.

     (iii)  Records of the Administrator's deliberations and decisions.

(b)  The Administrator shall appoint a secretary, and at its discretion, an
     assistant secretary, to keep the record of proceedings, to transmit its
     decisions, instructions, consents or directions to any interested party, to
     execute and file, on behalf of the Committee, such documents, reports or
     other matters as may be necessary or appropriate to perform ministerial
     acts.

(c)  The Administrator shall not be required to maintain any records or
     accounts, which duplicate any records or accounts maintained by the
     Company.

Section 6.10 - Inspection of Records

Copies of the Plan and records of a Participant's Benefit shall be open to
inspection by him or his duly authorized representatives at the office of the
Administrator at any reasonable business hour.

Section 6.11 - Claims Procedure

The claims procedures hereunder shall be in accordance with the claims
procedures set forth in the Qualified Plan; provided that for purposes of the
claims procedure under this Plan, the review official described in the Qualified
Plan shall be the President of the Company.

Section 6.12 - Conflicting Claims

The procedures for the resolution of conflicting claims by the Committee shall
be in accordance with the procedures set forth in the applicable section of the
Qualified Plan.

Section 6.13 - Service of Process

The Secretary of the Avery Dennison Corporation is hereby designated as agent of
the Plan for the service of legal process.

                     ARTICLE VII - MISCELLANEOUS PROVISIONS

Section 7.1 - Amendment, Termination or Suspension of the Plan

(a)  The Plan may be amended or terminated by the Board or the Compensation
     Committee at any time; the CEO may amend the Plan at any time.  Such
     amendment or termination may modify or eliminate any benefit hereunder
     other than a benefit or a portion of a benefit that is a Vested Benefit.

(b)  If the Board determines that payments under the Plan would have a material
     adverse effect on the Company's ability to carry on its business, the Board
     may suspend such payments temporarily for such time as in its sole
     discretion it deems advisable, but in no event for a period in excess of
     one year.  The Company shall pay such suspended payments immediately upon
     the expiration of the period of suspension.

                                       7


(c)  The Plan is intended to provide benefits for a "select group of management
     or highly compensated employees" within the meaning of Sections 201, 301
     and 401 of ERISA, and therefore to be exempt from the provisions of Parts
     2, 3 and 4 of Title I of ERISA.  Accordingly, the Plan shall terminate and,
     except for benefits or portions of benefits that have vested (which at the
     option of the Board, may be accelerated and the balance paid in a single,
     Actuarial Equivalent lump sum), no further benefits shall be paid hereunder
     in the event it is determined by a court of competent jurisdiction or by an
     opinion of the Company's regular outside employee benefits counsel that the
     Plan constitutes an employee pension benefit plan within the meaning of
     Section 3(2) of ERISA which is not so exempt.

Section 7.2 - Limitation on Rights of Employees

The Plan is strictly a voluntary undertaking on the part of the Company and
shall not constitute a contract between the Company and any Employee, or
consideration for, or an inducement or condition of, the employment of an
Employee.  Nothing contained in the Plan shall give any Employee the right to be
retained in the service of the Company or to interfere with or restrict the
right of the Company, which is hereby expressly reserved, to discharge or retire
any Employee, except as provided by law, at any time without notice and with or
without cause.  Inclusion under the Plan will not give any Employee any right or
claim to any benefit hereunder except to the extent such right has specifically
become fixed under the terms of the Plan and there are funds available therefor
in the hands of the Company.  The doctrine of substantial performance shall have
no application to Employees, Participants or any other persons entitled to
payments under the Plan.  Each condition and provision, including numerical
items, has been carefully considered and constitutes the minimum limit on
performance, which will give rise to the applicable right.

Section 7.3 -  Plan Binding in Event of Consolidation or Merger; Adoption of
               Plan by Other Companies

(a)  In the event of the consolidation or merger of a Company with or into any
     other corporation, this Plan shall be binding on such new corporation.

(b)  Any Company or Company Affiliate may, with the approval of the Board, the
     Compensation Committee or the CEO, adopt the Plan as a whole company or as
     to any one or more divisions effective as of the first day of any Plan Year
     by resolution of its own board of directors or agreement of its partners.
     Such Company or Company Affiliate shall give written notice of such
     adoption to the Committee by its duly authorized officers.

Section 7.4 - Assignments, etc.  Prohibited

Except for the withholding of any tax under the laws of the United States or any
state or locality, no part of a Participant's Benefit hereunder shall be liable
for the debts, contracts or engagements of any Participant, his Beneficiaries or
successors in interest, or be taken in execution by levy, attachment or
garnishment or by any other legal or equitable proceeding prior to distribution,
nor shall any such person have any rights to alienate, anticipate, commute,
pledge, encumber or assign any Benefits or payments hereunder in any manner
whatsoever except to designate a Beneficiary as provided herein.

                                       8


Section 7.5 - Errors and Misstatements

In the event of any misstatement or omission of fact by a Participant to the
Committee or any clerical error resulting in payment of benefits in an incorrect
amount, the Committee shall promptly cause the amount of future payments to be
corrected upon discovery of the facts and shall cause the Company to pay the
Participant or any other person entitled to payment under the Plan any
underpayment in cash in a lump sum or to recoup any overpayment from future
payments to the Participant or any other person entitled to payment under the
Plan in such amounts as the Committee shall direct or to proceed against the
Participant or any other person entitled to payment under the Plan for recovery
of any such overpayment.

Section 7.6 - Payment on Behalf of Minor, Etc.

In the event any amount becomes payable under the Plan to a minor or a person
who, in the sole judgment of the Committee is considered by reason of physical
or mental condition to be unable to give a valid receipt therefore, the
Committee may direct that such payment be made to any person found by the
Committee in its sole judgment, to have assumed the care of such minor or other
person.  Any payment made pursuant to such determination shall constitute a full
release and discharge of the Company, the Board, the Committee and their
officers, directors and employees.

Section 7.7 - Governing Law

This Plan shall be construed, administered and governed in all respects under
and by applicable federal laws and, where, state law is applicable, the laws of
the State of California.

Section 7.8 - Pronouns and Plurality

The masculine pronoun shall include the feminine pronoun, and the singular the
plural where the context so indicates.

Section 7.9 - Titles

Titles are provided herein for convenience only and are not to serve as a basis
for interpretation or construction of the Plan.

Section 7.10 - References

Unless the context clearly indicates to the contrary, a reference to a statute,
regulation or document shall be construed as referring to any subsequently
enacted, adopted or executed statute, regulation or document.

                                       9


                      APPENDIX A - PARTICIPATION CRITERIA

Participation in the Plan shall be limited to Employees of the Company, selected
by the Administrator, who satisfy the following criteria:


          1.   Employees whose Compensation, as determined under Section
               4.1(a)(i) a 1 and 2 of this Plan, exceeds the limitations of Code
                         - -     -
               Section 401(a)(17) (the $150,000 annual limit adjusted for
               increases in the cost of living) ($160,000 in the 2000 Plan
               Year), and as amended thereafter.

          2.   Effective December 1, 1998, Employees who participate in the
               Company's non-qualified deferred compensation program, regardless
               of whether they satisfy criterion 1. above.

          3.   Present or former employees of the Company (or any present or
               former direct or indirect subsidiary) listed on Appendix B.

The criteria in this Appendix may be changed or revoked by the Administrator at
any time and without formal amendment, as provided under Section 2.1 of the
Plan.

                                       10


                     APPENDIX B - SPECIAL BENEFIT SCHEDULE


Notwithstanding any provisions of the Plan to the contrary, the following
individuals shall receive the following indicated benefits under the Plan:


     Recipient           Benefit
     ---------           -------

     Nelson Gifford      $3,858.57 per month for life, commencing June 1, 2001

                                       11



                                                                 Exhibit 10.34.3

                              AMENDMENT No. 2 to

                           CAPITAL ACCUMULATION PLAN

The Capital Accumulation Plan (the "Plan"), amended and restated as of September
16, 1998, is hereby further amended effective December 1, 2001, as follows:

1.  Article 3.2 "Participation Election"

     a.  The third sentence is amended to read as follows:

          "In the Participation Election Form, the Participant shall designate
          (i) for Eligible Employees, the total dollar amount of Deferrals to be
          made under the Plan during the Deferral Period (as a whole multiple of
          Total Compensation to a maximum established by the Committee, which
          currently is six times Total Compensation, or, for non-employee
          Directors, the Stock Option Gains from Options to be deferred under
          the Plan during the Deferral Period (as a total number of Options to
          purchase up to a maximum of 18,000 shares of Stock), (ii) the form of
          Retirement Benefit distributions, and (iii) any other information or
          elections required by the Administrator."

2.  All other terms and conditions of the Plan remain in full force and effect.



                                                                      Exhibit 12

                          Avery Dennison Corporation
               Computation of Ratio of Earnings to Fixed Charges
                             (Dollars in Millions)



                                                               
                                                             2001          2000
                                                            ------        ------
     Earnings
     Income before taxes                                    $359.8        $426.3
     Add:  Fixed Charges*                                     75.0          74.9
           Amortization of capitalized interest                2.0           1.7
     Less: Capitalized interest                               (6.9)         (4.4)
                                                            ------        ------
                                                            $429.9        $498.5
                                                            ======        ======


     *Fixed charges:
           Interest expense                                 $ 50.2        $ 54.6
           Capitalized interest                                6.9           4.4
           Amortization of debt issuance costs                  .3            .4
           Interest portion of leases                         17.6          15.5
                                                            ------        ------
                                                            $ 75.0        $ 74.9
                                                            ======        ======

     Ratio of Earnings to Fixed Charges                        5.7           6.7
                                                            ======        ======

     




The ratios of earnings to fixed charges were computed by dividing earnings by
fixed charges.  For this purpose, "earnings" consist of income before taxes plus
fixed charges (excluding capitalized interest), and "fixed charges" consist of
interest expense, capitalized interest, amortization of debt issuance costs and
the portion of rent expense (estimated to be 35%) on operating leases deemed
representative of interest.



                                                                      Exhibit 13

                          Avery Dennison Corporation

FINANCIAL HIGHLIGHTS



(In millions, except per share amounts)                             2001           2000               1999
- --------------------------------------------------------------------------------------------------------------
                                                                                            
For the Year:

Net sales                                                           $3,803.3      $3,893.5           $3,768.2

Income before taxes                                                    359.8         426.3              330.4

Net income                                                             243.2         283.5              215.4

Net income as a percent of sales                                         6.4           7.3                5.7

Net income per common share, assuming dilution                      $   2.47      $   2.84           $   2.13

Dividends per common share                                              1.23          1.11                .99

Capital expenditures                                                   135.4         198.3              177.7

Return on average shareholders' equity (percent)                        27.4          34.6               27.1
=============================================================================================================




                           Avery Dennison Corporation

ELEVEN-YEAR SUMMARY



                                           Compound Growth Rate         2001/(1)/            2000               1999/(2)/
                                         ------------------------
(In millions, except per share amounts)     5 Year     10 Year     Dollars       %      Dollars       %      Dollars       %
- --------------------------------------------------------------------------------------------------------------------------------
                                                                                                 
FOR THE YEAR
Net sales                                    3.4%        4.1%     $3,803.3     100.0    $3,893.5    100.0    $3,768.2    100.0
Gross profit                                 4.0         4.5       1,240.2      32.6     1,332.2     34.2     1,281.4     34.0
Marketing, general and
     administrative expense                  3.1         2.4         830.5      21.8       851.3     21.9       842.6     22.4
Interest expense                             6.1         3.0          50.2       1.3        54.6      1.4        43.4      1.2
Income before taxes                          5.9        13.1         359.8       9.5       426.3     10.9       330.4      8.8
Taxes on income                              4.2        10.8         116.4       3.1       142.8      3.7       115.0      3.1
Net income                                   6.7        14.5         243.2       6.4       283.5      7.3       215.4      5.7
==============================================================================================================================


                                                  1998

(In millions, except per share amounts)      Dollars       %
- --------------------------------------------------------------
                                                  
FOR THE YEAR
Net sales                                   3,459.9     100.0
Gross profit                                1,144.5      33.1
Marketing, general and
     administrative expense                   773.2      22.3
Interest expense                               34.6       1.0
Income before taxes                           336.7       9.7
Taxes on income                               113.4       3.3
Net income                                    223.3       6.5
==============================================================




                                                                    2001          2000          1999       1998
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                      
PER SHARE INFORMATION
Net income per common share                  8.2%    17.2%    $     2.49    $      2.88    $    2.17    $    2.20
Net income per common share,
     assuming dilution                       8.7      N/A           2.47           2.84         2.13         2.15
Dividends per common share                  14.7     12.5           1.23           1.11          .99          .87
Average common shares outstanding           (1.4)    (2.3)          97.8           98.3         99.2        101.5
Average common shares outstanding,
     assuming dilution                      (1.7)     N/A           98.6           99.8        101.3        104.1
Book value at fiscal year end                3.4      3.5     $     9.49    $      8.49    $    8.20    $    8.33
Market price at fiscal year end              9.4     16.0          56.20          54.88        72.88        45.06
Market price range                                                 44.39 to       43.31 to     39.75 to     40.88 to
                                                                   60.24          78.00        72.88        60.75
- -----------------------------------------------------------------------------------------------------------------------------------

AT YEAR END
Working capital                                               $     31.2    $     181.7    $   105.6    $   137.7
Property, plant and equipment, net                               1,074.6        1,079.0      1,043.5      1,035.6
Total assets                                                     2,819.2        2,699.1      2,592.5      2,142.6
Long-term debt                                                     626.7          772.9        617.5        465.9
Total debt                                                         849.7          827.2        685.7        537.2
Shareholders' equity                                               929.4          828.1        809.9        833.3
Number of employees                                               17,300         17,900       17,400       16,100
- -----------------------------------------------------------------------------------------------------------------------------------

OTHER INFORMATION
Depreciation expense                                          $    124.1    $     126.0    $   126.5    $   114.6
Research and development expense                                    69.9           67.8         64.3         65.0
Effective tax rate                                                  32.4%          33.5%        34.8%        33.7%
Long-term debt as a percent of
     total long-term capital                                        40.3           48.3         43.3         35.9
Total debt as a percent of total capital                            47.8           50.0         45.8         39.2
Return on average shareholders'
     equity (percent)                                               27.4           34.6         27.1         26.7
Return on average total capital (percent)                           16.2           19.6         17.0         19.0
===================================================================================================================================


/(1)/  Results for 2001 include a pretax gain of $20.2 million from the sale of
       the Company's non-strategic specialty coatings business and a pretax cost
       reduction charge of $19.9 million.
/(2)/  Results for 1999 include a pretax cost reduction charge of $65 million.



                           Avery Dennison Corporation

ELEVEN-YEAR SUMMARY



       1997              1996               1995               1994                  1993
  Dollars    %      Dollars     %      Dollars     %      Dollars      %        Dollars
- ---------------------------------------------------------------------------------------------
                                                        
$  3,345.7   100.0   $3,222.5   100.0    $3,113.9  100.0    $2,856.7   100.0     $2,608.7
   1,082.7    32.4    1,018.3    31.6       957.3   30.7       907.8    31.8        818.1

     739.8    22.1      712.4    22.1       689.8   22.2       691.9    24.2        642.7
      31.7      .9       37.4     1.2        44.3    1.4        43.0     1.5         43.2
     311.2     9.3      270.6     8.4       224.7    7.2       172.9     6.1        132.2
     106.4     3.2       94.7     2.9        81.0    2.6        63.5     2.2         48.9
     204.8     6.1      175.9     5.5       143.7    4.6       109.4     3.8         84.4
=============================================================================================

                 1992               1991
   %      Dollars     %      Dollars     %
- -------------------------------------------
                          
100.0    $2,622.9  100.0    $2,545.1  100.0
 31.4       838.2   32.0       796.2   31.3

 24.6       665.7   25.4       653.9   25.7
  1.7        42.3    1.6        37.5    1.5
  5.1       130.2    5.0       104.8    4.1
  1.9        50.1    1.9        41.8    1.6
  3.2        80.1    3.1        63.0    2.5
===========================================




      1997         1996          1995             1994            1993               1992          1991
- ----------------------------------------------------------------------------------------------------------
                                                                             
 $    1.99      $    1.68    $     1.35       $     .98        $    .73         $      .66     $    .51

      1.93           1.63          1.32             .97             .72                .66          n/a
       .72            .62           .55             .50             .45                .41          .38
     103.1          105.0         106.5           111.1           115.9              120.8        123.9

     106.1          107.6         108.5           112.3           116.9              121.8          n/a
 $    8.18      $    8.03    $     7.69       $    6.81        $   6.40         $     6.82     $   6.73
     43.75          35.88         25.07           17.75           14.69              14.38        12.69
     33.38 to       23.88 to      16.63 to        13.32 to        12.75 to           11.63 to      9.69 to
     44.13          35.88         25.07           17.88           15.57              14.44        12.75
- ----------------------------------------------------------------------------------------------------------

 $   163.6      $   110.6    $    127.6       $   122.8        $  141.6         $    222.6     $  226.0
     985.3          962.7         907.4           831.6           758.5              779.9        814.2
   2,046.5        2,036.7       1,963.6         1,763.1         1,639.0            1,684.0      1,740.4
     404.1          370.7         334.0           347.3           311.0              334.8        329.5
     447.7          466.9         449.4           420.7           397.5              427.5        424.0
     837.2          832.0         815.8           729.0           719.1              802.6        825.0
    16,200         15,800        15,500          15,400          15,750             16,550       17,095
- ----------------------------------------------------------------------------------------------------------

 $   105.5      $   100.2    $     95.3       $    87.9        $   84.1         $     83.8     $   83.1
      61.1           54.6          52.7            49.1            45.5               46.7         48.7
      34.2 %         35.0 %        36.0 %          36.7 %          37.0 %             38.5 %       39.9 %

      32.6           30.8          29.0            32.3            30.2               29.4         28.5
      34.8           35.9          35.5            36.6            35.6               34.8         33.9

      24.8           21.4          18.6            14.8            11.0                9.7          7.7
      18.1           16.4          14.4            12.1             9.3                8.3          6.7
==========================================================================================================




                           Avery Dennison Corporation

CONSOLIDATED BALANCE SHEET



(Dollars in millions)                                                        2001                2000
- -------------------------------------------------------------------------------------------------------
                                                                                         
ASSETS
Current assets:
   Cash and cash equivalents                                               $   19.1            $   11.4
   Trade accounts receivable, less allowances
       of $37.5 and $37.4 for 2001 and 2000, respectively                     569.1               580.5
   Inventories, net                                                           267.4               271.5
   Deferred taxes                                                              61.1                64.5
   Other current assets                                                        65.8                54.5
- -------------------------------------------------------------------------------------------------------
       Total current assets                                                   982.5               982.4
Property, plant and equipment, net                                          1,074.6             1,079.0
Intangibles resulting from business acquisitions, net                         413.2               394.3
Other assets                                                                  348.9               243.4
- -------------------------------------------------------------------------------------------------------
                                                                           $2,819.2            $2,699.1
=======================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Short-term and current portion of long-term debt                        $  223.0            $   54.3
   Accounts payable                                                           316.4               326.4
   Accrued payroll and employee benefits                                      116.5               117.1
   Other accrued liabilities                                                  204.3               236.0
   Income taxes payable                                                        91.1                66.9
- -------------------------------------------------------------------------------------------------------
         Total current liabilities                                            951.3               800.7
Long-term debt                                                                626.7               772.9
Long-term retirement benefits and other accrued liabilities                   146.1               129.5
Non-current deferred taxes                                                     91.1                94.0
Other long-term obligation                                                     74.6                73.9
Shareholders' equity:
   Common stock, $1 par value, authorized - 400,000,000 shares at year
     end 2001 and 2000; issued - 124,126,624 shares at year end 2001
     and 2000                                                                 124.1               124.1
   Capital in excess of par value                                             707.2               692.0
   Retained earnings                                                        1,556.1             1,448.3
   Cost of unallocated ESOP shares                                            (13.7)              (15.3)
   Employee stock trusts, 12,008,123 shares and
     12,758,017 shares at year end 2001 and 2000, respectively               (674.5)             (699.9)
   Treasury stock at cost, 14,235,871 shares and
     13,881,533 shares at year end 2001 and 2000, respectively               (633.4)             (615.7)
   Accumulated other comprehensive loss                                      (136.4)             (105.4)
- -------------------------------------------------------------------------------------------------------
      Total shareholders' equity                                              929.4               828.1
- -------------------------------------------------------------------------------------------------------
                                                                           $2,819.2            $2,699.1
=======================================================================================================


See Notes to Consolidated Financial Statements



                          Avery Dennison Corporation

CONSOLIDATED STATEMENT OF INCOME



(In millions, except per share amounts)                                        2001        2000       1999
- ----------------------------------------------------------------------------------------------------------
                                                                                         
Net sales                                                                  $3,803.3    $3,893.5   $3,768.2
Cost of products sold                                                       2,563.1     2,561.3    2,486.8
- ----------------------------------------------------------------------------------------------------------
  Gross profit                                                              1,240.2     1,332.2    1,281.4
Marketing, general and administrative expense                                 830.5       851.3      842.6
Interest expense                                                               50.2        54.6       43.4
Other (income) expense, net                                                     (.3)          -       65.0
- ----------------------------------------------------------------------------------------------------------
  Income before taxes and accounting change                                   359.8       426.3      330.4
Taxes on income                                                               116.4       142.8      115.0
- ----------------------------------------------------------------------------------------------------------
  Income before accounting change                                             243.4       283.5      215.4
Cumulative effect of accounting change, net of tax                              (.2)          -          -
- ----------------------------------------------------------------------------------------------------------
  Net income                                                               $  243.2    $  283.5   $  215.4
==========================================================================================================
Per share amounts:
  Net income per common share                                              $   2.49    $   2.88   $   2.17
  Net income per common share, assuming dilution                               2.47        2.84       2.13
  Dividends                                                                    1.23        1.11        .99
Average shares outstanding:
  Common shares                                                                97.8        98.3       99.2
  Common shares, assuming dilution                                             98.6        99.8      101.3
==========================================================================================================
Common shares outstanding at year end                                          97.9        97.5       98.8
==========================================================================================================


See Notes to Consolidated Financial Statements



                          Avery Dennison Corporation

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY



                                                                                               Cost of
                                                     Common     Capital in                 unallocated
                                                    stock, $1    excess of      Retained          ESOP       Employee    Treasury
(Dollars in millions)                               par value    par value      earnings        shares   stock trusts       stock
- ---------------------------------------------------------------------------------------------------------------------------------
                                                                                                       
Fiscal year ended 1998                              $   124.1    $   587.5      $1,185.1     $   (18.3)    $   (677.6)   $ (359.4)

Comprehensive income:
 Net income                                                                        215.4
 Foreign currency translation adjustment
  Total comprehensive income
Repurchase of 2.4 million shares
 for treasury                                                                                                              (121.9)
Stock issued under option plans,
 net of $34 of tax and dividends paid on stock
 held in stock trusts                                                (23.0)                                      61.4

Dividends: $.99 per share                                                         (112.0)
ESOP transactions, net                                                                             1.5
Employee stock benefit trust market value
 adjustment                                                          397.8                                     (397.8)
- ---------------------------------------------------------------------------------------------------------------------------------
Fiscal year ended 1999                                  124.1        962.3       1,288.5         (16.8)      (1,014.0)     (481.3)

Comprehensive income:
 Net income                                                                        283.5
 Foreign currency translation adjustment
  Total comprehensive income
Repurchase of 2.4 million shares                                                                                           (134.4)
 for treasury
Stock issued under option plans,
 net of $36.3 of tax and dividends paid on stock
 held in stock trusts
Dividends: $1.11 per share                                           (28.9)       (123.7)                        72.7
ESOP transactions, net                                                                             1.5
Employee stock benefit trust market value
 adjustment                                                         (241.4)                                     241.4
- ---------------------------------------------------------------------------------------------------------------------------------
Fiscal year ended 2000                                  124.1        692.0       1,448.3         (15.3)        (699.9)     (615.7)

Comprehensive income:
 Net income                                                                        243.2
 Other comprehensive loss:
  Foreign currency translation adjustment
  Minimum pension liability adjustment
  Effective portion of gains or losses on cash
    flow hedges
    Other comprehensive loss
      Total comprehensive income
Repurchase of .4 million shares
 for treasury, net of shares issued                                                                                         (17.7)
Stock issued under option plans,
 net of $22.3 of tax and dividends paid on stock
 held in stock trusts                                                   .2                                       40.4

Dividends: $1.23 per share                                                        (135.4)
ESOP transactions, net                                                                             1.6
Employee stock benefit trust market value
 adjustment                                                           15.0                                      (15.0)
- ---------------------------------------------------------------------------------------------------------------------------------
Fiscal year ended 2001                              $   124.1    $   707.2      $1,556.1     $   (13.7)    $   (674.5)   $ (633.4)
=================================================================================================================================


                                                          Accumulated
                                                                other
                                                        comprehensive
(Dollars in millions)                                   income (loss)       Total
- ---------------------------------------------------------------------------------
                                                                   
Fiscal year ended 1998                                   $      (8.1)    $  833.3

Comprehensive income:
 Net income                                                                 215.4
 Foreign currency translation adjustment                       (44.8)       (44.8)
                                                                         --------
  Total comprehensive income                                                170.6
Repurchase of 2.4 million shares
 for treasury                                                              (121.9)
Stock issued under option plans,
 net of $34 of tax and dividends paid on stock
 held in stock trusts                                                        38.4

Dividends: $.99 per share                                                  (112.0)
ESOP transactions, net                                                        1.5
Employee stock benefit trust market value
 adjustment                                                                     -
- ---------------------------------------------------------------------------------
Fiscal year ended 1999                                         (52.9)       809.9

Comprehensive income:
 Net income                                                                 283.5
 Foreign currency translation adjustment                       (52.5)       (52.5)
                                                                         --------
  Total comprehensive income                                                231.0
Repurchase of 2.4 million shares
 for treasury                                                              (134.4)
Stock issued under option plans,
 net of $36.3 of tax and dividends paid on stock
 held in stock trusts                                                        43.8
Dividends: $1.11 per share                                                 (123.7)
ESOP transactions, net                                                        1.5
Employee stock benefit trust market value
 adjustment                                                                     -
- ---------------------------------------------------------------------------------
Fiscal year ended 2000                                        (105.4)       828.1

Comprehensive income:
 Net income                                                                 243.2
 Other comprehensive loss:
  Foreign currency translation adjustment                      (17.7)       (17.7)
  Minimum pension liability adjustment                         (14.3)       (14.3)
  Effective portion of gains or losses on cash
    flow hedges                                                  1.0          1.0
                                                         ------------------------
    Other comprehensive loss                                   (31.0)       (31.0)
                                                                         --------
      Total comprehensive income                                            212.2
Repurchase of .4 million shares
 for treasury, net of shares issued                                         (17.7)
Stock issued under option plans,
 net of $22.3 of tax and dividends paid on stock
 held in stock trusts                                                        40.6

Dividends: $1.23 per share                                                 (135.4)
ESOP transactions, net                                                        1.6
Employee stock benefit trust market value
 adjustment                                                                     -
- ---------------------------------------------------------------------------------
Fiscal year ended 2001                                   $    (136.4)    $  929.4
=================================================================================


See Notes to Consolidated Financial Statements



                          Avery Dennison Corporation

CONSOLIDATED STATEMENT OF CASH FLOWS




(In millions)                                                                              2001      2000      1999
- -------------------------------------------------------------------------------------------------------------------
                                                                                                   
OPERATING ACTIVITIES
Net income                                                                             $  243.2   $ 283.5   $ 215.4
Adjustments to reconcile net income to net cash provided by operating activities:
      Depreciation                                                                        124.1     126.0     126.5
      Amortization                                                                         31.9      30.9      23.9
      Deferred taxes                                                                        3.0      11.8     (15.3)
      Divestitures and cost reduction efforts, net                                          (.3)        -      65.0
      Changes in assets and liabilities, net of the effect of foreign currency
        translation, business acquisitions and divestitures, and cost reduction
        efforts:
             Trade accounts receivable, net                                                 7.8     (37.0)    (66.1)
             Inventories, net                                                               1.9       8.8     (28.0)
             Other receivables                                                         (5.9)1.5      (6.4)      (.3)
             Prepaid expenses                                                               1.5      (2.0)     (4.6)
             Accounts payable and accrued liabilities                                     (58.3)     (4.3)     74.7
             Taxes on income                                                               27.4       6.5      60.9
             Long-term retirement benefits and other accrued liabilities                    (.8)     (7.9)    (25.2)
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                                 375.5     409.9     426.9
- -------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of property, plant and equipment                                                (135.4)   (198.3)   (177.7)
Purchase of software                                                                      (50.3)    (35.0)     (9.7)
Payments for acquisitions                                                                 (63.9)    (75.3)   (185.9)
Proceeds from sale of assets                                                               33.7      10.6      10.1
Other                                                                                     (52.4)    (17.5)    (12.4)
- -------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities                                                    (268.3)   (315.5)   (375.6)
- -------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Additional borrowings                                                                     152.3     169.1     154.5
Payments of debt                                                                         (131.0)    (23.6)     (3.2)
Dividends paid                                                                           (135.4)   (123.7)   (112.0)
Purchase of treasury stock                                                                (17.9)   (134.4)   (121.9)
Proceeds from exercise of stock options                                                    17.4      19.7      16.9
Other                                                                                      15.5       3.9       3.3
- -------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities                                                     (99.1)    (89.0)    (62.4)
- -------------------------------------------------------------------------------------------------------------------
Effect of foreign currency translation on cash balances                                     (.4)      (.9)      (.5)
- -------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents                                            7.7       4.5     (11.6)
- -------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, beginning of year                                               11.4       6.9      18.5
- -------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                                                 $   19.1   $  11.4   $   6.9
===================================================================================================================


See Notes to Consolidated Financial Statements



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.  Summary of Significant Accounting Policies

Nature of Operations

The Company is a worldwide manufacturer of pressure-sensitive adhesives and
materials, and consumer and converted products. The Company's major markets are
in office products, data processing, health care, retail, transportation,
industrial and durable goods, food and apparel. The Pressure-sensitive Adhesives
and Materials segment and the Consumer and Converted Products segment each
contribute approximately 50 percent of the Company's total sales. Sales are
generated primarily in the United States and continental Europe.

Principles of Consolidation

The consolidated financial statements include the accounts of all majority-owned
subsidiaries. All intercompany accounts, transactions and profits are
eliminated. Investments in certain affiliates (20 percent to 50 percent
ownership) are accounted for by the equity method of accounting. Investments
representing less than 20 percent ownership are accounted for by the cost method
of accounting.

Fiscal Year

The Company's 2001, 2000 and 1999 fiscal years reflected 52-week periods ending
December 29, 2001, December 30, 2000 and January 1, 2000, respectively.
Normally, each fiscal year consists of 52 weeks, but every fifth or sixth fiscal
year consists of 53 weeks.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions for
the reporting period and as of the financial statement date. These estimates and
assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent liabilities and the reported amounts of revenues and
expenses. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits in banks and short-term
investments, with maturities of three months or less when purchased. The
carrying amounts of these assets approximate fair value due to the short
maturity of the instruments. Cash paid for interest and taxes was as follows:



(In millions)                                                                    2001    2000    1999
- -----------------------------------------------------------------------------------------------------
                                                                                      
Interest, net of capitalized amounts                                            $50.0  $ 54.8   $44.1
Income taxes, net of refunds                                                     95.1   142.8    62.7
=====================================================================================================


Non-cash activities included the receipt of $16.7 million in notes and
receivables related to the sale of assets and the sale of a non-strategic
business in 2001.

Inventories

Inventories are stated at the lower of cost or market value. Cost is determined
using methods that approximate both the first-in, first-out (FIFO) and last-in,
first-out (LIFO) methods. Inventories valued using the LIFO method comprised 39
percent and 37 percent of inventories before LIFO adjustment at year end 2001
and 2000, respectively. Inventories at year end were as follows:



(In millions)                                                             2001               2000
- -------------------------------------------------------------------------------------------------
                                                                                     
Raw materials                                                           $ 82.9             $ 85.8
Work-in-progress                                                          67.6               67.1
Finished goods                                                           134.6              139.9
LIFO adjustment                                                          (17.7)             (21.3)
- -------------------------------------------------------------------------------------------------
                                                                        $267.4             $271.5
=================================================================================================




Note 1.  Summary of Significant Accounting Policies (continued)

Property, Plant and Equipment

Major classes of property, plant and equipment are stated at cost and were as
follows:



(In millions)                                                                     2001              2000
- --------------------------------------------------------------------------------------------------------
                                                                                         
Land                                                                          $   45.7          $   44.5
Buildings and improvements                                                       469.4             443.6
Machinery and equipment                                                        1,457.6           1,378.9
Construction-in-progress                                                          84.8             144.8
- --------------------------------------------------------------------------------------------------------
                                                                               2,057.5           2,011.8
Accumulated depreciation                                                         982.9             932.8
- --------------------------------------------------------------------------------------------------------
                                                                              $1,074.6          $1,079.0
========================================================================================================



Depreciation is generally computed using the straight-line method over the
estimated useful lives of the assets ranging from ten to forty-five years for
buildings and improvements and three to fifteen years for machinery and
equipment.  Maintenance and repair costs are expensed as incurred; renewals and
betterments are capitalized.  Upon the sale or retirement of properties, the
accounts are relieved of the cost and the related accumulated depreciation, with
any resulting profit or loss included in net income.

Software

The Company capitalizes software costs in accordance with American Institute of
Certified Public Accountants' Statement of Position 98-1 "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use."  Capitalized
software is amortized on a straight-line basis over the estimated useful life of
the software, not to exceed 10 years.

Intangibles Resulting From Business Acquisitions

Intangibles resulting from business acquisitions consist primarily of the excess
of the acquisition cost over the fair value of net tangible assets acquired and
are amortized over a 5 to 40 year period using the straight-line method. The
Company evaluates the carrying value of its goodwill on an ongoing basis and
recognizes an impairment when the estimated future undiscounted cash flows from
operations are less than the carrying value of the goodwill. Accumulated
amortization at year end 2001 and 2000 was $103.6 million and $83.4 million,
respectively.

The Company will adopt Statement of Financial Accounting Standards (SFAS) No.
142, "Goodwill and Other Intangible Assets," at the beginning of fiscal 2002.
See Note 1 - "Future Accounting Requirements" for information on the expected
impact of this standard.

Foreign Currency Translation

All asset and liability accounts of international operations are translated into
U.S. dollars at current rates. Revenue, costs and expenses are translated at the
weighted-average currency rate, which prevailed during the fiscal year.
Translation gains and losses of subsidiaries operating in hyperinflationary
economies are included in net income currently. Operations in hyperinflationary
economies consist of the Company's operations in Turkey for 2001, 2000 and 1999.
Gains and losses resulting from foreign currency transactions, other than those
transactions described below, are included in income currently. Gains and losses
resulting from hedging the value of investments in certain international
operations and from translation of financial statements are excluded from net
income and are recorded directly to a component of other comprehensive income.

Transaction and translation losses decreased net income in 2001, 2000 and 1999
by $2.7 million, $3 million and $1.7 million, respectively.

Financial Instruments

The Company enters into foreign exchange forward, option and swap contracts to
reduce its risk from exchange rate fluctuations associated with receivables,
payables, loans and firm commitments denominated in foreign currencies that
arise primarily as a result of its operations outside the United States
of America. The Company also enters into interest rate contracts to manage its
exposure to interest rate fluctuations.

On the date that the Company enters into a derivative contract, it determines
whether the derivatives will be designated as a hedge. Those derivatives not
designated as hedges are recorded on the balance sheet at fair value, with
changes in the fair value recognized currently in earnings. Those derivatives
designated as hedges are classified as either (1) a hedge of the fair value of a
recognized asset or liability or an unrecognized firm commitment (a "fair value"
hedge) or (2) a hedge of a forecasted transaction or the variability of cash
flows that are to be received or paid in connection with a recognized asset or
liability (a "cash flow" hedge). The Company generally does not hold or purchase
any foreign currency or interest rate contracts for trading purposes.



Note 1.  Summary of Significant Accounting Policies (continued)

The Company assesses, both at the inception of the hedge and on an ongoing
basis, whether hedges are highly effective. If it is determined that a hedge is
not highly effective, the Company prospectively discontinues hedge accounting.
For cash flow hedges, the effective portion of the related gains and losses are
recorded as a component of other comprehensive income, and the ineffective
portion is reported currently in earnings. Amounts in accumulated other
comprehensive income are reclassified into earnings in the same period during
which the hedged forecasted transaction is consummated. In the event that the
anticipated transaction is no longer likely to occur, the Company recognizes the
change in fair value of the instrument in earnings currently. Changes in fair
value hedges are recognized currently in earnings. Changes in the fair values of
underlying hedged items (such as unrecognized firm commitments) are also
recognized currently in earnings and offset the changes in the fair value of the
derivative.

Revenue Recognition

Sales, provisions for estimated sales returns, and the cost of products sold are
recorded at the time of shipment. Actual product returns are charged against
estimated sales return allowances. If title to product does not pass to
customers upon shipment, estimates are used, where significant, to delay revenue
recognition until such time that title is transferred.

Shipping and Handling Costs

Shipping and handling costs, which consist primarily of transportation charges
incurred to move finished goods to customers, are included in "Cost of products
sold" for the Pressure-sensitive Adhesives and Materials segment and in
"Marketing, general and administrative expense" for the Consumer and Converted
Products segment. Shipping and handling costs included in "Marketing, general
and administrative expense" were $32.2 million, $32.9 million and $33.7 million
for 2001, 2000 and 1999, respectively.

Advertising Costs

Advertising costs are not significant to the Company's operations and are
expensed as incurred.

Research and Development

Research and development costs are expensed as incurred.  Research and
development expense for 2001, 2000 and 1999 was $69.9 million, $67.8 million and
$64.3 million, respectively.

Stock-Based Compensation

The Company's stock option grants are generally priced at fair market value on
the date of grant. Under the provisions of SFAS No. 123, "Accounting for Stock-
Based Compensation," the Company uses the intrinsic value method of accounting
for stock-based compensation in accordance with Accounting Principles Board
(APB) Opinion No. 25 "Accounting for Stock Issued to Employees."

Environmental Expenditures

Environmental expenditures that do not contribute to current or future revenue
generation are expensed. Expenditures for newly acquired assets and those which
extend or improve the economic useful life of existing assets are capitalized
and amortized over the remaining asset life. The Company reviews, on a quarterly
basis, its estimates of costs of compliance with environmental laws and the
cleanup of various sites, including sites in which governmental agencies have
designated the Company as a potentially responsible party. When it is probable
that obligations have been incurred and where a minimum cost or a reasonable
estimate of the cost of compliance or remediation can be determined, the
applicable amount is accrued. For other potential liabilities, the timing of
accruals coincides with the related ongoing site assessments. Potential
insurance reimbursements are not recorded or offset against the liabilities
until received, and liabilities are not discounted.

Investment Tax Credits

Investment tax credits are accounted for in the period earned in accordance with
the flow-through method.



Note 1.  Summary of Significant Accounting Policies (continued)

Net Income Per Share

Net income per common share amounts were computed as follows:



(In millions, except per share amounts)                                         2001     2000     1999
- ------------------------------------------------------------------------------------------------------
                                                                                        
(A)  Net income available to common shareholders                              $243.2   $283.5   $215.4
- ------------------------------------------------------------------------------------------------------
(B)  Weighted average number of common shares outstanding                       97.8     98.3     99.2
     Additional common shares issuable under employee stock
       options using the treasury stock method                                    .8      1.5      2.1
- ------------------------------------------------------------------------------------------------------
(C)  Weighted average number of common shares
       outstanding assuming the exercise of stock options                       98.6     99.8    101.3
======================================================================================================

Net income per common share (A) / (B)                                         $ 2.49   $ 2.88   $ 2.17
Net income per common share, assuming dilution (A) / (C)                        2.47     2.84     2.13
======================================================================================================


Comprehensive Income

Comprehensive income includes net income, foreign currency translation
adjustments, adjustments to the minimum pension liability and the effective
portion of gains or losses on cash flow hedges that are currently presented as a
component of shareholders' equity.

For the year ended 2001, the foreign currency translation adjustment, minimum
pension liability, net gain on derivative instruments designated as cash flow
hedges and total accumulated other comprehensive loss balances were $(123.1)
million, $(14.3) million, $1 million and $(136.4) million, respectively.  For
the year ended 2000, the accumulated other comprehensive loss balance primarily
consisted of foreign currency translation adjustments.

The table below details the cash flow hedging instrument activity in other
comprehensive income (loss):



(In millions)                                                                                               December 29, 2001
- ---------------------------------------------------------------------------------------------------------------------------------
                                                                                                               
Beginning accumulated derivative gain or loss                                                                            -
Net gain reclassified to earnings                                                                                      $(.6)
Net change in the revaluation of hedging transactions                                                                   1.6
- ---------------------------------------------------------------------------------------------------------------------------------
Ending accumulated derivative gain                                                                                     $1.0
=================================================================================================================================


Future Accounting Requirements

In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
141, "Business Combinations," which supersedes APB Opinion No. 16, "Business
Combinations." This Statement requires that all business combinations be
accounted for by the purchase method and establishes specific criteria for the
recognition of intangible assets separately from goodwill. The provisions of the
Statement apply to business combinations initiated after June 30, 2001. For
business combinations accounted for using the purchase method before July 1,
2001, the provisions of this Statement will be effective in the first quarter of
2002. Upon adoption, the Company expects to separately state goodwill and
intangible assets, which are currently shown on the Consolidated Balance Sheet
as "Intangibles resulting from business acquisitions, net."

In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets," which supersedes APB Opinion No. 17, "Intangible Assets." This
Statement addresses the accounting and reporting of goodwill and other
intangible assets subsequent to their acquisition. SFAS No. 142 provides that
(i) goodwill and indefinite-lived intangible assets will no longer be amortized,
(ii) impairment will be measured using various valuation techniques based on
discounted cash flows, (iii) goodwill will be tested for impairment at least
annually at the reporting unit level, (iv) intangible assets deemed to have an
indefinite life will be tested for impairment at least annually and (v)
intangible assets with finite lives will be amortized over their useful lives.
The Statement provides specific guidance on testing goodwill and intangible
assets for impairment, and requires that reporting units be identified for the
purpose of assessing potential future impairments.  Goodwill and intangible
assets acquired after June 30, 2001 were subjected to the provisions of this
Statement.  All provisions of this Statement will be effective in the first
quarter of 2002.  Utilizing internal and external resources, the Company is in
the process of adopting SFAS No. 142 and is identifying its reporting units and
the amounts of goodwill, intangible assets, other assets and liabilities to be
allocated to those reporting units.



Note 1.  Summary of Significant Accounting Policies (continued)

SFAS No. 142 requires that goodwill be tested annually for impairment using a
two-step process. The first step is to identify a potential impairment and, in
transition, this step must be measured as of the beginning of the fiscal year.
However, companies have six months from the date of adoption to complete the
first step. The Company expects to complete the first step of the goodwill
impairment test during the first quarter of 2002. The second step of the
goodwill impairment test measures the amount of impairment loss (measured as of
the beginning of the year of adoption), if any, and must be completed by the end
of 2002. Intangible assets deemed to have an indefinite life will be tested for
impairment using a one-step process which compares the fair value to the
carrying amount of the asset as of the beginning of the year. This process will
be completed during the first quarter of 2002. The Company is in the process of
completing these impairment tests for goodwill and other intangible assets and,
based on current information, does not anticipate transitional impairment
losses. The Company expects the adoption of SFAS No. 142 to benefit earnings per
share, assuming dilution, by approximately $.13 compared to 2001.

In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations," which addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs.  This Statement requires that the fair value of a
liability for an asset retirement obligation be recognized in the period in
which it is incurred if a reasonable estimate of fair value can be made.  The
associated asset retirement costs are capitalized as part of the carrying amount
of the long-lived asset. All provisions of this Statement will be effective at
the beginning of fiscal 2003.  The Company is in the process of determining the
impact of this standard on the Company's financial results when effective.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." This Statement supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" and amends APB Opinion No. 30, "Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions." This Statement requires that long-lived
assets that are to be disposed of by sale be measured at the lower of book value
or fair value less costs to sell. SFAS No. 144 retains the fundamental
provisions of SFAS No. 121 for (a) recognition and measurement of the impairment
of long-lived assets to be held and used and (b) measurement of long-lived
assets to be disposed of by sale. This Statement also retains APB Opinion No.
30's requirement that companies report discontinued operations separately from
continuing operations. All provisions of this Statement will be effective in the
first quarter of 2002. The adoption of this standard is not expected to have a
significant impact on the Company's financial results.

The Company is currently reviewing the requirements of Emerging Issues Task
Force (EITF) Issue No. 00-14, "Accounting for Certain Sales Incentives." This
EITF consensus addresses the recognition, measurement and income statement
classification for sales incentives offered by a vendor without charge to a
customer as a result of a single exchange transaction. The provisions of this
consensus will be effective in the first quarter of 2002. The application of the
consensus is not expected to have a significant impact on the Company's
financial results.

The Company is currently reviewing the requirements of EITF Issue No. 00-25,
"Vendor Income Statement Characterization of Consideration Paid to a Reseller of
the Vendor's Products." This EITF consensus addresses whether certain
consideration from a vendor to a reseller of the vendor's products is an
adjustment to selling prices or cost.  The provisions of this consensus will be
effective in the first quarter of 2002.  The application of the consensus is not
expected to have a significant impact on the Company's financial results.

Related Party Transactions

From time to time, the Company enters into transactions in the normal course of
business with related parties.  The Company believes that such transactions are
at arm's-length and for terms that would have been obtained from unaffiliated
third parties. One of the Company's directors, Mr. Peter W. Mullin, is the
chairman and chief executive officer and a director of MC Insurance Services,
Inc. ("MC"), Mullin Insurance Services, Inc. ("MINC") and PWM Insurance
Services, Inc. ("PWM"), executive compensation and benefit consultants and
insurance agents.  Mr. Mullin is also the largest stockholder of MC and the
majority stockholder of MINC and PWM.  During 2001, the Company paid insurance
companies premiums for life insurance placed by MC, MINC and PWM in 2001 and
prior years in connection with various Company employee benefit plans. In 2001,
2000 and 1999, MC, MINC and PWM earned commissions from such insurance companies
in aggregate amounts of approximately $1.7 million, $1.6 million and $1 million,
respectively, for the placement and renewal of this insurance.  Mr. Mullin had
direct and indirect interests related to these commissions of approximately $1
million in 2001 and 2000 and $.7 million in 1999.  None of these transactions
are significant to the financial position or results of operations of the
Company.

Financial Presentation

Certain prior year amounts have been reclassified to conform with the 2001
financial statement presentation.



Note 2.  Acquisitions and Joint Ventures

On September 7, 2001, the Company announced an agreement to acquire the
Jackstadt GmbH pressure-sensitive adhesive materials business.  Jackstadt is a
privately-held manufacturer of pressure-sensitive adhesive materials based in
Germany.  Jackstadt, with consolidated revenues of approximately $400 million in
2000, has a global customer base and generates approximately 80 percent of its
sales outside of Germany.  The transaction is subject to a number of closing
conditions, including regulatory approvals.  Completion of the acquisition has
been delayed pending further review by the German Federal Cartel Office, which
has raised specific issues with respect to market definition and market share in
that country.  The Company is responding to the concerns, but the timing and
ultimate outcome of the final regulatory review are currently unknown.  As of
year end 2001, the Company had capitalized approximately $9 million for direct
costs related to this pending acquisition.  If these issues cannot be overcome,
the proposed transaction may be renegotiated or terminated, in which case some
or all of these costs may be expensed depending on the outcome of the regulatory
review.

In the first quarter of 2001, the Company acquired Dunsirn Industries, Inc., a
privately-held company based in Wisconsin.  Dunsirn Industries is a leading
supplier of non-adhesive materials to the narrow-web printing industry, as well
as a provider of customized slitting and distribution services for roll
pressure-sensitive materials manufacturers.  The Dunsirn operation is included
within the Company's Pressure-sensitive Adhesives and Materials segment.  Sales
in 2000 for Dunsirn Industries were approximately $68 million, including sales
to the Company.  The excess of the cost-basis over the fair value of net
tangible assets acquired was $21.1 million.

In the first quarter of 2001, the Company acquired CD Stomper, a leading product
line of CD and DVD labels, software and a label applicator, from Stomp Inc., a
software developer and manufacturer based in California.  Sales in 2000 for the
CD Stomper product line were approximately $20 million.  The CD Stomper product
line is included in the Company's Consumer and Converted Products segment.  The
excess of the cost-basis over the fair value of net tangible assets acquired was
$22.6 million.

In the first quarter of 2000, the Company acquired the Adespan pressure-
sensitive materials operation of Panini S.p.A., a European printing and
publishing company based in Italy.  Adespan had sales of approximately $75
million in 1999.  The Adespan business operates as a division within the
Company's Pressure-sensitive Adhesives and Materials segment.  The excess of the
cost-basis over the fair value of net tangible assets acquired was $24.1
million.

In the fourth quarter of 1999, the Company acquired the remaining minority stake
in its Argentine business, the largest pressure-sensitive materials operation in
that country.

In the third quarter of 1999, the Company acquired Stimsonite Corporation
(Stimsonite), based in Niles, Illinois, a leading manufacturer of reflective
safety products for the transportation and highway safety markets.  The Company
paid approximately $150 million (including the assumption of approximately $20
million in debt) for Stimsonite, which was primarily funded with the issuance of
debt.  Stimsonite had sales of $87 million in 1998.  The excess of the cost-
basis over the fair value of net tangible assets acquired was $124.7 million.
The Stimsonite business is included within the Company's Pressure-sensitive
Adhesives and Materials segment.

In the first quarter of 1999, the Company completed a transaction with Steinbeis
Holding GmbH to combine substantially all of the Company's office products
businesses in Europe with Zweckform Buro-Produkte GmbH (Zweckform), a German
office products supplier.  The Company's aggregate cost-basis in this venture
was financed through available cash resources of approximately $23 million and
the assumption of an obligation as reported in the "Other long-term obligation"
line on the Consolidated Balance Sheet. The obligation is guaranteed by a
standby letter of credit and it is the intention of the Company to pay the
entire obligation in 2004.  The excess of the cost-basis over the fair value of
net tangible assets acquired was $104.6 million.  The Zweckform business is
included within the Company's Consumer and Converted Products segment.

The aggregate cost of acquired companies was approximately $66 million, $76
million and $285 million in 2001, 2000 and 1999, respectively.  Intangibles
resulting from these business acquisitions were $48.7 million, $25 million and
$266.2 million in 2001, 2000 and 1999, respectively.  Other acquisitions during
2001, 2000 and 1999 not described above were not significant to the consolidated
position of the Company.

In 2001, 2000 and 1999, acquired businesses added approximately 2 percent, 3
percent and 5 percent, respectively, to the Company's total sales.  The acquired
businesses did not have a significant impact on the Company's results of
operations for any of the three years ended December 29, 2001.



Note 3.  Debt

Long-term debt and its respective weighted average interest rates at December
29, 2001 consisted of the following:



(In millions)                                                                     December 29, 2001   December 30, 2000
- -----------------------------------------------------------------------------------------------------------------------
                                                                                                
Medium-term notes
     Series 1993 at 6.6% - due 2003 through 2005                                       $ 98.0              $ 98.0
     Series 1994 at 7.7% - due 2002 through 2004                                        100.0               100.0
     Series 1995 at 7.3% - due 2005 through 2025                                        100.0               100.0
     Series 1997 at 6.6% - due 2007                                                      60.0                60.0
     Series 1998 at 5.9% - due 2008                                                      50.0                50.0
     Series 2000 at 2.0% - due 2006                                                      40.0                40.0

Other long-term borrowings                                                                4.1                 6.3
Domestic variable rate short-term borrowings at 2.0%
     to be refinanced on a long-term basis                                              195.0               322.3

Less: amount classified as current                                                      (20.4)               (3.7)
- -----------------------------------------------------------------------------------------------------------------------
                                                                                       $626.7              $772.9
=======================================================================================================================


The Company's medium-term notes have maturities from 2002 through 2025 and
accrue interest at fixed and floating rates.  The Company issued $40 million of
medium-term notes during 2000.  The proceeds from this issuance were used to
refinance short-term debt and for other general corporate purposes.

Maturities of long-term debt during the years 2002 through 2006 are $20.4
million, $73 million, $85.7 million, $73 million and $235 million, respectively,
with $160 million maturing thereafter.

The Company's total interest costs in 2001, 2000 and 1999 were $57.1 million,
$59 million and $45.8 million, respectively, of which $6.9 million, $4.4 million
and $2.4 million, respectively, were capitalized as part of the cost of assets
constructed for the Company's use.

The Company had $52.6 million of borrowings outstanding under short-term lines
of credit with a weighted average interest rate of 8.3 percent at year end 2001.
In December 2001, the Company issued $150 million of one-year callable
commercial notes at a weighted average interest rate of 2.1 percent.

As of December 29, 2001, the Company had additional available short-term lines
of credit totaling $523.7 million.  These available lines of credit included a
364-day revolving credit facility with five domestic banks to provide up to $200
million in borrowings through December 12, 2002.  The Company may annually
extend the revolving period and due date with the approval of the banks.
Financing available under this agreement will be used as a commercial paper
back-up facility and to finance other corporate requirements.  There was no debt
outstanding under this agreement as of year end 2001.

The Company also has a revolving credit agreement with four domestic banks to
provide up to $250 million in borrowings through July 1, 2006.  The Company may
annually extend the revolving period and due date with the approval of the
banks.  Financing available under this agreement will be used, as needed, as a
commercial paper back-up facility and to finance other corporate requirements.
There was no debt outstanding under this agreement as of year end 2001.

The terms of various loan agreements in effect at year end require that the
Company maintain specified ratios on consolidated debt and consolidated interest
expense in relation to certain measures of income.  Under the loan agreements,
consolidated debt as a ratio to consolidated earnings before interest, taxes,
depreciation and amortization may not exceed 3.5 to 1.0.  The Company's ratio at
year end 2001 was 1.5 to 1.0.  Consolidated earnings before interest and taxes,
as a ratio to consolidated interest may not be less than 3.5 to 1.0. The
Company's ratio at year end 2001 was 8.2 to 1.0.  Assets pledged as collateral
and commitment fees relating to long-term financing arrangements are not
significant.

The fair value of the Company's debt is estimated based on the discounted amount
of future cash flows using the current rates offered to the Company for debts of
the same remaining maturities.  At year end 2001 and 2000, the fair value of the
Company's total debt, including short-term borrowings, was $857.6 million and
$835.5 million, respectively.



Note 3.  Debt (continued)

The Company had standby letters of credit outstanding of $217.9 million and
$207.9 million at the end of 2001 and 2000, respectively. The aggregate contract
amount of all outstanding standby letters of credit approximated fair value.

In the third quarter of 2001, the Company filed a shelf registration statement
with the Securities and Exchange Commission to permit the issuance of up to $600
million in debt and equity securities.  Proceeds from the shelf offering may be
used for general corporate purposes, including repaying, redeeming or
repurchasing existing debt, and for working capital, capital expenditures and
acquisitions. No securities have been issued since the filing.

Note 4.  Financial Instruments

The Company adopted SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended, in the first quarter of 2001 and recorded a
transition adjustment reducing net income by $.2 million (net of tax).  This
Statement requires that all derivative instruments be recorded on the balance
sheet at their fair value.

The Company formed an implementation team drawn from both internal and external
resources, which reviewed the Company's derivative contracts and existing hedge
relationships, developed appropriate hedge effectiveness models and updated
accounting and reporting procedures to ensure proper measurement, recording and
reporting of derivative instruments and hedged items.

During the year ended December 29, 2001, the ineffectiveness related to cash
flow hedges was not significant.  The net gain reclassified from other
comprehensive income to earnings during 2001 was approximately $.6 million.  A
net gain of approximately $1 million is expected to be reclassified from other
comprehensive income to earnings within the next 12 months.  The maximum length
of time in which the Company hedges its exposure to the variability in future
cash flows for forecasted transactions is generally 12 months.

For purposes of this footnote, the terms "cash flow hedge," "derivative
instrument," "fair value," "fair value hedge," "financial instrument," "firm
commitment," and "highly effective" are used as these terms are defined in SFAS
No. 133, as amended.

The carrying value of the foreign exchange forward contracts approximated the
fair value, which, based on quoted market prices of comparable instruments, was
a net asset of approximately $1 million and a net liability of approximately $.5
million at the end of 2001 and 2000, respectively.  The carrying value of the
foreign exchange option contracts, based on quoted market prices of comparable
instruments, was a net liability of approximately $.1 million and a net asset of
approximately $.2 million at the end of 2001 and 2000, respectively.  The
carrying value of the foreign exchange option contracts approximated the fair
market value.

During 1998, the Company entered into a swap contract to hedge foreign currency
commitments of approximately $9 million over a five year period.  The carrying
value of this contract approximated fair value, which was an asset of
approximately $.4 million and a liability of approximately $.6 million at the
end of 2001 and 2000, respectively.

The counterparties to foreign exchange forward, option and swap contracts
consist of a large number of major international financial institutions.  The
Company centrally monitors its positions and the financial strength of its
counterparties.  Therefore, while the Company may be exposed to losses in the
event of nonperformance by these counterparties, it does not anticipate any such
losses.

At year end 2001 and 2000, approximately 23 percent and 26 percent,
respectively, of trade accounts receivable were from nine domestic customers.
The Company does not require its customers to provide collateral, but the
financial position and operations of these customers are monitored on an ongoing
basis.  The Company may be exposed to losses in the event of nonpayment.



Note 5.  Commitments

Minimum annual rental commitments on operating leases having initial or
remaining noncancellable lease terms in excess of one year are as follows:

(In millions)
- ---------------------------------------------------------------
Year
- ---------------------------------------------------------------
2002                                                     $ 36.5
2003                                                       30.5
2004                                                       26.2
2005                                                       21.5
2006                                                       19.0
Thereafter                                                 26.5
- ---------------------------------------------------------------
Total minimum lease payments                             $160.2
===============================================================

Operating leases relate primarily to office and warehouse space, electronic data
processing and transportation equipment.  The terms of these leases do not
impose any significant restrictions or unusual obligations.

Rent expense for 2001, 2000 and 1999 was $50 million, $49 million and $47
million, respectively.


Note 6.  Taxes Based on Income

Taxes based on income were as follows:



(In millions)                                                                      2001               2000               1999
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                                             
Current:
     U.S. Federal tax                                                            $ 47.5             $ 68.6             $ 78.7
     State taxes                                                                    7.5               12.3               12.8
     International taxes                                                           45.5               50.6               39.4
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                  100.5              131.5              130.9
=============================================================================================================================
Deferred:
     U.S. taxes                                                                     8.5                8.4               (9.9)
     International taxes                                                            7.4                2.9               (6.0)
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                   15.9               11.3              (15.9)
- -----------------------------------------------------------------------------------------------------------------------------
Taxes on income                                                                  $116.4             $142.8             $115.0
=============================================================================================================================


The principal items accounting for the difference in taxes as computed at the
U.S. statutory rate and as recorded were as follows:



(In millions)                                                                      2001                2000                1999
- -------------------------------------------------------------------------------------------------------------------------------
                                                                                                                 
Computed tax at 35% of income before taxes                                       $125.9              $149.2              $115.6
Increase (decrease) in taxes resulting from:
     State taxes, net of federal tax benefit                                        4.9                 8.0                 8.3
     Research and development credit                                               (4.4)               (3.5)               (3.0)
     Impact related to difference in tax rates for foreign operations              (9.1)               (9.7)               (4.2)
     Other items, net                                                               (.9)               (1.2)               (1.7)
- -------------------------------------------------------------------------------------------------------------------------------
Taxes on income                                                                  $116.4              $142.8              $115.0
===============================================================================================================================




Note 6.  Taxes Based on Income (continued)

Consolidated income before taxes for U.S. and international operations was as
follows:



(In millions)                                                                      2001               2000               1999
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                                              
U.S.                                                                             $182.8             $245.5             $222.6
International                                                                     177.0              180.8              107.8
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                 $359.8             $426.3             $330.4
=============================================================================================================================


U.S. income taxes have not been provided on undistributed earnings of
international subsidiaries ($713.9 million at year end 2001) because such
earnings are considered to be reinvested indefinitely or because U.S. income
taxes on dividends would be substantially offset by foreign tax credits.

Operating loss carryforwards for international subsidiaries aggregating $25
million are available to reduce income taxes payable, of which $10.1 million
will expire from 2002 through 2011, while $14.9 million can be carried forward
indefinitely.  A valuation allowance has been provided for approximately 34
percent and 46 percent of the deferred tax assets related to the net operating
losses and foreign tax credit carryforwards at year end 2001 and 2000,
respectively.

Deferred income taxes reflect the temporary differences between the amounts at
which assets and liabilities are recorded for financial reporting purposes and
the amounts utilized for tax purposes.  The primary components of the temporary
differences which give rise to the Company's deferred tax assets and liabilities
were as follows:



(In millions)                                                                               2001                2000
- --------------------------------------------------------------------------------------------------------------------
                                                                                                        
Accrued expenses not currently deductible                                                $  98.6              $ 81.2
Net operating losses and foreign tax credit carryforwards                                   13.1                14.9
Postretirement and postemployment benefits                                                  14.1                12.6
Pension costs                                                                              (18.7)              (13.1)
Depreciation and amortization                                                             (107.5)              (89.9)
Deferred tax on intangibles resulting from business acquisitions                           (20.1)              (21.5)
Valuation allowance                                                                         (4.4)               (6.8)
- --------------------------------------------------------------------------------------------------------------------
Total net deferred tax liabilities                                                       $ (24.9)             $(22.6)
====================================================================================================================


Note 7.  Contingencies

The Company has been designated by the U.S. Environmental Protection Agency
(EPA) and/or other responsible state agencies as a potentially responsible party
(PRP) at nine waste disposal or waste recycling sites which are the subject of
separate investigations or proceedings concerning alleged soil and/or
groundwater contamination and for which no settlement of the Company's liability
has been agreed upon.  Litigation has been initiated by a governmental authority
with respect to one of these sites, but the Company does not believe that any
such proceedings will result in the imposition of monetary sanctions.  The
Company is participating with other PRPs at all such sites, and anticipates that
its share of cleanup costs will be determined pursuant to remedial agreements
entered into in the normal course of negotiations with the EPA or other
governmental authorities.

The Company has accrued liabilities for all sites, including sites in which
governmental agencies have designated the Company as a PRP, where it is probable
that a loss will be incurred and the minimum cost or amount of loss can be
reasonably estimated.  However, because of the uncertainties associated with
environmental assessment and remediation activities, future expense to remediate
the currently identified sites, and sites which could be identified in the
future for cleanup, could be higher than the liability currently accrued.
Amounts currently accrued are not significant to the consolidated financial
position of the Company and, based upon current information, management believes
that it is unlikely that final resolution of these matters will significantly
impact the consolidated financial position and operations of the Company.

The Company and its subsidiaries are involved in various other lawsuits, claims
and inquiries, most of which are routine to the nature of the business.  In the
opinion of management, the resolution of these matters will not materially
affect the Company.



Note 8.  Shareholders' Equity

Common Stock and Common Stock Repurchase Program

The Company's Certificate of Incorporation authorizes five million shares of $1
par value preferred stock (none outstanding), with respect to which the Board of
Directors may fix the series and terms of issuance, and 400 million shares of $1
par value voting common stock.

In December 1997, the Company redeemed the outstanding preferred stock purchase
rights and issued new preferred stock purchase rights, declaring a dividend of
one such right on each outstanding share of common stock and since such time,
the Company has issued such rights with each share of common stock that has been
subsequently issued.  When exercisable, each new right will entitle its holder
to buy one one-hundredth of a share of Series A Junior Participating Preferred
Stock at a price of $150.00 per one one-hundredth of a share until October 31,
2007.  The rights will become exercisable if a person acquires 20 percent or
more of the Company's common stock or makes an offer, the consummation of which
will result in the person's owning 20 percent or more of the Company's common
stock.  In the event the Company is acquired in a merger, each right entitles
the holder to purchase common stock of the acquiring company having a market
value of twice the exercise price of the right.  If a person or group acquires
20 percent or more of the Company's common stock, each right entitles the holder
to purchase the Company's common stock with a market value equal to twice the
exercise price of the right.  The rights may be redeemed by the Company at a
price of one cent per right at any time prior to a person's or group's acquiring
20 percent of the Company's common stock.  The 20 percent threshold may be
reduced by the Company to as low as 10 percent at any time prior to a person's
acquiring a percent of Company stock equal to the lowered threshold.

The Board of Directors has authorized the repurchase of an aggregate 40.4
million shares of the Company's outstanding common stock.  The acquired shares
may be reissued under the Company's stock option and incentive plans or used for
other corporate purposes.  At year end 2001, approximately 3.4 million shares
were still available for repurchase pursuant to this authorization.

Stock Option and Incentive Plans

The Board of Directors previously authorized the issuance of up to 18 million
shares to be used for the issuance of stock options and the funding of other
Company obligations arising from various employee benefit plans.  The remaining
shares available are held in the Company's Employee Stock Benefit Trust (ESBT).
The ESBT common stock is carried at market value with changes in share price
from prior reporting periods reflected as an adjustment to capital in excess of
par value.

The Company maintains various stock option and incentive plans which are fixed
employee stock-based compensation plans.  Under the plans, incentive stock
options and stock options granted to directors may be granted at not less than
100 percent of the fair market value of the Company's common stock on the date
of the grant, whereas nonqualified options granted to employees may be issued at
prices no less than par value.  Options granted are generally priced at fair
market value on the date of the grant and generally vest ratably over a two year
period for directors, or for over a four year period for employees, except that
options may cliff-vest over a 3 to 9.75 year period for certain officers based
on the Company's performance.  Unexercised options expire ten years from the
date of grant.  The following table sets forth stock option information relative
to these plans (options in thousands):



                                                            2001                              2000                             1999
                                --------------------------------- --------------------------------- --------------------------------
                                  Weighted-average        Number     Weighted-average       Number     Weighted-average      Number
                                    exercise price    of options       exercise price   of options       exercise price  of options
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       
Outstanding at beginning of year        $40.75          6,071.2         $35.49         7,252.1            $28.70          7,744.9
Granted                                  54.72          1,929.6          54.57           744.0             58.23          1,190.5
Exercised                                27.69           (902.0)         22.34        (1,611.6)            18.09         (1,460.7)
Forfeited or expired                     49.95           (255.7)         46.43          (313.3)            35.18           (222.6)
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding at year end                  46.07          6,843.1          40.75         6,071.2             35.49          7,252.1
Options exercisable at year end         $36.72          3,079.4         $30.90         3,095.2            $23.22          3,426.5
====================================================================================================================================




Note 8.  Shareholders' Equity (continued)

The following table summarizes information on fixed stock options outstanding at
December 29, 2001 (options in thousands):



                                                      Options outstanding                                    Options exercisable
                            ---------------------------------------------------------------   --------------------------------------
                                                   Weighted-average
                                     Number               remaining      Weighted-average           Number       Weighted-average
Range of exercise prices        outstanding        contractual life        exercise price      exercisable         exercise price
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       
$12.88 to 16.25                    493.5              2.3 years                 $15.34               493.5                 $15.34
 23.63 to 34.94                  1,124.1              4.6 years                  31.38             1,124.1                  31.38
 38.31 to 55.71                  5,225.5              8.3 years                  52.13             1,461.8                  48.04
- ------------------------------------------------------------------------------------------------------------------------------------
$12.88 to 55.71                  6,843.1              7.2 years                 $46.07             3,079.4                 $36.72
====================================================================================================================================


As permitted under current accounting standards, no compensation cost was
recognized in the Consolidated Statement of Income for the Company's stock
option and incentive plans.  Had compensation cost for the Company's stock-based
compensation plans been recognized ratably over the options' vesting periods,
the Company's pro forma net income and net income per common share would have
been $230.6 million and $2.36, respectively, for 2001, $271.1 million and $2.75,
respectively, for 2000, and $202.5 million and $2.04, respectively, for 1999.
Net income per share, assuming dilution, would have been $2.34, $2.72 and $2.00
for 2001, 2000 and 1999, respectively.

The weighted-average fair value of options granted during 2001, 2000 and 1999
was $18.31, $22.16 and $19.70, respectively.  Option grant date fair values were
determined using a Black-Scholes option pricing model.  The underlying
assumptions used were as follows:



                                                                      2001                     2000               1999
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     
Risk-free interest rate                                               5.14%                    6.10%              5.40%
Expected stock price volatility                                      33.37                    34.63              28.13
Expected dividend yield                                               2.30                     1.43               1.72
Expected option term                                              10 years                 10 years           10 years
====================================================================================================================================


Note 9.  Components of Other Income and Expense

In the fourth quarter of 2001, the Company sold its non-strategic specialty
coatings business, reported within the Pressure-sensitive Adhesives and
Materials segment.   Cash proceeds and $11.5 million in notes and receivables
were received as part of the sale, which resulted in a pretax gain of
approximately $20.2 million.  Net sales from this business were $26.7 million
for ten months in 2001, $37.7 million in 2000 and $35.7 million in 1999.

The Company also recorded a charge in the fourth quarter of 2001 relating to
cost reduction actions.  The 2001 charge involves cost reduction programs and
the reorganization of manufacturing and administrative facilities in both of the
Company's operating segments. The cost reduction efforts resulted in a pretax
charge of $19.9 million, which consisted of employee severance and related costs
of $13.1 million for approximately 400 positions worldwide, and asset write-
downs of $6.8 million.  The positions to be eliminated include approximately 170
employees in the Pressure-sensitive Adhesives and Materials segment, 210
employees in the Consumer and Converted Products segment and 20 Corporate
employees.  Severance and related costs represent cash paid or to be paid to
employees terminated under the program.  Asset write-downs represent non-cash
charges required to reduce the carrying value of assets to be disposed of to net
realizable value as of the planned date of disposal.  At year end 2001, $11
million remained accrued for severance and related costs (included in "Accrued
payroll and employee benefits") and $3.7 million remained accrued for asset
write-downs (included in "Other accrued liabilities") in the Consolidated
Balance Sheet.  At the end of 2001, of the 400 positions under these actions,
approximately 145 employees had left the Company.  The Company expects to
complete this cost reduction program in 2002.



Note 9.  Components of Other Income and Expense (continued)

In the first quarter of 1999, the Company announced a major realignment of its
cost structure designed to increase operating efficiencies and improve
profitability.  The realignment resulted in a pretax cost reduction charge of
$65 million, or $.42 per diluted share on an after-tax basis.  The cost
reduction program involved the consolidation of manufacturing and distribution
capacity in both of the Company's operating segments.  The $65 million charge
reflected the costs to close manufacturing and distribution facilities, the
elimination of approximately 1,500 positions (principally in manufacturing), and
other initiatives to exit activities.

The 1999 cost reduction charge consisted of employee severance and related costs
of $35.1 million and asset write-downs of $29.9 million.  Severance and related
costs represented cash paid to employees terminated under the program.  Asset
write-downs, principally related to equipment, represented non-cash charges
required to reduce the carrying value of the assets to be disposed of to net
realizable value as of the planned date of disposal.  During 2000, the Company
completed the 1999 cost reduction program and utilized amounts accrued for
purposes identified in the realignment plan.

Note 10.  Pensions and Other Postretirement Benefits

Defined Benefit Plans and Postretirement Health Benefits

The Company sponsors a number of defined benefit plans covering substantially
all U.S. employees, employees in certain other countries and non-employee
directors.  It is the Company's policy to make contributions to these plans
sufficient to meet the minimum funding requirements of applicable laws and
regulations, plus additional amounts, if any, as the Company's actuarial
consultants advise to be appropriate.  Plan assets are invested in a diversified
portfolio that consists primarily of equity securities.  Benefits payable to
employees are based primarily on years of service and employees' pay during
their employment with the Company.  Certain benefits provided by the Company's
U.S. defined benefit plan may be paid, in part, from an employee stock ownership
plan.



Note 10.  Pensions and Other Postretirement Benefits (continued)

The Company provides postretirement health benefits to certain of its U.S.
retired employees up to the age of 65 under a cost-sharing arrangement, and
supplemental Medicare benefits to certain U.S. retirees over the age of 65.  The
Company's policy is to fund the cost of the postretirement benefits on a cash
basis.

The following provides a reconciliation of benefit obligations, plan assets and
funded status of the plans:



                                                                                             Postretirement
                                                                       Pension Benefits      Health Benefits
                                                                    ---------------------  ------------------
(In millions)                                                           2001       2000       2001      2000
=============================================================================================================
                                                                                           
Change in benefit obligation:
Benefit obligation at beginning of year                                $486.7    $462.1      $ 26.1    $ 24.4
Service cost                                                             13.4      12.0          .7        .6
Interest cost                                                            34.0      32.3         2.5       1.9
Participant contribution                                                  2.0       1.9           -         -
Amendments                                                                 .2       1.7           -         -
Actuarial loss                                                           23.4      16.3        18.8       1.2
Plan transfer                                                             3.5       4.5           -         -
Benefits paid                                                           (29.5)    (27.8)       (2.4)     (2.0)
Curtailment                                                                 -       (.4)          -         -
Foreign currency translation                                             (4.1)    (15.9)          -         -
- -------------------------------------------------------------------------------------------------------------------
Benefit obligation at end of year                                      $529.6    $486.7      $ 45.7    $ 26.1
===================================================================================================================

Change in plan assets:
Fair value of plan assets at beginning of year                         $650.9    $655.4           -         -
Actual return on plan assets                                             (6.2)     21.5           -         -
Plan transfer                                                             3.5       4.5           -         -
Employer contribution                                                     2.8       4.6      $  2.4    $  2.0
Participant contribution                                                  1.9       1.9           -         -
Benefits paid                                                           (29.3)    (27.8)       (2.4)     (2.0)
Foreign currency translation                                             (9.2)     (9.2)          -         -
- -------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year                               $614.4    $650.9           -         -
===================================================================================================================

Funded status of the plans:
Plan assets in excess of (less than) benefit obligation                $ 84.8    $164.2      $(45.7)   $(26.1)
Unrecognized net actuarial loss (gain)                                   13.1     (81.6)        9.9      (8.9)
Unrecognized prior service cost                                           2.0       2.7         1.1       1.2
Unrecognized net asset                                                  (10.3)    (12.1)          -         -
- -------------------------------------------------------------------------------------------------------------------
Net amount recognized                                                  $ 89.6    $ 73.2      $(34.7)   $(33.8)
===================================================================================================================

Amounts recognized in the Consolidated Balance Sheet consist of:
Prepaid benefit cost                                                   $133.5    $118.2           -         -
Accrued benefit liability                                               (64.7)    (45.3)     $(34.7)   $(33.8)
Intangible asset                                                          6.5        .3           -         -
Other comprehensive income                                               14.3         -           -         -
- -------------------------------------------------------------------------------------------------------------------
Net amount recognized                                                  $ 89.6    $ 73.2      $(34.7)   $(33.8)
===================================================================================================================


The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for pension plans with accumulated benefit obligations in excess
of plan assets were $240.4 million, $236.9 million and $166 million,
respectively, at year end 2001, and $215.4 million, $208.8 million and $176.7
million, respectively, at year end 2000.



Note 10.  Pensions and Other Postretirement Benefits (continued)



                                                                                       Postretirement
                                                               Pension Benefits        Health Benefits
                                                           --------------------     ------------------
                                                             2001   2000   1999     2001   2000   1999
- ------------------------------------------------------------------------------------------------------
                                                                                
Weighted-average assumptions used:
Discount rate                                                 6.8%   7.2%   7.2%    7.25%  7.75%  7.75%
Expected long-term rate of return on plan assets              8.8    9.1    9.3        -      -      -
Rate of increase in future compensation levels                4.0    4.0    4.1        -      -      -
======================================================================================================


The following table sets forth the components of net periodic benefit (income)
cost:



                                                                                          Postretirement
                                                               Pension Benefits          Health Benefits
                                                    ---------------------------   ----------------------
(In millions)                                           2001      2000     1999      2001   2000    1999
- --------------------------------------------------------------------------------------------------------
                                                                                 
Components of net periodic benefit (income) cost:
Service cost                                          $ 13.4    $ 12.0   $ 12.3     $  .7  $  .6   $  .8
Interest cost                                           34.0      32.3     30.6       2.5    1.9     1.7
Expected return on plan assets                         (55.6)    (53.2)   (48.1)        -      -       -
Recognized net actuarial gain                           (3.6)     (1.9)     (.2)        -    (.4)    (.4)
Amortization of prior service cost                        .8        .8       .9        .1     .1      .1
Amortization of transition obligation or asset          (1.7)     (1.9)    (2.0)        -      -       -
Curtailment                                                -         -      1.3         -      -     (.2)
- --------------------------------------------------------------------------------------------------------
Net periodic benefit (income) cost                    $(12.7)   $(11.9)  $ (5.2)    $ 3.3  $ 2.2   $ 2.0
- --------------------------------------------------------------------------------------------------------


For measurement purposes, a 12 percent annual rate of increase in the per capita
cost of covered health care benefits was assumed for 2002.  The rate is expected
to decrease to 6 percent by 2008.

A one-percentage-point change in assumed health care cost trend rates would have
the following effects:



                                                                                     One-percentage-       One-percentage-
(In millions)                                                                         point increase        point decrease
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                         
Effect on total of service and interest cost components                                         $ .4                $ (.4)
Effect on postretirement benefit obligation                                                      4.4                 (3.9)
- -----------------------------------------------------------------------------------------------------------------------------------


As a result of changes in assumptions used during 2001 and 2000, an additional
liability of $20.2 million and $.3 million, respectively, is reflected in the
Company's Consolidated Balance Sheet.  These amounts are offset in 2001 and 2000
by the recording of an intangible pension asset of $5.9 million and $.3 million,
respectively, and a charge to equity of $14.3 million in 2001.

Defined Contribution Plans

The Company sponsors various defined contribution plans covering its U.S.
employees, including a 401(k) savings plan.  The Company matches participant
contributions to the 401(k) savings plan based on a formula within the plan.
The Avery Dennison Corporation Employee Savings Plan (Savings Plan) has a
leveraged employee stock ownership plan (ESOP) feature, which allows the plan to
borrow funds to purchase shares of the Company's common stock at market prices.
Savings Plan expense consists primarily of stock contributions from the ESOP
feature to participant accounts.

ESOP expense is accounted for under the cost of shares allocated method.  Total
ESOP expense (income) for 2001, 2000 and 1999 was $.1 million, $(1.6) million
and $(1.6) million, respectively.  Company contributions to pay interest or
principal on ESOP borrowings for 2001 were $1.8 million.  There were no Company
contributions to pay interest or principal on ESOP borrowings for 2000 and 1999.

Interest costs incurred by the ESOPs for 2001, 2000 and 1999 were $1.2 million,
$1.7 million and $1.5 million, respectively.  Dividends on unallocated ESOP
shares used for debt service were $1.6 million in each of the years 2001, 2000
and 1999.



Note 10.  Pensions and Other Postretirement Benefits (continued)

Consolidated expense (income) for all defined contribution plans (including
total ESOP expense) for 2001, 2000 and 1999 was $1.7 million, $(.5) million and
$(.4) million, respectively.  Of the total shares held by the ESOP, 4.7 million
shares were allocated and 1.3 million shares were unallocated at year end 2001,
and 5.1 million shares were allocated and 1.4 million shares were unallocated at
year end 2000.

Other Retirement Plans

The Company has deferred compensation plans which permit eligible employees and
directors to defer a portion of their compensation.  The deferred compensation,
together with certain Company contributions, earn specified and variable rates
of return.  As of year end 2001 and 2000, the Company had accrued $115.9 million
and $111.5 million, respectively, for its obligations under these plans.  These
obligations are secured by standby letters of credit of $127.6 million for 2001
and 2000.  The Company's expense, which includes Company contributions and
interest expense, was $12.7 million, $11.5 million and $14 million for 2001,
2000 and 1999, respectively.  A portion of the interest may be forfeited by
participants if employment is terminated before age 55 other than by reason of
death, disability or retirement.

To assist in the funding of these plans, the Company purchases corporate-owned
life insurance contracts.  Proceeds from the insurance policies are payable to
the Company upon the death of the participant.  The cash surrender value of
these policies, net of outstanding loans, included in "Other assets" was $101.4
million and $90.9 million at year end 2001 and 2000, respectively.

Note 11.  Segment Information

The Company manages its business in two operating segments: Pressure-sensitive
Adhesives and Materials and Consumer and Converted Products.  The segments were
determined based upon the types of products produced and markets served by each
segment.  The Pressure-sensitive Adhesives and Materials segment manufactures
pressure-sensitive adhesives and base materials that are sold primarily to
converters and label printers for further processing.  Products in this segment
include Fasson-brand papers, films and foils, specialty tapes and chemicals.
The Consumer and Converted Products segment manufactures products for home,
school and office uses, and for the retail industry and original-equipment
manufacturers.  This segment includes Avery-brand labels and other consumer
products, custom labels, high performance specialty films and labels, automotive
applications and fasteners.

The accounting policies of the segments are the same as those described in the
summary of significant accounting policies.  Intersegment sales are recorded at
or near market prices and are eliminated in determining consolidated sales.  The
Company evaluates performance based on income from operations before interest
expense and taxes.  General corporate expenses are also excluded from the
computation of income from operations.

The Company does not disclose total assets by operating segment since the
Company does not produce and review such information internally.  Instead, the
Company reviews each operating segment's average invested capital to assess
performance and decide how to allocate resources to each segment.



Note 11.  Segment Information (continued)

Financial information by operating segment is set forth below:



(In millions)                                                              2001/(1)/         2000   1999/(2)/
- -------------------------------------------------------------------------------------------------------------------
                                                                                                   
Net sales:
Pressure-sensitive Adhesives and Materials/(3)/                            $2,189.4      $2,136.4    $2,025.0
Consumer and Converted Products/(4)/                                        1,784.6       1,898.3     1,892.3
Intersegment/(5)/                                                            (170.7)       (141.2)     (149.1)
- -------------------------------------------------------------------------------------------------------------------
Net sales                                                                  $3,803.3      $3,893.5    $3,768.2
===================================================================================================================
Income (loss) from operations before interest and taxes:
Pressure-sensitive Adhesives and Materials/(3)/                            $  191.8      $  212.4    $  180.0
Consumer and Converted Products/(4)/                                          244.6         293.2       223.8
Corporate administrative and research and
  development expenses                                                        (26.4)        (24.7)      (30.0)
- -------------------------------------------------------------------------------------------------------------------
                                                                              410.0         480.9       373.8
Interest expense                                                              (50.2)        (54.6)      (43.4)
- -------------------------------------------------------------------------------------------------------------------
Income before taxes                                                        $  359.8      $  426.3    $  330.4
===================================================================================================================
Capital expenditures:
Pressure-sensitive Adhesives and Materials                                 $   75.7      $  110.8    $   79.1
Consumer and Converted Products                                                48.9          74.2        80.9
Corporate                                                                      10.8          13.3        17.7
- -------------------------------------------------------------------------------------------------------------------
Capital expenditures                                                       $  135.4      $  198.3    $  177.7
===================================================================================================================
Depreciation expense:
Pressure-sensitive Adhesives and Materials                                 $   69.4      $   69.9    $   64.7
Consumer and Converted Products                                                49.2          48.7        53.4
Corporate                                                                       5.5           7.4         8.4
- -------------------------------------------------------------------------------------------------------------------
Depreciation expense                                                       $  124.1      $  126.0    $  126.5
===================================================================================================================


/(1)/ Results for 2001 include a pretax gain of $20.2 million from the sale of
      the Company's non-strategic specialty coatings business included in the
      Pressure-sensitive Adhesives and Materials segment results. Results for
      2001 also include a pretax cost reduction charge of $19.9 million. This
      charge was recorded as follows: $7.6 million to the Pressure-sensitive
      Adhesives and Materials segment, $9.4 million to the Consumer and
      Converted Products segment, and $2.9 million to Corporate. See Note 9 for
      additional information regarding the Company's 2001 cost reduction
      program.
/(2)/ Results for 1999 include a pretax cost reduction charge of $65 million.
      The charge was recorded as follows: $25.1 million to the Pressure-
      sensitive Adhesives and Materials segment, $37.6 million to the Consumer
      and Converted Products segment, and $2.3 million to Corporate. See Note 9
      for additional information regarding the Company's 1999 cost reduction
      charge.
/(3)/ Net sales for the Pressure-sensitive Adhesives and Materials segment
      include sales from divested operations of $33.5 million, $62.7 million and
      $50 million in 2001, 2000 and 1999, respectively. Income from operations
      for the segment includes income from divested operations of $22.2 million
      (including the gain from the sale of the specialty coatings business),
      $1.3 million and $3.4 million in 2001, 2000 and 1999, respectively.
/(4)/ Net sales for the Consumer and Converted Products segment include sales
      from divested operations of $15 million, $29.9 million and $42.3 million
      in 2001, 2000 and 1999, respectively. Income from operations for the
      segment includes income (loss) from divested operations of $(.2) million,
      $.7 million and $3.4 million in 2001, 2000 and 1999, respectively.
/(5)/ Intersegment sales primarily represent sales from the Pressure-sensitive
      Adhesives and Materials segment to the Consumer and Converted Products
      segment.



Note 11.  Segment Information (continued)

Financial information relating to the Company's operations by geographic area is
set forth below:



(In millions)                                                                       2001        2000        1999
- ----------------------------------------------------------------------------------------------------------------
                                                                                                  
Net sales:
U.S.                                                                            $2,318.8    $2,393.9    $2,343.6
International                                                                    1,561.7     1,539.9     1,471.4
Intersegment                                                                       (77.2)      (40.3)      (46.8)
- ----------------------------------------------------------------------------------------------------------------
Net sales                                                                       $3,803.3    $3,893.5    $3,768.2
================================================================================================================
Property, plant and equipment, net:
U.S.                                                                            $  615.2    $  607.6    $  588.3
International                                                                      394.0       405.7       378.9
Corporate                                                                           65.4        65.7        76.3
- ----------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net                                              $1,074.6    $1,079.0    $1,043.5
================================================================================================================


Revenues are attributed to geographic areas based on the location to which the
product is shipped.  The Company's international operations, conducted primarily
in continental Europe, are on the FIFO basis of inventory cost accounting.  U.S.
operations use both FIFO and LIFO.  Export sales from the United States to
unaffiliated customers are not a material factor in the Company's business.


Note 12.  Quarterly Financial Information (Unaudited)



                                                                     First          Second          Third        Fourth
(In millions, except per share data)                               Quarter         Quarter        Quarter       Quarter
- -----------------------------------------------------------------------------------------------------------------------
                                                                                                      
2001
Net sales                                                             $963.2          $960.8   $  966.7          $912.6
Gross profit                                                           319.0           311.8      312.8           296.6
Net income                                                              63.6            59.8       61.7            58.1
Net income per common share                                              .65             .61        .63             .60
Net income per common share, assuming dilution                           .65             .61        .63             .59
- -----------------------------------------------------------------------------------------------------------------------
2000
Net sales                                                             $965.3          $993.4   $1,001.7          $933.1
Gross profit                                                           334.1           343.7      340.3           314.1
Net income                                                              70.2            72.8       73.0            67.5
Net income per common share                                              .71             .74        .74             .69
Net income per common share, assuming dilution                           .70             .73        .73             .69
- -----------------------------------------------------------------------------------------------------------------------
1999
Net sales                                                             $933.9          $928.5   $  961.0          $944.8
Gross profit                                                           311.9           314.2      327.5           327.8
Net income                                                              18.4            63.7       66.0            67.3
Net income per common share                                              .19             .64        .66             .68
Net income per common share, assuming dilution                           .18             .63        .65             .67
=======================================================================================================================




STATEMENT OF MANAGEMENT RESPONSIBILITY FOR FINANCIAL STATEMENTS

The consolidated financial statements and accompanying information were prepared
by and are the responsibility of management.  The statements were prepared in
conformity with generally accepted accounting principles and, as such, include
amounts that are based on management's best estimates and judgments.

The internal control systems are designed to provide reliable financial
information for the preparation of financial statements, to safeguard assets
against loss or unauthorized use and to ensure that transactions are executed
consistent with Company policies and procedures.  Management believes that
existing internal accounting control systems are achieving their objectives and
that they provide reasonable assurance concerning the accuracy of the financial
statements.

Oversight of management's financial reporting and internal accounting control
responsibilities is exercised by the Board of Directors, through an audit
committee, which consists solely of outside directors (see page 50).  The
Committee meets periodically with financial management, internal auditors and
the independent accountants to obtain reasonable assurance that each is meeting
its responsibilities and to discuss matters concerning auditing, internal
accounting control and financial reporting.  The independent accountants and the
Company's internal audit department have free access to meet with the Audit
Committee without management's presence.



Philip M. Neal                                    Daniel R. O'Bryant
Chairman and                                      Senior Vice President, Finance
Chief Executive Officer                           and Chief Financial Officer



                       REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Shareholders of Avery Dennison Corporation:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, shareholders' equity and cash flows present
fairly, in all material respects, the financial position of Avery Dennison
Corporation and its subsidiaries at December 29, 2001 and December 30, 2000, and
the results of their operations and their cash flows for each of the three years
in the period ended December 29, 2001 in conformity with accounting principles
generally accepted in the United States of America.  These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits.  We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.


/s/ PricewaterhouseCoopers LLP
Los Angeles, California
January 21, 2002



Corporate Information

Counsel
Latham & Watkins
Los Angeles, California

Independent Accountants
PricewaterhouseCoopers LLP
Los Angeles, California

Transfer Agent-Registrar
EquiServe Trust Company, N.A.
P.O. Box 2500
Jersey City, NJ 07303-2500
(800) 756-8200
(201) 222-4955 (hearing impaired number)
http://www.equiserve.com (Web site)

Annual Meeting

The Annual Meeting of Shareholders will be held at 1:30 pm, Thursday, April 25,
2002, in the Conference Center of Avery Dennison's Charles D. Miller Corporate
Center, 150 North Orange Grove Boulevard, Pasadena, California.

The DirectSERVICE(TM) Investment Program

Shareholders of record may reinvest their cash dividends in additional shares of
Avery Dennison common stock at market price.  Investors may also invest optional
cash payments of up to $12,500 per month in Avery Dennison common stock at
market price.  Avery Dennison investors not yet participating in the program, as
well as brokers and custodians who hold Avery Dennison common stock for clients,
may obtain a copy of the program by writing to The DirectSERVICE(TM) Investment
Program, c/o EquiServe (include a reference to Avery Dennison in the
correspondence), P.O.  Box 2598, Jersey City, NJ 07303-2598, or calling (800)
649-2291, or logging onto their Web site at http://www.equiserve.com.



Direct Deposit of Dividends

Avery Dennison shareholders may deposit quarterly dividend checks directly into
their checking or savings accounts.  For more information, call Avery Dennison's
transfer agent and registrar, EquiServe Trust Company, N.A., at (800) 870-2340.

Form 10-K

A copy of the Company's Annual Report on Form 10-K, as filed with the Securities
and Exchange Commission, will be furnished to shareholders and interested
investors free of charge upon written request to the Secretary of the
Corporation.

Corporate Headquarters
Avery Dennison Corporation
Miller Corporate Center
150 North Orange Grove Boulevard
Pasadena, California  91103
Phone:  (626) 304-2000
Fax:  (626) 792-7312

Mailing Address:
P.O.  Box 7090
Pasadena, California  91109-7090



Stock and Dividend Data

Common shares of Avery Dennison are listed on the New York and Pacific stock
exchanges.
Ticker symbol:  AVY




                                                                    2001                2000
                                                            --------------------- -----------------
                                                                High      Low       High      Low
- ---------------------------------------------------------------------------------------------------
                                                                                  
Market Price
First Quarter                                                   $56.25   $50.50     $78.00  $ 55.31
Second Quarter                                                   60.24    48.88      69.69    57.75
Third Quarter                                                    52.24    44.39      69.13    43.38
Fourth Quarter                                                   56.81    46.30      57.19    43.31
===================================================================================================
Prices shown represent closing on the NYSE


                                                                           2001                2000
- ---------------------------------------------------------------------------------------------------
                                                                                      
Dividends Per Common Share
First Quarter                                                            $  .30             $   .27
Second Quarter                                                              .30                 .27
Third Quarter                                                               .30                 .27
Fourth Quarter                                                              .33                 .30
- ---------------------------------------------------------------------------------------------------
Total                                                                    $ 1.23             $  1.11
===================================================================================================
Number of shareholders of record as of year end 2001                                         12,368
===================================================================================================

Exhibit 21

JURISDICTION IN
NAME OF CURRENT SUBSIDIARY WHICH ORGANIZED

A.V. Chemie AG Switzerland
ADC Philippines, Inc. Philippines
ADESPAN S.R.L. Italy
ADESPAN U.K. Limited United Kingdom
AEAC, Inc. U.S.A.
Avery (China) Company Limited China
Avery Automotive Limited United Kingdom
Avery Corp. U.S.A.
Avery de Mexico S.A. de C.V. Mexico
Avery Dennison (Fiji) Limited Fiji
Avery Dennison (Guangzhou) Co. Ltd. China
Avery Dennison (Guangzhou) Converted Products Limited China
Avery Dennison (Hong Kong) Limited Hong Kong
Avery Dennison (India) Private Limited India
Avery Dennison (Ireland) Limited Ireland
Avery Dennison (Kunshan) Limited China
Avery Dennison (Malaysia) SDN. BHD. Malaysia
Avery Dennison (Shanghai) International Trading Limited China
Avery Dennison (Thailand) Ltd. Thailand
Avery Dennison Australia Group Holdings Pty Limited Australia
Avery Dennison Belgie B.V. B.A. Belgium
Avery Dennison C.A. Venezuela
Avery Dennison Canada Inc. Canada
Avery Dennison Chile S.A. Chile
Avery Dennison Colombia S.A. Colombia
Avery Dennison Converted Products de Mexico, S.A. de C.V. Mexico
Avery Dennison Coordination Center B.V.B.A. Belgium
Avery Dennison Danmark Holding ApS Denmark
Avery Dennison Deutschland G.m.b.H. Germany
Avery Dennison do Brasil Ltda. Brazil
Avery Dennison Dover S.A. Argentina
Avery Dennison Etiket Ticaret Limited Sirketi Turkey
Avery Dennison Europe Holding (Deutschland) G.m.b.H & Co KG Germany
Avery Dennison Finance Danmark A.p. S. Denmark
Avery Dennison Finance France S. A. S. France
Avery Dennison Finance Germany G.m.b.H. Germany
Avery Dennison Finance Luxembourg S. A. R. L. Luxembourg
Avery Dennison Foreign Sales Corporation Barbados
Avery Dennison France S.A. France
Avery Dennison G Holdings I Company U.S.A.
Avery Dennison G Holdings II Company U.S.A.
Avery Dennison G Investments I Limited Gibraltar
Avery Dennison G Investments II Limited Gibraltar
Avery Dennison G Investments III Limited Gibraltar
Avery Dennison G Investments IV Limited Gibraltar
Avery Dennison Group Danmark A.p.S. Denmark
Avery Dennison Health Management Corporation U.S.A.
Avery Dennison Holding & Finance The Netherlands B. V. Netherlands
Avery Dennison Holding AG Switzerland
Avery Dennison Holding G.m.b.H. Germany
Avery Dennison Holding Luxembourg S. A. R. L. Luxembourg
Avery Dennison Holdings Limited Australia
Avery Dennison Hong Kong B.V. Netherlands
Avery Dennison Hungary Limited Hungary

JURISDICTION IN
NAME OF CURRENT SUBSIDIARY WHICH ORGANIZED

Avery Dennison Iberica, S.A. Spain
Avery Dennison Investments The Netherlands B. V. Netherlands
Avery Dennison Italia S.p.A. Italy
Avery Dennison Korea Limited Korea
Avery Dennison Luxembourg S.A. Luxembourg
Avery Dennison Materials France S.A.R.L. France
Avery Dennison Materials G.m.b.H. Germany
Avery Dennison Materials Ireland Limited Ireland
Avery Dennison Materials Nederland B.V. Netherlands
Avery Dennison Materials Pty Limited Australia
Avery Dennison Materials U.K. Limited United Kingdom
Avery Dennison Mexico S.A. de C.V. Mexico
Avery Dennison Nordic A/S Denmark
Avery Dennison Norge A/S Norway
Avery Dennison Office Products (NZ) Limited New Zealand
Avery Dennison Office Products (PTY.) Ltd. South Africa
Avery Dennison Office Products Company U.S.A.
Avery Dennison Office Products De Mexico, S.A. de C.V. Mexico
Avery Dennison Office Products France S. A. S. France
Avery Dennison Office Products Italia S.r.l. Italy
Avery Dennison Office Products Manufacturing & Trading Limited
Liability Company (Avery Dennison Ltd.) Hungary
Avery Dennison Office Products PTY Limited Australia
Avery Dennison Office Products U.K. Limited United Kingdom
Avery Dennison Osterreich G.m.b.H. Austria
Avery Dennison Overseas Corporation U.S.A.
Avery Dennison Pension Trustee Limited United Kingdom
Avery Dennison Peru S. A. Peru
Avery Dennison Polska Sp. Z O.O. Poland
Avery Dennison Scandinavia A/S Denmark
Avery Dennison Schweiz AG Switzerland
Avery Dennison Security Printing Europe A/S Denmark
Avery Dennison Shared Services, Inc. U.S.A.
Avery Dennison Singapore (PTE) Ltd Singapore
Avery Dennison South Africa (Proprietary) Limited South Africa
Avery Dennison Suomi OY Finland
Avery Dennison Sverige AB Sweden
Avery Dennison Systemes d'etiquetage France S.A.S. France
Avery Dennison U.K. Limited United Kingdom
Avery Dennison Verwaltungs G.m.b.H. Germany
Avery Dennison Zweckform Austria G.m.b.H. Austria
Avery Dennison Zweckform Office Products Europe G.m.b.H. Germany
Avery Dennison Zweckform Unterstutzungskasse G.m.b.H. Germany
Avery Dennison, S.A. de C.V. Mexico
Avery Dennison-Maxell K.K. Japan
Avery Etiketsystemer A/S Denmark
Avery Etiketten B.V. Netherlands
Avery Etikettsystem Svenska AB Sweden
Avery Graphic Systems, Inc. U.S.A.
Avery Guidex Limited United Kingdom
Avery Holding B.V. Netherlands
Avery Holding Limited United Kingdom
Avery Holding S.A. France
Avery Maschinen G.m.b.H. Germany

JURISDICTION IN
NAME OF CURRENT SUBSIDIARY WHICH ORGANIZED

Avery Pacific Corporation U.S.A.
Avery Properties PTY. Limited Australia
Avery Research Center, Inc. U.S.A.
Avery, Inc. U.S.A.
BOA/IWACO Offset A/S Denmark
Cardinal Insurance Limited Bermuda (U.S.A.)
Dennison Comercio, Importacas E Exportacao Ltda. Brazil
Dennison Development Associates U.S.A.
Dennison International Company U.S.A.
Dennison International Holding B.V. Netherlands
Dennison Ireland Limited Ireland
Dennison Manufacturing (Trading) Ltd. Channel Islands
Dennison Manufacturing Company U.S.A.
Dennison Office Products Limited Ireland
DMC Development Corporation U.S.A.
Dunsirn Industries, Inc. U.S.A.
Etikettrykkeriet A/S Denmark
Fasson Canada Inc. Canada
Fasson Portugal Produtos Auto-Adesivos LDA. Portugal
IWACO A/S Denmark
IWACO Labels & Labelling Systems OY Finland
Iwaco Norge AS Norway
LAC Retail Systems Limited United Kingdom
Monarch Industries, Inc. U.S.A.
Ocawi Sverige AB Sweden
PT Avery Dennison Indonesia Indonesia
Retail Products Limited Ireland
Security Printing Division, Inc. U.S.A.
Spartan International, Inc. U.S.A.
Spartan Plastics Canada, Ltd Canada
Steinbeis Office Products Beteiligungs G.m.b.H. Germany
Stimsonite Australia PTY Limited Australia
Stimsonite Corporation U.S.A.
Stimsonite do Brasil Ltda Brazil
Stimsonite Europa Limited United Kingdom
Stimsonite International, Inc. U.S.A.
Tiadeco Participacoes, Ltda. Brazil
Zweckform U.K. Ltd. United Kingdom



                                                                      Exhibit 99


                   CAUTIONARY STATEMENT FOR PURPOSES OF THE
                        "SAFE HARBOR" PROVISIONS OF THE
               PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Information provided by the Company may contain certain forward-looking
information, as defined by the Private Securities Litigation Reform Act of 1995
(the "Act").  Words such as "aim," "anticipate," "assume," "believe,"
"continue," "could," "estimate," "expect," "intend," "may," "plan," "potential,"
"project," "should," "target," "will," and other expressions, which refer to
future events and trends, identify forward-looking statements that involve risks
and uncertainties.  Forward-looking information may relate to such matters as
sales, unit volume, income, margins, earnings per share, return on equity,
return on total capital, economic value added, capital expenditures, dividends,
cash flow, debt to capital ratios, growth rates, future economic performance and
trends, short- and long-term plans (including financing, operating and strategic
plans) and objectives for future operations as well as assumptions,
expectations, projections and estimates relating to any of the forward-looking
information.  This Statement is being made pursuant to the Act and with the
intention of obtaining the benefits of the so-called "safe harbor" provisions of
the Act.  The Company cautions that forward-looking statements are not
guarantees because there are inherent and obvious difficulties in attempting to
predict the outcome of future events.  Therefore, actual results may differ
materially from those expressed or implied.  Investors are therefore cautioned
not to place undue reliance on any forward-looking statements as a prediction of
future results.  The Company assumes no obligation to update any forward-looking
statements, other than as may be required by law.

The ability of the Company to attain management's goals and objectives are
materially dependent on numerous factors, including those set forth herein.

Operating results are importantly influenced by general economic conditions and
growth (or contraction) of the principal economies in which the Company
operates, including the United States, Canada, Europe, Latin America and the
Asia-Pacific region.  All economies in which the Company operates are cyclical
and the rates of growth (or contraction) can vary substantially.  More than one-
third of the Company's sales are in foreign currencies, which fluctuate in
relation to one another and to the United States dollar.  Fluctuations in
currencies can cause transaction, translation and other losses to the Company.
The Company's international operations are strongly influenced by the changes in
political, economic, tax and regulatory environment (including tariffs) in the
countries in which the Company conducts its operations.

As a manufacturer, the Company's sales and profitability are also dependent upon
availability and cost of raw materials, which are subject to price fluctuations,
and the ability to control or pass on costs of raw materials and labor.
Inflationary and other increases in the costs of raw materials and labor have
occurred in the past and are expected to recur, and the Company's performance
depends in part on: its ability to reflect changes in costs in its selling
prices for product; its productivity; and its focus on higher margin businesses.
Past performance may or may not be replicable in the future.

The Company's customers are widely diversified, but in certain portions of its
business, industry concentration has increased the importance and decreased the
number of significant customers.  In particular, sales of the Company's consumer
products in the United States are concentrated in a few major customers,
principally discount office product superstores and distributors.  These
developments, including increased credit risks and the possibility of related
bad debt write-offs, increase pressures on the Company's margins and profits.

A significant portion of the revenues in each of its recent fiscal years has
been represented by sales of products introduced by the Company within five
years prior to the period in question.  The Company's ability to develop and
successfully market new products and to develop, acquire and retain necessary
intellectual property rights is therefore essential to maintaining the Company's
growth, which ability cannot be assured.

Other factors, which are not exhaustive, include costs and other effects of
interest rate increases, legal and administrative cases and proceedings (whether
civil, such as environment and product related, or criminal), settlements,
judgements and investigations, claims, and changes in those items; developments
or assertions by or against the Company relating to intellectual property rights
and intellectual property licenses; adoption of new, or change in, accounting
policies and practices and the application of such policies and practices;
changes in business mix, successful integration of new acquisitions, rates of
growth and profitability may be influenced by customer or supplier business
reorganizations or combinations; loss of a significant contract(s) or
customer(s); customer acceptance of new products; disruptions in transportation
networks; fluctuations in interest rates; dependability of utilities; impact of
computer viruses; general or specific economic conditions and the ability and
willingness of purchasers to substitute other products for the products that the
Company manufactures or distributes; financial condition and inventory
strategies of customers and suppliers; and pricing, purchasing, financing and
promotional decisions by intermediaries in the distribution channel, which could
affect orders, or end-user demand, for the Company's products; other risks
associated with foreign operations, acts of war, terrorism, weather and other
natural disasters; and other factors.

The factors identified in this statement are believed to be important factors
(but not necessarily all of the important factors) that could cause actual
results to be materially different from those that may be expressed or implied
in any forward-looking statement made by, or on behalf, of the Company.  Other
factors not discussed in this statement could also have material adverse effects
concerning forward-looking objectives or estimates.