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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 January 2, 1999
OR

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

For the transition period from to
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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 91103
Pasadena, California (Zip Code)
(Address of principal executive offices)

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

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

Name of each
exchange on which
Title of Each Class 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. [_]

The aggregate market value of voting stock held by non-affiliates as of
March 1, 1999, was approximately $5,246,115,237.

Number of shares of common stock, $1 par value, outstanding as of March 1,
1999: 113,813,785.

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 January 2, 1999 (the "1998
Annual Report")......................... Parts I, II
Definitive Proxy Statement for Annual
Meeting of Stockholders to be held April
29, 1999 (the "1999 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,
tickets, tags, and imprinting equipment.

A self-adhesive material is one that adheres to a surface by mere press-on
contact. It consists of four elements--a face material, which may be 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 device is pressed or rolled into place.

Self-adhesive materials may initially cost more than materials using heat or
moisture activated adhesives, but their use often effects substantial 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 January 2, 1999, the Company manufactured and sold its products
from 200 manufacturing facilities and sales offices located in 39 countries,
and employed a total of approximately 16,100 persons worldwide.

On January 26, 1999, the Company announced plans for a major realignment of
its cost structure to streamline operations and improve profitability. In
connection with this realignment, the Company will close eight manufacturing
facilities, three of which have been announced: Rochelle, Illinois; Rancho
Cucamonga, California; and Haan, Germany. As a result of these closures,
approximately 1,500 positions will be eliminated, representing approximately
nine percent of the Company's total workforce.

The Company 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, availability and
pricing of raw materials, legal proceedings, and the impact of the Year 2000
issue.

Except as set forth below, no material part of the Company's business is
dependent upon a single customer or a few customers and the loss of a
particular customer or a few customers generally would not have a material
adverse effect on the Company's business. However, sales and related accounts
receivable of the Company's U.S. consumer products are increasingly
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 1998 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 Sector

The Pressure-Sensitive Adhesives and Materials sector manufactures and sells
Fasson and Avery Dennison-brand pressure-sensitive base materials, specialty
tapes, graphic films and chemicals. Base materials consist primarily of
papers, fabrics, plastic films and metal foils 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. The business of this sector is not seasonal.

Base material products consist of a wide range of pressure-sensitive coated
papers, films and foils which 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, release-coated
materials and specialty insulation paper.

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 for government and traffic
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, protective coatings and binders for internal uses as well
as for sale to other companies.

During 1998, the Company established coating operations in India and
completed a manufacturing facility in Thailand to market and sell a variety of
pressure-sensitive materials. In late 1998, the Company also increased its
majority ownership position in its base materials operation in Argentina.

In this sector, 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.

Consumer and Converted Products Sector

The Consumer and Converted Products sector 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 sector is 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 children's laser and ink-jet labels, markers,
adhesives and specialty products under brand names such as Avery, Avery Kids,
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 Latin America, Asia Pacific and Europe
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, distributors and licensees. 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 on-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 fine-
paper merchants.

During 1998, the Company acquired an office products company in Italy, and
broadened its distribution of Avery-brand products in Asia Pacific and Latin
America. In late 1998, the Company acquired Spartan International, a
distributor of pressure-sensitive products to the commercial graphics, sign
making, vehicle marking and automotive markets. In February 1999, the Company
also acquired certain assets and the graphic film business of Universal
Products, Inc., another distributor of films for digital printing
applications. In early 1999, the Company formed a joint venture with a German
office products company. The Company holds a majority ownership position in
the joint venture, which provides a platform for further expansion in the
office products market in Europe.

In this sector, 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 service its customers with an
extensive product line; its distribution strength; its ability to develop
internally and to commercialize new products successfully; 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 $65 million, $61.1 million, and
$54.6 million, in 1998, 1997 and 1996, 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 industry sectors.

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. Research and development generally focuses on projects affecting
more than one industry sector in such areas as printing and coating
technologies, and adhesive, release, coating and ink chemistries.

The loss of any 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 industry sectors. 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 Sector Information

The Business Sector Information attributable to the Company's operations for
the three years ended January 2, 1999, which appears in Note 10 of Notes to
Consolidated Financial Statements on pages 47 through 48 of the 1998 Annual
Report, is 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. 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 several years,
the Company has made a substantial investment in solvent capture and control
units and solvent-free systems. Installation of these units and systems has
reduced atmospheric 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, Colombia, France, Germany, Korea, China,
India and Thailand.

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.

The Company wishes to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, and is including Exhibit 99
to this filing to incorporate this safe harbor statement.

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). For information regarding the
Company's actions to address the Year 2000 Issue, see "Management's Discussion
and Analysis of Results of Operations and Financial Condition" (Part II, Item
7).

Item 2. PROPERTIES

The Company operates approximately 29 principal manufacturing facilities
ranging in size from approximately 100,000 square feet to approximately
270,000 square feet and totaling approximately 5 million square feet. The
following sets forth the locations of such principal facilities and the
business sectors for which they are presently used:

Pressure-Sensitive Adhesives and Materials Sector

Domestic--Painesville and Fairport, Ohio; Peachtree City, Georgia;
Quakertown, Pennsylvania; and Greenfield, Fort Wayne, Lowell, and
Schererville, Indiana.

Foreign--Hazerswoude, The Netherlands; Cramlington, England; Champ-sur-
Drac, France; Turnhout, Belgium; Ajax, Canada; Rodange, Luxembourg;
and Gotha, Germany.

Consumer and Converted Products Sector

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

Foreign--Bowmanville, Canada; La Monnerie, France; Hong Kong (S.A.R.),
China; Juarez, Mexico; Utrecht, The Netherlands; Maidenhead, U.K.;
and Oberlaidern, Germany.

In addition to the Company's principal manufacturing facilities described
above, the Company's 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 Ajax, Canada and Juarez, Mexico; and portions of the
facilities in Framingham, Massachusetts 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 will 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
encumbrances on, any of its properties except for mortgage liens against four
other facilities not listed separately above.

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
17 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 two 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 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. Based on current site assessments, management believes the
potential liability over the amounts currently accrued would not materially
affect 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*

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

Charles D. Miller............ 71 May 1965 1964-1983 Various positions of increasing
Chairman (also Director of responsibility
Registrant) 1983-1998 Chairman and Chief Executive
Officer
Philip M. Neal............... 58 January 1974 1974-1990 Various positions of increasing
President and Chief responsibility
Executive Officer 1990-1998 President and Chief Operating
(also Director of Officer
Registrant)
Kim A. Caldwell.............. 51 June 1990 1990-1997 Senior Group V.P., Worldwide
Executive Vice President, Materials--Americas and
Global Technology and Asia
New Business Development
Robert M. Calderoni.......... 39 October 1997 **1994-1996 V.P., Finance IBM Storage
Senior Vice President, Systems Division
Finance and Chief Financial **1996-1997 Senior V.P., Finance Apple
Officer Computer, Inc.
Robert G. van Schoonenberg... 52 December 1981 1981-1996 V.P., General Counsel and
Senior Vice President, Secretary
General Counsel and
Secretary
Wayne H. Smith............... 57 June 1979 None
Vice President and Treasurer
Thomas E. Miller............. 51 March 1994 1993-1994 V.P. and Assistant Controller
Vice President and
Controller
Diane B. Dixon............... 47 December 1985 1985-1997 V.P., Corporate
Vice President, Worldwide Communications
Communications and
Advertising
Geoffrey T. Martin........... 44 January 1994 1994-1997 Senior V.P., Worldwide Tape &
Senior Group Vice President, Converting and Materials--
Worldwide Converting, Europe
Graphic Systems and
Specialty Tapes
Stephanie A. Streeter........ 41 March 1996 1993-1996 V.P. and General Manager,
Group Vice President, Avery Dennison Brands
Worldwide Office Products
Dean A. Scarborough.......... 43 August 1997 1993-1995 V.P. and General Manager,
Group Vice President, Fasson Fasson Roll Division--
Roll--North America and Europe
Europe
1995-1997 V.P. and General Manager,
Fasson Roll Division--U.S.

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* All officers are elected to serve a one year term and until their successors
are elected and qualify.

** Business experience prior to service with Registrant.

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
1998 Annual Report and is incorporated herein by reference.

Item 6. SELECTED FINANCIAL DATA

Selected financial data for each of Registrant's last five fiscal years
appears on pages 26 and 27 of Registrant's 1998 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

1998 1997 1996
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(Dollars in millions)

Net sales........................................ $3,459.9 $3,345.7 $3,222.5
Cost of products sold............................ 2,315.4 2,263.0 2,204.2
-------- -------- --------
Gross profit..................................... 1,144.5 1,082.7 1,018.3
Marketing, general and administrative expense.... 773.2 739.8 712.4
Net gain on divestitures and restructuring
charges......................................... -- -- 2.1
-------- -------- --------
Earnings before interest and taxes............... $ 371.3 $ 342.9 $ 308.0

Sales increased 3.4 percent to $3.46 billion in 1998, compared to $3.35
billion in 1997. Excluding changes in foreign currency exchange rates, sales
increased 4.8 percent. The Company's 1998 fiscal year reflected a 53-week
period compared to 52-week periods in 1997 and 1996. The extra week in 1998
was reflected in the fourth quarter; however, this was a slow shipping period
due to the holidays and carried a full week of expense. As a result, the
impact on profit was immaterial. In 1997, sales increased 3.8 percent over
1996 sales of $3.22 billion. Excluding the impact of changes in foreign
currency exchange rates for 1997, sales increased 6.6 percent.

Gross profit margins for the years ended 1998, 1997 and 1996 were 33.1
percent, 32.4 percent and 31.6 percent, respectively. The improvements in 1998
and 1997 were primarily due to increased productivity, cost control and an
improved product mix.

Marketing, general and administrative expense as a percent of sales was 22.3
percent in 1998 and 22.1 percent in 1997 and 1996. The increase in 1998 over
1997 was primarily due to the extra week of expenses incurred in 1998. The
expense for 1997 benefited from cost control and lower costs for certain
employee benefit plans; however, these benefits were offset by increased
expenditures for marketing, and research and development activities.

During the third quarter of 1996, restructuring actions were taken,
resulting in a net pretax gain of $2.1 million. The Company sold its equity
interest in a label operation in Japan for $28.4 million, resulting in a
pretax gain of $17.9 million. The Company also recorded $15.8 million of
restructuring charges, which included an asset impairment write-down of $6.3
million for long-lived assets held in the Company's Consumer and Converted
Products sector. The restructuring program also included the reorganization of
certain manufacturing, distribution and administrative sites. These costs
consisted of severance and related costs for approximately 200 positions
worldwide ($7.4 million) and the discontinuance of product lines and related
asset write-offs ($2.1 million). These actions were completed during the third
quarter of 1997.

Interest expense for the years ended 1998, 1997 and 1996 was $34.6 million,
$31.7 million and $37.4 million, respectively. The increase in 1998 compared
to 1997 was primarily due to higher average borrowings to support a more
aggressive share repurchase program. The decrease in 1997 compared to 1996 was
primarily due to lower weighted-average interest rates and lower average
borrowings.

Income before taxes, as a percent of sales, was 9.7 percent for 1998, 9.3
percent for 1997 and 8.4 percent for 1996. The improvement during 1998 was
primarily due to higher gross profit margins. The improvement during 1997
compared to 1996 was primarily due to higher gross profit margins and lower
interest expense as a percent of sales. The effective tax rate was 33.7
percent in 1998, 34.2 percent in 1997 and 35 percent in 1996. The decrease in
1998 was primarily due to an increase in U.S. tax credits for research and
experimentation. The decrease in 1997 compared to 1996 was primarily due to
the utilization of foreign tax loss carryforwards and an increase in U.S. tax
credits for research and experimentation. The Company estimates that the
effective tax rate for 1999 will be 34 percent to 34.5 percent.

1998 1997 1996
------ ------ ------
(In millions, except
per share amounts)

Net income............................................. $223.3 $204.8 $175.9
Net income per common share............................ 2.20 1.99 1.68
Net income per common share, assuming dilution......... 2.15 1.93 1.63

Net income increased to $223.3 million in 1998 compared to $204.8 million in
1997, reflecting a 9 percent increase over 1997. Net income in 1996 was $175.9
million. Net income, as a percent of sales, was 6.5 percent, 6.1 percent and
5.5 percent in 1998, 1997 and 1996, respectively.

Net income per common share increased 10.6 percent to $2.20 in 1998,
compared to $1.99 in 1997. Net income per common share was $1.68 in 1996. Net
income per common share, assuming dilution, increased 11.4 percent to $2.15 in
1998 compared to $1.93 in 1997. Net income per common share, assuming dilution
was $1.63 in 1996.

Results of Operations by Business Sector

Pressure-Sensitive Adhesives and Materials:

1998 1997 1996
-------- -------- --------
(In millions)

Net sales........................................ $1,874.1 $1,823.8 $1,783.8
Income from operations before interest and taxes. 170.3 172.1 160.7

The Pressure-Sensitive Adhesives and Materials Sector reported increased
sales for 1998 compared to 1997. Sales increased in the U.S. operations
primarily due to strong unit volume growth in the core U.S. roll materials
business. Income for total U.S. operations in the sector decreased slightly,
primarily due to changes in product mix and start-up costs for new products.
However, operating margins for the core roll materials business in 1998
remained constant relative to prior year. Total international operations in
the sector reported increased sales, reflecting strong unit volume growth in
Europe and geographic expansion efforts. This increase in sales was partially
offset by changes in foreign currency rates. Income for the international
operations was down slightly from the prior year mainly due to pricing
pressures in Europe and costs associated with new plant start-ups.

In the fourth quarter of 1998, the Company increased its investment in its
Argentine business, the largest base material company in that region. The
Company now has a substantial majority in this venture.

The Pressure-Sensitive Adhesives and Materials Sector reported increased
sales and profitability for 1997 compared to 1996. The U.S. operations' sales
growth was primarily led by increased sales volume for products in the
pharmaceutical, variable imprint and graphics businesses; however, sales were
partially impacted by paper

price deflation and product mix. Income from the U.S. operations benefited
from improved capacity utilization and the extent of restructuring charges
taken in 1996 compared to 1997. The international businesses reported
increased sales and profitability primarily due to higher unit volume and
geographic expansion, which were partially offset by changes in foreign
currency rates.

Consumer and Converted Products:

1998 1997 1996
-------- -------- --------
(In millions)

Net sales........................................ $1,742.1 $1,672.6 $1,580.1
Income from operations before interest and taxes. 227.0 188.5 158.5

The Consumer and Converted Products sector reported increased sales and
profits for 1998 compared to 1997. Increased sales in the U.S. operations were
led by growth of the Avery-brand products, despite several major retailers
implementing inventory reduction programs. The Company experienced some
negative impact from these programs during the last half of 1998 and expects
the inventory reduction programs to continue into 1999. However, point-of-sale
data obtained from these customers through February 1999 continued to show
strong demand for Avery-brand products. Increased sales in the U.S. operations
were also attributed to growth from the high performance films businesses,
including Avloy-brand products. Income from the U.S. operations increased
primarily as a result of the consumer packaging, high performance films, and
office products businesses. The international operations reported increased
sales primarily due to strong unit volume growth in the European office
products operations, ticketing business and Asian and Latin American
businesses. This increase in sales was partially offset by changes in foreign
currency rates. Income increased in the international operations primarily due
to improved performance in the European converting and office products
operations and the ticketing businesses.

In the fourth quarter of 1998, the Company acquired Spartan International,
Inc. ("Spartan"), a privately held specialty converting company based in Holt,
Michigan. Spartan supplies pressure-sensitive products to the commercial
graphics, sign making, vehicle marking and automotive markets.

The Consumer and Converted Products sector reported increased sales and
profitability for 1997 compared to 1996. Increased sales in the U.S.
operations continued to be led by growth of the Avery-brand products, new
products and other consumer products. Profitability in the U.S. businesses
improved primarily as a result of the Avery-brand products, new products and
an improved product mix. Sales for the international businesses in 1997 were
comparable to 1996. Sales for 1997 benefited from geographic expansion;
however, this increase was offset by changes in foreign currency rates and
sales declines at certain European operations. Profitability for the
international businesses was primarily impacted by operations in France,
decreased sales at other select European operations due to the softness of
certain economies, and investment for the market expansion of new products.

Financial Condition

Average working capital, excluding short-term debt, as a percent of sales
was 7.1 percent in 1998, 8 percent in 1997 and 9.1 percent in 1996. The
decrease in 1998 was primarily due to improved payables management. The
decrease in 1997 compared to 1996 was primarily due to increased sales,
reduced days sales outstanding in accounts receivable, improved inventory
turnover and better payables management programs. Average inventory turnover
was 9.9 turns in 1998, 9.5 turns in 1997 and 9.3 turns in 1996; the average
number of days sales outstanding in accounts receivable was 52 days in 1998
and 1997 and 55 days in 1996.

Total debt increased $89.5 million to $537.2 million compared to year end
1997. Total debt to total capital increased to 39.2 percent at year end 1998
compared to 34.8 percent at year end 1997. Long-term debt as a percent of
total long-term capital increased to 35.9 percent from 32.6 percent at year
end 1997.

Shareholders' equity decreased to $833.3 million from $837.2 million at year
end 1997. During 1998, the Company repurchased 4 million shares of common
stock at a cost of $192.6 million. As of year end 1998, a

cumulative 31.9 million shares of common stock had been repurchased since 1991
and 3.5 million shares remained available for repurchase under the Board of
Directors' authorization. The market value of shares held in the employee
stock benefit trust, after the issuance of shares under the Company's stock
and incentive plans, decreased by $52.7 million to $677.6 million from year
end 1997.

Return on average shareholders' equity was 26.7 percent in 1998, 24.8
percent in 1997 and 21.4 percent in 1996. Return on average total capital for
those three years was 19 percent, 18.1 percent and 16.4 percent, respectively.
The improvements in 1998 and 1997 for these returns were primarily due to an
increase in profitability, more effective utilization of the Company's assets
and the impact from share repurchases.

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 (PRP) for past
and future cleanup costs at hazardous waste sites. The Company has received
requests for information, notices and/or claims with respect to 17 waste sites
in which the Company has no ownership interest. Litigation has been initiated
by a governmental authority with respect to two 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. Based on current site assessments, management believes that the
potential liability over the amounts currently accrued would not materially
affect the Company.

Liquidity and Capital Resources

Net cash flow from operating activities was $422.8 million in 1998, $368.4
million in 1997 and $304 million in 1996. The increase in net cash flow in
1998 and 1997 was primarily due to changes in working capital requirements and
the Company's improved profitability.

In addition to cash flow from operations, the Company has more than adequate
financing arrangements, at competitive rates, to conduct its operations.

During the fourth quarter of 1996, the Company registered with the
Securities and Exchange Commission $150 million in principal amount of
uncollaterized medium-term notes, of which $50 million and $60 million in
notes were issued in 1998 and 1997, respectively. No notes were issued in
1996. Proceeds from the medium-term notes were used to refinance short-term
debt and for other general corporate purposes. The Company's outstanding
medium-term notes have maturities from 2000 through 2025 and have a weighted-
average interest rate of 6.95 percent.

The Company's 1996 restructuring program was completed in 1997 and included
the $28.4 million sale of its equity interest in a label operation in Japan.
The restructuring program had a cost of $15.8 million.

Capital expenditures were $159.7 million in 1998 and $177.3 million in 1997.
Capital expenditures for 1999 are expected to be approximately $150 million.

The annual dividend per share increased to $.87 in 1998 from $.72 in 1997
and $.62 in 1996. This was the 23rd consecutive year the Company increased
dividends.

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.

In 1998 and 1997, the Company's Mexican operations were treated as being in
a hyperinflationary economy for accounting purposes due to the cumulative
inflation rate over the past three years. In 1998, the Company's Brazilian
operations were no longer treated as being in a hyperinflationary economy as
they had been in 1997. For operations in hyperinflationary economies, all
translation gains and losses were included in net income. These operations
were not significant to the Company's consolidated financial position.

Beginning in 1999, Mexico will no longer be treated as being in a
hyperinflationary economy for accounting purposes. As a result, all asset and
liability accounts for the Company's Mexican operations will be translated
into U.S. dollars at current rates and related losses and gains will be
recorded directly to a component of other comprehensive income. Gains and
losses resulting from foreign currency transactions will be included in net
income on a current basis.

Subsequent Events

On January 12, 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. Zweckform produces labels, films and specialty
papers for use with personal computers, desktop printers and copiers.
Zweckform had sales of approximately $120 million in 1997. The Company has a
substantial majority position in the venture.

On January 26, 1999, the Company announced plans for a major realignment of
its cost structure to increase operating efficiencies and improve
profitability. This restructuring program will include the closure of eight
manufacturing facilities in the Consumer and Converted Products and Pressure-
sensitive Adhesives and Materials sectors and will result in the elimination
of approximately 1,500 positions, or nine percent of the Company's current
workforce. In addition, a portion of the restructuring program will involve
the consolidation of some of its office products manufacturing facilities into
a new facility in Northern Mexico, which will involve the addition of some
positions in the year 2000.

The restructuring program is expected to result in a one-time pretax charge
of $60 million to $65 million, or $.40 to $.42 per diluted share after tax, in
the first quarter of 1999. Approximately two-thirds of the total estimated
charge is related to severance costs. The remainder of the charge represents
related asset write-offs and other one-time costs. After taxes, the cash
requirements to fund the restructuring will be in the range of $20 million to
$25 million in 1999. The restructuring program will be funded through
operating cash flow. The Company plans to complete the restructuring program
in the year 2000, with a significant portion of the actions planned for the
next four quarters.

Cost savings associated with the restructuring will begin to be recognized
in the second quarter of 1999. The Company expects 1999 pretax savings in the
range of $15 million to $18 million for the year. When fully implemented, the
Company expects annual pretax savings of $58 million to $62 million.

Future Accounting Requirements

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This Statement requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in
the fair value of derivatives will be recorded each period in current earnings
or other comprehensive income. The new rules will be effective the first
quarter of 2000. The Company is in the process of determining the impact of
this new standard and, based on current market conditions, anticipates that it
will not have a material impact on the Company's financial results when
effective.

Year 2000

The Year 2000 (Y2K) issue is the result of computer programs being written
for, or microprocessors using, two digits (rather than four) to define the
applicable year. Company computer programs that have date-sensitive

software may recognize a date using "00" as the year 1900 rather than the year
2000, which could result in system failures or miscalculations. The Company is
currently working to mitigate the Y2K issue and has established processes for
assessing the risks and associated costs.

The Company categorizes its Y2K efforts as follows: hardware, software,
embedded processors, vendors and customers. Progress in assessing and
remediating information technology systems (hardware and software) and non-
information technology systems (embedded processors) continues to be tracked
in phases including assessment, identification of non-compliant systems,
remediation, testing and verification. Hardware, software and embedded
processors have been assessed and remediation is in progress. The Company's
Y2K project is progressing and a large portion of its internal remediation
work was completed at year end 1998. The Company is using internal and
external resources to remediate and test its systems.

The Company has initiated communications with significant vendors and
customers to coordinate the Y2K issue, and is in the process of determining
the Company's vulnerability if these companies fail to remediate their Y2K
issues. There can be no guarantee that the systems of other companies will be
timely remediated, or that other companies' failure to remediate Y2K issues
would not have a material adverse effect on the Company. The Company continues
to develop contingency plans to mitigate risks associated with the Y2K issue.

Costs incurred to date in addressing the Y2K issue have been expensed as
incurred and are not material. Based on current information, the total cost to
remediate and test the Company's systems is not expected to be material.

The Company presently believes that with remediation, Y2K risks can be
mitigated. Although the Company is not currently aware of any material
internal operational or financial Y2K related issues, the Company cannot
provide assurances that the computer systems, products, services or other
systems upon which the Company depends will be Y2K ready on schedule, that the
costs of its Y2K program will not become material or that the Company's
contingency plans will be adequate. The Company is currently unable to
evaluate accurately the magnitude, if any, of the Y2K related issues arising
from the Company's vendors and customers. If any such risks (either with
respect to the Company or its vendors or customers) materialize, the Company
could experience serious consequences to its business which could have
material adverse effects on the Company's financial condition, results of
operations and liquidity.

Euro Conversion

On January 1, 1999, a single currency called the euro was introduced in
Europe. Eleven of the fifteen member countries of the European Union adopted
the euro as their common legal currency on that date. Fixed conversion rates
between these countries' existing currencies (legacy currencies) and the euro
were established on that date. The legacy currencies are scheduled to remain
legal tender in these participating countries between January 1, 1999 and July
1, 2002. During this transition period, parties may settle transactions using
either the euro or a participating country's legacy currency.

Certain of the Company's European facilities adopted the euro as their
functional currency in January 1999. The cost of system modifications to
accommodate the euro was not material.

Based on currently available information, the euro conversion has not had a
material adverse impact on the Company's business or financial condition.

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, Market-Sensitive Instruments and Risk Management and
other sections of this annual report contain "forward-looking statements"
within the meaning of the Private Securities Reform Act of 1995. These
statements, which are not statements of historical fact, may

contain estimates, assumptions, projections and/or expectations regarding
future events. 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 discussed in more
detail in the Company's Annual Report on Form 10-K for the year ended December
27, 1997 and include, but are not limited to, risks and uncertainties relating
to investment in new production facilities, timely development and successful
marketing of new products, impact of competitive products and pricing,
customer and supplier and manufacturing concentrations, changes in customer
order patterns and inventory levels, increased competition, impact of Year
2000 issues and the euro conversion, legal proceedings, fluctuations in
foreign exchange rates or other risks associated with foreign operations,
changes in economic or political conditions, and other factors.

Any forward looking statements should also be considered in light of the
factors detailed in Exhibit 99 in the Company's Annual Report on Form 10-K for
the years ended January 2, 1999 and December 27, 1997.

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.

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 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 to 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 interest rate
contracts outstanding at year end 1998.

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 risk 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 historical observations, using one year's
data with equal weightings. This data was obtained from the publicly available
JP Morgan RiskMetrics data set on the Internet. 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 would have been immaterial to the
Company's 1998 earnings.

Interest Rate Sensitivity

An assumed 50 basis point move in interest rates (10 percent of the
Company's weighted-average floating rate interest rates) affecting the
Company's variable-rate borrowings would have had an immaterial effect on the
Company's 1998 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 34
through 48, and in the Report of Independent Certified Public Accountants on
page 49 of Registrant's 1998 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 1999 Proxy Statement which has been
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 14 of the 1999 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 21 of the 1999 Proxy Statement which has been
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 filed no Reports on Form 8-K for the
three months ended January 2, 1999, but the Company did file one Report Form
8-K in January 1999:

Form 8-K dated January 26, 1999, in connection the Company's January 26,
1999 news release concerning the Company's 4th quarter and year-end
results, and realignment of the Company's cost structure.

(d) Those financial statement schedules required by Regulation S-X which are
excluded from Registrant's 1998 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/ Robert M. Calderoni
___________________________________
Robert M. Calderoni
Senior Vice President, Finance and
Chief Financial Officer

Dated: March 30, 1999

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

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

/s/ Charles D. Miller Chairman; Director March 30, 1999
____________________________________
Charles D. Miller

/s/ Philip M. Neal President and Chief March 30, 1999
____________________________________ Executive Officer; Director
Philip M. Neal

/s/ Robert M. Calderoni Senior Vice President, March 30, 1999
____________________________________ Finance and Chief Financial
Robert M. Calderoni Officer (Principal
Financial Officer)

/s/ Thomas E. Miller Vice President and March 30, 1999
____________________________________ Controller (Principal
Thomas E. Miller Accounting Officer)

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

/s/ Dwight L. Allison, Jr. Director March 30, 1999
____________________________________
Dwight L. Allison, Jr.

/s/ John C. Argue Director March 30, 1999
____________________________________
John C. Argue

/s/ Joan T. Bok Director March 30, 1999
____________________________________
Joan T. Bok

/s/ Frank V. Cahouet Director March 30, 1999
____________________________________
Frank V. Cahouet

/s/ Richard M. Ferry Director March 30, 1999
____________________________________
Richard M. Ferry

/s/ Kent Kresa Director March 30, 1999
____________________________________
Kent Kresa

/s/ Peter W. Mullin Director March 30, 1999
____________________________________
Peter W. Mullin

/s/ Sidney R. Petersen Director March 30, 1999
____________________________________
Sidney R. Petersen

/s/ John B. Slaughter Director March 30, 1999
____________________________________
John B. Slaughter

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 1998 Annual
Report to Shareholders of Avery Dennison Corporation:
Report of Independent Certified Public Accountants...... -- 49
Consolidated Balance Sheet at January 2, 1999 and
December 27, 1997...................................... -- 34
Consolidated Statement of Income for 1998, 1997 and
1996................................................... -- 35
Consolidated Statement of Shareholders' Equity for 1998,
1997 and 1996.......................................... -- 36
Consolidated Statement of Cash Flows for 1998, 1997 and
1996................................................... -- 37
Notes to Consolidated Financial Statements.............. -- 38-48

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 the information
referred to in Items 1, 5 and 6, all of which is included in the 1998 Annual
Report and incorporated herein by reference, the 1998 Annual Report is not to
be deemed "filed" as part of this report.

Data submitted herewith:
Report of Independent Certified Public Accountants...... S-2 --
Financial Statement Schedules (for 1998, 1997 and 1996):
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 CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders
of Avery Dennison Corporation

Our report on the consolidated financial statements of Avery Dennison
Corporation and subsidiaries has been incorporated by reference in this Form
10-K from page 49 of the 1998 Annual Report to Shareholders of Avery Dennison
Corporation. In connection with our audits of such financial statements, we
have also audited the related financial statement schedule listed in the index
on page S-1 of this Form 10-K.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.

PricewaterhouseCoopers LLP

Los Angeles, California
January 26, 1999

S-2

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

(In millions)

Additions
---------------------
Balance Charged Deductions--
at to Costs Uncollectible Balance
Beginning and From Accounts at End
of Year Expenses Acquisitions Written Off of Year
--------- -------- ------------ ------------- -------

1998
Allowance for doubtful
accounts.............. $15.6 $2.7 $.2 $2.0 $16.5
===== ==== === ==== =====
1997
Allowance for doubtful
accounts.............. $17.5 $4.3 $-- $6.2 $15.6
===== ==== === ==== =====
1996
Allowance for doubtful
accounts.............. $17.6 $4.1 $-- $4.2 $17.5
===== ==== === ==== =====

S-3

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the registration statements
of Avery Dennison Corporation on Form S-3 (File Nos. 333-16375 and 333-38905)
and Form S-8 (File Nos. 33-1132, 33-3645, 33-27275, 33-35995-01, 33-41238, 33-
45376, 33-54411, 33-58921, 33-63979, 333-38707 and 333-38709) of our report,
dated January 26, 1999, which appears on page 49 of the 1998 Annual Report to
Shareholders and is incorporated by reference in this Annual Report on Form
10-K. We also consent to the incorporation by reference of our report on the
financial statement schedule listed in the index on page S-1.

PricewaterhouseCoopers LLP

Los Angeles, California
March 30, 1999

S-4

AVERY DENNISON CORPORATION

EXHIBIT INDEX

For the Year Ended December 27, 1997

INCORPORATED BY REFERENCE:

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

(3.1) Restated Articles of B Proxy Statement dated February 28,
Incorporation 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 3.1.1 1983 Annual Report on Form 10-K
of Incorporation, filed
April 10, 1984 with
Office of Delaware
Secretary of State

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

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

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

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

(3.2) By-laws, as amended 3(ii) Second Quarterly report for 1998 on
Form 10-Q

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

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

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

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

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

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

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

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

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

(10.1) *Amended 1973 Stock 10.1 1987 Annual Report on Form 10-K
Option and Stock
Appreciation Rights
Plan for Key Employees
of Avery International
Corporation ("1973
Plan")

(10.1.1) *Form of Incentive Stock 10.1.3 1984 Annual Report on Form 10-K
Option Agreement for
use under 1973 Plan

(10.1.2) *Form of Non-Qualified 10.1.4 1987 Annual Report on Form 10-K
Stock Option Agreement
for use under 1973 Plan

(10.1.3) *Form of coupled Stock 10.1.5 1985 Annual Report on Form 10-K
Appreciation Right
Agreement for use under
1973 Plan

(10.1.4) 1985 U.K. Stock Option 10.1.7 1985 Annual Report on Form 10-K
Scheme

(10.1.5) Form of Incentive Stock 10.1.8 1985 Annual Report on Form 10-K
Option Agreement for
use under U.K. Stock
Option Scheme

(10.1.6) Form of Stock Option 10.1.9 1985 Annual Report on Form 10-K
Agreement for use under
U.K. Stock Option
Scheme

(10.2.2) *Form of Incentive Stock 10.2.2 1991 Annual Report on Form 10-K
Option Agreement for
use under 1988 Plan

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

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

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

(10.7.1) *Executive Employment 10.7.1 1982 Annual Report on Form 10-K
Security Policy dated
February 1, 1983

(10.7.2) *Executive Employment 10.13 1984 Annual Report on Form 10-K
Security Policy dated
February 1, 1985

(10.7.3) *Executive Employment 10.7.3 1993 Annual Report on Form 10-K
Security Policy dated
November 19, 1987

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

(10.8.1) *Agreement dated October 10.8.1 1990 Annual Report on Form 10-K
24, 1990 with Charles
D. Miller

(10.8.1.1) *Amendment dated April 10.8.1 1997 Annual Report on Form 10-K
15, 1997 to Agreement
with Charles D. Miller

(10.8.1.2) *Amendment dated 10.8.2 1997 Annual Report on Form 10-K
February 26, 1998 to
Agreement with Charles
D. Miller

(10.8.2) *Agreement dated April 10.8.2.1 1997 Annual Report on Form 10-K
15, 1997 with Philip M.
Neal

(10.8.3) *Agreement dated March 10.8.3 1996 Annual Report on Form 10-K
16, 1996 with R.G. van
Schoonenberg

(10.8.4) *Form of Employment 10.8.4 1997 Annual Report on Form 10-K
Agreement dated April
15, 1997

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

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

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

(10.11) *Supplemental Executive 10.11 1983 Annual Report on Form 10-K
Retirement Plan ("SERP")

(10.11.1) *Amended Letter of Grant 10.11.2 1992 Annual Report on Form 10-K
to C.D. Miller under
Supplemental Executive
Retirement Plan

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

(10.12.1) *Form of Enrollment 10.13.2 1985 Annual Report on Form 10-K
Agreement for use under
Executive Deferred
Compensation Plan

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

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

(10.15.1) *Amendment No. 1 to 1988 10.15.1 1994 Annual Report on Form 10-K
Stock Option Plan for
Non-Employee Directors
("Director Plan")

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

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

(10.16.1) *Form of Enrollment 10.16.1 1987 Annual Report on Form 10-K
Agreement for use under
Executive Variable
Deferred Compensation
Plan

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

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

(10.17.1) *Form of Enrollment 10.17.2 1985 Annual Report on Form 10-K
Agreement for use under
Directors Deferred
Compensation Plan

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

(10.18.1) *Form of Enrollment 10.18.1 1989 Annual Report on Form 10-K
Agreement for use under
Directors Variable
Deferred Compensation
Plan

(10.19) *1990 Stock Option and 10.19 1989 Annual Report on Form 10-K
Incentive Plan for Key
Employees of Avery
International
Corporation ("1990
Plan")

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

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

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

(10.19.4) *Form of Non-Qualified 10.19.4 1994 Annual Report on Form 10-K
Stock Option Agreement
for use under 1990 Plan
(for LTIP Participants)

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

(10.20.1) *1982 Incentive Stock Registration Statement on Form S-8
Option Plan of Dennison (File No. 33-35995-01)
Manufacturing Company

(10.20.2) *1985 Incentive Stock Registration Statement on Form S-8
Option Plan of Dennison (File No. 33-35995-01)
Manufacturing Company

(10.20.3) *1988 Stock Option Plan Registration Statement on Form S-8
of Dennison (File No. 33-35995-01)
Manufacturing Company

(10.20.4) *Amendments effective as Registration Statement on Form S-8
of October 16, 1990 to (File No. 33-35995-01)
the 1982 Incentive
Stock Option Plan, 1985
Incentive Stock Option
Plan and 1988 Stock
Option Plan of Dennison
Manufacturing Company

(10.21) *1996 Stock Incentive 10.21 1996 Annual Report on Form 10-K
Plan of Avery Dennison
Corporation

(10.27.1) *Amended and Restated 10.27.1 1993 Annual Report on Form 10-K
Key Executive Long-Term
Incentive Plan ("LTIP")

(10.27.2) *Second Amended and 1995 Annual Report on Form 10-K
Restated Key Executive
LTIP

(10.27.3) *Third Amended and 10.27.3 1996 Annual Report on Form 10-K
Restated Key Executive
LTIP

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

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

(10.28.1) *Form of Enrollment 10.28.1 1992 Annual Report on Form 10-K
Agreement for use under
Executive Deferred
Retirement Plan

(10.29) *Executive Incentive 10.29 1993 Annual Report on Form 10-K
Compensation Plan

(10.30) *Senior Executive 10.30 1993 Annual Report on Form 10-K
Incentive Compensation
Plan

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

(10.31.1) *Amended and Restated 10.31.1 1997 Annual Report on Form 10-K
Executive Variable
Deferred Retirement
Plan

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

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

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

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

(10.34.1) *Capital Accumulation 4.1 Registration Statement on Form S-8
Plan ("CAP") (File No. 333-38707)

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

- --------
* 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 January 28, 1999

10.8.2.1 *Agreement dated May 1, 1998 with P.M. Neal

10.11.1 *Amendment and Restated SERP dated April 23, 1998

10.11.2 *Letter of Grant to P.M. Neal under SERP

12 Computation of Ratio of Earnings to Fixed Changes

13 Portions of Annual Report to Shareholders for fiscal year ended
January 2, 1999

21 List of Subsidiaries

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

27 Financial Data Schedule

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.

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