RPM s E-COMMERCE. group, formed in 2003, is working with several of our Operating Companies to A D V A N C E. their BUSINESS

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2 RPM s E-COMMERCE group, formed in 2003, is working with several of our Operating Companies to A D V A N C E their BUSINESS SES.

3 LETTER to our SHAREHOLDERS... 4 COMPANY PROFILE...6 PRODUCTS and SERVICES...8 PERFORMANCE...10 BALANCE SHEETS...12

4 AS WE IMPLEMENT the steps to restore our company s Strong Growth Rates, we greatly A P P R E C I A T E the Ongoing Support of our Employees, Customers, and SHAREHOLDERS. Page no. 4

5 Page no. 5 Fiscal 2003 was a difficult year for RPM International. As a result of significant profit shortfalls at three operating units and a restructuring plan designed to strengthcn our financial performance in the future, RPM failed to achieve its 53rd consecutive year of record earnings. Temporary Effects of Restructuring While progress in the restructuring program has been at planned levels or better, the effort has not been without additional costs in terms of lost sales opportunities, as management faced the dual tasks of attempting to grow sales while implementing significant changes in operations. Our management responded to the restructuring plan with the customary RPM sense of urgency. In retrospect, some changes were simply implemented too quickly, hindering our ability to ship products in a timely manner. While fiscal 2003 proved to be one of the most difficult years in RPM s history, we are confident of a strong improvement in business during the 2004 fiscal year, with earnings growing in the 10 to 15 percent range from the pre-restructuring base of $0.73 per share. This improvement will come primarily in the second half of the year. As we implement the steps necessary to restore RPM s historically strong growth rates, we appreciate the ongoing support of our shareholders, employees, customers and suppliers. Sincerely, Thomas C. Sullivan Chairman and Chief Executive Officer August 24, 2003

6 RPM International INC employs approximately 8000 People, sells its products in more than 130 Countries, and O P E R A T E S at 68 Different Locations in 17 COUNTRIES. Page no. 6

7 Page no. 7 Our Company Profile C reating value for shareholders continues to be one of RPM s main goals. Fifty-four consecutive years of record sales, along with fifty-three consecutive years of record earnings, are accomplishments that are unmatched by any other publicly traded American manufacturer. RPM s success over the years has not gone unrecognized by the investment community. In fact, RPM has long been a favorite of investment clubs, individual investors and investment publications, and we have received numerous awards for our success as an investment. Where We Stand Today Today, the company has approximately 115 million shares outstanding owned by some 290 institutional investors and more than 104,000 individual investors. Since 1971, RPM shareholders have received an annual compounded rate of return on their investment of approximately 16 percent, with dividends reinvested. RPM has increased its cash dividend for 30 consecutive years and has had 11 stock splits since How We Stack Up RPM International INC was ranked third among the 29 companies in the Dow Jones Specialty Chemical Index in an April 2003 comparison of dividend yields. RPM s current quarterly cash dividend is $0.14 per share. At a share price of $15.00, RPM s dividend yield would be 3.7 percent. RPM International INC s common shares are traded on The New York Stock Exchange under the symbol RPM. We employ approximately 8000 people, not including independent sales representatives.

8 RPM International INC is a Worldwide Leader in Specialty Coatings, with products that typically C O M M A N D the Number One or Two Position in the markets they SERVE. Page no. 8

9 Page no. 9 RPM International is a holding company for subsidiaries that are leaders in specialty coatings. RPM has 87,000 shareholders, 7,900 employees and hundreds of independent technical and sales representatives. Our products are sold in more than 130 countries, and manufactured at 68 plant locations in 17 countries. RPM s 2003 sales totalled $2.01 billion; 55 percent was generated by industrial products worldwide and the remainder by branded consumer goods sold in North America. RPM International s Industrial Maintenance Products RPM s industrial customers are served by the following: waterproofing products, (including Tremco roofisng systems and Alumanation roofing coatings); corrosion protection coatings; Dryvit insulation finishing systems; and industrial and commercial floor coatings. Our specialized industrial products include Day-Glo fluorescent colorants and pigments; Wolman lumber treatments; Fibergrate reinforced grating; American Emulsions textile additives; and Euco concrete admixtures. RPM s Consumer Products Consumers in North America are served by RPM s do-it-yourself home improvement products. These include the Rust-Oleum product line, and decorative paints and coatings marketed under Painter s Touch and American Accents. We also sell Mar-Hyde paints and specialty products for the automotive aftermarket; Chemical Coatings woodworking and wood finishing products; and the Testors brand of model kits, coatings and accessories for the hobbyist market.

10 ENVIRONMENTAL ISSUES continue to be appropriately A D D R E S S E D and it is not anticipated that these matters will materially affect the Company s FINANCIAL CONDITION. Page no. 10

11 Page no. 11 Results of Operations: Fiscal 2003 Compared to 2002 The Company s fiscal 2003 net sales of $1.95 billion were $242 million, or 14%, greater than in The vast majority of this increase came as a net result of the August 2002 acquisition of DAP Products, Inc. DAP, headquartered in Baltimore, Maryland, has annual sales of approximately $250 million and is a leading North American manufacturer and marketer of caulks and sealants, spackling and glazing compounds, contact cements and other specialty adhesives. DAP s brand names are well known througout the U.S. and Canada. DAP s Financial Effect DAP accounted for 67% of the Company s year 2003 sales increase, adjusted for rate exchange differences between years. Growth within the Industrial and Consumer Divisions base businesses, not impacted by acquisitions divestitures, was approximately 3% and 4%, respectively. These growth rates include several product line additions and are generally reflective of real unit volume increases as price levels year-to-year remained fairly stable. Gross Profit Margins Gross profit margins this year declined 2.2%, ending at 43.7%, compared to last year s 45.9% performance. The Industrial Division s deterioration was lower at 0.8%, falling to 45.2% from 46%. The key influence to this change was due to the difficulty experienced in combining Carboline into the StonCor organization, most notably at non-u.s. operations. Additionally, there were mix differences and minor raw material price increases during the year. RPM officers believe that such cost increases can be effectively managed, as activities continue in its Purchasing Action Group.

12 IN ADDITION to restoring Growth in Earnings, we will be Working Diligently during the 2004 fiscal year to I M P R O V E the RPM International, INC year-end BALANCE SHEET. Page 12 no.

13 Page 13 no. As shown in the following charts, RPM has two major segments: Industrial and Consumer. The Industrial Division The Industrial Division has operations throughout North America and accounts for most of RPM s sales in Europe, South America, Asia, South Africa, Australia and the Middle East. The Industrial product line is primarily sold to distributors, contractors and end users, such as manufacturing plants,s educational and governmental institutions and commercial establishments. Industrial Division products reach their markets through a combination of direct sales, distributor sales and sales of licensees and joint ventures. The Commerical Division The Consumer Division s products are sold throughout North America by home centers, hardware stores, paint stores, automotive supply stores and craft shops. Major customers include The Home Depot, Lowe s Home Centers, Wal-Mart, Kmart, Sherwin-Williams, Ace Hardware stores and Cotter & Company. Consumer Division products are sold to retailers through direct sales, representative organizations and distributor sales. Corporate/Other In addition to the two operating segments, there are certain business activities, (referred to as Corporate/Other ), that do not constitute an operating segment. These include corporate headquarters and related administrative expenses, results of RPM s captive insurance company, gains or losses on the sales of certain assets, and other expenses not directly associated with either of our major operating segments.

14 5 (in millions of dollars) Sales Earnings Assets Corporate/Other Consumer Industrial Total Net Sales Assets (in millions of dollars) Europe Canada United States Other Foreign Total Foreign TOTAL Page 1 no. 4

15 Page no. 15 Corporate /Other Inventories Trade Accounts Cash & Investments RANGE of MARKET PRICES Fiscal 2003 High Low Dividends paid per share 1st Quarter $15-1/16 $13-1/8 $ nd Quarter $13-1/2 $11-1/8 $ rd Quarter $11-7/8 $9-1/2 $ th Quarter $11-15/16 $9-11/16 $0.1225

16 RPM International INC 2628 Pearl Road P.O. Box 777 Medina, Ohio P: F: