G’DAY,

The 10K report and proxy statement are included in your annual report pack. Both of these documents cover a great deal of detail about your company.

Please take time to read the 10K report—it discusses our business in great detail. It will give you a deeper understanding of our business—the challenges we face and the actions we have taken to continue to build a strong company. A company based on a number of core beliefs:

• People are the true asset—we must create an environment where people learn and are passionate about making a difference.
  
• Our products must deliver.
  
• A clear vision is the guiding light for a company.
  
• Values within an organization need to be clear and acted upon.
  
• Planning and execution needs to have clear goals and strong measures of success.
  
• We need to have a “work in progress” mindset, always reviewing our outcomes and results. We call these “Learning Moments”—they guide our future.
  

This year we faced some significant challenges and responded by taking steps I believe will have a long-term effect on the growth of our brands worldwide. It’s been a year that proved once again the dedication and resourcefulness of our teammates company-wide and the spirit of innovation that underscores everything we do here at WD-40 Company.

The past year was not one that we had expected, as we fell short of our financial goals. The challenges we faced were primarily in the U.S. and were the result of four major factors:

Household products category changes Innovation is a vital element of household products. Customers and consumers have come to expect new products, packaging, and value. Customer interest in innovation tends to drive the allocation of shelf space. New products earn shelf space at the expense of existing products or categories. Within our U.S. business, we saw some of the space allocated to our categories shifted to other unrelated new products. This affected our Carpet Fresh brand.

Innovation is both a threat and an opportunity. We launched thirteen new products in the past year–laying the foundation, we believe, for better results in the year ahead.

Household products competition While we face competition for retail space by unrelated products, we also face direct competition for the consumer by other products with similar uses. This direct competition was most evident in our X-14 hard surface cleaner brand.

Innovation is also a way to battle competition. At the same time, we feel an obligation to continue with our mission of offering products that deliver above-expectation performance at extremely good value.

Changes in consumer purchasing locations Conditions are changing rapidly in the U.S. grocery channel. Traditional grocery stores have lost ground to mass retailers and super centers. Driving this change—or perhaps as an outcome of it—consumers are changing where they purchase many items, including household products.

Our multiple-trade channel, multiple-country business model is built to enable consumers to buy our brands wherever they like. Increasing distribution of our brands is an ongoing function.

Rising costs We experienced higher costs in a number of areas over the past year. The higher price of oil influenced both our freight costs and cost of goods for our lubricant products. We also saw certain U.S. customers shift to ordering products in smaller but more frequent shipments. Costs have also risen in areas such as regulatory compliance, information technology support, insurance, and legal services. The cost of being a public company is certainly higher than ever before. In addition, we made an investment in the long-term health of our brands. Advertising and promotional costs were higher than in the prior year. While that extra expense brings short-term pain, we believe that a long-term approach is the best way to manage the business.

We have long acted on a mission to remove cost that doesn’t add value. As part of our daily work, we continue to look for ways to become more efficient and effective.

We are a small company As such, we do not have leverage over customers. Our strength lies with consumers—by giving products that deliver above-expectation performance at extremely good value. We call that ‘consumer glue.’ In the process, we must be responsive to customer needs and meet their logistics requirements. Our expertise in managing an outsourced supply chain is a vital component of our business.

While we faced some challenges this past year, we were also very busy creating new opportunities for your company.

INTERNATIONAL EXPANSION

We continued to build and grow our business outside of the U.S. market. As a result, we had higher sales in Australia, Asia, Canada, and Europe.

INNOVATION

This year we made an important commitment to continue our focus on product innovation and development in an ongoing effort to keep our brands fresh and relevant in a fiercely competitive and volatile marketplace. We introduced 13 new items over the past 12 months—the most innovative year in company history.

13 PRODUCTS

2004 has certainly been a year of product innovation at WD-40 Company. We introduced 13 new line extensions/products in all in order to continually grow share and maintain our competitive edge in the various markets where we compete.

New product development and innovation are important for another reason. At WD-40 Company, we have come to realize that the equity of our brands involves more than just market share. It involves how customers perceive our brands and the extent to which they remain loyal. And new product development is a way for us to show our ongoing commitment to nurturing that loyalty. It demonstrates the fact that we are always looking for new ways to make people’s lives easier at home and in the workplace—under the sink, in the garage, and in toolboxes throughout the world.

ACQUISITION

1001 is the leading brand of carpet care products in the U.K., with 65% brand awareness and over 40% market share in that market. This latest acquisition is a great match that not only takes advantage of our core competencies but also provides us with a platform for successfully introducing new items into the U.K. We believe we can leverage our considerable distribution capabilities to continue to grow this brand in the U.K. market. Toward that end, we have already launched three new 1001 No Vac fragrances and a 1001 Spot Shot instant carpet stain remover, and these products are already available at leading U.K. retailers.

75 DAYS

This year, our newest acquisition, 1001carpet cleaning products—a popular and very successful brand in the U.K.—was not only successfully integrated in just 75 days, but we launched new products, proving our ability to quickly transfer our technology from one market to another.

This year we faced some significant challenges and responded by taking steps I believe will have a long-term effect on the growth of our brands worldwide. It’s been a year that proved once again the dedication and resourcefulness of our teammates company-wide and the spirit of innovation that underscores everything we do here at WD-40 Company.

The results of our Employee Opinion Survey Once again this year, our employees worldwide rated the Company’s performance in a broad range of areas. And once again they gave us high marks, as well as specific feedback on areas where we can improve. The results of the survey prove that we are doing a lot of things right, and that we continue to maintain a critical eye on things we can do better.

Our sales per employee was up from $1,118K in 2003 to $1,128K in 2004, a number that continues to demonstrate our efficiency as an organization.

7.9% GROWTH

We also saw 7.9% WD-40 brand growth in FY 2004, a fact that reflects our focus on our strategy to build the WD-40 brand fortress around the world.

LOOKING AHEAD

I’ve always believed smart companies should invest time understanding the realities of their business first; those that do are much more successful at “making it better than it is today” as they pursue growth. I would like to share some of the current realities about WD-40 Company and how we plan to address these in 2005.

Our household product categories are dynamic We need to be continually aware of the evolution of consumer needs and customer requirements. We plan to work hard in 2005 to deliver products that our consumers need and our retail partners recognize as brands that truly deliver above-expectation performance at an extremely good value. Leading brands that deliver superior value to consumers are the brands that survive market dynamics. We believe our brands share those characteristics…and we must continue to make them available to consumers.

Prioritization and execution are keys to long-term success. Our priorities in 2005 include:

• Enhance our new product development capability while gaining speed to market.
  
• Build distribution of our U.S. household brands in multiple trade channels.
  
• Build new distribution for our new products in the U.S. and other developed markets.
  
• Grow the international lubricant business.
  
• Continue to develop our people, processes, and systems to support the long-term vitality of the business.
  

As we look forward to continued growth and profitability, I want to express my sincere appreciation to our shareholders for their continued support and ongoing feedback. And, of course, I want to thank our outstanding team of WD-40 employees worldwide for a superb job in making this one of the most innovative years in our Company’s history.