JAMES S. MARLEN

Chairman of the Board,
President and Chief
Executive Officer

"Ameron's core operations and joint-venture companies continue to strengthen, and I am optimistic about the Company's future."

In 2004, Ameron achieved record consolidated sales of $605.9 million, compared to sales of $600.5 million in 2003. In addition, Ameron's primary, unconsolidated joint-venture companies had sales of approximately $280 million in 2004, an increase of over $50 million from sales of $228 million in 2003. Net income totaled $13.5 million in 2004, or $1.59 per share, compared to the record performance in 2003 of $29.9 million, or $3.67 per share. However, as has been previously reported, two executive benefit plans were terminated in 2004 which resulted in a nonrecurring, after-tax charge for the curtailment and settlement of the plans of $14.9 million, or $1.77 per share. Excluding the plan termination costs, normalized earnings were $3.36 per share in 2004.

To put the year's performance in perspective, our core businesses and joint ventures had record sales, and the Company's net income, excluding the earnings impact of the plan terminations, was the second highest in the Company's history. The Company's earnings have grown steadily and consistently, reaching nearly 4.5 times the level of 1992.

Our primary focus and objective is to continue the strong earnings growth which will increase the Company's value and reward our shareholders. I am confident we will achieve this objective.

The Fiberglass-Composite Pipe Group had another outstanding year with slightly higher sales and with segment income about even with last year despite a decline of $3.0 million in dividends received from Bondstrand, Ltd., our 40%-owned joint venture in Saudi Arabia.

The Water Transmission Group, as expected, had lower sales and segment income. The business was confronted with a cyclical softening of market conditions and was unfavorably affected by labor strikes at two plants for up to two months and, in addition, had a $2.6 million reduction in dividends received from Ameron Saudi Arabia, Ltd., Ameron's 30%-owned joint-venture in Saudi Arabia.

The Performance Coatings & Finishes Group had higher sales but lower segment income. The increase in sales was attributable to foreign exchange rates as sales in local currencies were actually lower. The decline in segment income was due to margin pressures from highly competitive markets and rising raw material costs, and the under-utilization of plant capacity.

The Infrastructure Products Group, which consists of Ameron Hawaii, a ready-mix concrete and aggregates business, and the Pole Products Division, which manufactures and sells decorative concrete poles and steel poles for street lighting and traffic signal applications, had higher sales but lower segment income. Sales improved due to the continued strength in the residential and commercial construction markets and growth of the decorative concrete pole business in the southeastern

U.S. and in Southern California. Infrastructure Products had lower segment income, primarily as a result of wet weather and a two-month labor strike in Hawaii which caused inefficiencies and idle capacity.

TAMCO, the Company's 50%-owned steel mini-mill, achieved record sales and earnings in 2004. TAMCO manufactures and sells steel rebar for construction applications in the western U.S. TAMCO benefited from the strong demand for steel worldwide. Accordingly, TAMCO's net income improved significantly, as did Ameron's 50% share, increasing $10.2 million after taxes.

Looking forward, I expect continued steady growth in the Fiberglass-Composite Pipe Group. Market conditions are favorable in the marine and offshore segments, especially in Asia; and there are also early signs that spending in the onshore oilfield segment is improving worldwide. We remain cautiously optimistic that demand for fiberglass pipe in the chemical and industrial markets in Europe and the U.S. will improve. To support the long-term growth prospects of this business, pipe capacity is being added with the construction of a new plant in Malaysia which should come on line in late 2005. The capacity will be used principally to serve the marine and offshore industry, the Middle East markets and industrial markets in China.

The outlook for the Infrastructure Products Group is similarly positive due to the continued strength of housing starts in the key markets served by the Pole Products Division and the success of market penetration programs in the Southeast region with our new plant in Anniston, Alabama. In Hawaii, all market segments, including residential, commercial and military construction, are expected to remain strong.

In Water Transmission, while market conditions will continue to be soft, we expect improved income performance in 2005 as certain unusual costs incurred in 2004 will not reoccur. Longer term, the outlook is solid as the growing needs to expand, repair and replace the water infrastructure systems in the western U.S. will drive demand. In addition, Ameron is actively pursuing diversification programs and certain international water projects as worldwide needs for water systems intensify.

In the Performance Coatings & Finishes Group, steady growth is expected in Australasia, especially in New Zealand where the business has gained a strong market position based on technically-advanced coil coatings. Growth opportunities exist with intumescent coatings in Europe and Eastern Europe, the former Soviet Union, the Middle East and Africa. The marine market should be steady, while there is still uncertainty in the industrial markets that utilize high-

performance coatings. In the U.S., improvements are anticipated in the inland marine market, government marine and offshore markets. Introduction of a new concrete flooring line and introduction of intumescent coatings in the U.S. provide growth prospects. As in Europe, in the U.S., uncertainty remains regarding the direction of the chemical processing and industrial maintenance markets.

The outlook for the Company's joint venture companies is positive as the demand for fiberglass pipe and coatings in Saudi Arabia should remain strong, and the demand for concrete water piping in Saudi Arabia should improve. TAMCO's performance could moderate as steel demand worldwide may soften and thereby reduce the margin opportunities in local markets.

To achieve the Company's strategic objectives of consistently delivering outstanding earnings growth and value for our shareholders, numerous near-term growth initiatives are being pursued. We will critically evaluate each opportunity to determine if commitment of resources is warranted. The following is a representative list of initiatives with a brief explanation of each:

• Introduce sand-core fiberglass pipe to serve the U.S. water and wastewater market. Final product testing and qualification trials are underway, and full commercialization should occur in 2005. An initial pilot project was successfully completed for the city of Houston, Texas in 2004. This product line, developed as a collaborative effort between the Fiberglass-Composite Pipe and Water Transmission Groups, responds to the significant need for non-corrosive pipe materials to satisfy the growing demand to upgrade, repair and replace the nation's aged water infrastructure.
• Complete testing and industry qualification of fiberglass steel-strip laminate pipe (SSLT). SSLT is a proprietary technology that combines the strength of steel with the corrosion resistance of fiberglass-reinforced epoxy laminate. Opportunities available for SSLT in the oil and gas industry are varied and, longer term, can be significant. The Company continues to install test lines globally in close cooperation with major oil companies.
• Expand Fiberglass-Composite Pipe Group's position in South America. The growth opportunity for fiberglass pipe can be enhanced by having a manufacturing presence to more efficiently service the customer base. A number of Ameron-controlled joint-venture opportunities are being evaluated for implementation in 2005.
• Selectively expand the Water Transmission business by pursuing major international projects. The Water Transmission Group has a worldwide reputation for excellence in service, engineering and technology. The Company is pursuing several opportunities in China, Latin America and the Middle East.
• Start-up the new fiberglass pipe plant in Malaysia. This $12 million plant will provide the pipe capacity to support the anticipated growth in Asia and the Middle East, as well as the worldwide marine and offshore markets.
• Continue to focus on best-in-class technology in the Performance Coatings & Finishes Group. In addition to the introduction of thin-film intumescent coatings in the U.S. and the new concrete floor coatings product line, a number of new coatings products are under development. These include the next generation of hydrocoat, a water-based coil coating, single-pack epoxy primer coatings, a single-pack acrylic-siloxane topcoat, polysiloxane marine tank linings, high-flexibility epoxy coatings and the next generation of low-copper antifoulings.

Key strategic initiatives such as these provide the foundation for Ameron to grow by penetrating new markets, new geographic territories, and by offering the most technologically-advanced products in the industries in which we compete.

We continue to strengthen the financial condition of the Company. Total debt declined slightly to $94 million and is down by over 50% from a peak six years ago. The Company's financial leverage also continues to improve as the debt-to-capital ratio declined further to 25%, compared to over 50% six years ago. As we reduce debt levels and strengthen our financial leverage, the Company's financial liquidity and available debt capacity improve. Cash balances at the end of 2004 totaled $30 million and available lines totaled over $100 million. The Company's financial condition is solid with capital resources to support growth opportunities.

Ameron's stock again outperformed the general market index and its peer group of companies in 2004. Cumulative total shareholder return for Ameron over the past five years was 100% compared to 30% achieved by the peer group and 9% for the broad NYSE market. I am pleased to report that total shareholder return in fiscal 2004 was 17%, which compares favorably with most market indices. As we continue to grow the Company, achieve consistent earnings and enhance the Company profile as perceived by investors, we are confident that our shareholders will be rewarded.

The Sarbanes-Oxley Act was enacted to restore investor confidence and trust in the financial reporting of public companies after a number of high-profile financial scandals were disclosed in recent years. Sarbanes-Oxley Section 404 establishes the requirements that all public companies must satisfy with regard to the adequacy of internal controls over business processes and computer controls as they relate to financial reporting. Ameron was required to report on the Company's internal controls over financial reporting as of November 30, 2004. A thorough assessment and evaluation of internal controls has been conducted throughout Ameron's operations by our management team. Our external auditors, PricewaterhouseCoopers LLP, audited our internal controls and our assessment. I am pleased to report that PricewaterhouseCoopers LLP has issued an unqualified report on its audit of internal controls.

After 19 years of outstanding service as a member of Ameron's Board of Directors, John F. King will retire at the end of his term in March 2005. Mr. King, who served as Chairman of the Audit Committee of the Board of Directors the past ten years, provided exemplary dedication and made numerous contributions to the Company. I am appreciative of Director King's thoughtful advice and counsel.

All in all, I believe the near-term outlook is positive and anticipate a solid performance improvement in 2005. The Company has a history of solid earnings growth, and I am confident with the strategies being pursued and the management team in place that we will continue to achieve long-term earnings growth.

JAMES S. MARLEN

Chairman of the Board,
President and Chief Executive Officer