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Innovation and Growth at 3M

George W. Buckley
Chairman, President and Chief Executive Officer
2007 Morgan Stanley Global Industrials
CEOs Unplugged Conference
September 10, 2007
Forward-Looking Statements
     This presentation contains forward-looking information (within the meaning of the Private Securities
  Litigation Reform Act of 1995) about the company’s financial results and estimates, business prospects,
  and products under development that involve substantial risks and uncertainties. You can identify these
      statements by the use of words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,”
 “believe,” “will,” and other words and terms of similar meaning in connection with any discussion of future
  operating or financial performance. Among the factors that could cause actual results to differ materially
are the following: (1) worldwide economic conditions; (2) competitive conditions and customer preferences;
 (3) foreign currency exchange rates and fluctuations in those rates; (4) the timing and acceptance of new
  product offerings; (5) the availability and cost of purchased components, compounds, raw materials and
 energy (including oil and natural gas and their derivatives) due to shortages, increased demand or supply
  interruptions (including those caused by natural and other disasters and other events); (6) the impact of
         acquisitions, strategic alliances, divestitures, and other unusual events resulting from portfolio
management actions and other evolving business strategies, and possible organizational restructuring; (7)
 generating less productivity improvements than estimated; and (8) legal proceedings, including significant
developments that could occur in the legal and regulatory proceedings described in the company’s Annual
Report on Form 10-K for the year ended Dec. 31, 2006 and its subsequent Quarterly Reports on Form 10-
 Q (the “Reports”). Changes in such assumptions or factors could produce significantly different results. A
further description of these factors is located in the Reports under Part I, Item 1A (Annual Report) and Part
  II, Item 1A (Quarterly Report), “Risk Factors.” The information contained in this presentation is as of the
 date indicated. The company assumes no obligation to update any forward-looking statements contained
             in this presentation as a result of new information or future events or developments.
                       2007 Morgan Stanley CEOs Unplugged Conference                                       (#)
Outstanding Second Quarter
                                                        +11.8%                                                             +23.0%
                                                      ex. pharma                                                         ex. pharma




                                                                                                        $1.23
                           $6.1 Billion


                                  +8%                                                            +17.1%

                                Sales                                                                   EPS*



*Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.

                           2007 Morgan Stanley CEOs Unplugged Conference                                                              (#)
Working Our Plan
              Reinvigorate R&D
       ●
                     11% increase over 2006* ex. pharma


              Accelerate International Growth
       ●
                     Building local/regional brands
                     Pursue profitable adjacencies

              Invest in Our Supply Chain
       ●
                     Korea - Respiratory facility (July 2007)
                     Poland - Optical facility (June 2007)
                     Canada – CHIM Tapes facility (June 2007)
                                                                                                              OHES
                     China - Industrial Tapes facility (July 2007)
                                                                                       Optical
                     Others largely on-track
                                                                           CHIM Tape             Industrial
                                                                                                   Tapes
              Accelerate Growth in the Core
       ●
                     Eight acquisitions YTD in 2007



*Excludes special items. Refer to 3M’s July 26, 2007 press release for a
complete list and explanation of these items.

                                     2007 Morgan Stanley CEOs Unplugged Conference                               (#)
Sales Recap
                                          Q2 2007 vs. Q2 2006
                                                                                      Int’l
                                                         WW                  U.S.

Volume - organic                                        6.9%                2.1%     9.9%

Volume - acquired                                       2.8%                2.8%     2.8%

Price                                                   (0.4%)              1.3%     (1.4%)

   Total Local Currency*                                9.3%                6.2%     11.3%

Divestiture                                             (3.8%)              (4.0%)   (3.7%)

Translation                                             2.5%                  --     4.1%

   Total Sales Growth                                   8.0%                2.2%     11.7%

*Total Local Currency = Volume + Price + Acquisitions
                            2007 Morgan Stanley CEOs Unplugged Conference                     (#)
Balance Sheet & Cash Flow
                                                               Q2 2006                       Q1 2007                       Q2 2007
                 ($ in Millions)

                                                                                                                            $866(a)
                                                                                              $670(a)
Free Cash Flow                                                    $539

Net W/C Turns                                                                                                                   5.0
                                                                                                 5.0
                                                                   5.2

Inventories                                                                                                                 $2,779
                                                                                              $2,714
                                                                $2,557

Receivables-Net                                                                                                             $3,620
                                                                                              $3,444
                                                                $3,171

Cap-ex                                                                                                                        $348
                                                                                                $304
                                                                  $261

Dividends Paid                                                                                                                $346
                                                                                                $350
                                                                  $348

Share Repurchases                                                                                                           $1,035
                                                                                              $1,164
                                                                  $527

        Excludes certain special items that impacted cash flow. Refer to 3M's July 26, 2007 press release for an explanation of these items.
(a)
Note:   Refer to 3M’s July 26, 2007 press release for a complete discussion of net working capital turns and free cash flow
        (non-GAAP measures).
                             2007 Morgan Stanley CEOs Unplugged Conference                                                                     (#)
Great Opportunities Remain For 3M
                                                           Comparative Tax Rate (3M at 34% in 2007)
                                                                                                                                             Margin
    Built firm Six Sigma and Lean                                                                           Tax Rate
►                                                                                                                                           Advantage


    Processes in manufacturing
                                                           Ingersoll Rand                                    16%                               2150 bps
                                                           Tyco                                              21%                               1450 bps
                                                           ITW                                               31.5%                             150 bps
                                                           Danaher                                           27.3%                             920 bps
                                                           UTX                                               26.8%                             994 bps

    Fundamental principles remain
►                                                          J&J                                               23.8%                             1449 bps
                                                           Avery                                             20.4%                             1943 bps
                                                           3M                                                34%                               0    bps


     ● Protect our premium margins                            Conclusion; We fight to maintain high margins, and we reduce our
                                                            competitiveness and growth rates, but waste it all in paying higher taxes



     ● Defend our premium ROIC                                   Innovation                                                                                               (#)




                                                            Relative Value Of Growth
     ● Reemphasize innovation
                                                                                          MMM         5.2




     ● Leverage central overhead
                                                                                             GE      11.4
                                                                                  12.0
                                                                                            IBM       3.5
                                                                                           DHR        5.1
                                                                                             PG       7.2




                                                              e tiv a e f ro th
                                                                                  10.0
                                                                                           XOM        2.1




                                                             R la eV lu o G w
                                                                                             GM       2.4
                                                                                           WMT        1.6
                                                                                   8.0
                                                                                          #REF!   #REF!
                                                                                          #REF!   #REF!
                                                                                          #REF!   #REF!
                                                                                   6.0




     ● Adding growth, taxes and supply                                             4.0


                                                                                   2.0




       chain as new value creators                                                 0.0
                                                                                         MMM       GE          IBM       DHR       PG          XOM           GM     WMT
                                                                                                                         Company Ticker


                                                            ► Ratio of value creation from 100 bps of growth to 100 bps of margin


    Build on 3M’s enduring franchises                       ► Acquisitions add value by blending the value lost from margin dilution
►                                                                           and the value added from incremental growth and mass

                                                                                   Value Of Growth Vastly Exceeds Value Of Margin Expansion For 3M

     ● Building value and margin for our                                                             Source:HBR April 2005          © 3M 2006 All Rights Reserved




       customers 2007 Morgan Stanley CEOs Unplugged Conference
Start By Growing The Current Core

                                            Grow the
                                           Current Core
                                                                           Invent a
       Extend The Core              ● Constant reinvention
                                                                          New Future
                                    ● Localization and
                                       differentiation
                                                                     ● Imagine, dream and invent
● Build where we’re strong
                                    ● Key customer partnerships
                                                                     ● Beat competitors to the
● Get scale & relative share
                                                                       future
● Fill in the “white spaces”
                                                                     ● Plan for cannibalization
                                        Build Broad Long
● Define markets broadly
                                                                     ● Licensing as a route
                                       Term Competencies
● Become important to
                                                                     ● Avoid NIH syndrome
  customers
● Dual branding
● Local acquisitions            ● Develop broad based long-term capabilities
● Private labeling              ● Acquire supporting core technology
                                ● Build volume and scale

                     2007 Morgan Stanley CEOs Unplugged Conference                                 (#)
And Then Extend It With Simple Concepts
                                                  Market
                                                 Expansion


   Grow the Current           Complementary                 Build New              International
   Grow the Current           Complementary                  Build New              International
         Core                  Acquisitions              Business via EBOs             Growth
         Core                   Acquisitions             Business via EBOs             Growth


● Defend and extend the      ● Follows core strategy ● Follow Mega Trends          ● Go “local” in brands
  core                                                                               and manufacturing
                             ● Supports adjacencies ● Seeded by small M&A
● Build scale and relative                                                         ● BRICP emphasis
                             ● Mostly tuck-ins          ● Targeted areas
  share                                                                            ● Gulf and LA
                             ● Technology, capacity,       ● RFID/Wireless/GPS
● Localization                 distribution and local                              ● Eastern Europe
                                                           ● Minerals extraction
                               brands
● Disruptive technologies                                                          ● Growth everywhere
                                                           ● Oil & Gas
● Build long term
                                                           ● Food safety
  competencies


                       Customer Focus Critical on All Four Fronts
                    2007 Morgan Stanley CEOs Unplugged Conference                                   (#)
First You Must Create the Environment for Growth
                                                     Profitable
                                                      Growth
         Products                                                                          Efficiency
 ● Stimulating a creative
                                                                                         ● Lean Methods
    environment
                                                                                         ● Six Sigma
 ● Foster Imagination
                                                                                         ● Systemic Supply
 ● Increased R&D spend
                                                                                           Chain
    in the core                       Product                              Operational     Improvements
                                    Innovation                             Excellence
 ● Technology Focus
                                                                                         ● IT Systems
 ● See it through the
                                                                                         ● Better S&OP
    customers’ eyes
                                                                                           Process
 ● Mix in a little magic

                                            ● Market Expansion
                                            ● White space fill in
                    Customers               ● Geographic expansion
                                            ● Adjacencies and EBOs


                           2007 Morgan Stanley CEOs Unplugged Conference                                 (#)
Our Foundational Beliefs on Competitiveness
                                                                              6σ & Lean
                                                                Cost          Global sourcing
It’s not just about efficiency or just about
                                                                              Low Factory costs
   invention                                                                  Taxes
● We compete on six platforms                                                 Build on our enduring
                                                                Marketing
                                                                              franchises
                                                                & Brands
● Low cost is the ultimate competitive                                        Secondary for local
  deadly weapon                                                               Secure the best
                                                                Distribution Secure the broadest
● Scale and relative share are vital for
  efficiency and competitiveness                                              Build on a firm
                                                                              foundation
                                                                Technology
● Follow the customer value chain                                             Differentiation

                                                                              OTIF fill rates
● Pristine service and brands can                                             Quality
                                                                Service
  overcome price in some markets                                              Speed to market

                                                                              Inspire and guide
                                                                              Develop leadership
                                                                People
                                                                              Continuing education
                2007 Morgan Stanley CEOs Unplugged Conference                                      (#)
3M’s Convoluted Supply Chain
                                                                             • Any plant may have up to eight
                   Plant A                               Plant B               “owners” in 40 combinations
                  Six Owners                          Four Owners            • Lead owner varies plant to plant
                                                                             • Under absorbed costs in one
                                                                               business impacts another




Raw Material In




                                                                                                        Distribution
                                                                                                          Center
                                                                                    Plant D
                                            Plant C
                                                                                 Four Owners
                                         Eight Owners
                             2007 Morgan Stanley CEOs Unplugged Conference                                      (#)
And Here’s What We Are Beginning To Do
   Plant A                               Plant B
  Six Owners                          Four Owners




                                                                           Distribution
                                                                             Center
                                                               Plant D
                            Plant C
                                                             Four Owners
                         Eight Owners
             2007 Morgan Stanley CEOs Unplugged Conference                        (#)
Historical Capital Spending
$1,600                                                                  Growth Capital increase
                               53% Decline in
                                                                        almost all Optical Films
                               Capital Spending
$1,400

$1,200

$1,000

 $800

 $600

 $400

 $200

   $0
         1997   1998     1999     2000      2001      2002       2003   2004   2005    2006
                        Sustain      Strategic      Growth       Optical

     Since 2000, Optical spending equaled all other growth capital combined
                 2007 Morgan Stanley CEOs Unplugged Conference                                (#)
Supply Chain – Focused Factories
                                                                   Plant C
                   Plant A                                    Eight Product Lines
               Six Product Lines




  Raw                                                                                      Distribution
Material In                                                                                  Center




                                   Plant B                                   Plant D
                             Four Product Lines                       Four Product Lines


                  2007 Morgan Stanley CEOs Unplugged Conference                                       (#)
Supply Chain – Focused Factories
                         Plant A
                    Six Product Lines
                                                                 Plant C
                                                          Eight Product Lines




  Raw                                                                                       Distribution
                                        Focused Factory
Material In                                                                                   Center




                                Plant B                                     Plant D
                           Four Product Lines                          Four Product Lines


                 2007 Morgan Stanley CEOs Unplugged Conference                                         (#)
Stretched Supply Chains Drive Working Capital Use

   United States
   65% Product Source
   35% Consumption




                                                             International
                                                             35% Product Source
                                                             65% Consumption
             2007 Morgan Stanley CEOs Unplugged Conference                        (#)
Reducing To Its Simplest Form, What Must We Do?
● Growth is a pipeline; repair the inputs and outputs and clear the pipe of pluggage
● At the “sending end” of the pipe: Invent more things
       Prioritize R&D spending, focus and inspire our people
       Get scientists and engineers back in the business of inventing new products
● At the “receiving end” of the pipe; Sell and market better
       Put more feet of the street, and more advertising and merchandising
       Bring increased competency and professionalism to marketing
       Stop unnecessary complexity in SKUs and specifications
       Acquire local brands to penetrate distribution faster
● The pipe itself
       Provide a large enough diameter pipe: Capacity
       Keep the pipe as short and simple as possible
● Stop the pipe leaking
       Price giveaways
       Market share loss
                  2007 Morgan Stanley CEOs Unplugged Conference                        (#)
Capacity And Supply Chain Improvements In Progress



                                                   CANADA                                 CHIM Tape
    Medical: M6 Solvent
   Coater-Brookings, SD

                                                    USA


                                                                                        Northridge DDSD
                                                                                         Packaging Line
  Automotive Acrylic Tape-                   MEXICO
       Aberdeen, SD




                                                                                           Polyester
                                                                                         Greenville, NC

    CHIM: LFBMF Lines,              D11 MOF Line
       Aberdeen, SD                                                     Filtrete Mfg.
                                     Decatur, AL
                             2007 Morgan Stanley CEOs Unplugged Conference                                (#)
Capacity And Supply Chain Improvements In Progress


                                                          RUSSIA
                                                                                          OHES
   Manufacturing
                              POLAND
                                                                   CHINA
                                                                               KOREA
                                                          INDIA


       Optical                                                                         Suzhou LCD II




        Tapes
                                                                                        CHJ III Mfg




   Industrial Tapes                        Medical Mfg.            GuangZhou
                      2007 Morgan Stanley CEOs Unplugged Conference                                    (#)
3M Market Dynamics and Defense


Shouldn’t we exit
the Scotch Tape
  market? It’s
                                                         Push into upper
 commoditized!                                          middle level market



                                                                Competitors push into the lower
                                                                market … we refuse to defend


                    The objective is to bulwark and defend the
                     markets that we created, not just to grow

               2007 Morgan Stanley CEOs Unplugged Conference                                  (#)
Differentiated Brands & Technology to Grow Category
  Industrial                                                           Consumer
                                              Principal brands
                                             and differentiated
                                                  features


 Diamond Grade™




                                                  Secondary
                                                   Brands &
                                                 Technologies
High Intensity Grade



                                             Selective private
                                                labeling or
                                            manufacturing JVs to
                                            support partnership
                                                customers
Engineering Grade

                       2007 Morgan Stanley CEOs Unplugged Conference              (#)
And Then Extend It With Simple Concepts
                                                  Market
                                                 Expansion


   Grow the Current           Complementary                 Build New              International
   Grow the Current           Complementary                  Build New              International
         Core                  Acquisitions              Business via EBOs             Growth
         Core                   Acquisitions             Business via EBOs             Growth


● Defend and extend the      ● Follows core strategy ● Follow Mega Trends          ● Go “local” in brands
  core                                                                               and manufacturing
                             ● Supports adjacencies ● Seeded by small M&A
● Build scale and relative                                                         ● BRICP emphasis
                             ● Mostly tuck-ins          ● Targeted areas
  share                                                                            ● Gulf and LA
                             ● Technology, capacity,       ● RFID/Wireless/GPS
● Localization                 distribution and local                              ● Eastern Europe
                                                           ● Minerals extraction
                               brands
● Disruptive technologies                                                          ● Growth everywhere
                                                           ● Oil & Gas
● Build long term
                                                           ● Food safety
  competencies


                       Customer Focus Critical on All Four Fronts
                    2007 Morgan Stanley CEOs Unplugged Conference                                   (#)
Acquisitions
Higher organic growth results from more frequent acquisitions

                                                              Acquisitions are not only
                                                              about bulk, but can be
                                                              helpful in:
                  Acquisitions
                                                         1.   Strengthening the base by
                                                              filling in white spaces
                                                         2.   May facilitate growth through
                     Growth
                                                              entry into a new market
                                                         3.   May provide a key new
                       Base
                                                              technology or brand
                                                         4.   Fast capacity acquisition


         2007 Morgan Stanley CEOs Unplugged Conference                                    (#)
Thoughtful Acquisitions Help Drive Core Growth
                                  High Jump
                         20%
                                                    Info-X
                                                                                        Siemen's
                                                                                                       Interchemall Dom
                                                                                      Interconnect
  Target Growth Rate %




                         15%                                              Mercury


                                                                          CUNO                       Omni
                                    Hornell
                         10%
                                                                                    Gen'l Ind'l Diamond



                         5%

                                                       3M Historical Growth ~4%

                         0%
                           2004                          2005                               2006

                                               Less than $100MM               Greater than $100MM

                                  2007 Morgan Stanley CEOs Unplugged Conference                                     (#)
Brontes Technologies




2007 Morgan Stanley CEOs Unplugged Conference   (#)
Track & Trace Has Broad-Based Opportunities

Existing and Potential 3M Solution Spaces


                                                                      Improve and
                                                                      Advantage Me!
                                                                      Location-Based Services
                                                    How Am I?
                                                                      Supply Chain Optimization
                                                    Sensor Networks   Competitive “Superiority”
                       Where Am I?                  Sensors           in Order Fulfillment
                                                    Temp                  Supply Chain
                     Tracking Software
Who Am I?                                           Vibration             Distribution
                     RFID Network
                                                    Humidity
  RFID               Wireless Location
                                                    Light
  BarCode            RTLS
                                                    Contaminants
  Database           GPS
                     Road Tolling




             2007 Morgan Stanley CEOs Unplugged Conference                                (#)
Electrical Power Transmission




 2007 Morgan Stanley CEOs Unplugged Conference   (#)
New Consumer Products




2007 Morgan Stanley CEOs Unplugged Conference   (#)
And Then Extend It With Simple Concepts
                                                  Market
                                                 Expansion


   Grow the Current           Complementary                 Build New              International
   Grow the Current           Complementary                  Build New              International
         Core                  Acquisitions              Business via EBOs             Growth
         Core                   Acquisitions             Business via EBOs             Growth


● Defend and extend the      ● Follows core strategy ● Follow Mega Trends          ● Go “local” in brands
  core                                                                               and manufacturing
                             ● Supports adjacencies ● Seeded by small M&A
● Build scale and relative                                                         ● BRICP emphasis
                             ● Mostly tuck-ins          ● Targeted areas
  share                                                                            ● Gulf and LA
                             ● Technology, capacity,       ● RFID/Wireless/GPS
● Localization                 distribution and local                              ● Eastern Europe
                                                           ● Minerals extraction
                               brands
● Disruptive technologies                                                          ● Growth everywhere
                                                           ● Oil & Gas
● Build long term
                                                           ● Food safety
  competencies


                       Customer Focus Critical on All Four Fronts
                    2007 Morgan Stanley CEOs Unplugged Conference                                   (#)
3M’s Subsidiary Network: A Platform For Growth
                                                                                                 Poland                      Switzerland       Hungary
                                                                                      Norway
                                                                                                                                                            Ukraine
                                            Canada                                                                   East
                                                                               Czech
                               Trinidad                                                                                          Austria                          Romania
                                                                                                    Finland
                                                                               Republic Sweden
                               & Tobago
                Puerto Rico
                                                                                                                                                                          Russia
                                                                           Germany
    Dominican
    Republic
                                                                           Denmark
  Jamaica                                                                                                                                                                   Korea
                                                                        Netherlands
                                                                Belgium
                                                                                                                                                                             Japan
                                                          Ireland
Mexico
                                                                                                                                                                            China
                                                      United
  Guatemala                                           Kingdom
                                                                                                                                                                          Hong Kong
     El Salvador                                     Portugal
                                                                                                                                                                       Taiwan
         Costa Rica                                                                                       Pakistan
                                                      Spain
                                                                                                                                                                             Vietnam
              Panama                                          France
                                                                                                          UAE
                   Colombia
                                                                                                                                                                            Philippines
                                                                Morocco                                  Kuwait
                                                                                                                             Indonesia
                   Venezuela                                                                                                                                          Thailand
                                                                                                    Saudi
                                                                Tunisia
                                                                                                    Arabia
                     Ecuador                                                                                                Malaysia                                      Singapore
                                                                Italy
                                                                                                    Lebanon
                     Peru
                                                                                                                          Sri                                     New Zealand
                                                                Greece                                                                          Australia
                                                                                                                        Lanka
                   Brazil                                                                          Israel
                                                                                                                India
                                                                Turkey
                    Chile                                                                          Egypt
                                                                          South Africa                                          Key
                                                                                                 Kenya
                     Uruguay
                                Argentina                                                                                         Sales & Marketing
                                                                                                                                  Manufacturing/Converting
                                                                                                                                  Technical Capabilities
                                      2007 Morgan Stanley CEOs Unplugged Conference                                                                                              (#)
International Sales Growth
(Billions)
$15.0
                                                                                 $14.1

                                                                         $12.9
 13.0
                                                                 $12.1

                                                         $10.7
 11.0


                                                $8.9
                           $8.9
  9.0                                 $8.5
                 $8.2
        $7.8

  7.0


  5.0

        1998    1999      2000       2001      2002      2003    2004    2005    2006

               2007 Morgan Stanley CEOs Unplugged Conference                             (#)
Summary- Bringing it all Together
3M’s Strategy Reduces to Five Principal Elements
    Get our labs back in the business of developing and releasing new
●
    products faster
      Better prioritization of what we do, and don’t do, and where we do it
  Go local (or regional) in brands and sales coverage to drive growth
●
● Get all elements of the supply chain closer to customers to facilitate
  growth and reduce costs and W/C demands
● Accelerate technological capability, distribution penetration,
  customer satisfaction and manufacturing capacity through
  acquisitions
      Becoming more important to customers
    Leverage the growth
●
      Stop price leakage and share losses
      Trim non-essential corporate services


             2007 Morgan Stanley CEOs Unplugged Conference                    (#)
Coordinated Value Creation Strategy
Strategy    ► Focus on mega trends, scale and relative                       ► Review business units by key
                                                                 Strategy
              share in core business                                           metrics including growth and capital
                                                                               efficiency
            ► Safety & Protection
Near Term                                                                    ► Put ongoing review metrics in place
                                                                 Near Term
            ► Display & Graphics (Optics & Films)
Tactics                                                                      ► Divestiture of Pharmaceuticals
                                                                 Tactics
            ► Track & Trace (RFID/Wireless/GPS)
                                                                             ► Examine others for divestiture
            ► Wider Consumer Offerings
            ► Medical, Dental & Orthodontics


                        Organic                                                   Selected
                        Growth                                                   Divestitures


                                                                                    Capital
                     Acquisitions
                                                                                    Strategy

                                                                               ► Increase leverage on the balance
                                                                Strategy
Strategy    ► Work in high growth spaces with
                                                                                 sheet. Be willing, if necessary, to dip
               reasonable EPS targets. Value creation
                                                                                 below AA rating to A
               orientation. Less margin obsessive
                                                                               ► Use cash flow for investment,
                                                                Near Term
            ► Focus on adjacent segments
Near Term
                                                                                 acquisitions and increased share
               with higher growth, cost and                     Tactics
Tactics
                                                                                 buybacks
               revenue synergies
                        2007 Morgan Stanley CEOs Unplugged Conference                                              (#)
Cash Back to Shareholders
2500
                                                               For The Period 2001-06:
        Stock Repurchases $'000s
2000


                                                                      $8.9 billion in share
                                                               ●
1500


                                                                      repurchases
1000


                                                                      $6.7 billion in dividends paid
 500
                                                               ●
   0
                                                                      Dividend CAGR of 9%
                                                               ●
       2001    2002    2003     2004    2005    2006

1400
                                                                      No equity dilution policy
                                                               ●
        Dividends $'000s
1200
                                                                      Returned ~103% of reported
                                                               ●
                                                                      net income via dividends and
1000

                                                                      share repurchases
 800



 600
       2001   2002     2003     2004    2005    2006
                      2007 Morgan Stanley CEOs Unplugged Conference                                (#)
3M’s Summary Longer Term Strategy
                                                                                               20%+
► Drill into the core.
                   Move towards
                                                                           12 -15%
  scale where markets are large
                                                       2X IPI ≈ 8%
                                                         and up
► Innovation remains vital

► Move towards higher relative share
  in smaller markets
► Heavy up on globalization

► Accelerated M&A to improve core                                                         Investment
                                                   Organic Sales           EPS
  growth and fill gaps                                                                      Returns
                                                      Growth              Growth
► Careful tradeoffs of share and                 ● Technology lattice protects the downsides and ensures
  growth                                           upsides
                                                 ● Investment through the economic cycles
► Building brands and technology                 ● Driving growth as a way of doing business




                  2007 Morgan Stanley CEOs Unplugged Conference                                            (#)
2007 Morgan Stanley CEOs Unplugged Conference
© 3M 2007. All Rights Reserved.
Year-To-Date Highlights*
                                                                                                            Operating Income ($ in millions)
                     Sales ($ in millions)
   Pharma
                                                                                                                                         +14.2%
                                                           +10.9%                          $3,000
$13,000                                                                                                                                 ex. pharma
                                                          ex. pharma                                                         +8.9%
                                             +7.1%
                                                                                                                             $2,823
                                            $12,079
                                                                                                                $120
                                                                                           $2,500
$11,500
                     $389                                                                                      $2,473
                    $10,894
$10,000                                                                                    $2,000
                    YTD '06                 YTD '07                                                           YTD '06        YTD '07
                                                                                        Margin
  LC Growth          8.8%                    8.4%                                       (ex pharma)            22.7%          23.4%



                 Earnings Per Share (US dollars)                                                             Return on Invested Capital
                                                            +17.9%                                                                        +80 bps
                                                                                            25.0%
  $2.75                                                    ex. pharma                                                                    ex. pharma
                                                                                                                              +10 bps
                                              +12.6%
                                                                                                                               22.7%
                                                                                                                22.6%
                                               $2.50
                                                                                            20.0%
  $2.25
                     $0.10

                     $2.12
  $1.75                                                                                     15.0%
                                                                                                               YTD '06        YTD '07
                    YTD '06                   YTD '07

*Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.
Segment Highlights* – Display & Graphics
                                         Second Quarter
                                                                                                                           Q2 Drivers
$1,200                                                                                        • Local currency growth of 8.8%
                                                                         Operating
                               +10.2%
                                                                      Income Margins
                                $1,006                                                        • Optical films business leads with strong double digit
                                                                      Q2 ’06 Q2 ‘07
  $800              $913                                                                        sales and profit growth
                                                                      26.0% 28.7%
                                                                                              • Commercial graphics and traffic safety continue
  $400                                                                                          track record of delivering consistent performance
                                                                +21.5%
                                                                 $288
                                                                                              • LCD industry continues to remain healthy
                                                     $237
    $0                                                                                        • Solid YTD operating income performance with
                   Q2 ‘06      Q2 ‘07              Q2 ‘06       Q2 ‘07
                                                                                                operating income up over 10% and margins over
                        Sales                    Operating Income
                                                                                                30%

                                          Year-to-Date                                                             Other Highlights
$2,100                         +5.2%                                                          • LCD Poland facility online (June 2007)
                                                                        Operating
                                                                     Income Margins
                               $1,927                                                         • DBEF manufacturing capacity additions for LCD TV
                                                                    YTD ’06 YTD ‘07
                 $1,832
                                                                                                industry on track
$1,400                                                               28.9% 30.3%
                                                                                              • LCD industry accelerates back-half of year as TV
                                                                                                becomes bigger piece of mix
 $700                                                               +10.2%
                                                                                              • New service business for vehicle registration & road
                                                                    $583
                                                      $529                                      maintenance
   $0
                 YTD ‘06       YTD ‘07               YTD ‘06       YTD ‘07
                       Sales                        Operating Income

  *Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.
Segment Highlights* – Industrial & Transportation
                                        Second Quarter
                                                                                                                           Q2 Drivers
                               +8.5%
$1,800                                                                   Operating           • Local currency growth of 5.6% including 1.0% from
                               $1,804
                                                                      Income Margins
                                                                                               acquisitions
                  $1,662
                                                                      Q2 ’06 Q2 ‘07
$1,200                                                                                       • Continued growth leadership by industrial adhesives
                                                                      19.3% 20.0%
                                                                                               and tapes, automotive aftermarket, energy and
                                                                                               advanced materials and abrasives businesses
  $600                                                          +12.5%
                                                                                             • Good solid performance in auto OEM market
                                                                 $361
                                                    $320
                                                                                             • Broad based geographic performance with growth led
    $0             Q2 ‘06      Q2 ‘07              Q2 ‘06       Q2 ‘07
                                                                                               by Europe and Latin America Canada regions
                        Sales                    Operating Income
                                                                                             • Good operational discipline with double digit operating
                                                                                               income increase of 12.5% in Q206 and 10.4% YTD
                                          Year-to-Date
                               +7.6%
$3,600                                                                  Operating
                                                                                                                    Other Highlights
                               $3,589                                Income Margins
                 $3,334                                             YTD ’06 YTD ‘07          • Organic new products and complimentary gap fill
$2,400                                                                                         acquisitions
                                                                    21.0% 21.5%
                                                                                             • Continued emerging market penetration, particularly
                                                                                               BRICP countries
$1,200
                                                                    +10.4%
                                                                                             • Driving 3M technologies into oil and gas market to
                                                                     $772
                                                      $700                                     meet needs of major energy customers
   $0
                                                                                             • Weak US auto OEM & residential housing market
                 YTD ‘06       YTD ‘07               YTD ‘06       YTD ‘07
                       Sales                         Operating Income
  *Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.
Segment Highlights – Consumer & Office
                                 Second Quarter                                              Q2 Drivers
$900                +8.2%                                              • Local currency growth of 6.1% including 1.3% from
                                                         Operating
                                                                         Nylonge acquisition
                    $832                              Income Margins
                                                      Q2 ’06 Q2 ‘07
         $769
$600                                                                   • Sales and profit growth led by office retail channel
                                                      17.6% 19.7%
                                                                       • Solid growth in DIY and consumer mass retail
                                                                         channels
$300                                              +21.3%
                                                                       • Double-digit international growth rates
                                                  $164
                                       $135
  $0                                                                   • Outstanding Q2 and YTD operating leverage with
          Q2 ‘06        Q2 ‘07         Q2 ‘06     Q2 ‘07
                                                                         profits up 21.3% and 19.6% respectively
                Sales                 Operating Income

                                  Year-to-Date                                            Other Highlights
$1,800                  +9.0%                            Operating     • Invigorating existing categories with higher-value
                                                      Income Margins
                                                                         innovative products
                        $1,646
                                                    YTD ’06 YTD ‘07
         $1,510
                                                                       • Introducing products that change consumer behavior
$1,200                                               18.9% 20.7%
                                                                         and solve everyday problems
                                                                       • Increased investment in Q3 and Q4 for sales and
 $600
                                                                         marketing activities for back-to-school and holiday
                                                     +19.6%
                                                                         season
                                                     $341
                                         $285
                                                                       • Improving international penetration
   $0
         YTD ‘06        YTD ‘07         YTD ‘06     YTD ‘07
                                                                       • Slow U.S. residential housing construction persists
                Sales                   Operating Income
Segment Highlights* – Safety, Security & Protection
                                                                                                                           Q2 Drivers
                                         Second Quarter
                                                                                              • Local currency growth of 16.7%
$900                          +20.7%                                     Operating
                                                                                              • Acquisitions added 11.6%; primarily Security Printing
                                                                      Income Margins
                              $799
                                                                      Q2 ’06 Q2 ‘07             Systems Ltd. and E. Wood
$600             $662                                                 21.0% 21.2%
                                                                                              • Growth led by respiratory protection, corrosion protection
                                                                                                and building and commercial services
$300                                                            +21.9%
                                                                                              • Industrial mineral up 5% sequentially; down 13% YOY
                                                                $169
                                                   $139
                                                                                              • Europe delivers strong growth and profits
  $0               Q2 ‘06       Q2 ‘07             Q2 ‘06       Q2 ‘07
                                                                                              • Operating income up 22%
                        Sales                    Operating Income
                                                                                              • Consistent 20%+ operating margins
                                          Year-to-Date
                                                                                                                      Other Highlights
$1,800                                                                  Operating
                                +19.7%                                                       • Korea respiratory facility opening effective July 11, 2007
                                                                     Income Margins
                                $1,557                              YTD ’06 YTD ‘07
                                                                                             • Continued global demand for personal protective
$1,200                                                              22.8% 22.5%
                 $1,301                                                                        equipment particularly disposable respiratory protection
                                                                                             • Driving growth in passports, document readers and
                                                                                               access control in security market
 $600
                                                                    +18.1%
                                                                                             • International commercial construction drives increased
                                                                     $350
                                                      $297
                                                                                               demand for fire protection and window films
   $0
                 YTD ‘06        YTD ‘07              YTD ‘06       YTD ‘07
                        Sales                        Operating Income

  *Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.
Segment Highlights* – Electro & Communications
                                         Second Quarter                                                                    Q2 Drivers
$900                                                                                         • Local currency growth of 1.2%; 2.2% from acquisitions
                                                                         Operating
                             +3.4%                                    Income Margins
                                                                                             • Double-digit sales and profit growth in electrical markets
                                                                      Q2 ’06 Q2 ‘07
                              $693
$600                                                                                           for insulating, protecting and sensing
                 $670                                                 17.1% 19.1%
                                                                                             • Double-digit sales and profit growth in communications
                                                                                               markets
$300
                                                                +15.7%
                                                                                             • Weakness in consumer electronic applications
                                                                $132
                                                   $114
  $0                                                                                         • Productivity focus continues to drive double-digit profits
                   Q2 ‘06       Q2 ‘07             Q2 ‘06       Q2 ‘07
                                                                                               growth
                        Sales                     Operating Income
                                                                                             • Q2 and YTD margins more than 19.0%
                                          Year-to-Date
                                                                                                                      Other Highlights
$1,500                                                                  Operating
                                +3.5%
                                                                                             • Strong bench-to-bench relationships with big global
                                                                     Income Margins
                                $1,361                              YTD ’06 YTD ‘07
                 $1,315                                                                        customers
$1,000                                                              17.8% 19.3%              • Steady flow of new products into adjacent markets
                                                                                             • Continued penetration in consumer electronics and
                                                                                               other electronic devices
 $500
                                                                    +12.0%
                                                                     $262
                                                       $234
   $0
                 YTD ‘06        YTD ‘07              YTD ‘06       YTD ‘07
                        Sales                        Operating Income

  *Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.
Segment Highlights* – Health Care
                                         Second Quarter
    Pharma
                                                                                                                             Q2 Drivers
                                                                          Operating
  $1,050                                                               Income Margins
                                            23.1%
                               (1.1%)
                                                                                                • Local currency growth of 19.5% including 4.4% from
                                                                         (ex. Pharma)
                                          ex. pharma
                  $196                                                                            acquisitions
                              $988                                     Q2 ’06 Q2 ‘07
                                                                       26.1% 28.1%              • Sales growth was broad-based across Drug Delivery,
    $700          $804
                                                                                                  Dental, Medical and Health Info Systems
                                                                                32.3%
                                                                                                • Geographic growth led by Europe and US
                                                                              ex. pharma
    $350                                                            +2.9%
                                                         $60                                    • Excellent operating income performance up 32.3%,
                                                                                                  ex. pharma
                                                                   $277
                                                       $210
                                                                                                • Pharma divestiture reduced reported sales and
        $0
                                                       Q2 ‘06      Q2 ‘07
                 Q2 ‘06       Q2 ‘07                                                              operating income by 24.2% and 29.4%, respectively
                                                     Operating Income
                      Sales
                                                                                                                           Other Highlights
                                           Year-to-Date
                                                                                                 • Technology leadership in medical, dental, health
                                                                           Operating
                                                                        Income Margins
$2,100                                                                                             information management and drug delivery industries
                                           23.7%
                             (0.8%)
                                                                          (ex. Pharma)
                                         ex. pharma
              $389                                                                               • Strategic focus in medical on infection prevention,
                                                                       YTD ’06 YTD ‘07
                            $1,950
                                                                                                   acute/chronic wound care management
                                                                        28.4% 28.0%
$1,400       $1,577
                                                                                                 • Dental launched Pro TempTM malleable materials for
                                                                                21.9%
                                                                                                   temporary crowns
                                                                              ex. pharma
 $700                                                                (3.8%)                      • Product and technology gap fill acquisitions help build
                                                       $120
                                                                                                   scale and market leadership in medical and dental
                                                                    $546
                                                       $448
                                                                                                 • Emerging market penetration
    $0
                                                         YTD ‘06      YTD ‘07
                  YTD ‘06     YTD ‘07
                                                        Operating Income
                       Sales
  *Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.

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Morgan Stanley Global Industrials CEOs Unplugged Conference

  • 1. Innovation and Growth at 3M George W. Buckley Chairman, President and Chief Executive Officer 2007 Morgan Stanley Global Industrials CEOs Unplugged Conference September 10, 2007
  • 2. Forward-Looking Statements This presentation contains forward-looking information (within the meaning of the Private Securities Litigation Reform Act of 1995) about the company’s financial results and estimates, business prospects, and products under development that involve substantial risks and uncertainties. You can identify these statements by the use of words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will,” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Among the factors that could cause actual results to differ materially are the following: (1) worldwide economic conditions; (2) competitive conditions and customer preferences; (3) foreign currency exchange rates and fluctuations in those rates; (4) the timing and acceptance of new product offerings; (5) the availability and cost of purchased components, compounds, raw materials and energy (including oil and natural gas and their derivatives) due to shortages, increased demand or supply interruptions (including those caused by natural and other disasters and other events); (6) the impact of acquisitions, strategic alliances, divestitures, and other unusual events resulting from portfolio management actions and other evolving business strategies, and possible organizational restructuring; (7) generating less productivity improvements than estimated; and (8) legal proceedings, including significant developments that could occur in the legal and regulatory proceedings described in the company’s Annual Report on Form 10-K for the year ended Dec. 31, 2006 and its subsequent Quarterly Reports on Form 10- Q (the “Reports”). Changes in such assumptions or factors could produce significantly different results. A further description of these factors is located in the Reports under Part I, Item 1A (Annual Report) and Part II, Item 1A (Quarterly Report), “Risk Factors.” The information contained in this presentation is as of the date indicated. The company assumes no obligation to update any forward-looking statements contained in this presentation as a result of new information or future events or developments. 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 3. Outstanding Second Quarter +11.8% +23.0% ex. pharma ex. pharma $1.23 $6.1 Billion +8% +17.1% Sales EPS* *Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items. 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 4. Working Our Plan Reinvigorate R&D ● 11% increase over 2006* ex. pharma Accelerate International Growth ● Building local/regional brands Pursue profitable adjacencies Invest in Our Supply Chain ● Korea - Respiratory facility (July 2007) Poland - Optical facility (June 2007) Canada – CHIM Tapes facility (June 2007) OHES China - Industrial Tapes facility (July 2007) Optical Others largely on-track CHIM Tape Industrial Tapes Accelerate Growth in the Core ● Eight acquisitions YTD in 2007 *Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items. 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 5. Sales Recap Q2 2007 vs. Q2 2006 Int’l WW U.S. Volume - organic 6.9% 2.1% 9.9% Volume - acquired 2.8% 2.8% 2.8% Price (0.4%) 1.3% (1.4%) Total Local Currency* 9.3% 6.2% 11.3% Divestiture (3.8%) (4.0%) (3.7%) Translation 2.5% -- 4.1% Total Sales Growth 8.0% 2.2% 11.7% *Total Local Currency = Volume + Price + Acquisitions 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 6. Balance Sheet & Cash Flow Q2 2006 Q1 2007 Q2 2007 ($ in Millions) $866(a) $670(a) Free Cash Flow $539 Net W/C Turns 5.0 5.0 5.2 Inventories $2,779 $2,714 $2,557 Receivables-Net $3,620 $3,444 $3,171 Cap-ex $348 $304 $261 Dividends Paid $346 $350 $348 Share Repurchases $1,035 $1,164 $527 Excludes certain special items that impacted cash flow. Refer to 3M's July 26, 2007 press release for an explanation of these items. (a) Note: Refer to 3M’s July 26, 2007 press release for a complete discussion of net working capital turns and free cash flow (non-GAAP measures). 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 7. Great Opportunities Remain For 3M Comparative Tax Rate (3M at 34% in 2007) Margin Built firm Six Sigma and Lean Tax Rate ► Advantage Processes in manufacturing Ingersoll Rand 16% 2150 bps Tyco 21% 1450 bps ITW 31.5% 150 bps Danaher 27.3% 920 bps UTX 26.8% 994 bps Fundamental principles remain ► J&J 23.8% 1449 bps Avery 20.4% 1943 bps 3M 34% 0 bps ● Protect our premium margins Conclusion; We fight to maintain high margins, and we reduce our competitiveness and growth rates, but waste it all in paying higher taxes ● Defend our premium ROIC Innovation (#) Relative Value Of Growth ● Reemphasize innovation MMM 5.2 ● Leverage central overhead GE 11.4 12.0 IBM 3.5 DHR 5.1 PG 7.2 e tiv a e f ro th 10.0 XOM 2.1 R la eV lu o G w GM 2.4 WMT 1.6 8.0 #REF! #REF! #REF! #REF! #REF! #REF! 6.0 ● Adding growth, taxes and supply 4.0 2.0 chain as new value creators 0.0 MMM GE IBM DHR PG XOM GM WMT Company Ticker ► Ratio of value creation from 100 bps of growth to 100 bps of margin Build on 3M’s enduring franchises ► Acquisitions add value by blending the value lost from margin dilution ► and the value added from incremental growth and mass Value Of Growth Vastly Exceeds Value Of Margin Expansion For 3M ● Building value and margin for our Source:HBR April 2005 © 3M 2006 All Rights Reserved customers 2007 Morgan Stanley CEOs Unplugged Conference
  • 8. Start By Growing The Current Core Grow the Current Core Invent a Extend The Core ● Constant reinvention New Future ● Localization and differentiation ● Imagine, dream and invent ● Build where we’re strong ● Key customer partnerships ● Beat competitors to the ● Get scale & relative share future ● Fill in the “white spaces” ● Plan for cannibalization Build Broad Long ● Define markets broadly ● Licensing as a route Term Competencies ● Become important to ● Avoid NIH syndrome customers ● Dual branding ● Local acquisitions ● Develop broad based long-term capabilities ● Private labeling ● Acquire supporting core technology ● Build volume and scale 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 9. And Then Extend It With Simple Concepts Market Expansion Grow the Current Complementary Build New International Grow the Current Complementary Build New International Core Acquisitions Business via EBOs Growth Core Acquisitions Business via EBOs Growth ● Defend and extend the ● Follows core strategy ● Follow Mega Trends ● Go “local” in brands core and manufacturing ● Supports adjacencies ● Seeded by small M&A ● Build scale and relative ● BRICP emphasis ● Mostly tuck-ins ● Targeted areas share ● Gulf and LA ● Technology, capacity, ● RFID/Wireless/GPS ● Localization distribution and local ● Eastern Europe ● Minerals extraction brands ● Disruptive technologies ● Growth everywhere ● Oil & Gas ● Build long term ● Food safety competencies Customer Focus Critical on All Four Fronts 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 10. First You Must Create the Environment for Growth Profitable Growth Products Efficiency ● Stimulating a creative ● Lean Methods environment ● Six Sigma ● Foster Imagination ● Systemic Supply ● Increased R&D spend Chain in the core Product Operational Improvements Innovation Excellence ● Technology Focus ● IT Systems ● See it through the ● Better S&OP customers’ eyes Process ● Mix in a little magic ● Market Expansion ● White space fill in Customers ● Geographic expansion ● Adjacencies and EBOs 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 11. Our Foundational Beliefs on Competitiveness 6σ & Lean Cost Global sourcing It’s not just about efficiency or just about Low Factory costs invention Taxes ● We compete on six platforms Build on our enduring Marketing franchises & Brands ● Low cost is the ultimate competitive Secondary for local deadly weapon Secure the best Distribution Secure the broadest ● Scale and relative share are vital for efficiency and competitiveness Build on a firm foundation Technology ● Follow the customer value chain Differentiation OTIF fill rates ● Pristine service and brands can Quality Service overcome price in some markets Speed to market Inspire and guide Develop leadership People Continuing education 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 12. 3M’s Convoluted Supply Chain • Any plant may have up to eight Plant A Plant B “owners” in 40 combinations Six Owners Four Owners • Lead owner varies plant to plant • Under absorbed costs in one business impacts another Raw Material In Distribution Center Plant D Plant C Four Owners Eight Owners 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 13. And Here’s What We Are Beginning To Do Plant A Plant B Six Owners Four Owners Distribution Center Plant D Plant C Four Owners Eight Owners 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 14. Historical Capital Spending $1,600 Growth Capital increase 53% Decline in almost all Optical Films Capital Spending $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Sustain Strategic Growth Optical Since 2000, Optical spending equaled all other growth capital combined 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 15. Supply Chain – Focused Factories Plant C Plant A Eight Product Lines Six Product Lines Raw Distribution Material In Center Plant B Plant D Four Product Lines Four Product Lines 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 16. Supply Chain – Focused Factories Plant A Six Product Lines Plant C Eight Product Lines Raw Distribution Focused Factory Material In Center Plant B Plant D Four Product Lines Four Product Lines 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 17. Stretched Supply Chains Drive Working Capital Use United States 65% Product Source 35% Consumption International 35% Product Source 65% Consumption 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 18. Reducing To Its Simplest Form, What Must We Do? ● Growth is a pipeline; repair the inputs and outputs and clear the pipe of pluggage ● At the “sending end” of the pipe: Invent more things Prioritize R&D spending, focus and inspire our people Get scientists and engineers back in the business of inventing new products ● At the “receiving end” of the pipe; Sell and market better Put more feet of the street, and more advertising and merchandising Bring increased competency and professionalism to marketing Stop unnecessary complexity in SKUs and specifications Acquire local brands to penetrate distribution faster ● The pipe itself Provide a large enough diameter pipe: Capacity Keep the pipe as short and simple as possible ● Stop the pipe leaking Price giveaways Market share loss 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 19. Capacity And Supply Chain Improvements In Progress CANADA CHIM Tape Medical: M6 Solvent Coater-Brookings, SD USA Northridge DDSD Packaging Line Automotive Acrylic Tape- MEXICO Aberdeen, SD Polyester Greenville, NC CHIM: LFBMF Lines, D11 MOF Line Aberdeen, SD Filtrete Mfg. Decatur, AL 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 20. Capacity And Supply Chain Improvements In Progress RUSSIA OHES Manufacturing POLAND CHINA KOREA INDIA Optical Suzhou LCD II Tapes CHJ III Mfg Industrial Tapes Medical Mfg. GuangZhou 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 21. 3M Market Dynamics and Defense Shouldn’t we exit the Scotch Tape market? It’s Push into upper commoditized! middle level market Competitors push into the lower market … we refuse to defend The objective is to bulwark and defend the markets that we created, not just to grow 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 22. Differentiated Brands & Technology to Grow Category Industrial Consumer Principal brands and differentiated features Diamond Grade™ Secondary Brands & Technologies High Intensity Grade Selective private labeling or manufacturing JVs to support partnership customers Engineering Grade 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 23. And Then Extend It With Simple Concepts Market Expansion Grow the Current Complementary Build New International Grow the Current Complementary Build New International Core Acquisitions Business via EBOs Growth Core Acquisitions Business via EBOs Growth ● Defend and extend the ● Follows core strategy ● Follow Mega Trends ● Go “local” in brands core and manufacturing ● Supports adjacencies ● Seeded by small M&A ● Build scale and relative ● BRICP emphasis ● Mostly tuck-ins ● Targeted areas share ● Gulf and LA ● Technology, capacity, ● RFID/Wireless/GPS ● Localization distribution and local ● Eastern Europe ● Minerals extraction brands ● Disruptive technologies ● Growth everywhere ● Oil & Gas ● Build long term ● Food safety competencies Customer Focus Critical on All Four Fronts 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 24. Acquisitions Higher organic growth results from more frequent acquisitions Acquisitions are not only about bulk, but can be helpful in: Acquisitions 1. Strengthening the base by filling in white spaces 2. May facilitate growth through Growth entry into a new market 3. May provide a key new Base technology or brand 4. Fast capacity acquisition 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 25. Thoughtful Acquisitions Help Drive Core Growth High Jump 20% Info-X Siemen's Interchemall Dom Interconnect Target Growth Rate % 15% Mercury CUNO Omni Hornell 10% Gen'l Ind'l Diamond 5% 3M Historical Growth ~4% 0% 2004 2005 2006 Less than $100MM Greater than $100MM 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 26. Brontes Technologies 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 27. Track & Trace Has Broad-Based Opportunities Existing and Potential 3M Solution Spaces Improve and Advantage Me! Location-Based Services How Am I? Supply Chain Optimization Sensor Networks Competitive “Superiority” Where Am I? Sensors in Order Fulfillment Temp Supply Chain Tracking Software Who Am I? Vibration Distribution RFID Network Humidity RFID Wireless Location Light BarCode RTLS Contaminants Database GPS Road Tolling 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 28. Electrical Power Transmission 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 29. New Consumer Products 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 30. And Then Extend It With Simple Concepts Market Expansion Grow the Current Complementary Build New International Grow the Current Complementary Build New International Core Acquisitions Business via EBOs Growth Core Acquisitions Business via EBOs Growth ● Defend and extend the ● Follows core strategy ● Follow Mega Trends ● Go “local” in brands core and manufacturing ● Supports adjacencies ● Seeded by small M&A ● Build scale and relative ● BRICP emphasis ● Mostly tuck-ins ● Targeted areas share ● Gulf and LA ● Technology, capacity, ● RFID/Wireless/GPS ● Localization distribution and local ● Eastern Europe ● Minerals extraction brands ● Disruptive technologies ● Growth everywhere ● Oil & Gas ● Build long term ● Food safety competencies Customer Focus Critical on All Four Fronts 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 31. 3M’s Subsidiary Network: A Platform For Growth Poland Switzerland Hungary Norway Ukraine Canada East Czech Trinidad Austria Romania Finland Republic Sweden & Tobago Puerto Rico Russia Germany Dominican Republic Denmark Jamaica Korea Netherlands Belgium Japan Ireland Mexico China United Guatemala Kingdom Hong Kong El Salvador Portugal Taiwan Costa Rica Pakistan Spain Vietnam Panama France UAE Colombia Philippines Morocco Kuwait Indonesia Venezuela Thailand Saudi Tunisia Arabia Ecuador Malaysia Singapore Italy Lebanon Peru Sri New Zealand Greece Australia Lanka Brazil Israel India Turkey Chile Egypt South Africa Key Kenya Uruguay Argentina Sales & Marketing Manufacturing/Converting Technical Capabilities 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 32. International Sales Growth (Billions) $15.0 $14.1 $12.9 13.0 $12.1 $10.7 11.0 $8.9 $8.9 9.0 $8.5 $8.2 $7.8 7.0 5.0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 33. Summary- Bringing it all Together
  • 34. 3M’s Strategy Reduces to Five Principal Elements Get our labs back in the business of developing and releasing new ● products faster Better prioritization of what we do, and don’t do, and where we do it Go local (or regional) in brands and sales coverage to drive growth ● ● Get all elements of the supply chain closer to customers to facilitate growth and reduce costs and W/C demands ● Accelerate technological capability, distribution penetration, customer satisfaction and manufacturing capacity through acquisitions Becoming more important to customers Leverage the growth ● Stop price leakage and share losses Trim non-essential corporate services 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 35. Coordinated Value Creation Strategy Strategy ► Focus on mega trends, scale and relative ► Review business units by key Strategy share in core business metrics including growth and capital efficiency ► Safety & Protection Near Term ► Put ongoing review metrics in place Near Term ► Display & Graphics (Optics & Films) Tactics ► Divestiture of Pharmaceuticals Tactics ► Track & Trace (RFID/Wireless/GPS) ► Examine others for divestiture ► Wider Consumer Offerings ► Medical, Dental & Orthodontics Organic Selected Growth Divestitures Capital Acquisitions Strategy ► Increase leverage on the balance Strategy Strategy ► Work in high growth spaces with sheet. Be willing, if necessary, to dip reasonable EPS targets. Value creation below AA rating to A orientation. Less margin obsessive ► Use cash flow for investment, Near Term ► Focus on adjacent segments Near Term acquisitions and increased share with higher growth, cost and Tactics Tactics buybacks revenue synergies 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 36. Cash Back to Shareholders 2500 For The Period 2001-06: Stock Repurchases $'000s 2000 $8.9 billion in share ● 1500 repurchases 1000 $6.7 billion in dividends paid 500 ● 0 Dividend CAGR of 9% ● 2001 2002 2003 2004 2005 2006 1400 No equity dilution policy ● Dividends $'000s 1200 Returned ~103% of reported ● net income via dividends and 1000 share repurchases 800 600 2001 2002 2003 2004 2005 2006 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 37. 3M’s Summary Longer Term Strategy 20%+ ► Drill into the core. Move towards 12 -15% scale where markets are large 2X IPI ≈ 8% and up ► Innovation remains vital ► Move towards higher relative share in smaller markets ► Heavy up on globalization ► Accelerated M&A to improve core Investment Organic Sales EPS growth and fill gaps Returns Growth Growth ► Careful tradeoffs of share and ● Technology lattice protects the downsides and ensures growth upsides ● Investment through the economic cycles ► Building brands and technology ● Driving growth as a way of doing business 2007 Morgan Stanley CEOs Unplugged Conference (#)
  • 38. 2007 Morgan Stanley CEOs Unplugged Conference © 3M 2007. All Rights Reserved.
  • 39. Year-To-Date Highlights* Operating Income ($ in millions) Sales ($ in millions) Pharma +14.2% +10.9% $3,000 $13,000 ex. pharma ex. pharma +8.9% +7.1% $2,823 $12,079 $120 $2,500 $11,500 $389 $2,473 $10,894 $10,000 $2,000 YTD '06 YTD '07 YTD '06 YTD '07 Margin LC Growth 8.8% 8.4% (ex pharma) 22.7% 23.4% Earnings Per Share (US dollars) Return on Invested Capital +17.9% +80 bps 25.0% $2.75 ex. pharma ex. pharma +10 bps +12.6% 22.7% 22.6% $2.50 20.0% $2.25 $0.10 $2.12 $1.75 15.0% YTD '06 YTD '07 YTD '06 YTD '07 *Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.
  • 40. Segment Highlights* – Display & Graphics Second Quarter Q2 Drivers $1,200 • Local currency growth of 8.8% Operating +10.2% Income Margins $1,006 • Optical films business leads with strong double digit Q2 ’06 Q2 ‘07 $800 $913 sales and profit growth 26.0% 28.7% • Commercial graphics and traffic safety continue $400 track record of delivering consistent performance +21.5% $288 • LCD industry continues to remain healthy $237 $0 • Solid YTD operating income performance with Q2 ‘06 Q2 ‘07 Q2 ‘06 Q2 ‘07 operating income up over 10% and margins over Sales Operating Income 30% Year-to-Date Other Highlights $2,100 +5.2% • LCD Poland facility online (June 2007) Operating Income Margins $1,927 • DBEF manufacturing capacity additions for LCD TV YTD ’06 YTD ‘07 $1,832 industry on track $1,400 28.9% 30.3% • LCD industry accelerates back-half of year as TV becomes bigger piece of mix $700 +10.2% • New service business for vehicle registration & road $583 $529 maintenance $0 YTD ‘06 YTD ‘07 YTD ‘06 YTD ‘07 Sales Operating Income *Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.
  • 41. Segment Highlights* – Industrial & Transportation Second Quarter Q2 Drivers +8.5% $1,800 Operating • Local currency growth of 5.6% including 1.0% from $1,804 Income Margins acquisitions $1,662 Q2 ’06 Q2 ‘07 $1,200 • Continued growth leadership by industrial adhesives 19.3% 20.0% and tapes, automotive aftermarket, energy and advanced materials and abrasives businesses $600 +12.5% • Good solid performance in auto OEM market $361 $320 • Broad based geographic performance with growth led $0 Q2 ‘06 Q2 ‘07 Q2 ‘06 Q2 ‘07 by Europe and Latin America Canada regions Sales Operating Income • Good operational discipline with double digit operating income increase of 12.5% in Q206 and 10.4% YTD Year-to-Date +7.6% $3,600 Operating Other Highlights $3,589 Income Margins $3,334 YTD ’06 YTD ‘07 • Organic new products and complimentary gap fill $2,400 acquisitions 21.0% 21.5% • Continued emerging market penetration, particularly BRICP countries $1,200 +10.4% • Driving 3M technologies into oil and gas market to $772 $700 meet needs of major energy customers $0 • Weak US auto OEM & residential housing market YTD ‘06 YTD ‘07 YTD ‘06 YTD ‘07 Sales Operating Income *Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.
  • 42. Segment Highlights – Consumer & Office Second Quarter Q2 Drivers $900 +8.2% • Local currency growth of 6.1% including 1.3% from Operating Nylonge acquisition $832 Income Margins Q2 ’06 Q2 ‘07 $769 $600 • Sales and profit growth led by office retail channel 17.6% 19.7% • Solid growth in DIY and consumer mass retail channels $300 +21.3% • Double-digit international growth rates $164 $135 $0 • Outstanding Q2 and YTD operating leverage with Q2 ‘06 Q2 ‘07 Q2 ‘06 Q2 ‘07 profits up 21.3% and 19.6% respectively Sales Operating Income Year-to-Date Other Highlights $1,800 +9.0% Operating • Invigorating existing categories with higher-value Income Margins innovative products $1,646 YTD ’06 YTD ‘07 $1,510 • Introducing products that change consumer behavior $1,200 18.9% 20.7% and solve everyday problems • Increased investment in Q3 and Q4 for sales and $600 marketing activities for back-to-school and holiday +19.6% season $341 $285 • Improving international penetration $0 YTD ‘06 YTD ‘07 YTD ‘06 YTD ‘07 • Slow U.S. residential housing construction persists Sales Operating Income
  • 43. Segment Highlights* – Safety, Security & Protection Q2 Drivers Second Quarter • Local currency growth of 16.7% $900 +20.7% Operating • Acquisitions added 11.6%; primarily Security Printing Income Margins $799 Q2 ’06 Q2 ‘07 Systems Ltd. and E. Wood $600 $662 21.0% 21.2% • Growth led by respiratory protection, corrosion protection and building and commercial services $300 +21.9% • Industrial mineral up 5% sequentially; down 13% YOY $169 $139 • Europe delivers strong growth and profits $0 Q2 ‘06 Q2 ‘07 Q2 ‘06 Q2 ‘07 • Operating income up 22% Sales Operating Income • Consistent 20%+ operating margins Year-to-Date Other Highlights $1,800 Operating +19.7% • Korea respiratory facility opening effective July 11, 2007 Income Margins $1,557 YTD ’06 YTD ‘07 • Continued global demand for personal protective $1,200 22.8% 22.5% $1,301 equipment particularly disposable respiratory protection • Driving growth in passports, document readers and access control in security market $600 +18.1% • International commercial construction drives increased $350 $297 demand for fire protection and window films $0 YTD ‘06 YTD ‘07 YTD ‘06 YTD ‘07 Sales Operating Income *Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.
  • 44. Segment Highlights* – Electro & Communications Second Quarter Q2 Drivers $900 • Local currency growth of 1.2%; 2.2% from acquisitions Operating +3.4% Income Margins • Double-digit sales and profit growth in electrical markets Q2 ’06 Q2 ‘07 $693 $600 for insulating, protecting and sensing $670 17.1% 19.1% • Double-digit sales and profit growth in communications markets $300 +15.7% • Weakness in consumer electronic applications $132 $114 $0 • Productivity focus continues to drive double-digit profits Q2 ‘06 Q2 ‘07 Q2 ‘06 Q2 ‘07 growth Sales Operating Income • Q2 and YTD margins more than 19.0% Year-to-Date Other Highlights $1,500 Operating +3.5% • Strong bench-to-bench relationships with big global Income Margins $1,361 YTD ’06 YTD ‘07 $1,315 customers $1,000 17.8% 19.3% • Steady flow of new products into adjacent markets • Continued penetration in consumer electronics and other electronic devices $500 +12.0% $262 $234 $0 YTD ‘06 YTD ‘07 YTD ‘06 YTD ‘07 Sales Operating Income *Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.
  • 45. Segment Highlights* – Health Care Second Quarter Pharma Q2 Drivers Operating $1,050 Income Margins 23.1% (1.1%) • Local currency growth of 19.5% including 4.4% from (ex. Pharma) ex. pharma $196 acquisitions $988 Q2 ’06 Q2 ‘07 26.1% 28.1% • Sales growth was broad-based across Drug Delivery, $700 $804 Dental, Medical and Health Info Systems 32.3% • Geographic growth led by Europe and US ex. pharma $350 +2.9% $60 • Excellent operating income performance up 32.3%, ex. pharma $277 $210 • Pharma divestiture reduced reported sales and $0 Q2 ‘06 Q2 ‘07 Q2 ‘06 Q2 ‘07 operating income by 24.2% and 29.4%, respectively Operating Income Sales Other Highlights Year-to-Date • Technology leadership in medical, dental, health Operating Income Margins $2,100 information management and drug delivery industries 23.7% (0.8%) (ex. Pharma) ex. pharma $389 • Strategic focus in medical on infection prevention, YTD ’06 YTD ‘07 $1,950 acute/chronic wound care management 28.4% 28.0% $1,400 $1,577 • Dental launched Pro TempTM malleable materials for 21.9% temporary crowns ex. pharma $700 (3.8%) • Product and technology gap fill acquisitions help build $120 scale and market leadership in medical and dental $546 $448 • Emerging market penetration $0 YTD ‘06 YTD ‘07 YTD ‘06 YTD ‘07 Operating Income Sales *Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.