UBS Best of Americas

An Emerging Strategy for Growth

George W. Buckley
Chairman, President and Chief Executive Officer

UBS Best of Americas Conference – May 31, 2006 © 3M 2006 All Rights Reserved

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,” 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 the outcome of pending Congressional action concerning asbestos-
related litigation and other 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, 2005
(the “Report”). Changes in such assumptions or factors could produce significantly different results. A
further description of these factors is located in the Report under Part I, Item 1A, “Risk Factors.” The
information contained in these presentations is as of the date indicated. The company assumes no
obligation to update any forward-looking statements contained in these presentations as a result of new
information or future events or developments.


Topics We Will Address Today

Portfolio Overview
1

Describing 3M’s strategy for growth while maintaining
2
premium margins

Continued commitment to operational excellence
3

Strategic Management of 3M’s Portfolio
4

Summary – bringing it all together
5


2005 Business Segment Results

Display &
Industrial &
Health Care
Graphics
Transportation
$3.8B
$6.1B $3.5B
LC Growth: 4.7%
LC Growth: 6.5% LC Growth: 4.2%
OI Margin: 19.7% OI Margin: 33.1%
OI Margin: 29.6%

Electro & Safety, Security &
Consumer & Office
Communications Protection Services
$3.0B $2.3B $2.3B
LC Growth: 4.2% LC Growth: 6.9%
LC Growth: 3.6%
OI Margin: 19.2% OI Margin: 23.4%
OI Margin: 18.5%


3M International Overview

2005 Sales
Subsidiaries in 69 countries
($ billions)
33 countries with laboratories
LAC
79 manufacturing sites
$1.9
36,600+ employees
U.S.
99% of 3M International
APAC $8.3
subsidiary employees are
$5.7
local nationals
3M product sales in over 200
Europe
countries
$5.2


Historical Performance Has Been Good….

$5,000
Operating Income
$19,000
Organic LC Growth
6%
$4,400
$18,400
=1
%
3 .8 GR
CA
= $3,800
$17,800
GR
CA
$17,200 $3,200

$16,600 $2,600

$16,000 $2,000
2001 2002 2003 2004 2005 2001 2002 2003 2004 2005

25%
$4.00
ROIC %
EPS %
pt s
18
6. 2
=
$3.50 R
AG
C
$3.00 20%

$2.50

$2.00 15%
2001 2002 2003 2004 2005 2001 2002 2003 2004 2005


Relative Value Of Growth For Different Companies
MMM 5.2
GE 11.4
12.0
IBM 3.5
DHR 5.1
PG 7.2
10.0
rowth

XOM 2.1
GM 2.4
Relative Value of G

W MT 1.6
8.0
#REF! #REF!
#REF! #REF!
#REF! #REF!
6.0

4.0

2.0

0.0
MMM GE IBM DHR PG XOM GM WMT
Company Ticker

Growth 5X
1% pt. LT sustainable growth rate = $10B
Margin
1% pt. more sustainable margin = $2B
Gordon Growth Model = FCF/(WACC – Growth) Source: HBR April 2005

Expanding Growth Rates
Creates More Value Than Margin Expansion

3M’s Summary Strategy

20%+
Drill into the core. Move towards
12 -15%
scale where markets are large
8%+ and
Move towards higher relative share growing
in smaller markets
Heavy up on globalization
Technology remains part of who
we are
Earnings Investment
Organic Sales
Careful tradeoffs of share and Growth Returns
Growth
growth to maintain value creation
momentum Technology lattice protects the downsides
and ensures upsides
Building on brands, technology, Investment through the economic cycles
people, service & distribution Driving growth as a way of doing business


Defining 3M’s Core

3M’s fundamental core competency is applying coatings to backings
– Both the coatings and the backings are traditionally developed inside 3M
– Backings may be woven or non-woven fabrics, paper, cloth, plastics or metal
– Coatings are adhesives, abrasives, medicines, nano particles or imprinted optical
patterns

It does this in a highly precise manufacturing approach that involves the
large scale unwinding, winding and splitting of tapes
Incredible manufacturing capability and know how is the unsung hero of
3M and a significant barrier to entry


Defining 3M’s Core

In applying coatings, 3M developed world class competencies
in modifying the shapes and patterns of surface coatings
(called micro-replication) that alters the fundamental behavior
of a product
Fuel Cell MEA
Cubitron Trizact Abrasive
VIKUITI™ BEF

This micro-manufacturing competency, leveraged across
many markets into nanotechnology gives 3M huge advantage
Reinvention of the materials science space over the next few years
with nanotechnology is one source of the next wave of growth


3M’s Technologies Extend Into Multiple Markets
3M Technology Platforms Markets

Adhesives Architecture & Const.
Abrasives Auto. & Aerospace
Ceramics Electronics Manuf.
Electronic packaging Graphic arts
Micro replication Health care
Optics Home and Leisure
Specialty materials Industrial OEM
Non-woven Materials Consumer & Office
Polymer melting Safety & Security
Telecoms and Utilities


But Here’s What The Lattice Really Covers;
3M’s Other 32 Technology Platforms…

Rf
Ad Am Bi Reclosable
Adhesives Advanced Biotech
Fasteners
Materials

Ab Dd Mr Pe Rp
Abrasives Drug Micro- Predictive Radiation
Engineering
Delivery replication Processing
& Modeling

Ac Dm Nt Nm Pm Sm
Acoustics Display Nano Nonwoven Polymer Specialty
Melt
Materials Technology Materials Materials
Processing

As Do Fi Fs Is Md Mi Pc Po Su
Application Dental & Films Filtration, Integrated Medical Microbial Precision Porous Surface
Systems
Software Orthodontic Separation, Data Detection Coating Materials & Modification
Materials Purification Design Mgmt & Control Membrane
s

Ce Ep Fl Im Lm Me Mo Pd Pr Wo
Ceramics Electronic Fluoro- Imaging Light Metal Molding Particle & Process Wound
Packaging materials Mgmt Matrix Dispersion Design & Mgmt
Composites Processing Control

Vp
Cp Fc Fo Ip Pp
Precision Vacuum
Chemical Flexible Fiber Inks &
Processing
Power Converting Optics Pigments Processing
Sources & Packaging


Product And Technology Migration At 3M;
Microreplication Technology
Micro-channel Fluid High flow
Structured
1983 cooling Transport Filter
Surface MATERIALS
Optical ISO Structured
Filter
porous Surface Sensor
Technology
Center ELECTRONICS
Electrical Connectors
Formed Stem Web Control Smart
ADHESIVES
Micro Comply
Tape TAC Adhesives
Cube corner Reclosable
Griplets
Diamond Structured
Fasteners
Prism
ABRASIVES
Shaped Trizact
Grade Surface
Reflectivity
Particles Abrasives
Sheeting Abrasives
Glare-free
Lane Markers
REFLECTIVE
Overhead Fluorescent
Wide Angle
Projector DGS DG3
Programmed MATERIALS
DGS
Lens Conspicuity
Optics for Signs

Scotchlite Internally Light
Lens
DGS Lit Signs Pole
Film
ILLUMINATION
Total Lighted Lighted
Traffic
Internal Guidance Lane
Signal Optical
Reflection Tube Marker
Lighting
Film
LED Light Mixing
Brightness LCD
Linear Enhancement Film FLG
FILM
Solar Film Light Control
Concen-
Day X-ray Notched Large-Diameter
trator
lighting Scan Fiber Optical Fiber
Ov erhead
Low-profile
Radial Multi focal
Proj ector
LENSES
Overhead
Solar Interocular Micro lenses
Lens
Projector
Concentrator Lens

1964 1970 1980 1990 2000

The Role Of Technology and Innovation at 3M

As well as our history, it is the engine of our future growth
The key to sustainable success is unfettered innovation
– But it’s not only about monetary volume, it’s also about direction
– 3M’s shared technology model is essentially unique
– The 15% rule is alive and well
We’ll search for disruptive technologies as well as logical
developments and extensions to invent new futures for our products
We’ll prospect for “just out of the garage” technology developments
key to building our core
The heart of 3M’s approach will remain technological differentiation
and applied across multiple lines of business
We’ll add “digital” oriented competencies over time


Some Breakthrough 3M Products

3M Confirm Laminate with
Dual Brightness
Floating Image
Enhancing Films Advanced Composite
Conductor

3M Trizact
Abrasives

Littmann® Electronic
Stethoscope with A mbient Post-it Picture Paper
Noise Reduction Flexible Circuit


Advancing 3M’s Growth


The Four Principal Elements
Of Growth We’ll Use
Strategic
Thrust

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

Defend and extend the Follows core Adjacency Mega Trends BRICP
core strategy Seeded by small M&A Eastern Europe
Build scale Supports Electronics and software Western Europe
adjacencies
Build relative share Targeted areas Japan
Mostly tuck-ins
Emphasize localization RFID/Wireless/GPS Australasia
Disruptive technologies Minerals extraction Growth everywhere
Build long term Oil & Gas
competency Food safety
Consumer Electronics


Growing The Current Core Business

Grow the
Current Core
Invent a
Extend The Core New Future
Build key customer partnerships
Customization as tool
Constant reinvention; drill down Imagine, dream and invent
Build first where we’re strong Localization and differentiation Beat competitors to the future
Get scale & build relative share Plan for cannibalization
Fill in the product “white spaces” Licensing as a route
Build Broad Long
Become important to customers
Avoid NIH syndrome
Term Competencies
Use dual branding
International product localization
Local acquisitions
Private labeling
Develop broad based long-term capabilities
Acquire supporting core technology with quality brands
Build volume and scale


Building Scale And Relative Share In Our Core

Relative Share or
Scale or Getting Scale Targeting Relative Share Sub-Scale

Scotch® branded Industrial Pharmaceuticals
Dentistry
and Office Tapes
Touch systems
Orthodontics
Abrasives
Precision Optics
Office supplies
Automotive after-market
Visual displays
Roofing granules
Optical Films
Lighting
Commercial Graphics
Face masks & respirators
Electrical Connectors
Adhesives
Medical tapes and drapes
RFID
Post-It® Notes
Traffic Signage


Core Strategy
Using Differentiated Brands and Technology to Grow Our Market
Industrial Consumer
Use principal
brands and
differentiated
technology
or features
Diamond Grade™

Use
Secondary
Brands /
Technologies
High Intensity Grade

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


Acquisitions and Divestitures

Over time we’ll divest or close those businesses where;
– We cannot, over time, build scale or good relative share, or
– We cannot differentiate through technology, or
– The base technology is at “end of life” and cannot be refreshed, or
– The risk profile suggests another owner could extract more
value than 3M
The majority of acquisitions will be EPS accretive or neutral in
year 1 and EVA accretive by the end of year 3
They will closely reflect and support our strategic plan
We’re prepared to sacrifice some % margin for additional growth
provided net value creation is positive. We expect returns to
remain high
Strategic
Thrust

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


Growth Acquisitions – Formal Screening Criteria
Strategic
Thrust

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

High Growth
Market
Screen Operating
Metrics & Fit
Select Healthcare Screen
Valuation
segments
Inorganic and
Safety & Double digit growth
Size
Growth Protection Potential for margin
Opportunities improvement
Track & Trace
Potential
Energy Ability to leverage Mostly Mid-size
across current Targets
rather than
Display &
customers transformational
Graphics
Integration with Early EPS
Consumer
current 3M accretion
innovation
processes


EBO Adjacencies

“EBOs” are Emerging Business Opportunities used to drive faster growth
Concept
– Enhanced focus on emerging business opportunities with high growth
– Concept used where capability exists with ready adjacencies but no
current focus
Attributes
Collect all related activities into a
single entity
Initial EBO Candidates
Initial EBO Candidates
“Housed” in a Segment
1 Filtration
Filtration
Leader reports directly to the EVP
Track & Trace
2
Track & Trace Acquisitions and additional
resources provide support
Energy & minerals extraction
3
Energy & minerals extraction
Growth and speed are the focus
Food Safety
Food Safety
4

Strategic
Thrust



Track And Trace Has Broad Based Opportunities

Existing and Potential Solution Spaces

Improve and
Advantage Me!

How Am I? • Location-based serv ices
• Supply chain optimization
• Competitive “superiority”
Sensor Networks
Where Am I? in Order Fulfillment
• Sensors
– Supply chain
• Temp
• Tracking Software
Who Am I? – Distribution
• Vibration
• RFID Network
• Humidity
• Wireless Location
• RFID Tag
• Light
• RTLS
• Bar Code
• Contaminants
• GPS
• Database
• Road Tolling


Perhaps the Largest
Single Growth Opportunity
Hike
Personal Outdoor
Navigation
Ski Vehicle
Security
Fish
Target ID
Battlefield
Automotive
Mngmt
Fish
Animals
Consumer Farms
Asset
Military Warehouse
Agriculture
Mngmt
Navigation
Surveying Asset
GPS
Library
Information Industrial Track
RFID
Records
UHFID
Government
Containers
Transport Medical Patients
Railway
Security Packages
Signals
Pathology
Vehicle Records
Security
Road Toll Border
Passports Assets
Crossing
Asset ID cards
Track
Runway Transplants
Pets
Mgmt Children

Criminals

The Opportunity of International Growth

International growth rates 2X – 3X US
61% of 3M sales are outside the
United States today, ≈ 70% in 2011
Focus is on BRICP; double investments there
China growing ≈ 35% CAGR, expecting
circa $1Bn sales in 2006
India growing at 40%+
Double digit growth rates in E. Europe and LA
W. Europe grows faster on localization strategies
Acquire local brands and manufacturing as well as
organic expansion Strategic
Thrust



Building Emerging Country Capacity; End 2006

RUSSIA
● 237 Employees
POLAND
● 1 Plant
● 652 employees

● 2 Plants

CHINA
INDIA ● 2,070 Employees
● 722 Employees ● 6 Plants
BRAZIL ● 2 Plants
● 2,943 Employees

● 3 Plants


International Growth
Investing in Higher Growth Economies

2003 2006E 2011E

US
APAC
APAC APAC
30%
US
25% 29%
35%
US 38%
46%

EM EA
22%
LAC
EMEA
LAC
LAC
EMEA
25% 9%
7% 8%
26%


Operational Excellence


Our Foundational Beliefs on Competitiveness
6σ & Lean
Global sourcing
We compete on six competitive Cost Factory costs
platforms Taxes

Low cost is the ultimate Protect the Primary
Brands
Secondary for local
competitive deadly weapon
Scale and relative share are Secure the best
Distribution
Secure the broadest
vital for efficiency and competitiveness
Follow the customer value chain Nanotechnology
Technology Electronics & Software
Pristine service and brands can
overcome price in some markets Speed to market
Service OTIF
We can compete best in the core, Quality

but the core evolves dynamically Inspire and guide
People
Develop leadership
Continuing education


Keeping Our Commitment
To Operational Excellence

Our commitment to operational excellence and Six Sigma
remains strong
Six Sigma is evolving to also include “Lean” methods, beginning
first in manufacturing
Process excellence is a fundamental core competency of 3M
Put process in where it belongs… and ignore it where
it doesn’t
Operational excellence focus will be expanded to cover
procurement and logistics
– Offers large opportunities for margin expansion & sales growth
Initiatives will be driven into the fabric of 3M’s culture


Productivity Continues
Savings from Internal Initiatives Overhead Cost Leverage

$3.0 10.0%

$2.5 8.0%
Six Sigma + LEAN $2.0
6.0%
$1.5

$ Billions
Indirect Costs 4.0%
$1.0

2.0%
Sourcing
$0.5
eP3

$0.0 0.0%
GBP
2001 2005 2008
Overhead Cost % to Sales
2001 2002 2003 2004 2005 2006 2007 2008

1% more margin leverage 2005 – 2008

Productivity Continues Through Cost Out & Leverage

History Of Flags - Manufacturing

CMA

Automated Assembly
Jumbo Gannicott Master Pad
12” Master Roll converting
and Pack-out
Production Converting
into Lefts and Rights

Amery, WI U.S./O.U.S.
*Split Flag Asmby Distribution
MN
*2” Prtd Asmby Hutchinson, MN
Custom Printing
*Hldy Tags Asmby •Jumbo Coating & Printing
Milwaukee, WI
•Slitting
*2” Prtg (Index)
Minneapolis, MN
*Leaderstrips •All Assembly
*1”, 2” Printed
*Holiday Tags Hartford City, IN
*Quality Flags *Matte Coating

Nevada, MO
*LAB, Adh, Color Greenville, SC
Lolita, TX
*Slitting *Polyester Jumbo
BOPP Jumbo
*1” Assembly
*2” Assembly

U.S./O.U.S.
Distribution
1988-1996 2006
WIP/RM’s: 100 days WIP/RM’s: <20 days
Cycle time: 95+ days Cycle time: <15 days


And Here’s What Can Happen To Cost

Non-Material Unit6Cost / 6 8 3 - 4 A B
8 3-4 U n i t C o st B r e a k d o w n

Flags
$ 0 .9 0

$ 100%
0 .8 0
O tCost element 1 i n g
her P ac kag
$ 0 .7 0
In d i re celement 2
Cost t
75%
$ 0 .6 0
H oCost element 3 b e l
ld D o w n L a
$ 0 .5 0
L oCostL a b e l 4
g o element
50%
$ 0 .4 0
D i Cost n s e r 5
s p e element
P aCost element 6
$ 0 .3 0 d
M a c h ielement 7
Cost n e
25%
$ 0 .2 0
L aCost element 8
bor
$ 0 .1 0

$ 00%0
.0

ac k
TD
0

1

2

3

4

rd
200

200

200

200

200

gca
5- Y

2P
Lon
200


So ….. In Summary


Summary Target Growth Picture

3% - 5% sales growth in market
adjacencies, acquisitions and
5% - 8% sales growth in
EBOs, 20% incremental margin;
traditional 3M core; 40%
using new or primary brands
incremental leverage
using primary brands

International expansion
occurs in all three
dimensions.
Traction and momentum
2% - 4% sales growth in will occur at different rates.
subsidiary markets, at or
above peer margins;
using secondary brands


Driving Additional Growth At
Peer Margins
$10.0 28%

24%
$9.0

20%
$8.0
illions

16%

Percent
GR
$7.0
3% C A
11% -1
$B

12%

$6.0
8%

$5.0
4%

$4.0 0%
2006e 2007e 2008e

Op. Inc. Traditional Op. Inc. Subsi diary Op. Inc . Margin ROIC

Assumptions: traditional business LC grow th of 6.5%; incremental margin of 40%; additional grow th of 0% ’06; 1.5% ’07; 2.0% ’08 at 15% op. inc.

Additional Growth at Peer Margins = Greater Shareholder Value

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
► M edical, Dental & Orthodontics
Tactics ► Divestiture of Pharmaceuticals
Tactics
► Display & Graphics (Optics & Films)
► Examine others for divestiture
► Track & Trace (RFID/Wireless/GPS)
► Wider Consumer Offerings

Organic Selected
Growth Divestiture

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 share buybacks
with higher growth, cost and Tactics
Tactics
revenue synergies


Moving Forward

Our first priority is to build scale and relative share in 3M’s traditional core
markets
– By solving the chronic capacity underinvestment in the core
– By becoming vital to customers and filling in product “white spaces”
– Expansion in health care, optical applications, “safety at work”, the traditional
industrial core and broader consumer offerings
Our second priority is international expansion in high growth BRICP countries
– Supporting movement of the customer base and local infrastructure growth
Our third priority is adjacency “mega trend” expansion in high growth EBOs
– Filtration, track & trace, energy, materials extraction, and “safety at work”
Technological differentiation will remain hallmarks of 3M’s competitive strategy
for the future
Steadily improved brand building and marketing
Growth opportunities are evident in every sector, especially in secondary
markets and white space fill in


UBS Best of Americas

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