UBS Best of Americas

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

George W. Buckley

Chairman, President and Chief Executive Officer

An Emerging Strategy for Growth


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 Overview1

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

Continued commitment to operational excellence

Strategic Management of 3M’s Portfolio

2

3

4

5 Summary – bringing it all together


2005 Business Segment Results

Industrial &Transportation

$6.1B

Health Care$3.8B

Display &Graphics

$3.5B

Consumer & Office$3.0B

Electro &Communications

$2.3B

Safety, Security &Protection Services

$2.3B

LC Growth: 6.5%OI Margin: 19.7%







3M International Overview

Subsidiaries in 69 countries33 countries with laboratories79 manufacturing sites36,600+ employees99% of 3M International subsidiary employees are local nationals3M product sales in over 200 countries

2005 Sales($ billions)

Europe$5.2

APAC $5.7

U.S. $8.3

LAC$1.9


Historical Performance Has Been Good….

$16,000

$16,600

$17,200

$17,800

$18,400

$19,000

2001 2002 2003 2004 2005

CAGR = 3.8%Organic LC Growth

15%

20%

25%

2001 2002 2003 2004 2005

6.2 ptsROIC %

$2,000

$2,600

$3,200

$3,800

$4,400

$5,000

2001 2002 2003 2004 2005

CAGR = 16%Operating Income

$2.00

$2.50

$3.00

$3.50

$4.00

2001 2002 2003 2004 2005

EPS

CAGR = 18%


Relative Value Of Growth For Different CompaniesMMM 5.2

GE 11.4IBM 3.5

DHR 5.1PG 7.2

XOM 2.1GM 2.4

WMT 1.6#REF! #REF!#REF! #REF!#REF! #REF!

0.0

2.0

4.0

6.0

8.0

10.0

12.0

MMM GE IBM DHR PG XOM GM WMT

Company Ticker

Rel

ativ

e V

alue

of G

row

th

Source: HBR April 2005

Expanding Growth RatesCreates More Value Than Margin Expansion

Growth 5X Margin

1% pt. LT sustainable growth rate = $10B1% pt. more sustainable margin = $2B

Gordon Growth Model = FCF/(WACC – Growth)


3M’s Summary Strategy

Technology lattice protects the downsides and ensures upsidesInvestment through the economic cyclesDriving growth as a way of doing business

Organic Sales Growth

Earnings Growth

Investment Returns

8%+ and growing

12 -15%

20%+Drill into the core. Move towards scale where markets are large

Move towards higher relative share in smaller markets

Heavy up on globalization

Technology remains part of who we are

Careful tradeoffs of share and growth to maintain value creation momentum

Building on brands, technology, people, service & distribution


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

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

Trizact AbrasiveFuel Cell MEACubitronVIKUITI™ BEF


3M’s Technologies Extend Into Multiple Markets

Adhesives

Abrasives

Ceramics

Electronic packaging

Micro replication

Optics

Specialty materials

Non-woven Materials

Polymer melting

3M Technology Platforms

Architecture & Const.

Auto. & Aerospace

Electronics Manuf.

Graphic arts

Health care

Home and Leisure

Industrial OEM

Consumer & Office

Safety & Security

Telecoms and Utilities

Markets


AdAdhesives

DdDrug

Delivery

DmDisplay

Materials

AcAcoustics

CpChemical

PowerSources

VpVacuum

Processing

PpPrecision

Processing

MeMetalMatrix

Composites

SuSurface

Modification

FsFiltration,

Separation,Purification

DoDental &

OrthodonticMaterials

RfReclosableFasteners

AbAbrasives

MrMicro-

replication

PePredictive

Engineering& Modeling

RpRadiationProcessing

NmNonwovenMaterials

PmPolymer

MeltProcessing

SmSpecialtyMaterials

AsApplicationSoftware

FiFilms

MdMedicalDataMgmt

MiMicrobialDetection& Control

PoPorous

Materials &Membrane

s

PcPrecisionCoating

CeCeramics

EpElectronicPackaging

FlFluoro-

materials

ImImaging

IsIntegratedSystemsDesign

MoMolding

PdParticle &DispersionProcessing

PrProcess

Design &Control

WoWoundMgmt

FcFlexible

Converting& Packaging

FoFiberOptics

IpInks &

Pigments

LmLightMgmt

AmAdvancedMaterials

BiBiotech

NtNano

Technology

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


BrightnessEnhancement

Film

LCDFilm

LED Light Mixing

Light ControlFLG

X-rayScan

NotchedFiber

Large-DiameterOptical Fiber

FILM

Product And Technology Migration At 3M; Microreplication Technology

1964 1970 1980 1990 2000

OpticalLighting

Film

Glare-freeOverheadProjector

Lens

LensFilm

TrafficSignal

LinearSolar

Concen-trator Day

lighting

TotalInternal

Reflection

Ov erheadProjector

LensRadialSolar

Concentrator

Multi focalInterocular

Lens

Low-profileOverheadProjector

Micro lenses

1983Optical

TechnologyCenter Formed

StructuredSurface

AbrasivesShaped Particles

TrizactAbrasives

Scotchlite DGS

InternallyLit Signs

LightPole

LightedGuidance

Tube

LightedLane

Marker

Lane MarkersFluorescent

DGSConspicuity

DG3

Stem WebTape

ControlTAC

SmartAdhesives Micro Comply

Electrical Connectors

StructuredSurface

Filter ISOporous

StructuredSurface Sensor

Micro-channelcooling

FluidTransport

High flowFilter

ProgrammedOptics for Signs

Griplets

LENSES

ILLUMINATION

REFLECTIVEMATERIALS

ABRASIVES

ADHESIVES

MATERIALS

ELECTRONICS

PrismReflectivity

ReclosableFasteners

Wide AngleDGS

Cube cornerDiamond

GradeSheeting


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 productsWe’ll prospect for “just out of the garage” technology developments key to building our coreThe heart of 3M’s approach will remain technological differentiation and applied across multiple lines of businessWe’ll add “digital” oriented competencies over time


Some Breakthrough 3M Products

Advanced Composite Conductor

Dual Brightness Enhancing Films

Littmann® Electronic Stethoscope with A mbient

Noise Reduction Flexible Circuit

3M Trizact Abrasives

Post-it Picture Paper

3M Confirm Laminate with Floating Image


Advancing 3M’s GrowthAdvancing 3M’s Growth


Adjacency Mega Trends Seeded by small M&AElectronics and softwareTargeted areas

RFID/Wireless/GPSMinerals extractionOil & GasFood safetyConsumer Electronics

The Four Principal Elements Of Growth We’ll Use

Grow the Current Core Business

Build New Business via EBOs

StrategicThrust

Complementary Acquisitions

International Growth

Defend and extend the coreBuild scaleBuild relative shareEmphasize localizationDisruptive technologiesBuild long term competency

Follows core strategySupports adjacenciesMostly tuck-ins

BRICPEastern EuropeWestern EuropeJapanAustralasiaGrowth everywhere


Growing The Current Core Business

Imagine, dream and inventBeat competitors to the futurePlan for cannibalizationLicensing as a routeAvoid NIH syndrome

Invent a New Future

Build Broad LongTerm Competencies

Develop broad based long-term capabilitiesAcquire supporting core technology with quality brandsBuild volume and scale

Build key customer partnershipsCustomization as toolConstant reinvention; drill downLocalization and differentiation

Grow the Current Core

Extend The Core

Build first where we’re strongGet scale & build relative shareFill in the product “white spaces”Become important to customersUse dual brandingInternational product localizationLocal acquisitionsPrivate labeling


Building Scale And Relative Share In Our Core

Scotch® branded Industrial and Office Tapes

Abrasives

Automotive after-market

Optical Films

Face masks & respirators

Medical tapes and drapes

Post-It® Notes

Traffic Signage

Pharmaceuticals

Touch systems

Precision Optics

Visual displays

Lighting

Electrical Connectors

RFID

Dentistry

Orthodontics

Office supplies

Roofing granules

Commercial Graphics

Adhesives

Scale or Getting ScaleRelative Share or

Targeting Relative Share Sub-Scale


Core StrategyUsing Differentiated Brands and Technology to Grow Our Market

Selective privatelabeling or

manufacturing JVs to support partnership

customers

Use principal brands and

differentiated technology or features

Use Secondary Brands /

Technologies

Industrial Consumer

Diamond Grade™

High Intensity Grade

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 inyear 1 and EVA accretive by the end of year 3They will closely reflect and support our strategic planWe’re prepared to sacrifice some % margin for additional growth provided net value creation is positive. We expect returns to remain high



StrategicThrust




Growth Acquisitions – Formal Screening Criteria

InorganicGrowthOpportunities

High Growth Market Screen

Select Healthcare segmentsSafety & ProtectionTrack & TraceEnergyDisplay & GraphicsConsumer

Operating Metrics & Fit

Screen

Double digit growth Potential for margin improvementAbility to leverage across current customers Integration with current 3M innovation processes

ValuationandSize

ValuationandSize

Mostly Mid-size rather than transformationalEarly EPS accretion

Mostly Mid-size rather than transformationalEarly EPS accretion

PotentialTargets



StrategicThrust




EBO Adjacencies

Concept– Enhanced focus on emerging business opportunities with high growth

– Concept used where capability exists with ready adjacencies but no current focus

“EBOs” are Emerging Business Opportunities used to drive faster growth

AttributesCollect all related activities into a single entity“Housed” in a SegmentLeader reports directly to the EVPAcquisitions and additional resources provide supportGrowth and speed are the focus

Initial EBO CandidatesFiltration

Track & Trace

Energy & minerals extraction

Food Safety

Initial EBO CandidatesFiltration

Track & Trace

Energy & minerals extraction

Food Safety

1

2

3

4



StrategicThrust




Track And Trace Has Broad Based Opportunities

Existing and Potential Solution Spaces

How Am I?

Where Am I? Sensor Networks • Sensors• Temp• Vibration• Humidity• Light• Contaminants

Who Am I?• RFID Tag• Bar Code • Database

• Tracking Software • RFID Network• Wireless Location• RTLS• GPS• Road Tolling

Improve and Advantage Me!

• Location-based serv ices• Supply chain optimization• Competitive “superiority”

in Order Fulfillment– Supply chain– Distribution


Perhaps the Largest Single Growth Opportunity

GPS RFID

UHFID

Consumer

Medical

Information

Security

Military Agriculture

Transport

Industrial

Children

Border Crossing Passports

ID cards

Criminals

Pets

Navigation

Target IDBattlefield Mngmt

Asset Mngmt

Automotive

Railway Signals

Road Toll

AssetTrackRunway

Mgmt

Vehicle Security

Animals Fish Farms

Vehicle Security

Navigation OutdoorSki

Hike

Fish

Personal

Patients

PathologyRecords

Transplants

Assets

Library

Government

Surveying

Records

AssetTrack

Warehouse

Containers

Packages


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



StrategicThrust




Building Emerging Country Capacity; End 2006

INDIA

● 722 Employees

● 2 Plants

POLAND

● 652 employees

● 2 Plants

RUSSIA

● 237 Employees

● 1 Plant

BRAZIL

● 2,943 Employees

● 3 Plants

CHINA

● 2,070 Employees

● 6 Plants


International Growth Investing in Higher Growth Economies

2003 2006E 2011E

APAC25%

US46%

LAC7%

EM EA22%

APAC29%US

38%

LAC8%

EMEA25% EMEA

26%

LAC9%

US30% APAC

35%


Operational Excellence


Our Foundational Beliefs on Competitiveness

We compete on six competitive platforms

Low cost is the ultimate competitive deadly weapon

Scale and relative share are vital for efficiency and competitiveness

Follow the customer value chain

Pristine service and brands can overcome price in some markets

We can compete best in the core, but the core evolves dynamically

People

Cost

Brands

Service

Technology

Distribution

6σ & LeanGlobal sourcingFactory costsTaxes

Secure the bestSecure the broadest

NanotechnologyElectronics & Software

Speed to marketOTIFQuality

Inspire and guideDevelop leadershipContinuing education

Protect the PrimarySecondary for local


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

Productivity Continues Through Cost Out & Leverage

2001 2002 2003 2004 2005

Six Sigma + LEAN

GBP

eP3

Indirect Costs

Sourcing

2006 2007 2008

1% more margin leverage 2005 – 2008

Overhead Cost Leverage

$ Bi

llion

s

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

2001 2005 20080.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Overhead Cost % to Sales

Savings from Internal Initiatives


History Of Flags - Manufacturing

2006WIP/RM’s: <20 daysCycle time: <15 days

Lolita, TXBOPP Jumbo

Hutchinson, MN•Jumbo Coating & Printing •Slitting•All Assembly

MNCustom Printing

Greenville, SC*Polyester Jumbo

Hartford City, IN*Matte Coating

Nevada, MO*LAB, Adh, Color*Slitting*1” Assembly*2” Assembly

Milwaukee, WI*2” Prtg (Index)*Leaderstrips

Amery, WI*Split Flag Asmby*2” Prtd Asmby*Hldy Tags AsmbyMinneapolis, MN*1”, 2” Printed*Holiday Tags*Quality Flags

U.S./O.U.S. Distribution

U.S./O.U.S. Distribution

1988-1996WIP/RM’s: 100 daysCycle time: 95+ days

CMA

Jumbo Production

12” Master Roll converting into Lefts and Rights

Gannicott Master Pad Converting

Automated Assembly and Pack-out


And Here’s What Can Happen To Cost

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

$ 0 .0 0

$ 0 .1 0

$ 0 .2 0

$ 0 .3 0

$ 0 .4 0

$ 0 .5 0

$ 0 .6 0

$ 0 .7 0

$ 0 .8 0

$ 0 .9 020

00

2 001

2002

2003

200 4

2 005

-YTD

Long

card

2 Pa

ck

O th e r P a c k a g in g

In d ire c t

H o ld D o w n L a b e l

L o g o L a b e l

D i s p e n s e r

P a d

M a c h in e

L a b o r

100%

50%

25%

75%

0%

Non-Material Unit CostFlags

Cost element 1Cost element 2Cost element 3Cost element 4Cost element 5Cost element 6Cost element 7Cost element 8


So ….. In Summary


Summary Target Growth Picture

3% - 5% sales growth in market adjacencies, acquisitions and EBOs, 20% incremental margin; using new or primary brands

2% - 4% sales growth in subsidiary markets, at or above peer margins; using secondary brands

International expansion occurs in all three dimensions.

Traction and momentum will occur at different rates.

5% - 8% sales growth in traditional 3M core; 40% incremental leverage using primary brands


Driving Additional Growth AtPeer Margins

$4.0

$5.0

$6.0

$7.0

$8.0

$9.0

$10.0

2006e 2007e 2008e

$ Bi

llion

s

0%

4%

8%

12%

16%

20%

24%

28%

Perc

ent

Op. Inc. Traditional Op. Inc. Subsidiary Op. Inc . Margin ROIC

Additional Growth at Peer Margins = Greater Shareholder ValueAdditional Growth at Peer Margins = Greater Shareholder ValueAssumptions: traditional business LC growth of 6.5%; incremental margin of 40%; additional growth of 0% ’06; 1.5% ’07; 2.0% ’08 at 15% op. inc.

11%-13% CAGR


Coordinated Value Creation Strategy

Strategy ► Review business units by key metr ics inc luding growth and capital effic iency

► Work in high growth spaces with reasonable EPS targets . Value creation orientation. Less margin obsessive

Strategy ► Increase leverage on the balance sheet. Be willing, if necessary, to dip below AA rating to A

Near TermTactics

► Put ongoing review metr ics in place► Divestiture of Pharmaceuticals► Examine others for divestiture

► Use cash flow for investment, acquis itions and share buybacks

Near TermTactics

Near TermTactics

► Safety & Protection► Medical, Dental & Orthodontics► Display & Graphics (Optics & Films)► Track & Trace (RFID/Wireless/GPS)► Wider Consumer Offer ings

Near TermTactics

► Focus on adjacent segments with higher growth, cost and revenue synergies

Strategy ► Focus on mega trends, scale and relative share in core business

Strategy

Selected DivestitureSelected

DivestitureOrganic Growth

Capital StrategyCapital

StrategyAcquisitionsAcquisitions


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 futureSteadily improved brand building and marketingGrowth opportunities are evident in every sector, especially in secondary markets and white space fill in

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