Customers: The customers of each business have always been different, but as we have grown and become a larger supplier to them, their needs have become more customized and the focus required by Millipore to meet their needs has increased. The needs of the life scientist are very different than the needs of a microelectronics process engineer both in terms of technology and support services.

Pace of Change: The pharmaceutical industry, which is highly regulated by governments around the world, is cautious and deliberate when assessing change. Certainly, new technologies and new methods are accepted, but at a measured pace. The microelectronics industry adopts new technology at a very rapid pace, with several changes underway simultaneously.

Skills and Expertise: The ability to satisfy any customer group depends upon the skills and expertise of an organization. The necessary skills to meet the needs of these markets are diverging. This is partly caused by the pace of change mentioned above, and partly caused by technologies and product and service attributes that create competitive advantage.

Business Cycles: Since its inception, the microelectronics industry has exhibited very cyclical growth. Periods of very strong growth have been followed by downturns when revenue volume has shrunk. To succeed in this environment, a company must be prepared to implement rapid expense reduction in downturns and to meet explosive growth in upturns. In contrast, the pharmaceutical and life science research markets have been much steadier in their growth with cyclical revenue reductions uncommon. To succeed in this environment, a steady approach to resourcing of research and development and customer contact and support is important.

Capital Markets: In order to grow utilizing vehicles other than internally developed new products, companies often have to access capital markets to generate resources to support acquisitions and/or alliances. Investors who participate in each of these industries are different, with different investment styles and goals.

Corporate Culture: For all of the reasons above, successful companies serving each of these industries must develop a culture that is similar to that of the customers they are serving. This culture influences everything a company does and how they do it, from the speed of decision making to their acceptance of risk, to their reward structure. In this regard, the differences in the industries are substantial.

    During 2000, as we reviewed our strategies for the future, it was obvious that these differences would only increase as time went on. As we challenged our organization to develop strategies to maximize future growth, the strategy that stood out as the most important action to take was the separation of Millipore into two independent companies: one to pursue the bioscience business and one to pursue microelectronics. With Board of Directors approval, we announced this strategy last October. As we look forward, we expect the split of the company to be completed before the end of the third quarter 2001. We are planning an initial public offering for less than 20 percent of the new Microelectronics Company during the second quarter and are planning to dividend the remaining 80 percent of the shares to Millipore shareholders during the third quarter. Of course this timing is subject to a number of conditions — including a favorable ruling from the IRS regarding the tax-free nature of the transaction, the effectiveness of the Registration Statement for the new Microelectronics Company stock under applicable securities laws, and overall market conditions — but we are on plan.
    We are committed to creating two, strong customer-focused companies. Each will have the products, infrastructure and people in place to successfully compete in these markets and have the technologies, skills and expertise to prosper over the long term. In closing, we would like to recognize the contributions of Samuel C. Butler, Partner at Cravath, Swaine and Moore, who retired from the Millipore Board of Directors in March, 2000. We greatly appreciate Sam’s help and expert counsel during his nine years on the Board and wish him well. Also, Elaine Chao, a Senior Partner at the Heritage Foundation, was recently named to head the Labor Department in the Bush cabinet, and has left the Board. Elaine has been very helpful to us over the past two years and we will miss her insights and contributions. We are excited for her and the fact that people of her caliber are part of the new administration.
    Last March, we welcomed Professor Dr. Daniel Bellus, Global Head of Additives Research, Ciba Specialty Chemicals, Inc. and Professor at the University of Fribourg, Switzerland, to our Board. We are pleased to have Daniel on the Board and look forward to working together. Sincerely,

 C. William Zadel               Francis  J. Lunger

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