In the HPLC market, currently estimated at $2 billion annually, Waters is the market share leader. The pharmaceutical industry is our largest market, and all indications are that it will continue to grow at a rapid pace. Current spending for research and development is at an all-time high. In addition, regulatory bodies around the world are making it faster for companies to get important new drugs to the public. Or use existing drugs for new purposes. These facts, as well as the aging of the population and a stable pricing environment, should add up to positive results for companies, such as ours, that provide vital solutions to this market. What’s more, the recent addition of Micromass Limited, and its mass spectrometry detectors for liquid chromatography, will further help us take advantage of our strength in the pharmaceutical arena. Liquid chromatography-mass spectrometry (LC-MS) is one of the fastest growing segments of the HPLC marketplace. LC-MS is a particularly valuable tool for analyzing drug compounds during the research and discovery phase.

The chemical industry is another one of our large market segments. Our 1996 acquisition of TA Instruments, Inc. is allowing us to provide a wider range of products to our chemical industry
customers. This past year, TA Instruments performed extremely well, with growth in the double digits.

As we approach new markets and try to gain a larger share of established ones, we will increasingly take advantage of our wide range of products. Waters offers all three keys to the success of the HPLC procedure: a high performance instrument, powerful data management software and
an HPLC column or consumable element that is of high quality and consistency. Our message
to scientists is that if any one of these pieces is sub-standard, the entire analysis process
is compromised. Our slogan, “It’s All Important,SM” refers to the way we feel about our technologies,
and how we sell them as well.

Another important way that we plan to engage new markets is by giving scientists a better way to move data around the corner or around the globe. This year, several important customer accounts began the move to standardize their worldwide software network using our new
Millennium32 Chromatography Software. We expect this migration to accelerate in the years to come, and plan to use our software as our competitive advantage, allowing us to penetrate new accounts with software, then eventually sell entire systems.