In 2000, while our revenues were up 13%, earnings per share, excluding the nonrecurring cumulative effect of an accounting change, grew 24%. Our balance sheet also continued to strengthen. Midway through 2000, we became net debt free, and by the end of the year we had accumulated $75 million of cash and short-term investments. Our businesses generated over $140 million
of free cash in 2000, excluding financing and acquisition activities. Because of the flexibility this provided, we were
able to invest in longer-term life science initiatives, including a strategic relationship with Variagenics, Inc.
to develop “SNP” (single nucleotide polymorphisms) analysis capabilities for the emerging field of pharmacogenomics, and a strategic partnership with Caprion Pharmaceuticals Inc. aimed at developing advanced proteomics tools.

• We plan to pursue similar opportunities in the future, where we can combine Waters advanced technologies and financial capabilities with promising life science research from innovative partners in order to accelerate symbiotic new products into the market. We are optimistic about the future. Our customers, in both life science and other industries, continue to demand more innovation, more throughput and better decision-making tools in their quest for faster product development. For 2001, we have planned a series of product launches across all our technology
platforms–new chromatography systems, new mass spectrometry systems and, importantly, a major new product launch for our thermal analysis business – which promise to extend our record of profitable innovation.

• I want to thank our customers and employees across our business units–Waters HPLC, Micromass and TA Instruments – for their indispensable contributions to our success in this and past years. And, I look forward to our next year together.

Sincerely,

Douglas A. Berthiaume
Chairman, President and
Chief Executive Office

The year 2000 was one of significant accomplishment for Waters, both strategic and financial. Our success
continued to build on our ability to bring innovative new products to market year after year. This relentless
pursuit of improved capabilities and technological breakthroughs has produced a stream of products driving strong revenue growth. In 2000, our revenues grew 13% despite unfavorable currency translation effects, without which our sales grew by an even more robust 17%. Products introduced in the last two years–including our
Q-TOF II mass spectrometer, Quattro Ultima mass spectrometer, ZQ Mass Detector, FractionLynx Autopurification System, Alliance HT and CapLC
chromatographs, and XTerra family of chromatographic columns–were major reasons for this growth.

• Our success has been most pronounced in the key life science research market. Our Time-of-Flight mass
spectrometers have been extremely well received in both the fast-growing field of proteomics research and the equally fast-growing drug metabolism analysis segment within the pharmaceutical industry. High throughput LC/MS systems, like the Alliance HT in combination with the ZQ Mass Detector, have also established strong market positions. Our combination of world leadership in high performance liquid chromatography (HPLC) and in mass spectrometry is providing life science researchers with the tools necessary to develop breakthrough drugs to treat disease and improve health care.

• By building on these strengths and focusing on operational excellence, we have been able to convert our strategic position into outstanding financial performance.