To Our Shareholders

I am pleased to report that instead of being just another strong year for Cummins, 2007 was a record setter and an outstanding year in most respects.

Sales exceeded $13 billion – a 15 percent increase over 2006. Earnings before interest and taxes were $1.2 billion – or 9.4 percent of sales. Net earnings were $739 million, compared to $715 million for the previous year.

This fourth straight year of record sales and profits reinforces our value promise to shareholders. As of the end of 2007, Cummins’ investors have enjoyed a five-year average annual total return of 58 percent.

Along with this outstanding performance, we have increased our dividends by 67 percent and have purchased almost $500 million in stock over the last two years. In December, we announced plans to buy back another $500 million worth of shares. We also executed a pair of two-for-one stock splits, one during 2007 and another in early 2008.

Our success in 2007 was driven by increased sales in all our business segments. Power Generation, Distribution and Engine once again delivered excellent results. They had record revenues, increased share in many of their markets and offered innovative products and services, which delighted Cummins’ customers around the world.

Notable among our segments were Power Generation, which continued its trend of improving results – going from an EBIT loss of $19 million in 2003 to $334 million in EBIT in 2007 – and Distribution, which has seen its sales more than double in the last four years, growing to $1.5 billion in 2007.

The Components segment also experienced a growing demand for its products, which are highly valued by both Cummins and our customers. The successful technologies in our filtration, aftertreatment, turbocharger and fuel system component products have allowed us to produce cutting-edge, environmentally-friendly customer solutions for toughening emissions standards around the world.