Dear Fellow Shareholders,

"Our results demonstrate the success we have had in driving operational improvements throughout the business and executing on our strategy."

I am pleased to report that 2007 was a very successful year for the company. We ended the year with both record bookings and backlog. We grew sales by 8 percent, while increasing operating income by 20 percent. Our results demonstrate the success we have had in driving operational improvements throughout the business and executing on our strategy.

In 2007, we increased the dividend for the third year in a row and announced a $2.0 billion share repurchase plan, our largest to date. During the year, the company repurchased 28.7 million shares for $1.6 billion and retired over $1.7 billion of long-term debt.

It was also a year in which we reshaped our portfolio to focus on our core government and defense business. We completed the sale of Raytheon Aircraft and our Flight Options business - so that we are now fully focused on leveraging our world-class technologies within our core business to serve both our domestic and international customers.

We also made exciting acquisitions in 2007 with a goal of enhancing Raytheon's technological capabilities in attractive, growing markets. We acquired Oakley Networks, Inc., which strengthens our capabilities in information security and supports our strategic focus on information assurance and information operations; and we also acquired the robotics technologies and capabilities of Sarcos, which is expert at advanced micro-electronics and actuators.