Dear Fellow Shareholders,

Performance, relationships and solutions: These are the pillars that have supported the company’s progress — and these are the principles, combined with our process discipline, that continue to deliver strong results.

Two thousand six was a year of record bookings, backlog and operating cash flow from continuing operations for the company, a year in which we achieved “organically”- driven sales growth of 7 percent — as well as a 37 percent increase in diluted earnings per share from continuing operations.

It was a year in which net debt — total debt less cash and cash equivalents — was reduced by $1.7 billion to a year-end level of $1.5 billion, the lowest level in more than 12 years.

We also improved our return on invested capital (ROIC) from 5.9 percent in 2005 to 7.6 percent in 2006, a 29 percent increase — with more than 19,000 employees trained in ROIC to date and additional employees planned for 2007.

It was a year in which the company took strategic steps to focus on our core government and defense businesses, announcing in December a definitive agreement to sell Raytheon Aircraft Company. We thank the team at Raytheon Aircraft for building on the Hawker® and Beechcraft® brands. It was also announced that, subject to the closing of the transaction, the Board of Directors authorized an increase in the current share repurchase program by an additional $750 million and the early retirement of approximately $1 billion in debt, in addition to approximately $685 million of scheduled maturities in 2007.

Our long-term senior unsecured credit rating was upgraded by Standard & Poor’s to BBB+ in December, by Fitch to BBB+ in early January 2007 and by Moody’s to Baa1 in early March 2007.

And it was a year in which the company’s stock price increased more than 30 percent.