Table of Contents:

Management's Discussion and Analysis
Management's Responsibility for
   Financial Statements and Controls
Report of Independent Auditors
Consolidated Statement of Operations
Consolidated Balance Sheet
Consolidated Statement of Cash Flow
Consolidated Statement of Changes in 
   Shareowners' Equity
Notes to Consolidated Financial Statements

Exhibit 13

Five Year Summary

Note: During 2003, the Corporation acquired Chubb plc which is reported as a separate segment.

Certain reclassifications have been made to prior years amounts to conform to the current year presentation.

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Management’s Discussion and Analysis

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Business Overview

The Corporation is a global provider of high technology products and services to the building systems and aerospace industries. Its operations are classified into five principal segments: Otis, Carrier, Chubb, Pratt & Whitney and Flight Systems. Otis, Carrier and Chubb serve customers in the commercial and residential property industries worldwide. Carrier also serves commercial and transport refrigeration customers. Pratt & Whitney and the Flight Systems segment, which includes Hamilton Sundstrand and Sikorsky Aircraft (“Sikorsky”), primarily serve commercial and government customers in the aerospace industry and also serve customers in industrial markets. The percentage of consolidated revenues contributed in 2003 and 2002 by the Corporation’s businesses is as follows:

In 2003 and 2002, approximately 57% and 58%, respectively, of the Corporation’s sales were generated from original equipment sales and 43% and 42%, respectively, were generated from aftermarket sales. The Corporation’s segment operating results are discussed in the Segment Review and Note 17 of the Notes to Consolidated Financial Statements.

Business Environment

As worldwide businesses, the Corporation’s operations are affected by global, regional and industry economic and political factors. However, the Corporation’s geographic and industry diversity, as well as the diversity of its product sales and services, has helped limit the impact of any one industry or the economy of any single country on the consolidated operating results. Economic conditions in the commercial airline industry, global refrigeration industries, and commercial heating, ventilating and air conditioning (“HVAC”) and construction markets negatively impacted the Corporation’s consolidated operating results in 2003 for a portion of the year. Strength in commercial and residential construction markets and a recovery in commercial HVAC markets and commercial aviation are expected to contribute positively to the Corporation’s results in 2004.

The Corporation’s growth strategy contemplates acquisitions. The rate and extent to which appropriate acquisition opportunities are available and to which acquired businesses are integrated and anticipated synergies and cost savings are achieved can affect the Corporation’s operations and results.

Revenues from outside the U.S., including U.S. export sales, in dollars and as a percentage of total segment revenues, are as follows:

As part of its globalization strategy, the Corporation has invested in businesses in certain countries, including Argentina, Brazil, the People’s Republic of China, Russia and South Africa, which carry higher levels of currency, political and economic risk. At December 31, 2003, the Corporation’s net investment in any one of these countries was less than 3% of consolidated equity.

During 2003, the strengthening of the euro had a significant favorable impact on the translation of foreign currency-denominated operating results into U.S. dollars. The favorable impact of foreign currency translation contributed $.23 of diluted earnings per share in 2003.

OTIS is the world’s largest elevator and escalator manufacturing, installation and service company. Otis designs, manufactures, sells and installs a wide range of passenger and freight elevators, escalators and moving walkways. In addition to new equipment, Otis provides modernization products and services to upgrade elevators and escalators as well as maintenance services for the products it sells and those of other manufacturers. It serves an international customer base, principally in the commercial and residential property industries. In 2003, 79% of its revenues were generated outside the U.S. Otis’ results can be impacted by various economic factors, including fluctuations in commercial construction, labor costs, interest rates, foreign currency exchange rates and raw material costs.

During 2003, building construction activity in Europe was mixed but remained essentially flat, and in Asia, activity was strong in both China and South Korea, but remained weak in Japan. U.S. office building construction starts continued to decline and national office vacancy rates increased as market conditions remained soft.

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CARRIER is the world’s largest manufacturer and distributor of commercial and residential HVAC systems and refrigeration and equipment. Carrier provides aftermarket services and components for its products and those of other manufacturers in both the HVAC and refrigeration industries. During 2003, 48% of Carrier’s revenues were generated outside the U.S. and by U.S. exports. Carrier’s results can be impacted by a number of external factors, including commercial and residential construction activity, production and utilization of transport equipment, weather conditions, fuel prices, interest rates, foreign currency exchange rates, raw material costs and industry capacity.

During 2003, U.S. commercial construction starts continued to decrease as did investment in replacement refrigeration, negatively impacting commercial HVAC and refrigeration equipment. The global transport refrigeration market improved in 2003, due in part to stabilizing fuel prices and favorable trends in interest rates. Strength in housing starts favorably impacted North American residential HVAC operations, while global commercial construction markets were weak for a portion of the year, and showed some improvement in the fourth quarter of 2003. Global pricing trends are expected to continue to present challenges to the North American and international HVAC and commercial refrigeration markets in 2004.

CHUBB is a global provider of security and fire protection products and services and was acquired by the Corporation on July 28, 2003. In the fire protection industry, Chubb provides system integration, installation and service of portable and fixed suppression systems and fire detection systems. In the electronic security industry, Chubb provides system integration, installation and service of intruder alarms, access control systems and video surveillance. Chubb also provides monitoring, response and security personnel services to complement both the fire and electronic security equipment businesses. Chubb’s operations are predominantly outside the U.S. and Chubb is a leading provider of products and services in the U.K., France, Hong Kong, South Africa, Australia and Canada. For the five-month period ended December 31, 2003, 96% of Chubb’s revenues were generated outside the U.S. Chubb’s results can be impacted by a number of external factors, such as customer attrition, interest rates, foreign currency exchange rates, labor costs, commercial construction activity and other global economic and political factors.

PRATT & WHITNEY and the FLIGHT SYSTEMS segments comprise the Corporation’s aerospace businesses and produce and service commercial and government aerospace and defense products and also serve customers in the industrial markets. The financial performance of these segments is directly tied to the aerospace and defense industries. Traffic growth, load factors, worldwide airline profits, and general economic activity have been reliable indicators for new aircraft and aftermarket orders in the aerospace industry. Spare part sales and aftermarket service trends are impacted by many factors including usage, pricing, regulatory changes and retirement of older aircraft. Performance in the general aviation sector is closely tied to the overall health of the economy and is positively correlated to corporate profits.

Conditions in the airline industry stabilized in the second half of 2003, but continue to remain at low levels in areas such as flight schedules and employment. The number of idle aircraft continues to be at historically high levels. The airline industry continues to experience poor financial performance. Airlines and aircraft manufacturers continue to reduce supplier bases and seek lower cost packages. These conditions have resulted in decreased aerospace volume and orders in the Corporation’s commercial aerospace businesses for a portion of 2003 but are expected to improve in 2004.

The Corporation’s total sales to the U.S. Government increased in 2003 to $5.3 billion or 17% of total sales, compared with $4.6 billion or 16% of total sales in 2002 and $3.8 billion or 14% of total sales in 2001. The defense portion of the Corporation’s aerospace businesses is affected by changes in market demand and the global political environment. The Corporation’s participation in long-term production and development programs for the U.S. Government has contributed positively to the Corporation’s results in 2003 and is expected to continue to benefit results in 2004.

PRATT & WHITNEY is among the world’s leading suppliers of commercial, general aviation and military aircraft engines. Pratt & Whitney provides spare parts and aftermarket and fleet management services for the engines it produces, along with power generation and space propulsion systems. These products and services must adhere to strict regulatory and market-driven safety and performance standards which can create uncertainty regarding engine program profitability. The aftermarket business is impacted by competition and technological improvements to newer generation engines that increase reliability. Pratt & Whitney continues to enhance its programs through performance improvement measures and product base expansion. Manufacturing and aftermarket operations are benefiting from repositioning actions aimed at improving efficiency and from selective acquisitions and ventures.

Product base expansion includes Pratt & Whitney’s development of large commercial engines for the narrow-bodied and wide-bodied aircraft markets and small commercial engines that have already been selected for new light jet aircraft programs. Investments in new commercial engines involve significant financial risk due to the size of the investment required and the technical issues surrounding new engine development. Pratt & Whitney is also positioned to deliver engines and aftermarket products and services for next generation fighter aircraft to both the U.S. and foreign governments. Pratt & Whitney’s engines have been selected to power the Air Force’s F/A-22 and F-35 Joint Strike Fighter aircraft. The F119 engine that powers the F/A-22 has been approved for operational use by the U.S. Air Force. The F-35 Joint Strike Fighter program is intended to lead to the development of a single aircraft, with configurations for conventional and short takeoff and landing, for the U.S. Navy, Air Force and Marine Corps, the United Kingdom Royal Navy and other international customers.

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FLIGHT SYSTEMS SEGMENT provides global products and services through Hamilton Sundstrand and Sikorsky. Hamilton Sundstrand provides aerospace and industrial products and aftermarket services for diversified industries worldwide. Aerospace products include aircraft power generation management and distribution systems, and environmental, flight and fuel control systems. Industrial products include air compressors, metering devices, fluid handling equipment and gear drives. Hamilton Sundstrand is responding to industry conditions by focusing on development of new product and service offerings, acquisitions and actions aimed at improving efficiency and aftermarket growth opportunities.

Sikorsky is one of the world’s largest manufacturers of military and commercial helicopters and provides aftermarket helicopter and aircraft products and services. It has responded to continued overcapacity among helicopter manufacturers by improving its cost structure, increasing the capabilities of its existing products, developing new products and expanding its aftermarket business. In its government business, Sikorsky will continue to supply Black Hawk helicopters and their derivatives to the U.S. and foreign governments under contracts extending into 2007. A Sikorsky-Boeing joint venture is under contract with the U.S. Army to develop the RAH-66 Comanche, nine of which are contracted for delivery in 2005-2006. Sikorsky is also leading an international team in developing the S-92, a large cabin derivative of the Black Hawk, for the commercial markets. Type certification of the S-92 was obtained from the U.S. Federal Aviation Administration in December 2002. Production of the S-92 began in 2003 and deliveries are scheduled to begin in 2004. Variants of the S-92 for military markets are currently in development.

Critical Accounting Estimates

Preparation of the Corporation’s financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Note 1 to the Consolidated Financial Statements describes the significant accounting policies used in preparation of the Consolidated Financial Statements. Management believes the most complex and sensitive judgments, because of their significance to the Consolidated Financial Statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. The most significant areas involving management judgments and estimates are described below. Actual results in these areas could differ from management’s estimates.

LONG-TERM CONTRACT ACCOUNTING. The Corporation utilizes percentage of completion accounting on certain of its long-term contracts. The percentage of completion method requires estimates of future revenues and costs over the full term of product delivery.

Losses, if any, on long-term contracts are provided for when anticipated. Loss provisions are based upon excess inventoriable manufacturing, engineering, estimated product warranty and product performance guarantee costs in excess of the revenue from the products contemplated under the contractual arrangement. Revenue used in determining contract loss provisions is based upon an estimate of the quantity, pricing and timing of future product deliveries. The extent of progress toward completion on the Corporation’s long-term commercial aerospace and helicopter contracts is measured using units of delivery. In addition, the Corporation uses the cost-to-cost method for development contracts in the aerospace businesses and for elevator and escalator installation and modernization contracts. For long-term aftermarket contracts revenue is recognized over the contract period in proportion to the costs expected to be incurred in performing services under the contract. Contract accounting also requires estimates of future costs over the performance period of the contract as well as an estimate of award fees and other sources of revenue.

Contract costs are incurred over a period of several years, and the estimation of these costs requires management’s judgment. The long-term nature of these contracts, the complexity of the products, and the strict safety and performance standards under which they are regulated can affect the Corporation’s ability to estimate costs precisely. As a result, the Corporation reviews and updates its cost estimates on significant contracts on a quarterly basis, and no less than annually for all others, or when circumstances change and warrant a modification to a previous estimate. Adjustments to contract loss provisions are recorded in earnings upon identification.

INCOME TAXES. The future tax benefit arising from net deductible temporary differences and tax carryforwards is $2.7 billion at December 31, 2003 and $3.1 billion at December 31, 2002. Management believes that the Corporation’s earnings during the periods when the temporary differences become deductible will be sufficient to realize the related future income tax benefits. For those jurisdictions where the expiration date of tax carryforwards or the projected operating results indicate that realization is not likely, a valuation allowance is provided.

In assessing the need for a valuation allowance, the Corporation estimates future taxable income, considering the feasibility of ongoing tax planning strategies and the realizability of tax loss carryforwards. Valuation allowances related to deferred tax assets can be impacted by changes to tax laws, changes to statutory tax rates and future taxable income levels. In the event the Corporation were to determine that it would not be able to realize all or a portion of its deferred tax assets in the future, the Corporation would reduce such amounts through a charge to income in the period in which that determination is made. Conversely, if the Corporation were to determine that it would be able to realize its deferred tax assets in the future in excess of the net carrying amounts, the Corporation would decrease the recorded valuation allowance through an

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increase to income in the period in which that determination is made. Subsequently recognized tax benefits associated with valuation allowances recorded in a business combination will be recorded as an adjustment to goodwill. See Note 10 to the Consolidated Financial Statements for further discussion.

GOODWILL AND INTANGIBLE ASSETS. The Corporation completed acquisitions in 2003 of $2.3 billion, including approximately $1.2 billion of debt assumed. In July 2003, the Corporation completed its acquisition of Chubb plc, a global provider of security and fire protection equipment and services for approximately $2.0 billion, including debt assumed. The assets and liabilities of acquired businesses are recorded under the purchase method of accounting at their estimated fair values at the dates of acquisition. Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses. The Corporation has recorded goodwill of $9.3 billion at December 31, 2003 and $7.0 billion at December 31, 2002. See Note 2 to the Consolidated Financial Statements for further discussion.

Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject to annual impairment testing. The identification and measurement of goodwill impairment involves the estimation of the fair value of reporting units. The estimates of fair value of reporting units are based on the best information available as of the date of the assessment, which primarily incorporate management assumptions about expected future cash flows and contemplate other valuation techniques. Future cash flows can be affected by changes in industry or market conditions or the rate and extent to which anticipated synergies or cost savings are realized with newly acquired entities. Although no goodwill impairment has been recorded to date, there can be no assurances that future goodwill impairments will not occur. See Note 7 to the Consolidated Financial Statements for further discussion.

PRODUCT PERFORMANCE. The Corporation extends performance and operating cost guarantees beyond its normal service and warranty policies for extended periods on some of its products, particularly commercial aircraft engines. Liability under such guarantees is based upon future product performance and durability. In addition, the Corporation incurs discretionary costs to service its products in connection with product performance issues. The Corporation accrues for such costs that are probable and can be reasonably estimated. The estimation of costs associated with these product performance and operating cost guarantees requires estimates over the full terms of the agreements, and requires management to consider factors such as the extent of future maintenance requirements and the future cost of material and labor to perform the services. These cost estimates are largely based upon historical experience. See Note 15 to the Consolidated Financial Statements for further discussion.

CONTRACTING WITH THE U.S. GOVERNMENT. The Corporation’s contracts with the U.S. Government are subject to government investigations and audits. Like many defense contractors, the Corporation has received audit reports which recommend that certain contract prices should be reduced to comply with various government regulations. Some of these audit reports involve substantial amounts. The Corporation has made voluntary refunds in those cases it believes appropriate. In addition, the Corporation accrues for liabilities associated with those government contracting matters that are probable and can be reasonably estimated. The inherent uncertainty related to the outcome of these matters can result in amounts materially different from any provisions made with respect to their resolution. See Note 16 to the Consolidated Financial Statements for further discussion. The Corporation recorded sales to the U.S. Government of $5.3 billion in 2003 and $4.6 billion in 2002.

EMPLOYEE BENEFIT PLANS. The Corporation and its subsidiaries sponsor domestic and foreign defined benefit pension and other postretirement plans. Major assumptions used in the accounting for these employee benefit plans include the discount rate, expected return on plan assets, rate of increase in employee compensation levels and health care cost increase projections. Assumptions are determined based on Company data and appropriate market indicators, and are evaluated each year as of the plans’ measurement date. A change in any of these assumptions would have an effect on net periodic pension and postretirement benefit costs reported in the Consolidated Financial Statements.

Market interest rates declined in 2003 and as a result, the discount rate used to measure pension liabilities and costs was lowered to 6.25%. Pension expense in 2004 is expected to be negatively impacted by these changes and the amortization of prior investment losses. See Note 11 to the Consolidated Financial Statements for further discussion.

Results of Operations

Consolidated revenues increased 10% in 2003 and 1% in 2002. Foreign currency translation contributed approximately 40% of the 2003 revenue increase and had a minimal favorable impact in 2002.

Sales growth in 2003 reflects revenue contributed from the acquisition of Chubb and growth at Otis and Carrier, and higher military revenues at Pratt & Whitney and Hamilton Sundstrand. These increases were partially offset by lower commercial

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aerospace volume and fewer helicopter shipments at Sikorsky. Sales in 2002 reflect growth at Otis and Sikorsky, largely offset by lower volume at Carrier and Pratt & Whitney.

Financing revenues and other income, net, increased $79 million in 2003 and decreased $179 million in 2002, respectively. The 2003 increase reflects a non-cash gain at Otis associated with an exchange of equity interests in China. The 2002 decrease reflects interest income associated with the settlement of prior year tax audits recorded in 2001.

Gross margin decreased 1.2 percentage points in 2003 to 26.7% from 27.9% in 2002 primarily due to lower commercial aerospace spares volume and the absence of the approximate $100 million gain on the environmental insurance settlement recorded in 2002. These decreases were partially offset by margin improvement at Otis and $111 million lower restructuring charges in 2003. Gross margin increased to 27.9% in 2002 from 26.9% in 2001 due primarily to $230 million of goodwill amortization in 2001 which was discontinued in 2002 and the approximate $100 million gain on the environmental insurance settlement in 2002. These items contributed 1.2 percentage points to gross margin in 2002.

The Corporation’s research and development spending includes both company and customer funded programs. Total research and development spending for the Corporation increased $227 million (10%) in 2003 to $2.6 billion and $280 million (13%) in 2002 to $2.4 billion.

Company funded research and development decreased $164 million (14%) in 2003 and $63 million (5%) in 2002. The 2003 decrease is primarily due to lower spending in the commercial aerospace businesses. The 2003 decrease also reflects a technology funding agreement at Pratt & Whitney Canada and lower spending on Sikorsky’s S-92 program which received U.S. Federal Aviation Administration type certification during the fourth quarter of 2002. The 2002 decrease reflects the variable nature of engineering development program schedules at Pratt & Whitney and cost reduction actions at Carrier partially offset by increased spending on Sikorsky’s S/H-92 program. Company funded research and development spending is subject to the variable nature of program development schedules. Company funded research and development spending in 2004 is expected to increase approximately $100 million over 2003 levels.

In addition to company funded programs, customer funded research and development was $1,580 million in 2003, $1,189 million in 2002, and $846 million in 2001. The 2003 and 2002 increases of $391 million and $343 million, respectively, are primarily attributable to the Corporation’s Joint Strike Fighter program.

Selling, general and administrative expenses as a percentage of sales increased five-tenths of a percent in 2003 and decreased seven-tenths of a percent in 2002. The 2003 increase was due primarily to the July 2003 acquisition of Chubb partially offset by $50 million lower restructuring charges in 2003. The 2002 decrease reflects the benefits of cost reduction actions, primarily at Carrier, and $43 million lower restructuring charges in 2002, when compared to 2001.