Earnings per share and net income both grew 18 percent in 2004. Revenues increased 21 percent on strong organic growth and acquisitions. The result was yet another year of total shareholder return for UTC equaling or exceeding market averages.

UTC’s total shareholder return performance has steadily outperformed over a longer period, and we’re including this in this Chairman’s Letter. We believe there are clear and sustainable reasons.

* American Standard, Boeing, Dover, Emerson Electric, General Electric, Honeywell, Illinois Tool Works, 3M, Rockwell Collins, Textron, Tyco and York.

The reasons begin with operating disciplines leading to significant cost reductions and game changing products. We see the evidence in UTC’s segment operating income margin having expanded from 5 percent a dozen years ago to 14 percent currently. We also see it in UTC’s exceptional organic revenue growth of 8 percent in 2004.

We’re benefiting from favorable economies and business conditions worldwide, but we are also outpacing competitors in many of our markets. We see the evidence in Otis’ 14 percent growth in unit elevator orders in 2004. We see it in Carrier’s 15 percent growth in units shipped in 2004. We see it in Pratt & Whitney Canada’s 42 percent growth in engines shipped in 2004. These are powerful numbers.

Balance has long been a strength at UTC. Thirty-six percent of revenues last year arose from aerospace, and 64 percent from our commercial and industrial companies. Forty-one percent arose from U.S. markets, and 59 percent internationally. These trends continue, with the Linde acquisition having closed in 2004, and prospectively Kidde in the current quarter. Linde is the commercial refrigeration market leader in Europe and will take this business for Carrier to leadership worldwide. Kidde
will double our commercial security and fire protection businesses worldwide, presuming the acquisition closes as scheduled at the end of the first quarter.