We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

     Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

     We previously audited in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet as of December 31, 2002, and the related consolidated statements of operations, of changes in shareowners' equity and of cash flows for the year then ended (not presented herein), and in our report dated January 16, 2003, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2002, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

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     The Corporation's operations are classified into four principal segments: Otis, Carrier, Pratt & Whitney and Flight Systems. Otis and Carrier serve customers in the commercial and residential property industries. 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.

     For discussion of the Corporation's business environment, refer to the discussion of "Business Environment" in the Management's Discussion and Analysis of Financial Condition and Results of Operations in the Corporation's Annual Report incorporated by reference in Form 10-K for calendar year 2002. The current status of significant factors impacting the Corporation's business environment in 2003 is discussed below.

     The Corporation's growth strategy contemplates acquisitions. The rate and extent to which appropriate acquisition opportunities are available and to which acquired businesses are effectively integrated and anticipated synergies or cost savings are achieved can affect the Corporation's operations and results. In July 2003, the Corporation acquired Chubb plc, a global provider of security and fire protection products and services headquartered in London. 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, closed circuit television systems and recording. 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 has leading market positions in the U.K., France, Hong Kong, Australia, and Canada. Chubb's operations can be affected by factors such as customer attrition, foreign exchange rates, construction activity and other global economic and political factors.

     As worldwide businesses, the Corporation's operations are affected by global and regional industry, economic and political factors. 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 results. Economic conditions in the commercial airline industry, global refrigeration industries, and commercial HVAC and construction markets had a negative impact on the Corporation's consolidated results in the first nine months of 2003 and are expected to continue to present challenges to its businesses. In addition, 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 the first nine months of 2003 and is expected to continue to benefit results for the remainder of 2003. During the first nine months of 2003, foreign currencies contributed positively to the Corporation's consolidated results, primarily driven by the strengthening of the euro in relation to the U.S. dollar.

     Traffic growth, load factors, worldwide airline profits, influenced in part by fuel prices and labor issues, and general economic activity have historically been reliable indicators for new aircraft and aftermarket orders in the aerospace industry. Spare part sales and aftermarket service trends are impacted by 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. Current conditions in the airline industry include reduced flight schedules, an increased number of idle aircraft, workforce reductions and declining financial performance, including recent airline bankruptcies. 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 in the first nine months of 2003 and are expected to 

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continue for the remainder of 2003. In addition, ongoing U.S. military involvement in Iraq has created uncertainty in the airline industry. 

     The Corporation's products and services are regulated by strict safety and performance standards, particularly in the commercial engine business. These standards can create uncertainty regarding the profitability of commercial engine programs.

     Continued commercial airline financial distress and uncertainty in the global economic recovery create uncertainties that could impact the Corporation's earnings outlook for the remainder of 2003.

     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. 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. Management's Discussion and Analysis and Note 1 to the Consolidated Financial Statements in the Corporation's Annual Report, incorporated by reference in Form 10-K for the calendar year 2002, describe the significant accounting estimates and policies used in preparation of the Consolidated Financial Statements. Actual results in these areas could differ from management's estimates. There have been no significant changes in the Corporation's critical accounting estimates during the first nine months of 2003.

RESULTS OF CONTINUING OPERATIONS

     Consolidated revenues were $8 billion in the third quarter of 2003, an increase of $655 million (9%) when compared to the same period of 2002 and $22.4 billion for the nine-month period of 2003, a $1.4 billion (7%) increase when compared to the same period of 2002. Approximately two-thirds of the third quarter increase reflects revenue contributed from the acquisition of Chubb. Foreign currency translation contributed approximately one-third of the revenue increase in the quarter and half of the nine-month increase for the periods ended September 30, 2003 due primarily to the continued strength of the euro in relation to the U.S. dollar. The third quarter and nine-month increases also reflect growth at Otis, increased aftermarket revenues at Sikorsky and increased military revenues at Pratt & Whitney. These increases were partially offset by declines in commercial spare parts volume in the aerospace businesses and a decrease in helicopter shipments at Sikorsky.

     Gross margin as a percentage of sales decreased 0.3% and 1.3% in the third quarter and first nine months of 2003, respectively, when compared to the same periods of 2002. The decreases primarily reflect lower commercial aerospace volume, a decrease in helicopter shipments at Sikorsky as well as the absence of the favorable impact of commercial engine contract changes at Pratt & Whitney recorded in the first quarter of 2002. These decreases were partially offset by margin improvement at Otis. Gross margin for the nine month period in 2002 also reflects $152 million of restructuring charges, partially offset by an approximate $100 million settlement of environmental claims. Third quarter of 2003 results also include gross margin contributed from Chubb.

     The Corporation's research and development spending includes both company and customer funded programs. Total research and development spending for the Corporation increased $114 million (19%) to $703 million in the third quarter of 2003 and increased $194 million (11%) to $2.0 billion in the first nine months of 2003 compared to the same periods of 2002.

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     Company funded research and development spending decreased $10 million (4%) and $137 million (15%) in the third quarter and nine-month period of 2003, respectively, when compared to the same periods of 2002. The third quarter and nine-month decrease is due primarily to lower spending in the commercial aerospace businesses. The nine-month decrease also reflects the finalization of a technology funding agreement at Pratt & Whitney Canada in the first quarter of 2003, lower spending on Sikorsky's S-92 program which received Federal Aviation Administration type certification during the fourth quarter of 2002 and costs associated with the PW6000 program recorded in the first quarter of 2002. As a percentage of sales, research and development was 3.3% and 3.5% in the third quarter and nine-month period of 2003, respectively, compared to 3.7% and 4.4% in the same periods of 2002. Company funded research and development spending is subject to the variable nature of program development schedules.  Company funded research and development spending in the fourth quarter 2003 is expected to approximate third quarter 2003 levels.

     In addition to company funded programs, customer funded research and development programs were $443 million and $1.2 billion in the third quarter and nine-month period of 2003, respectively, as compared to $319 million and $845 million for the same periods of 2002. The increases are primarily attributable to Pratt & Whitney's Joint Strike Fighter program.

     Selling, general and administrative expenses increased $144 million (18%) and $213 million (9%) in the third quarter and first nine months of 2003, respectively, when compared to the same periods of 2002. As a percentage of sales, these expenses were 11.8% and 11.5% for the quarter and nine months ended September 30, 2003 compared to 10.9% and 11.2% for the same periods of 2002. The third quarter and nine-month increases were due primarily to the impact of foreign currency translation at Otis and Carrier and the July 2003 acquisition of Chubb.

     Interest expense increased $2 million (2%) and decreased $9 million (3%) in the third quarter and nine-month period of 2003, respectively, when compared to the same periods of 2002.

     The effective income tax rate for the third quarter and nine-month period of 2003 was 28.0% as compared to 28.4% for the same periods of 2002.

     The Internal Revenue Service ("IRS") is currently reviewing the Corporation's claims from prior periods as part of its routine examinations of the Corporation's previously filed income tax returns. In 2004, the Corporation expects to resolve its claims and to settle other disputed issues related to prior open tax years from 1986 through 1993. Although the outcome of these matters cannot presently be determined, management believes that it may reach favorable settlement with the IRS.

     The Corporation continues to evaluate potential restructuring actions that could be implemented in 2004 if a favorable tax settlement is reached, although no such actions have been finalized or approved at this time.

     Net income and diluted earnings per share increased $27 million (4%) and $.06 (5%), respectively, in the third quarter of 2003 when compared with the same period of 2002. Net income and diluted earnings per share increased $70 million (4%) and $.17 (5%), respectively, in the first nine months of 2003 when compared to the same period of 2002. The favorable impact of foreign currency translation contributed $.05 per share and $.17 per share in the third quarter and first nine months of 2003, respectively.

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Restructuring

     During 2002, the Corporation recorded pre-tax restructuring and related charges totaling $321 million. These charges related to on-going cost reduction efforts, including workforce reductions and consolidation of manufacturing, sales and service facilities. These programs are expected to result in net workforce reductions of approximately 7,000 salaried and hourly employees, the elimination of approximately 2.0 million square feet of facilities and the disposal of assets associated with exited facilities. During 2003, the Corporation has incurred pre-tax cash outflows related to the 2002 programs of approximately $123 million which were funded from cash generated from operations. Savings are expected to increase over a two-year period resulting in recurring pre-tax savings of approximately $285 million annually. As of September 30, 2003, reductions of approximately 400 employees and approximately 500 thousand square feet remain to be completed under the programs. As of September 30, 2003, approximately $31 million of severance and related costs and $4 million of facility exit and lease termination accruals remain outstanding. The programs are expected to be completed in 2003.

     During the first nine months of 2003, the Corporation recorded pre-tax restructuring and related charges of $44 million in connection with its continuing cost reduction efforts. These charges include $11 million recorded in the first quarter, $22 million in the second quarter and $11 million in the third quarter. These charges were similar in nature to those noted above and were recorded in both the commercial and aerospace units. The amounts were not material to the results of any individual segment.

     In the fourth quarter of 2003, Carrier announced its intention to relocate its Syracuse-based container refrigeration and compressor manufacturing operations closer to key customers and into lower cost manufacturing locations, including Asia. The announced actions are expected to result in approximately 1,200 employee reductions and elimination of 800 thousand square feet of manufacturing facilities. Specific plans associated with these actions have not been finalized at this time and any decisions remain subject to Carrier's collective bargaining obligations. The Corporation also anticipates recognizing gains in the fourth quarter resulting from business divestiture transactions expected to be completed at that time.

     Revenues, operating profits and operating profit margins of the Corporation's principal segments include the results of all majority-owned subsidiaries, consistent with the management reporting of these businesses. As discussed in the Notes to the Condensed Consolidated Financial Statements for certain of these subsidiaries, minority shareholders have rights which overcome the presumption of control. In the consolidated results, these subsidiaries are accounted for using the equity method of accounting. Adjustments to reconcile segment reporting to consolidated results are included in "Eliminations and other," which also includes certain small subsidiaries.   Chubb plc, acquired in July 2003 is also included in "Eliminations and other" as its results were not material to the Corporation. Results for the quarters and nine-month periods ended September 30, 2003 and 2002 are as follows:

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