Raytheon has continued to build a dynamic Ethics and Compliance program on a solid foundation laid more than 20 years ago. We have a values-based Ethics program, which means that while legal compliance is required as a precondition of all our actions, employees are further expected to ensure that their behavior aligns with the ethical principles set forth in the company’s values of People, Integrity, Commitment and Excellence. Our leaders, starting with the Board of Directors and senior leadership team and including all levels of management, are fully committed to maintaining the highest standard of ethical business practices. That same commitment extends to every employee, and each of us is responsible to abide by and uphold our values, supported by our Code of Conduct.

The Ethics Office at Raytheon helps us ground our daily actions with guidance, direction and accountability. We have ethics officers at the corporate level and in each company business who are readily accessible and who routinely provide assistance to those seeking advice before taking a course of action. Most contacts with the Ethics Office ask for guidance and advice about how to handle potential conflicts of interest, gifts and gratuities, rules concerning the hiring of former government employees, as well as a wide range of other issues. The Ethics Office also provides a safe haven for employees to report potential violations of our Code of Conduct and be protected from retaliation for doing so. The Ethics Office is charged with investigating alleged violations of the code and, when misconduct is substantiated, ensuring that appropriate corrective action is taken, such as issuing discipline and strengthening internal controls.

Raytheon has long provided ethics training to make our employees aware of ethical issues they may encounter in their jobs, and to take action and get help from resources available within the company effectively to address those issues. Building on this foundation, initiatives to move our program from ethics training to ethics education are now underway. Ethics education helps employees build an ethics check into their decisionmaking process, and thereby make decisions consistent with our values. In addition to our annual awareness training, Raytheon employees now routinely access online modules covering a wide variety of risk and compliance topics related to our business. This enables employees to spot issues and seek guidance proactively, before a problem arises. As part of our ethics education plan, in 2006 managers will receive ethical leadership tools focused on their special obligation to promote an ethical culture in the company.

Employees also learn more about their ethical obligations through ongoing communications. Messages from leaders reinforce the competitive advantage of ethical vigilance and commitment, and encourage employees to forward any concerns for resolution. Our 2005 employee opinion survey reflects that 79 percent of all our employees recognize the company’s commitment to integrity and to conducting business ethically — one of the most positive responses to all the questions in the survey. While we have achieved much, we are continuing to drive change to build a culture of ethical decision-making where each of our employees treats the Raytheon name as his or her own.