AlwaysRight Thing

DoThe

2005 Global Citizenship Report

2 Global Citizenship

6 Corporate Governance

10 Environment, Safety & Health

30 Compliance

32 Community Involvement

38 Diversity and Inclusion

40 Leadership Development

42 Customers and Products

46 Supplier Relations

48 Investor Relations

Contents

• We will always be truthful.

• We will strictly adhere to the letter and spirit of all laws.

• We will provide high-quality products and services.

• We will conform to locally accepted standards of good corporate citizenship in each country in which we do business.

• We will promote and sustain a work environment that fosters mutual respect, openness and individual integrity.

• We will be fair in all aspects of our business.

This report outlines the many ways in which we lived up to these principles in 2005, and thesystems and tools we’ve put into place to ensureITT continues to be a respected global citizen in the future.

At ITT, we are committed to doing the right thing –always. In our quest to attain the highest levels of corporate responsibility, we adhere to these guiding principles:

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At ITT, we are dedicated to meeting that responsibility. We want to be defined not

only by what we do – but how we do it. Our people have made a promise to

themselves and the world to Do the Right Thing – Always, and our company has

put the tools, controls and programs in place to help them keep their word.

Whether it’s setting tough goals such as zero workplace accidents or asking our

people to consider possible product safety issues that could arise 20 years in the

future, we realize that the right thing isn’t something that just happens. We have

to make it happen – and then make it happen again the next time … and the next.

As a company, ITT is committed to the advancement of human progress.

We make pumps that bring water to distressed areas, night vision goggles that

turn night into day, and brake pads that decrease stopping distances and increase

highway safety. As part of our commitment, we also make every effort to be a

positive force in the world.

And the world is taking notice. Each year, ITT is included on more lists of

the most admired, best managed and most ethical companies in the world.

But the true measure of our progress is pride. ITT is a business that cares

about its employees, customers, communities, suppliers and investors. We want

all of these key stakeholders to feel proud about what we do and how we do it.

That’s the definition of a good global citizen.

Steve Loranger

Chairman, President and Chief Executive Officer

Global Citizenship

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You can become a global company through talent, innovation andplanning, but it takes more than that to become a global citizen.Citizenship means never letting the ends justify the means and alwaysliving up to your ethical, environmental and social responsibilities. In short, companies must be part of the social contract.

Systems & ToolsThe ITT Management SystemThe ITT Management System defines the way our company does business. These are the operating philosophies, core values and management processes that run deep in our organization – that we bring to bear as we work to improve our company’s performance.

VisionTo be a premier multi-industry

company known for its management talent, market leadership, and operational excellence. We

create value for our shareholders through a growth-oriented,global portfolio of businesses that are leaders in their individual markets.

ValuesHonesty - Integrity - Quality - Citizenship - Respect

- Fairness - Accountability - Diversity - Inclusion

Integrated Strategic Processes

Growth•Value-Based Management•Value-Based Product Development•Strategic Agenda Planning

Leadership•Value-Based Leadership Development•Partnership for Performance•Functional Excellence

OperationalExcellence•Value-Based Six Sigma/Lean •Value-Based Goal Deployment•Acquisition Integration

ResourceOptimization•Premier Resource Management•Portfolio Management/ Capital Allocation•Structural Alignment

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Global Citizenship

ITT Revenue ProfileDefense Electronics

& Services: 43%Fluid Technology: 38%Motion & Flow Control: 9%Electronic Components: 10%

Defense Electronics & ServicesWe provide government, commercial and military customers with products and services to ensure a safer, more secure world.

Fluid TechnologyWe are the world’s largest provide of water and wastewater treatment solutions, and a leading provider of pumps and related technologies for industrial, chemical and commercial customers.

Motion & Flow ControlWe are a well-known and well-respected leader in a number of transportation and lifestyle markets, with brands and businesses that have achieved high levels of success for decades.

Electronic Components*We are a leading provider of electronic interconnects,electromechanical switches and value-added solutionsutilized in the telecommunications, military/aerospace,industrial, transportation, computer, consumer andmedical market segments.

10%

43%

38%

9%

ITT Global ProfileNorth America: 64%Europe: 25%Asia-Pacific: 7%Other: 4%

7% 4%

64%

25%

ITT At A GlanceITT is a global, multi-industry company. We have 41,000 employees working around the worldto make a positive difference in the markets we serve and the communities in which they live.

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Metrics

Revenue ProfileSystems: 33%Space Systems: 20%Aerospace/Communications: 17%Electronic Systems: 11%Night Vision: 10%Advanced Engineering andSciences: 9%

9%

33%

17%

11%

20%

10%

Revenue ProfileFriction Materials: 44%Marine and Leisure: 32%KONI: 13%Aerospace Controls: 11%

11%

44%

32%

13%

Revenue ProfileConnectors: 50%Switches (to be

divested): 50%50%

50%

*As reported in 2005. In 2006, Electronic Components became part of the Motion & Flow Control management company.

Revenue ProfileWastewater: 31%Water: 31%Industrial BioPharm: 21%Water Treatment: 17%

17%

31%

31%

21%

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Measuring the Triple Bottom LineITT’s Economic, Environmental and Social PerformanceIn September 2005, ITT was again selected for the Dow Jones Sustainability Index, making us one of the few companies to be on the list every year since its inception in 1999.

The Index measures the sustainability performance of the 2,500 biggest companies in the world and selects the top 10 percent, based on scores in a number of areas. Companies that excel at corporate sustainability do a better job of aligning their businesses with society and the stakeholders they impact.

In 2005, ITT received higher scores in almost every area measured by the Index, as compared to the year before. Here is a look at our scores for the past two years, and a comparison to the industry average of all 2,500 companies measured for the Index. All scores are based on a scale from zero to 100 percent.

2004 2005 2005ITT Score ITT Score Industry Average

Economic Dimension 66 77 61Environmental Dimension 52 61 31Social Dimension 46 49 39

ECONOMIC DIMENSIONCorporate Governance 82 80 69Investor Relations 42 72 59Risk & Crisis Management 77 100 67Code of Conduct/Compliance 69 70 55Customer Relationship Mgmt. 66 62 55

ENVIRONMENTAL DIMENSIONEnvironmental Policy Mgmt. 68 80 67Environmental Performance (Eco-efficiency) 43 65 13Environmental Reporting 51 75 48Advanced Environmental Mgmt System 86 99 51Advanced Environmental Performance 10 6 10Product Stewardship 48 56 17Climate Strategy 36 41 22Large scale projects/project finance 100 100 57

SOCIAL DIMENSIONLabor Practice Indicators 53 55 54Human Capital Development 20 47 23Talent Attraction & Retention 34 48 37Stakeholder Engagement 59 68 53Corporate Citizenship/Philanthropy 31 53 22Social Reporting 18 30 46Occupational Health & Safety 68 58 45Global Sourcing 25 24 25

At ITT, good corporate governance is non-negotiable. We have created a businessstructure and put controls in place that promote corporate fairness, transparencyand accountability.

The oversight begins with our Board of Directors, which is composed of our CEO Steve Loranger plus eight independent members. These are strong, independent thinkers and experienced business leaders who use their expertise to help us run our company in the best manner possible. They do not dictate thedirection of ITT, nor do they act as a “rubber stamp” for management decisions.Instead they ensure shareholder interests are represented, and also consider howthe company’s actions will impact other stakeholders.

Management’s business plans and reviews are also a critical part of the process.Pursuant to the ITT Management System, each business has a set of measurableoperating objectives that are prioritized so that everyone knows the order of importance. Each objective has a detailed plan that specifies what, who and when for each action item. Standard tools are employed to review the plan, andcountermeasures are used to address problems or issues. Throughout the process,our code of conduct is ever-present.

An important aspect of ITT’s governance lies in its internal controls. Internalcontrols include the controls themselves, monitoring and internal auditing practicesand actions taken to correct deficiencies as identified. ITT’s internal controls provide for careful selection and training of personnel and appropriate division of responsibility. The controls are documented and management continuallymonitors its system of internal controls for compliance. In addition, based uponmanagement’s assessment of operational and financial risk, special reviews are performed by internal auditors to test the effectiveness of selected controls.

Corporate governance touches every part of our business and its impact cannotbe underestimated. Studies find that companies with consistently high governanceratings reduce risk and perform better in the marketplace. But beyond that, we

believe good corporate governance is a way to take good care of our businessso that it is benefiting all of our stakeholders for years to come.

George MinnichSenior Vice President and Chief Financial Officer

Organizations serve many masters – employees, customers, investors,regulators and communities. Good corporate governance results in awell-run company where all of these parties can see and understandcritical decisions.

Corporate Governance

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Systems & ToolsRisk AssessmentITT has a comprehensive risk assessment process that starts at the lowest level of the organization. Every location completes a risk scorecard that measuresrisk in 11 different categories. In addition, risk is analyzedat the value center level over both short- and long-termhorizons. Finally, risk assessment interviews are held withseveral dozen leaders of the company. This information is consolidated and reviewed with the executive counciland the audit committee. The risk assessment is the basisfor the internal audit plan.

Auditing and TestingITT management is responsible for establishing and maintaining adequate internal controls. The company’sinternal controls over financial reporting is a processdesigned to provide reasonable assurance regarding thereliability of financial reporting and the preparation offinancial statements for external purposes in accordancewith accounting principles generally accepted in theUnited States of America.

ITT has a team of internal auditors that test internalcontrols over financial reporting including controls overrevenue, purchasing, inventory, property and equipment,payroll and general computer controls. For each cycle,auditors test controls over every step of the process.

In addition to the internal auditors, management performs independent self-tests. Self-testing and the testing performed by the internal audit groups are designed to ensure the internal controls are operating effectively.

Disclosure CommitteeIn 2002, the company established a Disclosure Committeecomprised of management employees from various functional areas with responsibility for considering andevaluating the materiality of information and reviewingdisclosure obligations on a timely basis. The DisclosureCommittee meets regularly, reports to the GeneralCounsel and the CFO, and assists the CEO and the CFO in designing, establishing, reviewing and evaluating thecompany’s disclosure controls and procedures.

SurveysEvery quarter, the Disclosure Committee conducts a confidential survey of employees asking their assistance in raising any possible governance or compliance issues.The survey includes about a dozen questions pertainingto violations of code of conduct, conflicts of interest,questionable financial activities, etc. The survey results are forwarded to the company’s internal auditors whoconduct investigations where necessary and forward anyfindings to the Disclosure Committee.

A Perfect 10 for GovernanceIn 2005, ITT was one of only 33 companies in theworld to receive a perfect 10.0 rating from GovernanceMetrics International (GMI), a corporate governanceresearch and ratings agency. For five years, GMI hasbeen measuring the governance codes, principles andpractices of more than 3,400 companies with the goalof proving that there is a link between governancepractices and investment risks.

According to GMI data, the link is undeniable.Poorly rated companies with scores of 3.0 and lowerwere more likely to have restated earnings, have been subject to accounting investigation or found guilty ofaccounting fraud. In addition, their three-year totalshareholder return was 8.73 percent versus 15.93 percent for well-governed companies. ITT’s three-yearshareholder return from 2002-2005 was 73 percent.

Recognition

“A premier company is notjust a company that makesa lot of money. It meanssomething to me to playthe game at the higheststandards.”

– ITT CEO Steve Loranger,quoted in IndustryWeek

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PartnersThe ITT Board of DirectorsITT currently has nine Board of Director members. This allows for meaningful discussions and adequate representation on the Board’s four standing committees: audit, compensation and personnel, corporate responsibility, and nominating and governance.

ITT has taken steps to ensure that its board is independent in its thinking and actions. Only oneboard member – company CEO Steve Loranger – has an active role in the day-to-day management of ITT. While the other eight board members are compensated for the time they spend serving asdirectors by ITT, they play an independent role, separate from the company’s operating management.The four board committees – mentioned above – are all made up solely of independent directors.

The board meets regularly during the year. The typical agenda of these two-day work sessionsincludes a review of ITT’s overall financial affairs, corporate governance issues, the performance of ITT’s business segments, considerations of possible acquisition or divestiture activity, and meetingsof the various committees.

In 2005, among many other important activities, the ITT board assessed and ultimately approvedthe sale of our automotive tubing business, and interviewed candidates for several key leadership positions, including chief financial officer and director of global workforce strategy.

The conversations in these meetings are candid and productive. The board is honest about thechallenges facing the company, and its insights help keep ITT management focused on the big picture and moving in the right direction.

Corporate Governance

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Audit CommitteeThe audit committee ensures that ITT is meeting today’s stringent Sarbanes-Oxley regulations by providing oversight on matters relating to ITT’s financialreporting process, assuring that we develop and maintain adequate financialcontrols and procedures, and monitoring compliance with these processes. It also determines the qualifications and independence of our independent auditors, reviews financial reports and other financial information provided by ITT, reviews our company’s overall risk assessment and risk managementprocesses, monitors management’s response to significant audit findings,among many other tasks.

Compensation and Personnel CommitteeThe compensation and personnel committee makes sure that ITT’s compensation structure encourages forward thinking and decision-making. It provides oversight and review of compensation and benefits provided to ITT employees, evaluates senior management and the chief executive officer’s performance, sets annual performance objectives for the CEO and approvesindividual compensation actions for all corporate officers. In addition, the committee evaluates ITT’s benefit program and its human resources policies,programs and plans, including management development and continuity plans.

Corporate Responsibility CommitteeThe corporate responsibility committee makes recommendations concerningITT’s role and responsibilities as a good corporate citizen, and oversees areassuch as Environment, Safety & Health. The committee reviews major claims and litigation, examines ITT’s programs and policies for legal and regulatorycompliance, and regularly assesses the adequacy and effectiveness of ITT’s Code of Conduct.

Nominating and Governance CommitteeThe nominating and governance committee is responsible for ITT’s overall governance and the selection of strong directors to lead our company. This group annually updates and develops corporate governance principles for ITT. In the event it is necessary to select a new chief executive officer, this committee leads the process for candidate evaluation, consideration and screening. It also evaluates and makes recommendations regarding the composition, governance and structure of the board of directors.

Governance Guidance

The ITT Board of Directors, left to right:• Markos Tambakeras, executive chairman

to the board of directors, Kennametal, Inc.• Curtis J. Crawford, president and chief

executive officer, XCEO, Inc.• Christina Gold, senior executive vice

president, First Data Corp., and president,Western Union Financial Services, Inc.

• Steven Loranger, chairman, president and chief executive officer, ITT Corporation

• John Hamre, president and chief executiveofficer, Center for Strategic & InternationalStudies

• Frank MacInnis, chairman and chief executive officer, EMCOR Group, Inc.

• Linda Sanford, senior vice president,Enterprise on Demand Transformation &Information Technology, IBM Corporation

• Raymond LeBoeuf, retired chairman of the board and chief executive officer, PPG Industries, Inc.

• Ralph Hake, former chairman and chiefexecutive officer, Maytag Corporation

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The four standing committees of the ITT board of directors performessential corporate governance functions. The post of committee chairrotates every four years and members of each committee are rotatedperiodically to assure that fresh points of view are reflected.

But we can further improve our ESH performance, and the key will be individual

accountability. While our company has built a deep and effective ESH organization,

filled with professionals who are always striving to go “beyond compliance,” we

want all of our employees to take – and feel – personal responsibility for their part

in this effort. In short, it’s never somebody else’s job to make sure we are being

safe, staying informed or doing the right thing for the environment.

We have great examples of the power of personal accountability and many

of our locations already consider ESH issues in all of their decisions and actions.

Our industrial pump operation in Chongwon, Korea, has gone more than 13 years

and 800,000 hours without a recordable worksite accident. Why? Because general

manager I.K. Kim and his top supervisors have personally involved themselves in

plant safety, walking through the facility each day doing a safety check and

reminding all employees to inspect their own machines and areas. The result is an

incredible safety record and an ISO 14001 registration, which the plant earned in

May 2005 after making it a priority project only six months before. That’s what

can be accomplished when personal accountability is in place at every level of

a business, and our goal is to expand it beyond isolated pockets and into

the broader organization.

In 2005, the historic improvements we have experienced in many of

our ESH metrics slowed dramatically. Some of this is due to organizational

flux – new facilities, business divestitures, and new people – but it’s also

a reflection of our need to invest all our people with ownership of our ESH

goals. We have accomplished great things through the focused efforts of

our ESH coordinators and those locations that already have individual

accountability in place; we will accomplish much more when

every ITT employee shares in this responsibility.

Alan Leibowitz

Director of Environment, Safety,

Health & Security

Environment,Safety & Health

ITT has achieved a high level of success in Environment, Safety &Health (ESH). We are a progressive, proactive leader and a responsibleindustrial citizen.

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Systems & Tools

ESH Audit ProgramEach year, our trained ESH professionals travel to other ITT sites to inspect buildings, hazardous material use andmachinery, and interview employees about processes, procedures and documentation. The final report uses a numerical rating system to show where a facility is in or out of compliance with our ESH policies and protocols,and includes a list of action items and deadlines forimprovement priorities. In 2005, we conducted 90 of these audits.

ESH CommitteeThe ITT ESH Committee includes ESH directors and selected ESH managers from around the world who meetregularly to develop, update and monitor the company’sESH policies, strategies and metrics.

ESH TrainingITT provides online ESH training modules – covering morethan 20 topics and available in up to nine languages – toESH and non-ESH personnel alike. New employees arerequired to complete the ESH Introduction module or equivalent training. More advanced modules aremandatory based on job responsibilities. In addition, we provide product safety training to our engineers, marketers, product managers and ESH team members.

ESH Policy ManualOur ESH Policy Manual is available in seven languages onthe ESH website. It spells out our ESH policies in morethan 50 areas – from wastewater management to metricscollection – and includes the essential elements all ourbusinesses must have to be in compliance with these policies. In 2005, the Manual was updated to includeasbestos management, product safety and dealing withmedical issues such as the Avian Flu.

ESH WebsiteThe ITT ESH internet site offers a centralized station for up-to-date documents, manuals, data and dialogue.All employees can access the password-protected site toview model programs, read policy updates, post on themessage board, or review one of 20 training modules. In 2005, the website was updated to provide for greaterformatting flexibility and more multi-language platforms.

Business Continuity PlanningITT value centers regularly update their business continuityplans, detailing contingency and emergency plans toensure the safety of employees and recover critical business processes. With the understanding that a dusty,outdated document is worthless in a true emergency, thebusinesses test their plans through table-top exercises thatsimulate different scenarios, and communicate their plansto employees through formal briefing meetings.

At ITT, we take a systematic approach to success. Our ITT Management System is enablingus to execute business strategies and achieve financial goals, and we bring a similarly rigorous and consistent system to our ESH efforts. Some key elements include:

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ESH ForumsITT has three regional ESH Forums: Asia-Pacific (below), Europe and the Americas. The Forums includeITT ESH professionals from that geographic region, who meet annually to conduct customized training, and review legislation, regulations and company initiatives relevant to their part of the world. In 2005, a key topic at all three Forum meetings was our drive toward zero accidents.

Organization

ITT• Alan Leibowitz, ESH Director• Fern Fleischer Daves, ESH Counsel• Teresa Olmsted, Director of Environmental

Programs

Defense Electronics & Services• Kurt Urquhart, ESH Director

• Advanced Engineering & Sciences■ Dan Dameron, ESH Manager

• Aerospace/Communications■ Dave Koepper, ESH Manager

• Electronic Systems■ Don Polzo, ESH Manager

• Night Vision■ Rosann Kryczkowski, ESH Manager

• Space Systems■ Kathleen Melia, ESH Manager

• Systems■ Steve McKeon, ESH Director

Fluid Technology• Donna Dawson, ESH Director• Anne Wilmot, ESH Manager

• Flygt■ Patrick Camusat, ESH Manager■ John Kabo, ESH Manager

• Industrial & BioPharm■ Rob Molloy, ESH Manager■ Ben White, ESH Manager

• Residential & Commercial Water■ Bill Dempsey, ESH Manager

• Water Treatment■ Chris England, ESH Manager

Motion & Flow Control• Bennett Leff, ESH Director

• Aerospace Controls■ Steve Gedalje, ESH Manager■ Kathy Pace, ESH Manager

• Electronic Components■ Nirmal Singh, ESH Director

• Friction Materials■ Franco Dutto, ESH Director■ Silvia Cordiglia, ESH Manager

• KONI■ Johan van Dam, ESH Manager

• Marine & Leisure■ Lis Sorensen, ESH Manager■ Brijesh Sahota, ESH Manager

ITT’s Environmental, Safety & Health organization includes more than 120 full- and part-time members, led at the corporate level by Alan Leibowitz and at the business and division levels by the following people:

In 2005, a group of ESH directors and managers met in North Carolina to plot outthe ESH strategic plan. Theteam included Fern Daves,Donna Dawson, Chris England,Rosann Kryczkowski, BennettLeff, Alan Leibowitz, SteveMcKeon, Teresa Olmsted,Thomas Schmitt, EmilyScofield, Nirmal Singh, Kurt Urquhart, Anne Wilmot,Kathy Yang, and outside representatives MitchellMitgang and Charles Redinger.

Environment,Safety & Health

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Partners

CEECThe Corporate Environmental Enforcement Council is the only cross-industry coalition in which company legal,environmental & governmental affairs professionals caninteract and benchmark environmental compliance andenforcement issues and policies that impact each of us on a daily basis.

CHWMEGA non-profit trade association, CHWMEG is composed ofmanufacturing and other industrial companies interestedin efficiently managing the waste management aspects oftheir environmental stewardship programs.

International Audit Protocol ConsortiumIAPC is an industry-based group of multi-national corporations managed and maintained by ENSR and dedicated to promoting excellence in ESH auditing.

National Association for EnvironmentalManagementNAEM is a non-profit, non-partisan educational association dedicated to advancing the knowledge andpractice of Environment, Safety & Health management.

National Environmental Law AssociationNELA is a multi-disciplinary organization serving the needsof practitioners in law planning, natural resources andenvironmental management, environmental science andenvironmental impact assessment.

Organizational Resources CouncilORC is a U.S organization that provides a valuable two-way communication link between members and federal safety and health agencies, and regulatory andbest practices information for member companies.

ITT has aligned itself with a number of organizations that can help us further our Environment, Safety & Health efforts, and who can benefit from our expertise and involvement as well.

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Coalition for Environmentally Responsible EconomiesCERES is a leading coalition of environmental, investor and advocacy groups workingtogether for a sustainable future. It creates opportunities for members to discuss criticalissues facing companies, society and the environment.

ITT has endorsed the CERES Principles, a 10-point code of environmental conduct. In addition, ITT representatives have been actively involved in helping CERES develop a global standard for sustainability reporting. In 1998, we were asked to be part of thefirst Global Reporting Initiative (GRI), which standardized guidelines for companies to report sustainable development, and chosen as one of 21 companies to be pilot testers for the first set of published guidelines in 2000.

Our commitment to GRI continues. This 2005 Global Citizenship Report and its predecessors adhere to the general GRI framework, and in February 2006, we participated in a conference to finalize the latest GRI guidelines,called G3. Scheduled to be released in October 2006, the new, streamlined standards are intended to make it easier to compare reports and results of different companies.

RecognitionExternal recognition provides useful progress markers on our journey to become a best-in-class performer in the areas of Environment, Safety & Health. Internal recognition is a vital contributor to employee motivation and a way to showcase best ESH practicesthroughout our global company.

Environment,Safety & Health

Chairman’s ESH Leadership Awards

Each year at our Leadership Forum – in front of the company’s top executives – ITT recognizes the individuals and teams who made outstanding contributions to our pursuit of world-class ESH performance. For 2005, we honored four winners:

• Liz Ritter is a certified emergency response volunteer who put her expertise to work in 2005 helping thousands of hurricane victims in Florida. (Story, page 36.)

• John Schinski created the intuitive, on-line ESH metrics collection system now used throughout ITT to provide more timely, comprehensive and accurate data input and retrieval. (Story, page 16.)

• A six-person team at our pump plant in Chongwon, Korea, made ISO14001 certification a priority in late 2004 and passed the challenging audit just six months later. The plant also marked 13 yearswithout a recordable workplace accident in 2005. (Story, page 23.)

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Under Sonny Giroux’sdirection, an ITT teamoperates NASA’s networkof deep space antennasand acts as caretakers forthe 52-square-mile stretchof desert that contains the giant antennas.

• Henry “Sonny” Giroux is providing exceptional ESH oversight in hisrole as manager of the Deep Space Network complex, located on33,280 acres in the high desert of California.

The compound has been subject to a number of ESH audits by the customer, NASA, and earned commendations for outstanding management support of ESH activities, continuous improvement activities, fiber optic and laser safety training and exemplary air quality management. Giroux’s attention to employee and operational safety compelled the NASA ESH director to state “I have never seen anyone as effective or dedicated to ensuring that ESH is integrated as part of everyday business practice … anywhere at NASA.”

Giroux has also made a point to engage the community. Once a year, he invites local officials – from fire fighters to watercontrol board members – on site for an in-depth look at the team’senvironmental efforts. In 2005, the event included a tour of thenumerous cultural resources located on the land, including rock art from American Indian tribes estimated to be 4,500 years old,and wildlife demonstrations. A significant part of the team’s environmental responsibilities is protection of two endangeredspecies – the desert tortoise and the Lane Mountain Milk-vetchplant – and the team explained how ITT has altered work processesto safeguard these species.

Creating an AmericanStandard for ANSIFor the first time ever, the United States has a national standard for safety and health management systems. The benchmark was introduced in 2005 aftersix years of developmentwork by the ANSIAccredited StandardsCommittee – led by ITT’s ESH director, Alan Leibowitz, and involving as many as 80 environmental, safetyand health practitionersfrom industry, labor, government and academia.The new standard –ANSI/SIHA Z10-2005 – isreceiving internationalpraise as a major development in the area of occupational safety and health. It gives U.S. companies a well-conceived, state-of-the-artconcept and action outline to improve their safety and health management systems.

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Dow Jones Sustainability IndexFor six years in a row – since its inception – the Dow JonesSustainability Index has named ITT to its list of companies that excel in the area of corporate sustainability. The Indexmeasures a company’s environmental, social and economicperformance – the triple bottom line – and lists companiesthat performed strongly in all three areas. ITT improved its ratings in all three areas in 2005, and increased our overall rating from 54 to 61, versus an industry average of 41.Following are our environmental scores versus the averagescore for the 2,500 companies measured for the Index.

IndustryCriteria ITT Score Average

Environmental Policy/Management 80 67Environmental Performance

(Eco-Efficiency) 65 13Environmental Reporting 75 48Product Stewardship 56 17Advanced Environmental Management

System 99 51Advanced Environmental Performance 6 10Climate Strategy 41 22Large scale projects/project finance (IS) 100 57

To see our complete ratings in all areas, see page 5.

The new ITT facility inSundbyberg, Sweden –which serves as headquarters for our Flygtbrand pump business –uses 41 percent less energy than its predecessorby employing a low-flowventilation system, recycled heating and ampleaccess to natural light. It’s one example of howour company is improvingits eco-efficiency.

Environment,Safety & Health

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MetricsITT is a data-driven company. We make decisions, acquisitions, productsand improvements based on measurable data, and this process-orientedapproach to business extends into the area of Environment, Safety &Health.

On a company-wide basis, we track our ESH performance in all keyareas – safety, consumption of natural resources, waste managementand compliance. Each year, the numbers tell an important story. In 2005,we saw many of our key metrics level off or slow in their improvement.

The numbers themselves are not cause for alarm – we are still producing best-in-class results – but the overall trend lines point to a need for a process change at ITT. If we are going to remain a globalESH leader, we must make every employee – not just our ESH professionals – accountable for Environment, Safety & Health results.

One of the first changes will be increasing employee awareness of ESH metrics. Education is an important first step toward improvement,and all of our employees should know exactly how their sites are doingin terms of accidents, near misses, ESH training, audits, electricity usage,among other ESH metrics. This will lead to increased dialogue and morefront-line ideas for improvement.

We want to have those same discussions at the business and corporate level. Making this possible is the on-line metrics system created by John Schinski, an information technology specialist for our Fluid Technology business in Upper Saddle River, New Jersey. Using his system, ESH personnel at more than 200 ITT sites now posttheir monthly ESH results into a database system that automatically consolidates the data at a site, business and corporate level.

Every ITT site inputs monthly ESH metric data covering more than 30 categories from work-related injuries to natural gas usage. The onlinetool automatically rolls up the information so that it can be tracked on a site, value center or ITT-wide level. 2005 was the first year this tool was used by all ITT facilities.

The new on-line system is user-friendly and greatly enhances dataintegrity through the automated conversion of all information to U.S. standards. For his work in creating this system, ITT awarded Schinski with the Chairman’s ESH Leadership Award for 2005.

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Workplace Safety

2.60

1.89

1.68

1.68

1.39

1.42

1.40

1.36

4.49

3.36

2.81 2.76

02002 2003 2004 2005

0.5

1

1.5

2

2.5

3.5

4

5

4.5

3

Injury Frequency(medical + lost workday cases x 200,000/number of hours worked)Global ITT

■ Total Lost-Workday Injury Frequency■ Total No-Lost-Workday Injury Frequency— 2005 Injury Frequency Goal

ITT’s accident frequency target can be summed up by the phrase “Getting to Zero.” A sustained effort on accident prevention by line management has continued the steady decline in this metric.

37.3

61.9

41.6

29.424.9

02002 2003 2004 2005

10

20

30

40

50

60

70

Injury Severity(lost workday x 200,000/number of hours worked)Global ITT

■ Total Lost and Restricted Days■ Total Lost Days— 2005 Injury Severity Goal

Starting in 2005, ITT has modified this metric so that only days away from work (Lost Days), and not days of restricted work (Restricted Days), are included. This change is intended to encourage return-to-work programs. We will continue to track the number of Restricted Days in our online metricssystem, but we will no longer include them in the Injury Severity calculation.For comparison purposes, the chart shows both values for 2005.

Environment,Safety & Health

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Consumption ofNatural Resources

118

83

96

68

02002 2003 2004 2005

20

40

60

80

100

120

Water Consumption(gallons: normalized by sales - $thousands)Global ITT

— 2005 Water Consumption Goal

Last year, ITT targeted its water consumption for improvement. At one manufacturing unit, significant reductions in consumption were achieved byfixing piping leaks and replacing a faulty meter; in fact, water use was cut inhalf. Reductions company-wide more than offset the increased consumptionassociated with a new dormitory facility in China.

118

86 81

70

02002 2003 2004 2005

20

40

60

80

100

120

Electricity Consumption(kWH: normalized by sales - $thousands)Global ITT

The downward trend is the result of ITT’s continued efforts at reducing theconsumption of natural resources*.

*For 2005 a combination of milder and less humid weather also provided a substantial contribution to reduced fuel and energy consumption. While this is a continued focus it will be difficult to sustain in 2006 if mild conditions do not continue.

142

110 109

83

02002 2003 2004 2005

25

50

75

100

125

150

Natural Gas Consumption(cubic feet: normalized by sales - $thousands)Global ITT

The downward trend is the result of ITT’s continued efforts at reducing theconsumption of natural resources*.

206

153 143

118

02002 2003 2004 2005

60

20

40

80

120

100

140

160

180

200

220

CO2 Generated by EnergyConsumption(tons: normalized by sales - $thousands)Global ITT

— 2005 CO2 Generation Goal

Reductions in consumption of electricity, natural gas and other fuels have leadto a corresponding reduction in the amount of carbon dioxide emitted.*

19

Waste Management

0.25 0.260.22

0.17

0.59

0.39 0.43

0.35

0.84

0.65 0.65

0.52

02002 2003 2004 2005

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

Waste Disposal Cost(waste handling costs: normalized by sales - $thousands)Global ITT

■ Nonhazardous Waste Disposal Cost■ Hazardous Waste Disposal Costs

1.271.45

1.34

1.01

0.130.12

0.14

0.23

1.401.57

1.48

1.24

02002 2003 2004 2005

0.4

0.2

0.6

0.8

1

1.2

1.4

1.6

Hazardous Waste DisposalVolume(pounds: normalized by sales - $thousands)Global ITT

■ Hazardous Waste Recycled Amount■ Hazardous Waste Disposal Amount— 2005 Hazardous Waste Disposal Volume Goal

ITT continues to reduce the amount of both hazardous and non-hazardous waste it generates. This, in turn, continues to reducethe cost of managing the waste (recycling, treatment and disposal).

16.9

10.6

9.3

7.0

7.9

5.2

6.3

4.0

27.5

16.313.1

10.3

02002 2003 2004 2005

5

10

15

20

25

30

Nonhazardous Waste Disposal Volume(pounds: normalized by sales - $thousands)Global ITT

■ Nonhazardous Waste Recycled Amount■ Nonhazardous Waste Disposal Amount— 2005 Nonhazardous Waste Goal

Environment,Safety & Health

20

Training & Compliance

3.6

5.4

6.5 6.4

02002 2003 2004 2005

1

2

3

4

5

6

7

ESH Training Hours Per EmployeeGlobal ITT

— 2005 ESH Training Goal

24.0

32.0

7.0

28.0

02002 2003 2004 2005

5

10

15

20

25

30

35

Number of Action PlanDelinquenciesGlobal ITT

— 2005 Action Plan Delinquency Goal

The 28 action plan delinquencies in 2005 originated at two ITT locations.Each action plan delinquency has been addressed.

6255

78

90

02002 2003 2004 2005

10

20

30

40

50

60

70

80

90

100

Number of ESH AuditsGlobal ITT

Overall, more ESH audits were performed in 2005 than in the previous year.Within individual companies, numbers will vary because of schedule that generally has each site visited every 2-3 years. This highlights ITT’s continuedcommitment to a thorough ESH audit process.

Audit Task ForceIn 2005 ITT conducted 90 audits, with teams from around the world following criteria and schedules created by the ITT Audit Task Force (ATF).

A key to ensuring that all ITT sites perform at a world-class ESH level is to establish consistent protocols and tools that measure how well a facility lives up to expectations. The ATF, created in 1995, has developed standardized internal auditprocesses to be used at sites around the world.

To the ATF, a facility in Singapore and one in California share the same ITTEnvironment, Safety & Health culture. An ESH audit gauges how, and how much, a facility needs to improve.

To make sure that principles and practices are understood and used consistently,the ATF trains auditors and team leaders throughout ITT. Using internal rather than external auditors has saved the company $4,442,000 in consulting expensesover ten years. And by helping our businesses comply with regulatory requirements,the ATF reduces violations.

The ATF’s work enables employees to work in safer environments and to protect the communities whose diverse cultures foster our success. It is the appreciation for this valuable service that brings out the welcome mat when ESH auditors arrive.

21

At a U.S. Army base in Qatar, ITT firemen perform a mockemergency drill as ESH auditorKurt Urquhart evaluates their performance and equipment.The three firemen are WilsonVelez (standing), Jason Kelley(kneeling) and Samuel Kessler (on stretcher).

Environment,Safety & Health

ISO 14001 CertificationNearly 50 ITT facilities have voluntarily developed and installed environmental management systems that meet ISO 14001 standards. ISO 14000 is a series of environmental management standards developed and published by the International Standards Organization (ISO.) ISO 14001 is the most important standard because it specifies the requirements of an environmental management system and is the only ISO 14000 standard providing a mechanism for organizationsthat meet the standard to be certified.

Here is the full list of our ISO 14001 certified sites through April 2006:

Defense Electronics & Services

Space Systems• Rochester, New York August 2004

Systems• Kaiserslautern, Germany December 1999• Ft. Carson, Colorado Springs,

Colorado July 2002• Patrick AFB, Florida November 2003• Vandenberg AFB, California November 2003

Fluid TechnologyFlygt

• Lindas, Sweden April 1997• Group Mktg & Product Mgmt.,

Sweden March 1998• Gothenburg, Sweden March 1998• Kristianstad, Sweden March 1998• Malmo, Sweden March 1998• Norrkoping, Sweden March 1998• Solna, Sweden March 1998• Sundsvall, Sweden March 1998• Uppsala, Sweden March 1998• Grindex, Sweden May 1999• Sam McCoy Group, Malaysia February 2001• Flygt Werk, Germany July 2002• Flygt Executive Team, Sweden September 2003• Oslo, Norway October 2005

Industrial & BioPharm• Amory, Mississippi December 1999• Lancaster, Pennsylvania June 2001• Chongwon, Korea May 2005

Residential and Commercial Water• Chicago, Illinois November 1997

Water Treatment• Herford, Germany September 1996• Essen, Germany April 2004

Motion & Flow ControlElectronic Components•Meaux, France December 1998

• Berlin, Germany February 2000• Tianjin, China December 2001

• Basingstoke, U.K. February 2002• Tianjin, China (MMI) December 2002• Xiamen, China January 2003• Milan, Italy February 2003• Nantong, China August 2003• Weinstadt, Germany September 2003• Shenzhen, China January 2004• Xinglin, China January 2004• Zama City, Japan March 2004• Santa Ana, Costa Rica August 2004• Dole, France December 2004• Nogales, Mexico December 2004Friction Materials• Termoli, Italy February 2002• Vauda Canavese, Italy July 2003• Barge, Italy January 2004Marine & Leisure• Foothill Ranch, California December 2002• Hoddesdon, U.K. December 2003KONI• Oud-Beijerland, Netherlands June 2001

22

OHSAS 18001 CertificationSeveral ITT sites have earned OHSAS 18001 certification, and more are working toward it. To meet this Occupational Health & Safety standard,a site must develop a comprehensive system formanaging health and safety risks at its facility. Here are the ITT sites that have already achievedOHSAS 18001 certification:

From our Electronic Components business:• Xiamen, China – January 2003• Xinglin, China – February 2004• Tianjin, China – June 2004

From our Marine & Leisure business:• Hoddesdon, U.K. – February 2005

From our Water Treatment business:• Herford, Germany – May 2005

Earning ISO 14001 Certification in Record TimeIn late 2004, our industrial pump plant in Chongwon, Korea, accepted the challenge to earn ISO 14001 certification to improve its competitive position. It made the project a priority and – six months later – proud employees were hanging the certificate on their wall. Here is how the employees in Chongwon made it happen:

• November 29 - December 1,2004: ESH coordinator ChunGoo Lee and quality controlmanager Dong Jin Kang com-plete ISO 14001 training course.

• December 6, 2004 – January 4,2005: ISO 14001 project teammembers are nominated andtrained. They include Lee and Kang, as well as productmanager Yi Joon Ryu, materialsexpeditor Il Jun Yoon, accountantDong Joo Kim and quality assurance engineer Mi Jin Kim.

• January 5 – February 23, 2005:The team prepares manual andprocedures, including variouscheck lists. They review shop

processes related to ESH issues,re-evaluate key factors forimprovement, and create integrated manual that coversboth ISO 9001 (quality management) and ISO 14001(environmental management)systems.

• February 24, 2005: Preliminaryaudit is conducted by Det NorskeVeritas (DNV), one of the world’sleading registrars of ISO 14001certification.

• March 2 – March 13, 2005:Employees are trained and educated about the importanceof making adherence to ESH procedures a priority.

• March 14, 2005: DNV conductsaudit for ISO 14001 manual,procedures and documentation.

• March 28, 2005: DNV conductsfinal audit of Chongwon site.

• March 30 – April 21, 2005: Theteam and employees completecorrective and preventive actionsfor minor defects identified byDNV auditors.

• May 6, 2005: ISO 14001 certificate is awarded to ITT industrial pump plant inChongwon, Korea.

23

The Chongwon teamholds the ISO certificationit earned in just sixmonths. Team membersinclude (front row, l. to r.)Mi Jin Kim and Chun Goo Lee, and (back row)Dong Jin Kang, Il JunYoon, Dong Joo Kim and Yi Joong Ryu.

Environment,Safety & Health

Workplace Health & Safety

Safer Body MotionsOur friction materials business in Italy utilizesapproximately 300 employees to prepare, paint andfinish thousands of brake pads each day. In 2004,more than 10 percent of this work force was suffering from upper limb disorders that necessitated work limitations. In response, technicalengineer Livio Pazé turned to OCRA, the new toolthat quantifies the relationship between the dailynumber of actions performed by the upper limbsand the corresponding number of recommendedactions. Guided by OCRA, he optimized workbreaks, introduced job rotation and introduced new working methods to reduce repetitive motions.As a result, the maximum risk rating of these operations moved from red/orange to yellow/green,and all 35 affected workers were able to be fully re-integrated into the workplace.

Safer Work ProcessesOur boiler control plant in Chicago recycles morethan 1,500 gallons of metalworking coolant eachyear. The old process caused some employees tohave concerns related to contact with dirty coolantand a steam-cleaning procedure that presentedrisks from open flames, combustion fumes andhigh-pressure. In 2005, a team moved to a muchsafer and more efficient process called “Dump,Clean and Recharge” which minimizes contact with old coolant and greatly reduces steam cleaning time. As a result, the plant further extends the life of the coolant, while also minimizing employees’ risk.

Safer MachinesWhen ITT was chosen to run the space launch facilities at Vandenberg Air Force Base in California and Patrick Air Force Base in Florida, we assumedresponsibility for some of the most sophisticated technology in the world today – and some old machinery. The maintenance shops included unsafeequipment, so an ITT team initiated a comprehensivemachine guard risk assessment and installation program. By adding emergency stops, lockable disconnects, shields, covers and other safety features tomore than 50 pieces of machinery, the team reducedinjuries and workers comp cases, and contributed to$181,000 in savings realized by the Air Force customer.

24

Putting Computer Monitors to SleepIn 2005, ITT joined Energy Star’s Million Monitor Drive andagreed to install server software that puts computer monitorsto sleep after a set period of inactivity. We have enabled more than 20,000 of our computers with monitor powermanagement, which amounts to saving more than 4 millionkilowatt-hours of electricity per year.

With more than 55 million office computers in the UnitedStates, the Environmental Protection Agency estimates thatmore than 11 billion kilowatt-hours could be saved throughmonitor power management. Going forward, ITT plans toinstall the forced-sleep software on servers that touch 25,000computers around the world.

Natural Resources

25

These two teams found ways to save more than 2 million gallonsof water a year. In the Philippines (l. to r.): Randy Peros, RollyCamposano and Bob Scott. In China (inset photo l. to r.): Jim Song,Daiyue, Li Yi Min, Leo Liu and Peter Zhu.

Controlling Our Water UseLike all ITT facilities, our pump manufacturingplant in Nanjing, China, and pump repairand distribution center in Calamba Laguana,Philippines, share the same ESH mission to“reduce consumption of natural resourcesand energy.” So there was understandableconcern when water consumption at these two plants spiked by 184 percent in 2004.

Each site assigned a team to analyze waterconsumption and sales data from 2003 and 2004. It quickly became clear that wateruse was going up much faster than sales,meaning consumption wasn’t caused byincreased production needs. There was wastesomewhere in the system, and the teamspored deeper into the data to find the causes.

After detailed analysis, the teams zeroed in on the water-wasting culprits – leakingpipes and a faulty water meter in Nanjing,and pipe deterioration in Calamba Laguana.Repairs reduced water consumption by more than 2 million gallons per month – a62 percent improvement that has returnedusage rates to 2003 levels.

Huge Decrease inHazardous Waste By incorporating waste reduction into businesschange, our radar system business in VanNuys, California, reduced hazardous waste volume by 95 percent. As part of a strategy to transform the function of its operationfrom manufacturing to systems integration, a site services team eliminated or outsourcednumerous sub-assembly processes and divested associated equipment. They also created new processes to minimize the wastestream volume at the re-designed assemblyfacility. Hazardous waste volume plummetedfrom a previous four-year annual average of19,900 pounds, with $18,000 in expenses, to a 2004-2005 annual average of just 820 pounds and only $3,900 in expenses.

Recycling RejuvenatedAt the end of 2004 less than one ton of solid waste wasbeing recycled annually by our facility in Charlotte, NorthCarolina, where we make ultraviolet water treatmenttechnologies. Sales of the few materials targeted for recycling yielded little financial return, so ESH coordinatorEmily Scofield initiated a new recycling program. The 160employees embraced the plan with enthusiasm, and theirefforts to expand the range of recycled materials, identifymarkets and reduce excess waste paid off. Before 2005was over, the operation had recycled 22 tons and hadreduced non-hazardous solid waste by five tons eachmonth, at an annual cost savings of $10,000.

Reducing Sulfates and SludgeIn Hockenheim, Germany, our automotivetubing business generated multiple benefitsfrom a multi-faceted effort to treat wastewater. The conventional method forreducing sulfate contaminants in wastewater– precipitating them with limewater, a calcium hydroxide solution – generates a highamount of hazardous sludge. Ute Noppe,water management engineer, devised aninnovative combination of processes thatreduces the sulfates from 292-438 grains/gallon to less than 146 grains/gallon, whilesignificantly reducing the sludge. In additionto lowering waste disposal costs, the new system makes byproduct available for sale to a zinc anode manufacturer.

Environment,Safety & Health

Waste Management

26

Ute Noppe

Water-based Paint Water is increasingly being used as a replacement solvent in industrial applications. In place of organic solvents that infiltrate the air and create a risk of fire and explosion, paint formulatorssubstitute water, which is stable and non-polluting. In 2005 our HVAC pump division in Morton Grove, Illinois, decided toreplace solvent-based alkyd-acrylic paint with waterborne paint. The water-based paint team identified a product that delivers the same performance quality as the original while reducing environmental risks.

The water-based paint improved on the previous enamel in three ways:• reducing volatile organic compounds (VOCs): VOC rating

was halved, from 2.8 to 1.21 pounds per gallon.• eliminating hazardous air pollutants (HAPs): HAPs were

reduced to zero from 2 percent by volume.• achieving lower risk of fire and reactivity: Under the

Hazardous Material Information System (HMIS), the water-basedpaint is rated 0 (minimal) for both flammability and reactivity;the enamel paint was rated 3 (serious) and 1 (slight), respectively.

In all, the business decreased its potential emissions of VOCs from 218 tons per year to 71 tons per year. The environmental benefits also generated financial pluses. Not only does the newpaint have a lower price, but the changeover will enable the HVACpump operation to reduce costs associated with storage and use ofhazardous materials. Total savings will be at least $150,000 a year.

Materials

27

Frank Domzalski

Green SwitchChallenge breeds innovation. The ITT plant in Gloucester,Massachusetts, which makes Rulebrand submersible bilge pumpsand marine accessories, needed to re-engineer one of their mostsuccessful products, a marinepump float switch. The switch wasof such high quality that it wasguaranteed to last for one millioncycles under a 16-amp load. But itrelied on a liquid contact made ofmercury, which doesn’t meet thenew Restriction on HazardousSubstances (RoHS) requirements.Replacing the switch with the existing alternative would not comply with regulatory restrictionseither, because that switch usedcadmium.

That’s when Frank Domzalski, a senior development engineer atour sister electronic componentsbusiness, stepped in. He literallywent back to the drawing board to re-design the fundamentalswitching element so it would work using non-toxic contactalloys. In place of either mercury orcadmium, the new “green switch”uses silver-tin oxide, a material that not only satisfies the division’senvironmental objectives, but alsoprovides the high durability of theoriginal design.

Environment,Safety & Health

Preparation and Prevention

28

Jose Ruiz and his coworkers at our Valencia, California, facility came within hours ofbeing one-year-accident-free.They are committed to achieving that goal in the coming year.

Our Goal: Zero AccidentsIn 2005, ITT established a safety goal for all our sites: zeroaccidents. As a company, we have improved our injury frequency rate every year for the past five years. It now stands at a historic low of 2.76 accidents per 200,000 hoursworked, but in this area even a low rating is still too high.With the new “Getting to Zero” initiative, we set the onlypossible target – zero – and created a six point plan for success.

1. Communicate the zero accident goal throughout ITT.2. Create a job safety/risk analysis for every job.3. Apply root cause analysis to near-misses. (Currently, we

use this data-based tool to uncover the true causes of accidents, spot trends, and prevent future incidents.)

4. Integrate ESH into all key business processes and decisions.5. Refine elements of injury case management.6. Track progress against the best and safest companies.

“Getting to Zero” is not an impossible goal. Our 45-personpump plant in Chongwon, Korea, has gone 13 years withouta lost-time accident because everyone from top managementto forklift operators takes safety seriously.

After our aerospace valve plant in Valencia, California,incurred an injury on February 2, 2005, management steppedup workplace safety precautions and promotions, includingawards for one year without a recordable accident. Threehours before the plant was about to reach the one year milestone, an employee accidentally touched a rotating drill press and lost a fingernail.

Steve Gedalje, ESH manager for the plant, says everyone’sfirst reaction was “disbelief” that they had come so close to being one-year-accident-free, but that it didn’t take longfor them to begin setting their sights on their next one-year,zero-accident deadline in 2007. It’s a strong sign that thezero-accident culture is taking hold at ITT.

Preparing forDisasters When disaster strikes, business mightnot proceed as usual, but it doesn’thave to grind to a halt. A BusinessContinuity & Disaster Recovery Plan(BCDRP) can mitigate many of the consequences of catastrophic events.

Our operation in Clifton, New Jersey,created the first BCDRP for an ITT manufacturing business unit, an effortbegun in 2002 by a cross-functionalteam. The plan includes procedures,requirements and specifications necessary to re-start manufacturingprocesses. Recognizing the value of getting the plan into the hands of other business units, the team produced a CD, which has been distributed to many businesses, as wellas an online version. In this way theBCDRP serves as a training tool and a model structure from which otherbusinesses can fashion their own plans.

SAFE: Safe Actions for EveryoneOne summer morning in 2005, an employee of our pump operation inPewaukee, Wisconsin, was connecting a ground wire, when his wrenchcontacted an electrical source, causing a serious burn from which he hassince recovered.

How can we prevent this type of incident from happening again? It’s not acceptable just to tell employees to be more careful: specific corrective actions must be taken. Since 2001, our ESH team has beenusing a standard investigative process, the SAFE (Safe Actions for Everyone)Accident Prevention Program, to fix the problems that accidents reveal.SAFE uses Root Cause Analysis (RCA), a metrics-driven tool that identifiesthe true causes of accidents, injuries and illnesses. By successively askingwhy, the process generates the how.

Using RCA, ESH Manager Chris England identified not one but ninecorrective actions. Ultimately, careful analysis and ESH response to thisaccident led to equipment upgrades, additional training and changes in procedure.

29

Sharing Bioremediation Best Practices The Eighth International In Situ and On-Site Bioremediation Symposium was held in Baltimore, Maryland, in June of 2005. This conference is held every other year so that scientists, regulators, and industry leaders from around the world can shareinformation on the latest innovative in situ bioremediation technologies to further therestoration of soil and groundwater contaminated as a result of site activities.

ITT participated in the program againthis year with Rosann Kryckowski from oneof our defense businesses and Greg Carterfrom Earth Tech presenting three papers:“Strategy For Managing a StreamlinedCleanup Project,” “Evaluation of Bio-TrapSamplers at a Fractured Rock Site,” and“Bioremediation of Isopropyl Ether inGroundwater.” The paper on strategy was co-authored and presented with their EPA regional project coordinator.

ITT’s Rosann Kryczkowski and Earth Tech’sGreg Carter presented three papers on in situ bioremediation, based on lessons learned from the successful groundwater remediation of an ITT site in Roanoke, Virginia.

Instead, we urge everyone to ask themselves a simple question: Am I behaving

in a way that I wouldn’t mind reading about in the New York Times or discussing

with my family over the dinner table?

That’s what compliance means at ITT. It’s not a technical question. It’s more

a matter of our heads and hearts telling us that we are doing the right thing.

In some areas – federal tax laws, for instance – people aren’t born with an intuitive

understanding of the legal requirements, and in those cases the right thing to do is

consult with our internal tax and legal experts to make sure we are in compliance.

In all cases, the law is a starting point. Acting in a legal manner represents

the absolute minimum level of compliance at ITT, and we ask and expect much

more of all our employees. At the same time, we understand that mistakes will

happen. Our goal is to create an environment where transgressions are not

intentional acts – and where our people feel comfortable coming forward to

report and rectify the situation.

To that end, we have expanded our Ombudsperson program so that we

now have trained, objective “business ethics guides” all around the world.

We have also conducted extensive Code of Conduct training at all our sites,

and worked heavily with our human resources personnel to ensure they are

prepared to deal with ethical questions and concerns.

We continue to strengthen employee communications about our compliance

program. ITT has an Ethics and Compliance intranet site where employees can

access resource materials, ombudsperson information and training information.

All of our sites are provided with posters and wallet cards that communicate the

company’s ethical values and list the toll-free phone numbers for our top-level

ombudspersons. And every month, we publish a “Code Corner” article in our

all-employee online newsletter that highlights a timely compliance issue.

In 2005, ITT formalized its commitment to compliance by naming a full-time,

company-wide Compliance Director and relocating the compliance staff to

our global headquarters office. It was another clear signal that ITT is

a company with a strong ethical culture dedicated to helping

employees do the right thing – always.

Vince Maffeo

Senior Vice President and General Counsel

At ITT, we want to keep the concept of compliance as uncomplicated aspossible. Our people shouldn’t have to parse the language in a law bookto know if they are making the right decision or acting appropriately.

Compliance

30

Systems & ToolsInternational Trade & Compliance Group ITT is a truly global company with products and services that are attractive to a wide range of potential customers, but somegovernments prohibit us from dealing with certain individuals orentities. Sometimes governments restrict us from doing businesswith entire countries. Our own Code of Conduct requires us toengage in business transactions in open and honest terms andfollow all government laws and regulations, and in late 2005, ITT created a team to help employees to safely navigate all thecomplex national and international laws that guide today’s business activities. The International Trade and Compliance (IT&C)group has a mandate to establish, coordinate, and manage ITT’sinternational trade compliance, and is a valuable new resourceavailable to assist all ITT units to do the right thing always.

Ombudsperson ProgramITT has always had ombudspersons in place to receive ethicalquestions or concerns from employees and assist in the investigation of possible violations. Occasionally, they will offeradvice or direction, but they are trained more as facilitators who can bring the right team of people together to make thefinal decision and keep our company on the ethical course.

The ombudspersons program allows employees to raise issues anonymously, and when names are provided, ITT takes allreasonable and legally permissible steps to protect confidentiality.In 2005, we increased the number of ombudspersons. We now have 39, located in all key geographies where ITT has an organizational or manufacturing presence. Employees can now be assured that they are speaking with someone who is familiar with their culture and can communicate with them in their native language.

Code of Conduct ITT’s Code of Conduct clearly spells out our company’s“beyond compliance” objective on areas from businesscourtesies to intellectual property. To increase understanding and eliminate gray areas, the Code supplements broader policy language with pointed questions addressing specific situations frequently confronted by our employees. The Code is available inprint and online, and is translated into 17 languages.

U.S. Government Contracting As a major supplier to the United States government, ITTis subject to the special rules and regulations pertaining tocontracting with the federal government. ITT is committedto ensuring that our businesses are ethical and that allactivities are conducted in full compliance with applicableregulations.

As the leader of our federal contracting activity, ITTDefense has been at the forefront of this effort. In 2000,ITT Defense set up a Compliance Review Board to overseeits compliance program, including federal contractingactivities. The Board conducted a risk assessment in 2005 focusing on federal contracting requirements and rolled out training programs designed to ensure that our employees involved with federal contracting fully understand and comply with all of the uniquerequirements of that work. The specialized training topics included “procurement integrity” and provided information on bribes, gifts and gratuities to governmentofficials; kickbacks; and the protection of governmentintellectual property.

31

International Trade & Compliance group members include (l. to r.): JeanSinger, Katie Maloney, Dave Tarbell, Lisa Caplinger and Nathalie Ekhsigian.

MetricsCompliance Training for EveryoneIn 2005, ITT completed a comprehensive, two-year training program to familiarize all employees with thecontents of our Code of Conduct and to draw attentionto recently updated compliance policies. Virtually 100percent of all employees have now received this training,and to maintain this level of training, it is part of ournew employee orientation.

On a global level, we focus our efforts on water-related philanthropy and look

for every opportunity to use our position as the world’s leading fluid technology

company to address water shortages in the short- and long-term. Our helping

hand takes many forms – from financial assistance and donated technology to ITT

volunteers and experts who lend their time and voices to solving the water crisis.

At the same time, we know we can maximize ITT’s humanitarian reach by

letting our local operations determine the most meaningful ways they can assist

their hometowns and neighbors.

We are a vital presence in hundreds of towns and cities around the world,

and the ITT people who live and work in these communities know best how we

can help. They organize walk-a-thons and golf tournaments to aid medical

research, sponsor robotic teams for young engineers, create theater groups for

special needs children, donate money to help wounded soldiers make it through

their long stays in military hospitals, and much more.

In 2005, we saw just how powerful this global-local balance can be.

When the Indian Ocean tsunami struck, ITT as a corporation donated

hundreds of thousands of dollars to the Red Cross’ relief effort.

Simultaneously, a large group of our employees took it upon themselves

to deliver ITT water purifying systems to Sri Lanka, bringing clean

drinking water to the devastated island country.

We took two roads, both headed in the right direction, and as a result

tsunami survivors got immediate relief in the wake of a disaster, as well as

equipment that will provide longer-term relief from future water shortages.

To be a good corporate citizen, you need to match your talents to pressing

human needs, and at ITT, that’s what we try to do.

Tom Martin

Senior Vice President and Director of Corporate Relations

When it comes to community involvement, ITT is using all of itsresources, especially the thinking power of its employees.

Community Involvement

32

Systems & Tools

Metrics

Partners

ITT Charitable FundOur global philanthropic activities are administeredthrough a charitable fund and overseen by an employeecommittee. As a Fortune 500 company, we receive manyrequests for support, and the committee works hard tomake sure we are donating money and equipment inareas that best match our corporate giving guidelines. In 2005, in addition to a number of smaller donations,we made substantial contributions to relief efforts thataided victims of the Indian Ocean tsunami, HurricaneKatrina and the Pakistani earthquake, and to a project runby the Millennium Water Alliance that will bring water to 30 villages in Ethiopia.

Motivating More Young ScientistsThe solution to the growing world water crisis couldcome from today’s teenagers. ITT’s sponsorship of theStockholm Junior Water Prize, which encourages high school students to search for solutions to water scarcity issues, has expanded over the past nine years (story, page 34). Here are the number of countries that have participated for the Prize each year since it began in 1997:

Millennium Water AllianceThe MWA is a cooperating group of humanitarian and faith-based agencies working to assist poor communities in the developing world gain access to safe water and sanitation.

Stockholm International Water InstituteA policy think tank that contributes to internationalefforts to find solutions to the world’s escalating watercrisis, SIWI administers the Stockholm Water Prize andStockholm Junior Water Prize to draw attention to criticalwater issues. ITT Industries is a founding member andongoing sponsor of both competitions.

USOThe USO provides emergency housing, food assistance,employment fairs, enrichment programs and hospital visits for U.S. military service members and their families.

Water Environment FederationOne of a leading group of international water qualitynon-governmental organizations, WEF is dedicated to the preservation and enhancement of the global water environment.

Water for PeopleWater For People is an international nonprofit development organization committed to the long-termimpact of increased access to safe drinking water andimproved sanitation and health. Time after time, WaterFor People finds that providing safe drinking water servesas a catalyst for greater community development.

Community service is a valued undertaking at ITT. Our company reserves its highest honor, the annual Harold S. Geneen Award, for employees who have made outstanding individual and team contributions to the company, or whose actionshave resulted in the improvement of life within a community. In 2005, the Geneen Award forCommunity Service went to our Tsunami RescueTeam. To read more about the team, see page 35.

8 10

14

17 18

22

26

28 29

1997

1998

1999

2000

2001

2002

2003

2004

2005

Recognition

33

Water toEthiopia & IndiaIn 2005, ITT teamed with theMillennium Water Alliance on a project to provide fresh water to approximately 30 villages inEthiopia. More than three-quartersof the population of this Africannation don’t have access to safe water supplies and nearly 90 percent of these people arewithout access to adequate sanitation. ITT’s financial contributions will enable MWApersonnel to drill wells and educate the local residents aboutwater hygiene practices.

The goal in all cases is to create a sustainable solution – notshort-term water relief. The peoplewho live in these villages will learnhow to operate and maintain the water-delivery systems, so the clean water will continue toflow once MWA technicians aregone. In 2005, ITT and MWA representatives traveled toEthiopia to identify villages that can provide strong localinvolvement. The well-drilling and water education begins in 2006.

In 2006, ITT funded a similarproject in India. Managed by Water for People, this well-building effort will benefit 50 families in the Sundarban Islands.

Community InvolvementGlobal Projects

The 2005 Stockholm Junior Water Prize was won by three South African students –Pontso Moletsane, Motobele Motshodi andSechaba Ramabenyane – for developing anirrigation system that uses light detection to control water pipe valves. By automatingirrigation so it occurs mostly at night, lesswater is lost to evaporation.

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Stockholm Junior Water PrizeITT continues to look for ways to engage the curiosity and studiousenergy of high school students around the world in solving the growingwater crisis. In 2005, for the ninth consecutive year, we sponsored the Stockholm Junior Water Prize Award, which honors the bestresearch projects by teenagers on the topics of water conservationand management.

Beginning in 2006, Sri Lanka will join a growing list of countries –Argentina, Canada, China, France, Holland, Sweden and the UnitedStates – taking part in the competition thanks to ITT’s sponsorship. In addition, we will inaugurate the ITT Award for Excellence in StudentWater Journalism, with national contests in the United States andSweden. Winners will travel to the 2006 Stockholm Water Symposiumto report on the student research showcased there, and help raiseawareness of water and ecological issues upon their return home.

Funding Fisher HousesITT helps fund Fisher Houses around the world. These houses serve as a “home away from home” for members of the U.S. armed services and their families during a medical crisis. When a loved one is undergoing medical treatment in an unfamiliar city, families and caring friends can stay close by – in a clean, safe, warm and compassionate setting where they can find respite from the stress of worry.

Tsunami RescueEffortThe unthinkable happened onDecember 26, 2004, when a tsunamismashed into 12 countries in Asia andAfrica. Never in our lifetime has a singlenatural disaster affected so many people in so many parts of the world.

ITT’s response matched the magnitudeof the disaster. We contributed millionsof dollars in cash, products and manpower to the tsunami relief effort.As a company, ITT donated hundreds of thousands of dollars to theInternational Red Cross to aid in theirrecovery work. Our employees madecountless individual contributions,which in many cases were matched by their local business units.

When CEO Steve Loranger asked the question “How can our fluid technology systems help the situation?”a team of employees in the U.S.,Europe and China had the answer. Over the next weeks and months, they worked impossible hours and overcame daunting logistical challengesto assemble and deliver nearly 60portable water purifying units, 10reverse osmosis systems and dozens of hand-held chlorinators to Sri Lanka.The units produced enough water to meet the daily needs of more than one-half million people living in makeshift refugee camps. All the systems were donated to the Sri Lankagovernment to aid in future flood relief efforts.

The full story of our tsunami rescueeffort is available in the book “After the Wave,” located on the ITT website,www.itt.com. To see a PDF version of the book, click on the News menu,and select Publications.

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Hurricane ReliefThe barrage of hurricanes that battered the southeast United States brought out thegiving side of ITT employees everywhere who– as business groups, teams and individuals –donated money, supplies and time to helpthe recovery effort.

One such hurricane hero was Liz Ritter, an ITT Environment, Safety & Health coordinator in the City of Industry, California,who ventured into the hurricane zone as a volunteer first responder. Ritter had completed Federal Emergency ManagementAgency (FEMA) first responders training in2004 and was called into action whenHurricane Wilma hit in late October 2005.Twenty-four hours after learning she wasneeded, Ritter was in LaBelle, Florida, serving800 hot and cold meals from a makeshiftrelief site in the town park. For the next twoweeks, she stayed on the scene, helping provide food and hope to people who hadlost everything.

House of RuthITT’s Defense business is a sponsor of the House of Ruth inWashington, D.C., which provides abused spouses and their children a safe, nurturing place to live, and offers services and support to allow them to build safer, more stable lives. The House of Ruth operates six locations for 57 families, including nearly 150 children, and provides emergency shelter for nearly 70 women every night.

Community InvolvementLocal Projects

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A Theater for SpecialNeeds ActorsThe arts have therapeutic powers, and three ITTemployees have created a theater to help peoplewith special needs. Jack Petruzelli, Joseph Raymoand David Schmidt – engineers and equipmentrepair specialists from our space business inRochester, New York – founded and now operatea performing arts center for actors, ranging in age from 13 to 60, who have a wide range ofdevelopmental issues. The casts get support frommainstream volunteer actors, professional set andcostume designers, musicians, technical specialistsand dance and movement therapists. In 2005, the theater put on its fourth play, Beauty and theBeast, with the three ITT founders providing setfabrication, lighting installation, and backstageproduction direction.

How ITT EmployeesHelped Those in Need in 2005• George Bouzakis served as president of a volun-

teer organization that helps immigrants from theBalkans and Cyprus become citizens and getestablished in the United States.

• Employees in Basingstoke, U.K., organized theirsecond charity golf tournament and raised nearly$2,000 for the Cystic Fibrosis Trust.

• Dave Novak, Chris Winkler and Bruce Bekke ran ina triathalon and raised more than $15,000 for theMake a Wish Foundation.

• Mitch Sparrow and his family opened their housefor the eighth time to a puppy they trained to bethe eyes for the sightless.

• Employees in Springfield, Massachusetts, raisedfunds to create a scholarship for a high schoolgraduate who plans to study engineering.

• Linda Madsen collected supplies from her co-workers and sent care packages to U.S. soliders in Iraq.

• ITT engineers and scientists inRochester, New York, mentored highschool students who were building a robot for a regional competition.

• Shirley Torrey served as a mentor andcounselor for a program dedicated tohelping troubled youth make the rightdecisions and accept responsibility for their actions.

• Dennis Fitzgerald and Michael Moore led a volunteer organization working to create analternative curriculum – with classes in subjectssuch as food service and public safety – that better fit the life circumstances of some studentsin upstate New York.

• Per-Inge Birgersson and his family traveledfrom Sweden to China to visit the 100 disadvantaged students in Yi County who receive financial support from theBirgersson’s so they can attend school.

• Janet Mozolewski, who was diagnosed with arare form of breast cancer in 2002, completed amarathon-length walk and raised $10,000 forbreast cancer research.

• Employees in Leonard, Michigan, purchased areading book for each of the 350 students at thelocal elementary school.

Breaking the Poverty Cycle in PuebloPueblo is the poorest city in Colorado, and many of itschildren feel powerless to rise above their environment.Dr. Sam Orozco wants to break this poverty cycle. As a Value-Based Six Sigma champion for ITT, he applieda process-oriented approach in founding Kids Inspiringthe Next Generation, a program to instill a can-do attitude in Pueblo’s kids. He uncovered root causes forlow self esteem, recruited strong leaders and role models,and created a self-perpetuating program by which olderchildren inspire younger ones through their involvementin activities and successes such as graduating from highschool. From 10 children in 2002 to more than 50 in2005, the program is growing and Dr. Orozco plans toexpand it further within the Pueblo community and shareit at the local, state and national level.

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For ITT to continue to thrive, we must attract the best and brightest people

from a talent pool that is changing rapidly. Europe’s population includes a larger

percentage of immigrants and Eastern Europeans than ever before. The Asian and

Hispanic populations in the U.S. will more than double by 2050, at which time

they’ll represent more than one-third of the total population. China and India will

become an even greater source of talent in Asia, especially in the area of technology.

We need to create work environments, business processes and development

opportunities that position ITT as an employer of choice for these groups – and

others – who can help us be faster, smarter and more innovative. Recognizing this,

ITT CEO Steve Loranger made diversity and inclusion a company priority and global

workforce strategy a formal function in 2005.

Our goal is not to meet quotas, but to get the right people into the right

positions. Some of our first steps include developing policies that foster

inclusion and dissolving organizational and geographic borders so that talent

can move freely from one region or country to another.

We are moving toward a more welcoming corporate culture. How will

we know when we’ve arrived? The top university students, the best women

and minorities in the workplace, proven industry leaders and coveted

customers from all around the world will want to come to ITT because

we understand them, talk to them, appreciate their differences and

reflect these differences in the opportunities and services we provide.

Usha Wright

Senior Vice President and Director of Global Workforce Strategy

Not many companies have more international experience than ITT,which was founded in 1921 by two brothers determined to create the first worldwide system of interconnected telephone lines. A lot has changed since then. We are no longer in the telephone business, and our success as a global employer requires us to do much more than set up shop in multiple countries.

EmployeesDiversity & Inclusion

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Systems & ToolsGlobal Workforce CouncilsIn 2005, ITT established three regional Workforce Strategy councils to drive diversity and inclusion efforts in Asia-Pacific, Europe and the Americas. Council members include key business leaders and represent a diverse cross-section of our company. The councils’ first project was developing a three-year regional roadmap to achieve greater international, functional and gender diversity among ITT global leaders.

Domestic Partner BenefitsIn 2005, ITT began offering domestic partner benefits to all employees, and extended its anti-discrimination policy to encompass sexual orientation. By establishing a benefits policy that includes our company’s gay and lesbian employees – and prohibiting discrimination based on sexual orientation – we are making our company more welcoming to a growing and vital part of the world population.

Employer of ChoiceA 2005 survey by Aviation Week identified ITT as one ofthe companies most sought after by aerospace/defenseprofessionals and recognized our company for our effortsin the areas of “valuing people” and “diversity.” Survey respondents gave us high ratings for our investment in ongoing education and professional development, the rate of internal promotions, and for promoting diversity in the workplace.

Recognition

MetricsFree Flow of Employee TalentITT is working to dissolve organizational and geographicboundaries so that talent flows more freely and we canmatch the best talent with the needs of the organization. At our 2006 Leadership Forum, the company’s top 175 executives and managers were asked if they had ever held jobs in other countries, businesses and functions. Here are the responses:

Between Businesses77 percent have worked in more than one

ITT business segment

Between Functions86 percent have worked in more than one job function

Between Countries35 percent have worked in more than one country

Global GatheringsTo promote inclusion and global thinking, ITT regularlyholds key meetings outside the U.S. In 2005, ITT Board of Director members met in Sundbyberg, Sweden, home to our Flygt brand pump business, and the company’s top leaders traveled to Shanghai for our annual China Forum, pictured here.

At the China Forum, bi-lingual translators were on-hand to relay key messages from the speakers, including CEO Steve Loranger, the three management company presidents, and the heads of ITT’s finance, operations excellence, human resources, diversity, compliance and communications functions. They alsotranslated questions from the audience, which includedrepresentatives from all 10 of ITT’s manufacturing facilitiesin China, and its two China-based sales organizations.

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Our goal now is to make the ITT leadership talent pool as deep as possible,

and get the right people in the right seats on the bus. The result will be a strategic

competitive advantage for ITT.

We are building a robust pipeline of potential leaders. It starts with the desire

to see all our people fulfill their true potential. If their talents include leadership

qualities, our job is to recognize this and provide these future team captains,

business managers and company executives with the training, opportunities,

challenges and channels they need to take their skills as far as possible.

To accelerate this process, we rolled out Value-Based Leadership Development

in 2005. With this tool, we defined the competencies we’re looking for in

ITT leaders and developed a mix of classroom and on-the-job training to help

them unlock their leadership potential.

In 2005, we experienced higher-than-normal turnover in our executive and

management ranks. Many of the open positions were filled by internal

candidates, and even in the face of this temporary flux, ITT maintained strong

forward momentum. It’s a testament to their strong leadership capabilities –

and our effective leadership development process.

Scott Crum

Senior Vice President and Director of Human Resources

Leadership is one of the key strategic objectives – and strengths – of ITT. Our company has been named to numerous best-managed, best-performing and most-admired lists, and the achievements behind those awards were spearheaded by strong leaders at all levels of ITT.

EmployeesLeadership Development

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Systems & ToolsGetting It Right at the TopThis Value-Based LeadershipDevelopment process is used toensure ITT has the right people in KeyValue-Creating (KVC) roles. We lookat how well the strengths of peoplein KVC roles support the businessstrategy. If there is a gap, the firstoption is further development, butredeployment is a possibility. EachKVC employee creates an individualdevelopment plan with action itemsto be carried out in a set timeframe.In 2005, we began implementingthis program at the highest levels ofthe company, and it will cascadethrough the organization in 2006.

Leadership WorkshopsThrough leadership workshops, ITT provides collective developmentopportunities for people at three different levels of the company: senior executives, ready successorsand business leaders. In group settings, these leaders take part in interactive and classroom presentations geared to their leadership level. The program wasrolled out at the senior executive level in 2005.

VBSS Team LeadersITT provides employees with numerous opportunities to test theirleadership skills through Value-BasedSix Sigma projects. Employees whovolunteer and are selected to head ateam must attain VBSS certification,which requires leadership training.They lead their co-workers throughcontinuous improvement projects,which can focus on anything fromreducing scrap to improving the payroll process.

Accelerating Talent DevelopmentAt the corporate level, Accelerating Talent Development puts potentialITT leaders through a two-year program that includes self- and peer-appraisals and classroom training. In keeping with the VBLD tenetthat 70 percent of leadership development comes from experiential orhands-on learning, their leadership learnings are immediately put totest on months-long team projects focused on creating real value forITT Industries. In 2005, 60 potential leaders at the corporate level of ITT began their ATD training. An ATD program for employees at thevalue center level is currently being rolled out throughout ITT.

41

ATD participants in 2005 included (l. to r.)Wang Fei, Brenda Doyon, Lu Shuping,Chris Jamieson and Paul Donnini.

We define customer satisfaction as delivering unrivaled value to the people who

buy and use our products. That means they are delivered on time and meet the

true needs of customers, but it also means they are safe and compliant, enabling

customers to meet or exceed today’s increasingly stringent regulatory and

environmental standards.

How do we achieve this?

Our pump design process includes life cycle costing calculations that consider

environmental impact at every stage – production, usage and end-of-life – enabling

us to provide customers with pumps that are more durable and use less energy

over their entire life.

In the defense area, we are working with our customers to remove lead

from aging aircraft, and have formulated lead-free solder alternatives for

our products.

On a broader scale, our businesses have reviewed, updated or replaced

items in their product lines to ensure we are in compliance with RoHS and

WEEE, the new European Union directives that mandate the removal of

hazardous substances and recyclability of electrical and electronic products.

Customers can buy from us with the knowledge that they will be able to

use, dispose or recycle our products in accordance with the latest guidelines.

These are just a few examples of product stewardship in action at ITT,

and show how we are anticipating and solving customer needs. With our

Value-Based Product Development process and Product Safety initiatives,

we are working to meet business, customer and regulatory criteria now and

in the future. Our products are Engineered for life – long life – and our goal

is to stay far ahead of the compliance curve so that they are always exceeding

environmental and safety standards.

Brenda Reichelderfer

Senior Vice President and Chief Technology Officer

At ITT, we’re proud that many of our products are used to make the world cleaner, safer and more efficient. But our job is not completeunless the products themselves are part of the solution.

Customers & Products

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Systems & Tools

Partners

Value-Based Product DevelopmentVBPD is improving how we develop and deliver newproducts. The data-driven process utilizes a Stage Gateapproach that brings management decision-making toevery key step of the product development cycle. It alsouses the Nimba Value Model to help us capture and analyze the voice of the customer and develop the rightsolutions with the right level of functions and features. By filling our pipeline with need-to-have – not nice-to-have – products, VBPD is helping us deliver unrivaled levels of customer satisfaction.

Product Safety TrainingITT wants its products to be as safe as possible for anyone who makes them, buys them, uses them or is in any way touched by them. Our product safety trainingmodule gives all our sites a “beyond compliance” process to evaluate the safety of all new products andconduct periodic safety reviews of all existing products.The process also encourages our engineers, product managers and environmental personnel to look aheadand identify possible product safety issues that aren’t on the horizon today.

EuropumpEuropump is an organization whose mission is to providetechnical expertise and an information-exchange forum,and to serve as a spokesman for pump manufacturers on pan-European pump industry-related matters.

Hydraulic InstituteA non-profit industry association established in 1917, HI and its members are dedicated to excellence in the engineering, manufacture, and application of pumping equipment.

LinklatersLinklaters is a leading international legal firm retained byITT to provide WEEE and RoHS training and guidance.

Wastewater Equipment Manufacturing AssociationA non-profit trade organization, WWEMA’s mission is to inform, educate and provide leadership on issueswhich affect the worldwide water and wastewater equipment industry.

In 2005, NASA’s Goddard Space Flight Center presented us with its 2005 Contractor ExcellenceAward in the large product category. This marks the second time in three years that we won theaward, which recognizes outstanding customer satisfaction, schedule performance and continuousimprovement. Winners must also have sound programs for workplace safety, diversity, educationaloutreach and other socially responsible practices.

In addition, Boeing named us a Gold Level supplier, Honeywell put us on its exclusive list ofGreen/Grow suppliers, and the U.S. Army andRaytheon recognized us for delivering 12,000 connectors in an extremely tight time frame to get a sea-based radar project back on track.

2002

11 17

22 30

2003

2004 2005

Recognition

MetricsMeeting customer needs with more new productsA strong and steady flow of new products is one way we meet the needs of our customers and keep them current with compliance requirements. Our Value-Based Product Development initiative is enabling ITT to create a more robust new product pipeline. Here is the percentage of ITT’s total sales generated by new products (released in the last three years) since the launch of VBPD in 2002:

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Customers & ProductsMaking

Better ProductsDiscussing Safety ConcernsProduct safety is a top-of-mind topic at ITT product development meetings, like this one for our PROsmart monitoring system. Cross-functional teams explore all possible uses and abuses, manufacturing processes and installation requirements for our products, and make modifications to protect against possible injury.

The goal is to consider all aspects of product development andusage – not just intended use, but any foreseeable use – to ensure that our products are safe for customers, employees, the general public and the environment.

The wireless PROsmart, which was designed for easy use and installation, continuously monitors and automatically predicts the health of pumps and rotating equipment. The product reducesreliance on less frequent and less reliable walk-around inspections and cutting the number of catastrophic failures. It won Processingmagazine’s Breakthrough Product of the Year award, and was a finalist for Plant Engineering magazine’s Product of the Year award.

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The PROsmart design teammet in the summer of 2005 to discuss design and safetyissues (clockwise from bottomleft): Darren Moscato, Teresa Parsons, Gene Sabini,W. Patrick Yehl, Dan Chacchia,Erik Torseke, Greg Peck, John Wilkie, Jerry Lorenc,Charlie Cappellino, ButchHenyan, Mark Playford andKen Hauenstein.

Making the World a Better PlaceMany ITT products have a direct, positive impact on our lives and environment. Here are just a few examples:

• Our dual-stage membrane bioreactors allow towns and citiesto use less space to process wastewater into a clear effluent.

• Our new opto-actuator enables airplane manufacturers to build safer aircraft by removing one of the sources of ignition from the fuel system.

• Our satellite imagers and sounders collect in-depth data formore accurate weather forecasts and hurricane warnings.

• Our fire pumps protect ten million passengers each year on the subway system that runs through Bangkok, Thailand.

• Our ultraviolet water disinfection system mimics the naturalaction of the sun and cleans water without additional chemicals.

• Our connectors improve medical diagnoses by providing doctors with more vivid ultrasound images.

• Our cell-phone sized battlefield radios provide secure, reliablecommunications and reduce the load for front-line soldiers.

• Our technicians operate the Deep Space Network of giantantennas that allow NASA scientists to communicate withspace craft traveling to Mars, Saturn and beyond.

• Our portable water purifiers offer an affordable solution to developing countries that are facing water shortages.

• Our telescope assembly, integration and test efforts, and Near Infrared Spectrometer focal planedevelopment for JWST will enable scientists to study the universe’s origins.

A Night Vision GoggleThat Does More With LessOur new Enhanced Night Vision Goggle combines two long-standing night-to-day technologies into one system. Image intensification tubes enhance existing light,while thermal imaging sensors turn heat intovisuals. The result is a goggle that lets soldierssee in total darkness, and through thick smoke,fog or glass.

It’s a revolutionary technological breakthrough, but we took additional steps tocreate a goggle that met all of the U.S. Army’sneeds. We added a second color to more clearly outline thermal images, made it smallerthan its predecessor and 66 percent lighter thanthe combined weight of the two stand-alonesystems. We were also able to decrease powerconsumption. In the past, soldiers routinely discarded used batteries rather than risk batteryfailure at a critical moment. Our new systemoperates for 15 hours on one set of batteries, so soldiers can complete one night’s operationwith full battery power and the Army can avoida major expense of battery replacement.

RoHS: 100 Percent Product ComplianceOn July 1, 2006, the European Union beginsenforcing its Restriction on HazardousSubstances (RoHS) Directive, which bans the use of certain substances in electrical and electronic equipment. Our electronic components operation produces tens of thousands of different connectors and othersmall electronic devices, some of which contain lead, hexavalent chromium or cadmium– three substances on the RoHS list of regulatedhazardous substances.

The work involved to achieve compliancewith the directive was extensive. To meet thedeadline established by the European Union, a massive global effort was spearheaded by our electronic component’s engineering groups worldwide. Through collaboration,roadmapping and a systematic approach toproduct conversions, the business is now wellpositioned to meet the established deadline.

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Our suppliers are, in some respects, an extension of our company. Therefore, they

must reflect our values.

We expect our suppliers to obey all laws and industry regulations, treat their

workers fairly, provide safe and healthy work environments, protect environmental

quality and adhere to purchasing ethics. The standards set forth in our Code of

Conduct apply to our suppliers. As the Code says, “We expect everyone associated

with ITT not only to know right from wrong, but also to always choose right over

wrong.”

Before entering or extending a relationship with a supplier, ITT does due

diligence. With the Global Strategic Sourcing shared service and standard sourcing

processes, we have tools that allow us to review, analyze and compare

supplier performance.

This is an increasingly important safeguard, as our company pursues

larger-scale supplier partnerships. Through our Global Strategic Sourcing

initiative introduced in 2005, we are seeking out suppliers who can provide

services, materials and products that can be utilized across the span of ITT.

These company-wide suppliers, several located in emerging regions of the

world, provide ITT with a competitive edge. But they demand even greater

due diligence and vigilance because of their potential impact on all parts of

our business.

Even as we develop more global suppliers, ITT will continue to partner with

small, minority and disadvantaged vendors. We have a number of small business

councils in place throughout our company to ensure we are meeting our objectives

in this area.

In our effort to achieve supply chain excellence, we will live up to our

responsibilities as an ethical purchaser and continue to demand that our

providers live up to our ethical standards.

John Williamson

Vice President and Director of Operational Excellence

At ITT, we recognize that our suppliers are integral and many times strategic to our business success. We look to them to provide us withproducts and services that meet our quality, delivery and cost standardswhile acting in an ethical manner and adhering to ITT’s Code of Conduct.

Supplier Relations

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Systems & ToolsMetricsITT Premier Sourcing Process and

associated evaluation toolsITT uses the these tools to analyze supplier performance,identify critical supplier partnerships, and develop technology enhancements that will improve the supplier’sability to service ITT and its customers.

Global Strategic SourcingIn 2005, ITT created Global Strategic Sourcing, a consolidated shared services organization dedicated tosourcing services and materials for the entire corporationand for creating and sharing best-in-class sourcing and procurement practices. With the initiative, ITT aims to leverage the collective buying power of its many businesses and ensure that worldwide sourcing and purchasing practices adhere to applicable laws, regulations and the ITT Code of Conduct.

ITT is greatly increasing its number of corporate supplyagreements, meaning there are, and will continue to be, more suppliers doing business with ITT as a globalcompany, rather than with our business units. This in turn ensures that a growing number of suppliers are adhering – as part of the contract – to our Code of Conduct and purchasing practice standards. Here is the past and anticipated growth of dollars under the Corporate ITT Supply Contract:

Supplier SupportThe value of having suppliers that share our values came into focus in the early days of 2005. With ITT personnel in Europe and the U.S. working urgently to deliver water purifying systems to tsunami survivors in Sri Lanka, a number of our suppliers helped move the humanitarian effort forward.

RJW Ltd., Bass Engineering and MPB Industries donated components neededto produce hand-held chlorinators, and their employees volunteered to work over the holidays and into the nights to make the rush deliveries. Excel Logistics andCommercial Storage Ltd., two U.K. shipping companies, agreed to transport the waterpurifying units from customer stockpiles to ITT factories for refurbishing – free of charge.

“We were able to get clean drinking water to thousands of desperate people because we had suppliers who shared our ethics – and our urgency,” says Steve Morris,general manager of the ITT facility in the U.K. that produced the chlorinators.

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Steve Morris and his team: (l. to r.) Stephen Giles, ColinDipper, Mervin Fogarty, NigelLane, Roy Small, Wendy Small,Dave Dipper, Steve Morris,Peter Noyce and MickBingham.

$2.7

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$500

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2004

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Numbers are not enough. Our job in investor relations is to communicate the

ITT story accurately and with a high degree of transparency, so that there is no

confusion about how we are achieving our results. We continually strive to have

a very deep understanding of our many businesses and unique capabilities.

We also have a responsibility to disseminate that information to the investor

community in a clear and credible way.

We adhere to the fair disclosure practices put forth by the U.S. Securities

and Exchange Commission – quarterly financial statements and annual 10K reports

– and go beyond those basic guidelines. Every day, we reach out to investors

or respond to their requests for information. We are very active in investor

conferences and conduct hundreds of one-on-one meetings with the people

who buy and sell our stock.

We treat all investors with the same degree of responsiveness and make

a point to know our shareholders very well and to gain an appreciation for

why they own ITT.

Increasingly, their answer involves ITT’s performance in non-financial areas

such as environmental impact, workplace safety and community involvement.

Investors and analysts use these criteria to evaluate our company’s overall health

and worth, and we were pleased to be included on the 2005 Dow Jones

Sustainability Index, which measures environmental, social and economic

performance – the triple bottom line.

ITT is fortunate to have a great story to tell. Our company has developed

a solid track record of meeting its commitments to the investor community and

as a result, we have established credibility with investors. But all that goodwill

would disappear quickly if investors didn’t have confidence in our communications.

We take our credibility with analysts and shareholders very seriously

and will continue to provide them with transparency and

straightforward answers so they can make informed decisions.

Robert Powers

Vice President and Director of Investor Relations

ITT is in business to create value for our shareholders, but just asimportantly, we must provide investors and analysts with a true understanding of what is driving and building that value.

Investor Relations

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Systems & Tools

Metrics

Investor Relations WebsiteThe ITT IR website was developed to ensure that shareholders, analysts and potential investors have readyaccess to information and materials about our company.It includes webcasts and presentations of recent investorconferences and earnings calls, an archive of financialstatements and news releases, the latest annual report,business profiles and contact information.

Quarterly Earnings CallsWhen ITT releases its quarterly earnings, senior management is available to analysts and investors for a presentation of the information, followed by a question-and-answer session. The quarterly investor presentation and an audio webcast of the session areposted on the IR website and available to anyone.

Investor Relations in ActionMaking Our WaterBusiness MoreTransparentIn November 2005, 50 of ITT’s analysts andinvestors attended the Water EnvironmentFederation’s Technical Exhibition and Conference –WEFTEC – to get a closer look at the company’s latest fluid technology systems and to hear from ourtop water business leaders, including Hank Driesse,president of our Fluid Technology operation.

ITT sponsors these hands-on, field trip events on a regular basis as a way for investors to get a better handle on our business. At the WEFTECtrade show, analysts saw live demonstrations of ITT pumping and monitoring systems, and got a visual representation of our broad capabilities in the fluid technology market.

In years’ past, these investor events have beenheld at ITT sites around the world, including our pump and electronic component facilities in China. In 2006, investors will once again have the opportunity to visit ITT facilities to meet our outstanding management team, to gain a betterappreciation of our technologies, and to see firsthand how our businesses embrace the ITT Management System.

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ITT’s investor relations organization is continually communicating with the investor community. In additionto formal events such as investor conferences, quarterlyearnings calls and the annual 10K report, we maintain anactive dialogue with analysts and institutional investors.

• ITT investor relations held nearly 400 institutional meetings in 2005.

4 West Red Oak LaneWhite Plains, NY 10604914.641.2000www.itt.com