<page>

EXHIBIT 13

<table>
                      FIVE-YEAR SELECTED FINANCIAL DATA
                      KAMAN CORPORATION AND SUBSIDIARIES
    (In thousands except per share amounts, shareholders and employees)
<s>                     <c>        <c>        <c>         <c>         <c>
                           2003       2002        2001       2000       1999
- --------------------------------------------------------------------------------
OPERATIONS
  Net sales             $ 894,499  $ 880,776  $  875,869  $1,031,234  $ 995,404
  Cost of sales           670,150    723,243     673,782     774,264    751,291
  Selling, general and ad-
    ministrative expense  207,857    199,453     188,752     202,319    201,807
  Restructuring costs           -      8,290           -      (1,680)     4,132
  Other operating income   (1,448)    (1,302)     (1,076)     (1,092)    (1,773)
  Operating income (loss)  17,940    (48,908)     14,411      57,423     39,947
  Net gain on sale of product
    lines and other assets(18,163)    (2,299)     (2,637)          -          -
  Interest expense
    (income), net           3,008      2,486         623      (1,660)    (1,614)
  Other expense, net        1,265      1,831         761       1,363      1,088
  Earnings (loss) before
    income taxes           31,830    (50,926)     15,664      57,720     40,473
  Income taxes (benefit)   12,425    (17,325)      3,950      20,800     15,400
  Net earnings (loss)      19,405    (33,601)     11,714      36,920     25,073

FINANCIAL POSITION
  Current assets        $ 418,851  $ 414,245  $  442,651  $  482,000  $ 460,111
  Current liabilities     160,555    157,094     141,260     173,342    168,374
  Working capital         258,296    257,151     301,391     308,658    291,737
  Property, plant and
    equipment, net         51,049     61,635      60,769      63,705     64,332
  Total assets            528,311    535,540     521,946     553,830    534,203
  Long-term debt           36,624     60,132      23,226      24,886     26,546
  Shareholders' equity    303,183    291,947     333,581     332,046    316,377

PER SHARE AMOUNTS
  Net earnings (loss) per
     share - basic      $     .86  $   (1.50) $      .52  $     1.61  $    1.07
  Net earnings (loss) per
    share - diluted           .86      (1.50)        .52        1.57       1.05
  Dividends declared          .44        .44         .44         .44        .44
  Shareholders' equity      13.40      13.00       14.97       14.92      13.68
  Market price range        14.91      18.81       19.50       17.75      16.13
                             9.40       9.42       10.90        8.77      10.06
AVERAGE SHARES OUTSTANDING
  Basic                    22,561     22,408      22,364      22,936     23,468
  Diluted                  23,542     22,408      23,649      24,168     24,810

GENERAL STATISTICS
  Registered shareholders   5,509      5,634       5,869       6,136      6,522
  Employees                 3,499      3,615       3,780       3,825      4,016
</table
                             Page 1
<page>


Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


RESULTS OF OPERATIONS
Overview

Kaman Corporation is composed of three business segments:
Aerospace, Industrial Distribution, and Music.

     The Aerospace segment's programs are conducted through three
principal businesses, consisting of Aircraft Structures and
Components, Advanced Technology Products, and Helicopter Programs.
The Aircraft Structures and Components business involves
aerostructure and helicopter subcontract work as well as
manufacture of components such as self-lubricating bearings and
driveline couplings for aircraft applications. For 2003, this
business constituted 48% of Aerospace segment sales, the same
level as 2002. The aerostructure subcontract element of this
business continues to be an area of strategic emphasis for the
corporation. The Advanced Technology Products business
manufactures products involving systems, devices and assemblies
for a variety of military and commercial applications, including
safe, arm and fuzing devices for several missile and bomb
programs; precision non-contact measuring systems for industrial
and scientific use; electro-optic systems for mine detection and
other applications; and high reliability memory systems for
airborne, shipboard, and ground-based programs. For 2003, this
business constituted 22% of segment sales compared to 21% for
2002. The Advanced Technology Products business is also an area of
strategic emphasis for the corporation. Helicopter Programs
include prime helicopter production along with spare parts and
support. The helicopters produced by this business are the SH-2G
multi-mission maritime helicopter and the K-MAX medium to heavy
external lift helicopter. For 2003, this business constituted 30%
of segment sales compared to 31% for 2002.

     The Industrial Distribution segment is the third largest U.S.
industrial distributor servicing the bearing,
electrical/mechanical power transmission, fluid power, motion
control and materials handling markets in the United States. This
segment offers more than 1.5 million items, as well as value-added
services to a base of more than 50,000 customers spanning nearly
every sector of U.S. industry from about 200 branches and regional
distribution centers in the U.S., Canada, and Mexico.

     The Music segment, the name of which has been changed from
"Music Distribution" in order to better express the breadth of the
segment's other activities, is America's largest independent
distributor of musical instruments and accessories, and is
involved in some combination of designing, manufacturing,

                             Page 2
<page>

Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


marketing and distributing more than 15,000 products from five
facilities located in the United States and Canada, to retailers
of all sizes for musicians at all skill levels.

     Results for 2003 reflect weakness in Aerospace segment
performance as well as conditions in the U.S. industrial economy
which adversely affected the Industrial Distribution segment.
Aerospace segment results reflect the impact of several factors,
including adverse conditions in the commercial aerospace market,
difficulties experienced in certain significant segment programs,
including the MD Helicopters, Inc. ("MDHI") helicopter subcontract
program, the Australia SH-2G(A) program, and the Joint
Programmable Fuze ("JPF") program, and cost and operational issues
associated with the transition from the segment's Moosup, Conn.
manufacturing facility to its expanded facility in Jacksonville,
Fla., during 2003. These factors have led to lower sales volume,
which in turn has resulted in overhead and general and
administrative expenses being absorbed at higher rates by active
segment programs and this has led to generally lower profitability
or losses for these programs. The segment is working to address
these issues and is taking actions, where appropriate, to help
bring its cost structure in line with the business base.

     For discussion of the operations of, and factors affecting,
each of these business segments, please refer to the specific
discussions below.






















                             Page 3
<page>

Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


TABULAR PRESENTATION OF FINANCIAL RESULTS

The following table summarizes certain financial results of the
corporation and its business segments for calendar years 2003,
2002, and 2001:

             SEGMENT INFORMATION (IN MILLIONS)
<table>
<s>                           <c>         <c>         <c>
Year Ended December 31,         2003        2002        2001
- ---------------------------------------------------------------
Net sales:
  Aerospace                   $  251.2    $  275.9    $  301.6
  Industrial Distribution        497.9       477.2       453.7
  Music                          145.4       127.7       120.6
- ---------------------------------------------------------------
                              $  894.5    $  880.8    $  875.9
===============================================================
Operating profit (loss):
  Aerospace                   $   14.8    $  (55.2)    $   6.5
  Industrial Distribution         12.7        12.3        13.2
  Music                            9.5         7.2         6.6
- ---------------------------------------------------------------
                                  37.0       (35.7)       26.3
Interest, corporate and
  other expense, net             (23.4)      (17.5)      (13.2)
Net gain on sale of
  product lines and
  other assets                    18.2         2.3         2.6
- ---------------------------------------------------------------
Earnings (loss)
 before income taxes              31.8       (50.9)       15.7
Income taxes (benefit)            12.4       (17.3)        4.0
- ---------------------------------------------------------------
Net earnings (loss)           $   19.4    $  (33.6)    $  11.7
===============================================================
</table>

DISCUSSION AND ANALYSIS OF FINANCIAL RESULTS - CONSOLIDATED

The corporation experienced an increase in consolidated net sales
for 2003 compared to 2002 due to increased sales in the Industrial
Distribution and Music segments. The increase in Music was
primarily derived from the acquisition of Latin Percussion, Inc.
Sales  and operating profits for 2003 were adversely affected,
however, by performance in the Aerospace segment.


                             Page 4
<page>

Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


     Results for the year 2002 include pre-tax charges of $86.0
million (of which $52.7 million was non-cash) taken in the second
quarter of that year to cover the write down of K-MAX helicopter
assets, principally inventories; for cost growth associated with
the Australian SH-2G(A) helicopter program; and to phase out
operations at the corporation's Moosup, Conn. plant, all items in
the Aerospace segment. Net sales for 2002 included $61.7 million
from acquisitions made during 2002 and 2001, and $16.2 million
from two divested Aerospace segment business lines. Net sales for
2002 were also reduced by $6.5 million as a result of the
adjustment for the Australia helicopter program. Results for 2002
were also adversely affected by weak economic conditions in the
commercial aerospace and industrial markets, which are served by
the corporation's Aerospace and Industrial Distribution segments.

     Net sales for 2001 were reduced by $31.2 million due to the
sales and pre-tax profit adjustment taken in the second quarter of
that year, principally related to cost growth in the Australia
helicopter program. Net sales for 2001 included sales from
acquisitions of $8.0 million. Results for 2001 were adversely
impacted by the above-described adjustment as well as continuing
national economic difficulties that affected each of the
corporation's business segments, but particularly the Industrial
Distribution segment.

DISCUSSION AND ANALYSIS OF NET SALES BY BUSINESS SEGMENT

AEROSPACE SEGMENT

Aerospace segment net sales have decreased in each of the past
three years - 9.0% in 2003, 8.5% in 2002 and 21.0% in 2001.
Results for 2003 in each of the segment's businesses were
adversely affected by a variety of factors, including the current
weak market for commercial airliners, which has caused order
stretch-outs and a lower volume of deliveries than anticipated for
certain Boeing programs, lack of new helicopter orders, and
the stop-work mode of the MDHI program, resulting in lower
sales. The decrease in 2002 was due to the charge described above,
declining revenues from both the New Zealand SH-2G program (which
was completed in early 2003) and the Australia SH-2G(A) program,
and a lack of new SH-2G or K-MAX helicopter sales.

AIRCRAFT STRUCTURES AND COMPONENTS -

Aerostructures subcontract work involves commercial and military
aircraft programs. Current programs include production of aircraft
subassemblies and other parts for virtually all Boeing commercial

                             Page 5
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Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


aircraft and the C-17 military transport. This element of the
Aerospace segment operation continues to be an area of strategic
emphasis for the corporation. The low current and projected build
rates for commercial airliners affect this business directly, and
the market has become increasingly cost competitive on an
industry-wide basis.

     Helicopter subcontract work involves commercial and military
helicopter programs. Commercial programs include multi-year
contracts for production of fuselages for the MDHI 500 and 600
series helicopters and composite rotor blades for the MD Explorer
helicopter. Total orders from MDHI have run at significantly lower
rates than originally anticipated due to lower than expected
demand. The corporation's investment in these contracts consists
of $4.4 million in billed receivables and $16.4 million in
recoverable costs - not billed (including start-up costs and other
program expenditures) as of December 31, 2003. In 2003, the
corporation received payments totaling $4.4 million, primarily for
items shipped during 2003. The recoverability of unbilled costs
will depend to a significant extent upon MDHI's future
requirements through 2013. The corporation stopped production on
these contracts in the second quarter of 2003, while working
closely with this customer to resolve overall payment issues and
establish conditions under which production could be resumed,
including the timing thereof. Based upon MDHI's projected future
requirements and inventory on hand at both MDHI and Kaman, this
would not be expected to occur until the second half of 2004 at
the earliest. Although the outcome is not certain, the corporation
understands that MDHI management is pursuing strategies to improve
its current financial and operational circumstances.

    The segment's Kamatics operation manufactures proprietary
self-lubricating bearings used in aircraft flight controls,
turbine engines and landing gear and produces driveline couplings
for helicopters. This business had increased sales in 2003 with
military and commercial aftermarket sales helping to offset
continued softness in commercial and regional aircraft
manufacturing. Kamatics' products are in wide use in commercial
airliners operated by the major and regional airlines, and
increasingly, in military programs. Boeing is Kamatics' largest
commercial customer.

ADVANCED TECHNOLOGY PRODUCTS -

Advanced Technology Products is also an area of strategic emphasis
for the corporation. In July 2002, the corporation acquired
Dayron, a weapons fuze manufacturer for a variety of munitions

                             Page 6
<page>

Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


programs. The principal motivation for the acquisition was a
Dayron contract to develop a fuze for the U.S. Air Force and Navy
Joint Programmable Fuze program. The JPF program is expected to
generate substantial business once final qualification has been
achieved and future production orders have been received. Final
qualification testing was undertaken early in 2003 but test
results at that time necessitated additional qualification work,
which has delayed production unit sales and increased program
costs. Final qualification testing resumed in the fourth quarter
of 2003, however, with Dayron completing the portion of
qualification testing required to be conducted by it as the
contractor. The customer has now resumed its portion of the
qualification testing with positive early results. Management
expects that final qualification testing will be completed in
March 2004.

HELICOPTER PROGRAMS -

The segment's helicopter products include the SH-2G multi-mission
maritime helicopter and the K-MAX medium-to-heavy external lift
helicopter. The SH-2G helicopter represents the majority of the
segment's helicopter program sales and generally consists of
retrofit of the corporation's SH-2F helicopters to the SH-2G
configuration or refurbishment of existing SH-2G helicopters. The
SH-2, including its F and G configurations, was originally
manufactured for the U.S. Navy. The SH-2G aircraft is currently in
service with the Egyptian Air Force and the New Zealand and Polish
navies.

     The program for five retrofit SH-2G aircraft for New Zealand,
which had a contract value of about $190 million, was completed
early in 2003. A much smaller program for the refurbishment of
four SH-2G aircraft for Poland, which had a contract value of
almost $7 million, was completed during 2003.

     Work continues on the SH-2G(A) program for Australia which
involves eleven helicopters with support, including a support
services facility, for the Royal Australian Navy ("RAN"). The
total contract has an anticipated value of about $723 million.
The helicopter production portion of the program is valued
at approximately $598 million, of which about 96% has been
recorded as sales through December 31, 2003. As previously
reported, this contract is now in a loss position due to increases
in anticipated costs to complete the program which were reflected
in the $25.0 million pre-tax charge taken in 2002 and the $31.2
million sales and pre-tax profit adjustment taken in 2001.


                             Page 7
<page>

Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


     Production of all the SH-2G(A) aircraft is essentially
complete. As previously reported, the aircraft lack the full
Integrated Tactical Avionics System ("ITAS") software and progress
is continuing on this element of the program. In September 2003,
the RAN began the process of provisional acceptance of these
aircraft after receiving a decision to proceed from the Australian
government. The corporation expects to be able to deliver the full
capability of the ITAS weapons system software in late 2004 with
final acceptance anticipated in 2005. While management believes
that the corporation's reserves are sufficient to cover estimated
costs to complete the program, final development of the software
by subcontractors and its integration, which is the corporation's
responsibility, are yet to come and they are complex tasks.

     The corporation continues to pursue other opportunities for
the SH-2G helicopter in the international defense market. This
market is highly competitive and heavily influenced by economic
and political conditions. However, management continues to believe
that the aircraft is in a good competitive position to meet the
specialized needs of navies around the world that operate smaller
ships for which the SH-2G is ideally sized.

     The corporation also maintains a consignment of the U.S.
Navy's inventory of SH-2 spare parts under a multi-year agreement
that provides the corporation the ability to utilize certain
inventory for support of its SH-2G programs.

     With respect to its K-MAX helicopter program, the segment
continues to pursue both a sale and short-term lease program for
existing K-MAX aircraft inventory that was written down to
estimated fair market value in 2002. As previously reported, this
approach follows a 2002 market evaluation of the K-MAX helicopter
program which had experienced several years of significant market
difficulties. In connection with this decision, the corporation
wrote down the value of existing aircraft, excess spare parts, and
equipment inventories ($46.7 million for inventories and $3.3
million for capital equipment). Development costs for the aircraft
were expensed in earlier years when incurred. On a going forward
basis, the corporation intends to maintain adequate inventories
and personnel to support the fleet and additional aircraft will be
produced only upon firm order by a customer. During 2003, two
K-MAX helicopters were leased and two others were converted from
leases to sales. The sales produced pre-tax profit of $2.1
million. Currently, there are seven K-MAX aircraft remaining
available for sale, including the two K-MAX aircraft currently
leased to customers.


                             Page 8
<page>

Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


INDUSTRIAL DISTRIBUTION SEGMENT

Industrial Distribution segment net sales increased 4.3% for 2003
and 5.2% for 2002 compared to a decrease of 12.9% for 2001. Net
sales for 2003 included $6.5 million from an acquisition made
early in the fourth quarter of the year. Net sales for 2002
included $38.0 million from acquisitions made during 2002 and
2001, while net sales for 2001 included $8.0 million from
acquisitions made in 2001.

     This segment is the third largest U.S. industrial distributor
servicing the bearing, electrical/mechanical power transmission,
fluid power, motion control and materials handling markets in the
United States, offering more than 1.5 million items, as well as
value-added services, to a base of more than 50,000 customers
spanning nearly every sector of U.S. heavy and light industry from
approximately 200 branches and regional distribution centers in
the U.S., Canada, and Mexico.

     Because the segment's customers include a broad spectrum of
U.S. industry, this business is directly affected by national
macroeconomic variables such as the percentage of plant capacity
utilization within the U.S. industrial base, and the business
tends to track the U.S. Industrial Production Index with a short
lag. The segment has been adversely affected by conditions in the
manufacturing sector that have existed since late 2000. During
this period, cost controls and focus on working capital investment
helped performance.

     During 2003, economic conditions continued to be difficult
and the segment performed in line with these circumstances,
although it benefited from acquisitions completed in the past
several years and from awards of new business at the national
account level. Late in 2003, the segment began to experience
increased requests for proposals and order activity; although
industrial production levels remain far from the levels sustained
several years ago, management is encouraged by signs of
improvement in national industrial markets.

     Success in the segment's markets requires a combination of
competitive pricing and value-added services that save the
customer money while helping it become more efficient and
productive. Management believes that this segment has the
appropriate platforms, including technology, systems management
and customer and supplier relationships to compete effectively in
the evolving and highly fragmented industrial distribution
industry. The segment's size and scale of operations allow it to

                             Page 9
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Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


attract highly skilled personnel and realize internal operating
efficiencies, and also to take advantage of vendor incentives in
the form of rebates, which tend to favor the larger distributors.
Management believes that the segment's resources and product
knowledge enable it to offer a comprehensive product line and
invest in sophisticated inventory management and control systems
while its position in the industry enhances its ability to rebound
during economic recoveries and grow through acquisitions.

     In addition, over the past several years, large companies
have increasingly centralized their purchasing through suppliers
that can service all of their plant locations across a wide
geographic area. As this trend continues, the segment has expanded
its presence in geographic markets considered key to winning these
customers through acquisitions in the upper Midwest and Mexico,
and the selective opening of new branches. Early in the fourth
quarter of 2003, the segment acquired a majority of the net assets
and business of Industrial Supplies, Inc. ("ISI"), of Birmingham,
Alabama, a distributor of a wide variety of bearing, conveyor,
electrical, fluid power and power transmission components used by
manufacturing, mining, steel, lumber, pulp and paper, food and
other industries. As a result of the acquisition, the segment now
operates four branches in Alabama and one branch in Florida
formerly maintained by ISI, and has therefore expanded its
presence in the increasingly important southeast industrial
market. The segment also added branches in the Dallas and Richmond
areas during 2003, so that as of the end of the year, the segment
now serves 70 of the top 100 industrial markets in the country.
Management's goal is to grow the Industrial Distribution segment
by expanding into additional areas that enhance its ability to
compete for large regional and national customer accounts.

     As previously reported, this segment had experienced an
increase in the number of "John Doe" type legal proceedings filed
against it, generally relating to parts allegedly supplied to the
U.S. Navy's shipyard in San Diego, California by a predecessor
company over 25 years ago, that may have contained asbestos. While
management believes that the segment has good defenses to these
claims, it is in the process of settling virtually all of the
claims for amounts, which in the aggregate are immaterial, with
contribution from insurance carriers. Management does not
currently expect that these circumstances will have a material
adverse effect on the corporation.





                             Page 10
<page>

Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


MUSIC SEGMENT
(FORMERLY THE MUSIC DISTRIBUTION SEGMENT)

Music segment net sales increased 13.9% in 2003 and 5.9% in 2002
compared to a decrease of 6.2% in 2001. Net sales for 2003
included $18.6 million generated by Latin Percussion, the world
leader in hand percussion instruments that was acquired in October
2002, while net sales for 2002 included $3.7 million from Latin
Percussion. This segment's business is directly affected by
consumer confidence levels and although results for the segment's
base business (i.e., without Latin Percussion) reflected a
somewhat weak consumer environment, conditions improved toward the
end of the year and the segment had good results overall,
including a good Christmas season, particularly at the large
national stores.

     The segment's array of instruments includes premier and
proprietary products, such as the Ovation (registered trademark)
and Hamer (registered trademark) guitars, and Takamine (registered
trademark) guitars under its exclusive distribution agreement. To
enhance its market position, the segment has significantly
extended its line of percussion products and accessories over the
past two years, augmenting its CB, Toca (registered trademark) and
Gibraltar (registered trademark) lines with the addition of an
exclusive distribution agreement with Gretsch (registered
trademark) drums in 2001 and the acquisition of Latin Percussion
in 2002. In September 2003, the segment acquired Genz Benz
Enclosures, Inc., a small manufacturer of amplification and sound
reinforcement equipment. Genz Benz has been working with the
segment for several years through an exclusive distribution
agreement, so while the acquisition will not add immediate
incremental sales, it does assure the segment of ownership of this
product line. The segment continues to seek opportunities to add
exclusive premier brand product lines that would build upon the
segment's market position.

DISCUSSION AND ANALYSIS OF OPERATING PROFITS - CONSOLIDATED

As would be expected with any commercial business, operating
profits is a key indicator utilized by management in its
evaluation of the performance of its business segments. The
corporation's segments, in total, had net operating profits of
$37.0 million for 2003 compared to a net operating loss of $35.7
million in 2002. Total net operating profits were $26.3 million
for 2001.



                             Page 11
<page>

Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


     Results for 2003 reflect the impact on the corporation's
businesses of continued weakness in the U.S. manufacturing sector
and commercial aircraft markets and the increasingly competitive
conditions resulting therefrom, in combination with the costs
associated with the transition from the Aerospace segment's Moosup
facility to expanded facilities in Jacksonville and the stop-work
status of the MDHI program.

     Another key performance indicator for management is each
business segment's return on investment. Management defines
"return on investment" as operating profits divided by average
investment for each segment. Average investment is computed by
combining equity, intercompany borrowings plus letters of credit
and, for foreign subsidiaries, outside debt financings. The
corporation's goals for return on investment are expressed as a
range, with 15% at the lower end of the range. For 2003, the Music
segment performed above the minimum percentage, while the
Industrial Distribution and Aerospace segments performed below the
minimum.

     The 2002 results reflect difficult economic conditions in
that year and include the second quarter pre-tax charge of $86.0
million described earlier. The 2001 results include the $31.2
million second quarter sales and pre-tax profit adjustment
described earlier and reflect lower revenues in the Australia and
New Zealand SH-2G helicopter programs as well as lower sales in
the Industrial Distribution segment due to economic conditions.

DISCUSSION AND ANALYSIS OF OPERATING PROFITS BY BUSINESS SEGMENT

AEROSPACE SEGMENT

Results for the year 2003 reflect the impact of the factors
described previously (i.e., costs associated with the move from
the Moosup facility to Jacksonville, the current weak market for
commercial airliners, the absence of new helicopter orders, and
the stop-work mode of the MDHI program) upon the Kaman Aerospace
subsidiary, and include $3.6 million in ongoing relocation and
recertification costs related to the move from Moosup to
Jacksonville and $1.4 million in idle facilities and related
costs, most of which relate to the Moosup facility. The result has
been lower sales volume, which in turn has resulted in overhead
and general and administrative expenses being absorbed at higher
rates by active segment programs; this has led to generally lower
profitability or losses for these programs. Management continues
to evaluate Kaman Aerospace's cost structure, including its
manpower requirements, and action is being taken, where

                             Page 12
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Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


appropriate, to help bring cost structure in line with the
business base. Management directed the move from Moosup, the
corporation's oldest facility, to Jacksonville, a modern, expanded
facility, in order to provide a lower cost base from which to
compete in the aerostructures subcontract arena. This move was
essentially completed in 2003. However, the transition has
generated additional costs associated with the phase-out of
Moosup, production man-hour performance in Jacksonville, which has
not yet achieved the levels that had existed on an overall basis
in Moosup, and the normal FAA and customer requirements to
requalify manufacturing and quality processes in Jacksonville.
These factors have resulted in lower profitability or losses in
certain aerostructures programs. While these costs continue to be
an issue going into 2004, the opportunity to operate at lower cost
in Jacksonville remains evident and is an expectation for the
future. The Jacksonville facility is ready to accept additional
business, although that may take time to develop in the present
environment.

     Despite current circumstances, to date, management has
elected to continue expenditures for longer-term competitiveness
in the commercial aircraft market and to maintain its prime
helicopter program capabilities.

     For the year 2002, the Aerospace segment had an operating
loss of $55.2 million, primarily due to the previously described
$86.0 million charge. Included in the second quarter 2002 pre-tax
charge was $11.0 million for the cost of phasing out the
corporation's Moosup manufacturing plant. The charge represents
severance costs of about $3.3 million at the Moosup and
Bloomfield, Connecticut locations which is expected to involve the
separation from service of approximately 400 employees (of which a
total of $2.2 million had been paid for 289 such separations as of
December 31, 2003); asset write-offs of about $2.7 million; and
$5.0 million for the cost of closing the facility (including costs
associated with an ongoing voluntary environmental remediation
program). Operating profits for the Aerospace segment were $6.5
million in 2001, a decrease from $44.2 million the prior year,
reflecting the sales and pre-tax profit adjustment in the
Aerospace segment for that year and lower revenues from the
Australia and New Zealand SH-2G helicopter programs.







                             Page 13
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Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


INDUSTRIAL DISTRIBUTION SEGMENT

Results in this segment for each of the past three years reflect
the weak economic performance in the U.S. manufacturing sector
that has existed since the latter part of 2000. Because the
segment's customers include a broad spectrum of U.S. industry,
this business is directly affected by national macroeconomic
variables such as the percentage of plant capacity utilization
within the U.S. industrial base and the business tends to track
the U.S. Industrial Production Index with a short lag.
Particularly in this type of environment, vendor incentives in the
form of rebates (i.e., vendors provide inventory purchase rebates
to distributors at specified volume-purchasing levels) have been a
major contributor to the segment's operating profits in each of
the past three years. In addition, cost controls and focus on
working capital investment helped performance.

MUSIC SEGMENT

Music segment operating profits for 2003 and 2002 reflect
continued consumer spending in the music retail market and the
positive effects of the acquisition of Latin Percussion.

NET EARNINGS AND CERTAIN EXPENSE ITEMS

For the year 2003, the corporation reported net earnings of $19.4
million or $0.86 per share diluted, including an after-tax gain of
$10.6 million or $0.48 per share from the sale of its
Electromagnetics Development Center ("EDC") in January 2003,
compared to a net loss of $33.6 million, or $1.50 net loss per
share diluted, in 2002. Net earnings for 2001 were $11.7 million,
or $0.52 per diluted share. The 2002 and 2001 results each include
the charges or adjustments previously described.

     Selling, general and administrative expenses for the year
2003 were higher than for 2002, largely due to acquisitions and to
increases in corporate expenses attributable to several items,
including a reduction in group insurance liabilities for 2002 that
did not recur in 2003, and growth in stock appreciation rights,
pension, and general insurance expense. Selling, general and
administrative expenses for 2002 were higher than for 2001,
principally due to acquisitions.

     For each of the years ended December 31, 2003 and 2002, net
interest expense increased, principally due to borrowings to fund
acquisitions. For the year ended December 31, 2001, interest
expense exceeded interest income due to a reduction of surplus
cash.
                             Page 14
<page>

Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


     The consolidated effective income tax rate for the year 2003
was 39%. For 2002, there was a tax benefit calculated at
approximately 34%, representing the combined estimated federal and
state tax effect attributable to the second quarter loss. In the
2001 period, the corporation adjusted its estimated tax rate to
25%, primarily due to reduced tax considerations on the Australian
helicopter program.

     For a discussion of Financial Accounting Standards Board
Statements applicable to the corporation, please refer to the
Recent Accounting Standards Note in the Notes to Consolidated
Financial Statements of Kaman Corporation and Subsidiaries for the
year ended December 31, 2003.

CRITICAL ACCOUNTING ESTIMATES

The preparation of consolidated financial statements in conformity
with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Significant accounting
policies are disclosed in the Notes to Consolidated Financial
Statements of Kaman Corporation and Subsidiaries for the year
ended December 31, 2003. The most significant areas currently
involving management judgments and estimates are described below.
Actual results could differ from those estimates.

LONG-TERM CONTRACTS - REVENUE RECOGNITION

Sales and estimated profits under long-term contracts are
principally recognized on the percentage-of-completion method of
accounting, generally using as a measurement basis either (1) a
ratio that costs incurred bear to estimated total costs, after
giving effect to estimates of cost to complete based upon most
recent information for each contract, or (2) units-of-delivery.
Reviews of contracts are made regularly throughout their lives and
revisions in profit estimates are recorded in the accounting
period in which the revisions are made. Any anticipated contract
losses are charged to operations when first indicated.

     The percentage-of-completion method requires estimates of
future revenues and costs over the life of a contract. In some
cases, estimates of future revenues are based on projected
customer requirements. Contract costs may be incurred over a
period of several years, and the estimation of these costs

                             Page 15
<page>

Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


requires management's judgment. The complexity of certain
programs, including the SH-2G(A) program for the Royal Australian
Navy, the effects of the corporation's transition of manufacturing
operations from Moosup to Jacksonville, and the impact on the
absorption of overhead expenditures caused by a lower volume of
deliveries than anticipated on certain programs, could affect the
corporation's ability to precisely estimate future contract costs.

     Specifically, the corporation is required to make significant
estimates and assumptions related to its completion of a long-term
contract with the Royal Australian Navy. The remaining estimates
are generally associated with the completion of the Integrated
Tactical Avionics System software and its integration into the
aircraft. While the corporation believes its reserves are
sufficient to cover estimated costs to complete the program, final
development of the software by subcontractors and its integration,
which is the corporation's responsibility, are yet to come, and
these are complex tasks. Technical difficulties could increase
costs and/or delay customer payments. See the Accounts Receivable
section of the Critical Accounting Estimates for additional RAN
program information.

ACCOUNTS RECEIVABLE

Trade accounts receivable consist of amounts billed and currently
due from customers. The allowance for doubtful accounts reflects
management's best estimate of probable losses inherent in the
trade accounts receivable balance. Management determines the
allowance for doubtful accounts based on known troubled accounts,
historical experience, and other currently available evidence.
Billed amounts for U.S. Government, commercial, and other
government contracts consist of amounts billed and currently due
from customers. Recoverable costs and accrued profit - not billed
for U.S. Government, commercial, and other government contracts
primarily relate to costs incurred on contracts which will become
billable upon future deliveries, achievement of specific contract
milestones or completion of engineering and service type
contracts.

     The corporation had $74.8 million and $72.5 million of trade
receivables at December 31, 2003 and 2002, respectively. The
allowance for doubtful accounts for trade receivables was $3.3
million and $2.9 million at December 31, 2003 and 2002,
respectively. Accounts receivable written off, net of recoveries,
in years 2003 and 2002 were $1.2 million and $2.2 million,
respectively. In addition to trade receivables, the corporation
had $118.4 million and $123.4 million of amounts due from

                             Page 16
<page>

Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


government and commercial contracts at December 31, 2003 and 2002,
respectively. The corporation evaluates, on an ongoing basis, the
recoverable costs associated with its government and commercial
contracts. Specifically, the corporation had an investment of
billed receivables and recoverable costs not billed of $20.8
million as of December 31, 2003 with its customer, MDHI. The
recoverability of this investment will depend to a significant
extent upon MDHI's future requirements through 2013. Should these
future requirements not be realized, an adjustment to the then
remaining balance could be required.

     In applying the guidance of Statement of Financial Accounting
Standards No. 5, "Accounting for Contingencies" ("SFAS 5"), the
corporation's management has concluded that some level of
impairment to the MDHI investment, while not probable, is
reasonably possible. In assessing the range of potential loss,
current program estimates project the entire amount of the
corporation's current investment to be recoverable over the full
term of the contracts, which makes the minimum end of the
potential loss range zero. Therefore, no impairment to the
carrying value of the corporation's investment in the MDHI
programs has been recorded to date.

     In addition, the corporation had $60.8 million of recoverable
costs not billed with the RAN as of December 31, 2003, which will
be due and payable as the segment satisfactorily completes the
program. The final amount of recoverable costs not billed will be
offset by $19.0 million of advances on contracts previously paid
to the corporation by the RAN. Also, $20.9 million will be
required to fund the program's accrued contract loss as of
December 31, 2003.

INVENTORIES

Inventory of merchandise for resale is stated at cost (using the
average costing method) or market, whichever is lower. Contracts
and work in process, and finished goods are valued at production
cost represented by material, labor and overhead, including
general and administrative expenses where applicable. Contracts
and work in process, and finished goods are not recorded in excess
of net realizable values.

     The corporation had $179.0 million and $164.7 million of
inventory as of December 31, 2003 and 2002, respectively.
Inventory valuation at the Industrial Distribution and Music
segments generally requires less subjective management judgment
than valuation of certain Aerospace segment inventory, including

                             Page 17
<page>

Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


the K-MAX inventory. Based upon a market evaluation in 2002, the
corporation wrote down its K-MAX inventory in the amount of $46.7
million in that year. The corporation believes its K-MAX inventory
of $33.4 million at December 31, 2003 is stated at net realizable
value, although lack of demand for this product in the future
could result in additional write-downs of the inventory value.

VENDOR INCENTIVES

The corporation's Industrial Distribution segment enters into
agreements with certain vendors providing for inventory purchase
incentives that are generally earned upon achieving specified
volume-purchasing levels. The segment recognizes these incentives
as a reduction in cost of goods sold. Supplier incentives have
been an important contributor to the segment's operating profits.
While management believes that vendors will continue to offer
incentives, there can be no assurance that the Industrial
Distribution segment will continue to receive comparable amounts
in the future.

GOODWILL AND OTHER INTANGIBLE ASSETS ACCOUNTING

Goodwill and certain other intangible assets are no longer
required to be amortized but rather are evaluated at least
annually for impairment. The corporation utilizes discounted cash
flow models to determine fair value used in the goodwill and other
intangible asset impairment evaluations. Management's estimates of
fair value are based upon factors such as projected sales and cash
flows and other elements requiring significant judgments. The
corporation utilizes the best available information to prepare its
estimates and perform impairment evaluations; however, actual
results could differ significantly, resulting in the future
impairment of recorded goodwill and other intangible asset
balances.

     The corporation has made a number of acquisitions during the
last three years, which have involved goodwill and other
intangible assets. The total value of these items, including
previously recorded goodwill and other intangible assets, was
$53.3 million and $51.0 million as of December 31, 2003 and 2002,
respectively. Based upon the corporation's analysis, management
believes these assets are not impaired as of December 31, 2003.

PENSION PLAN ACTUARIAL ASSUMPTIONS

The corporation's pension benefit obligations and related costs
are calculated using actuarial concepts within the framework of

                             Page 18
<page>

Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


Statement of Financial Accounting Standards No. 87, "Employers'
Accounting for Pensions" ("SFAS 87"). Two critical assumptions,
the discount rate and the expected return on plan assets, are
important elements of expense and/or liability measurement. These
critical assumptions are evaluated annually. Other assumptions
involve demographic factors such as retirement, mortality,
turnover and rate of compensation increases.

     The discount rate enables management to state expected future
cash flow as a present value on the measurement date. The
guideline for setting this rate is a high-quality long-term
corporate bond rate. A lower discount rate increases the present
value of benefit obligations and increases pension expense. The
Kaman Employees' Pension Plan used a discount rate of 7.0% in 2003
and 7.5% in 2002 for purposes of calculating net periodic benefit
cost. A one percentage point decrease in the assumed discount rate
would increase annual pension expense in 2003 by $1.7 million. A
one percentage point increase in the assumed discount rate would
decrease annual pension expense in 2003 by $3.2 million.

     To determine the expected return on plan assets, management
considers the current and expected asset allocation, as well as
historical and expected returns on each plan asset class. A lower
expected rate of return on pension plan assets will increase
pension expense. The expected return on plan assets was 8.5% and
8.6% at December 31, 2003 and 2002, respectively. A one percentage
point increase/decrease in the return on pension plan asset
assumption would decrease/increase annual pension expense in 2003
by $3.7 million.

LIQUIDITY AND CAPITAL RESOURCES

DISCUSSION AND ANALYSIS OF CASH FLOWS - CALENDAR YEAR 2003

Management assesses the corporation's liquidity in terms of its
ability to generate cash to fund operating, investing and
financing activities. Cash flow generation is another key
performance indicator reviewed by management in evaluating
business segment performance. Significant factors affecting the
management of liquidity might include cash flows generated from or
used by operating activities, capital expenditures, investments in
the business segments and their programs, acquisitions, dividends,
adequacy of available bank lines of credit, and factors which
might otherwise affect the corporation's business and operations
generally, as described below under the heading "Forward-Looking
Statements". Management believes that the corporation's annual
cash flow from operations and available unused bank lines of

                             Page 19
<page>

Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


credit under its revolving credit agreement will be sufficient to
finance its working capital and other recurring capital
requirements for the next twelve-month period. Management is aware
that earnings for 2003 were weak and the principal source of that
weakness is in the Aerospace segment which has been adversely
affected by conditions in the commercial aerospace market.
Aerospace management is working to address these issues through
its sales efforts as well as evaluation of its current cost
structure with the goal of improving operating profits and cash
flow generation.

     Operating activities provided cash in the amount of $26.6
million for 2003. These results reflect reductions in accounts
receivable in the Aerospace segment and in inventories in both the
Industrial Distribution and Music segments, and increases in
accounts payable in the Industrial Distribution segment, offset by
increases in inventories in the Aerospace segment, largely related
to the K-MAX program. The K-MAX inventory increase relates
primarily to production of rotor blades in anticipation of their
use for replacement purposes and investment in anticipated
overhauls, neither of which circumstances occurred to the extent
expected during 2003.

     The largest element of cash flows provided from investing
activities for 2003 consisted of the proceeds from the sale of the
EDC operation. Approximately $8 million was used for acquisitions
during the year. Cash used in financing for 2003 consisted of
reductions in long-term debt and payments of dividends to
shareholders.



















                             Page 20
<page>

Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


CONTRACTUAL OBLIGATIONS

The following table summarizes certain of the corporation's
contractual obligations as of December 31, 2003:

<table>
                             Payments due by period (in millions)
- ------------------------------------------------------------------
<s>               <c>       <c>        <c>       <c>        <c>
                                                             More
Contractual                 Within       1-3       3-5      than 5
Obligations        Total    1 year      years     years     years
- ------------------------------------------------------------------
Long-term debt    $ 38.3    $  1.7     $ 20.0    $  3.3     $ 13.3
- ------------------------------------------------------------------
Operating leases    29.2      13.0       10.3       3.4        2.5
- ------------------------------------------------------------------
Purchase
  obligations (A)  142.3      77.4       19.8      14.6       30.5
- ------------------------------------------------------------------
Other long-term
  liabilities (B)   28.0       2.5        4.6       3.0       17.9
- ------------------------------------------------------------------
Total             $237.8    $ 94.6     $ 54.7    $ 24.3     $ 64.2
==================================================================

<fn>
(A) This category includes purchase commitments with suppliers for
materials and supplies as part of the ordinary course of business,
consulting arrangements and support services. Only obligations in
the amount of at least fifty thousand dollars are included.

(B) This category includes obligations under the corporation's
supplemental employees' retirement plan and deferred compensation
plan and a supplemental disability income arrangement for one
former company officer.

</fn>
</table>









                             Page 21
<page>

Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


OFF-BALANCE SHEET ARRANGEMENTS

The following table summarizes the corporation's off-balance sheet
arrangements, which consist principally of letters of credit and
obligations to pay earn outs with respect to certain acquisitions:

<table>
                              Payments due by period (in millions)
- ------------------------------------------------------------------
<s>                <c>       <c>        <c>       <c>      <c>
                                                            More
Off-balance sheet           Within      1-3       3-5      than 5
arrangements       Total    1 year     years     years     years
- ------------------------------------------------------------------
Outstanding letters
 of credit under the
 Revolving Credit
 Agreement         $ 29.8    $ 26.8     $ 3.0     $   -    $   -
- ------------------------------------------------------------------
Other outstanding
 letters of credit    7.0       7.0         -         -        -
- ------------------------------------------------------------------
Acquisition
 earn outs (A)       25.0         -         -         -        -
- ------------------------------------------------------------------
Total              $ 61.8    $ 33.8     $ 3.0     $   -    $   -
==================================================================

<fn>
(A) The obligation to pay earn out amounts depends upon the
attainment of specific sales goals for Dayron, a company acquired
in 2002. Since it is not feasible to estimate exactly when such
payments may become due, they are stated in the aggregate only.
One million dollars was accrued for such earn out payments in
2003.

</fn>
</table>

DISCUSSION AND ANALYSIS OF CASH FLOWS -
CALENDAR YEARS 2002 AND 2001

For calendar year 2002, operating activities used a net of $11.2
million of cash. The Industrial Distribution segment was the
largest user of working capital during 2002, mostly due to growth
in receivables and inventories and reductions in accounts
payables. Cash flow for the year was generally not affected by the

                             Page 22
<page>

Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


$86.0 million second quarter Aerospace charges previously
described because $52.7 million of the charges were non-cash in
nature, $26.8 million was expected to be paid in future years and
$6.5 million consisted of a write-down of receivables.

     During 2002, cash was used by investing activities
principally due to the acquisitions of Delamac in the Industrial
Distribution segment, Dayron and RWG in the Aerospace segment, and
Latin Percussion in the Music segment and by the purchase of items
such as machinery and computer equipment; cash in the amount of
approximately $51.2 million was used for the acquisitions. This
was offset to some degree by the sale of the microwave products
line. Cash provided by financing activities was primarily
attributable to bank borrowings to fund the acquisitions. This was
partially offset by the payment of dividends to shareholders.

     For calendar year 2001, operating activities provided cash in
the amount of $20.1 million. These results were due primarily to
net reductions in accounts receivable in the Aerospace and
Industrial Distribution segments, including the $31.2 million
sales and pre-tax profit adjustment in the Aerospace segment, and
reductions in inventories in the Industrial Distribution and Music
segments. This was offset by decreases in accounts payable in the
Aerospace and Music segments and accrued expenses and payables
throughout each of the segments and by a reduction in advances on
contracts in the Aerospace segment. Other items include a
reduction in income taxes payable as well as an increase in other
current assets, which relate primarily to the tax benefits
associated with the adjustment and a net pension income item,
respectively. During the year 2001, cash was used in investing
activities for the A-C Supply asset acquisition in the Industrial
Distribution segment, the Plastic Fabricating Company, Inc. stock
acquisition in the Aerospace segment, and for the purchase of
items such as machinery and computer equipment, which usage was
offset somewhat by proceeds from the sale of assets. Cash used by
financing activities was primarily attributable to the payment of
dividends to common shareholders, and to a lesser degree the
sinking fund requirement for the corporation's debentures
(described below) and repurchase of the corporation's Class A
common stock pursuant to a repurchase program for use in
administration of the corporation's stock plans and general
corporate purposes. The corporation had $30.8 million in cash and
cash equivalents at December 31, 2001 with an average balance of
$34.0 million for the year.




                             Page 23
<page>

Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


OTHER SOURCES/USES OF CAPITAL

In the past two years, the corporation has sold two non-core
portions of the Aerospace segment in order to free capital for
other uses. Specifically, in January 2003, the corporation sold
EDC, its electric motor and drive business that had sales of
approximately $14 million in 2002, for $27.5 million. In the
second quarter of 2002, the corporation sold its microwave
products line. That product line was associated with the former
Kaman Sciences Corp. subsidiary which was sold in 1997. Microwave
product sales were about $7.5 million in 2001.

     At December 31, 2003, the corporation had $21.6 million of
its 6% convertible subordinated debentures outstanding. The
debentures are convertible into shares of Class A common stock at
any time on or before March 15, 2012 at a conversion price of
$23.36 per share, generally at the option of the holder. Pursuant
to a sinking fund requirement that began March 15, 1997, the
corporation redeems approximately $1.7 million of the outstanding
principal of the debentures each year.

     In November 2000, the corporation's board of directors
approved a replenishment of the corporation's stock repurchase
program, providing for repurchase of an aggregate of 1.4 million
Class A common shares for use in administration of the
corporation's stock plans and for general corporate purposes. As
of December 31, 2003, a total of about 268,850 shares had been
repurchased since inception of this replenishment program.

FINANCING ARRANGEMENTS

Total average bank borrowings for the year 2003 were $43.0 million
compared to $23.8 million for 2002 and $2.5 million in 2001.

     The corporation maintains a revolving credit agreement (the
"Revolving Credit Agreement") with several banks that provides a
$150 million five-year commitment scheduled to expire in November
2005. Prior to November 2003, the corporation also maintained a
$75 million "364-day" annually renewable facility as part of the
Revolving Credit Agreement. Both portions of the Revolving Credit
Agreement provide for interest at current market rates. In view of
the longer term attractiveness of fixed rates in the current
environment and the fact that the "364-day" facility had never
been used, the corporation permitted it to expire in November
2003. In the third quarter of 2003, the Revolving Credit Agreement
was amended to give potential lenders under a new fixed rate
financing of up to $75 million the same covenant and guarantee

                             Page 24
<page>

Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


protections that the Revolving Credit Agreement lenders currently
possess. Facility fees are charged on the basis of the
corporation's credit rating which is a Standard & Poors BBB
investment grade rating. Management believes that such a rating is
favorable for a company of its size. Under the terms of the
current Revolving Credit Agreement, if this rating should
decrease, the effect would be to increase interest rates charged
and facility fees.

     The most restrictive of the covenants contained in the
Revolving Credit Agreement, which the corporation monitors
closely, requires the corporation to have EBITDA, as defined, at
least equal to 300% of net interest expense, on the basis of a
rolling four quarters and a ratio of consolidated total
indebtedness to total capitalization of not more than 55%. The
non-cash portion of the 2002 second quarter charges, up to $52.5
million, were excluded from the financial covenant calculations
during the four quarters ended March 31, 2003.

     In connection with the acquisition of RWG, the corporation
established a 9.5 million Euro term loan and revolving credit
facility (the "Euro Credit Agreement") with Wachovia Bank,
National Association ("Wachovia"), one of its Revolving Credit
Agreement lenders having offices in London. In general, the Euro
Credit Agreement contains the same financial covenants as the
Revolving Credit Agreement described previously and the term of
the Euro Credit Agreement expires at the same time as the
Revolving Credit Agreement. During the third quarter of 2003, the
Euro Credit Agreement was amended to conform with the 2003
amendment to the Revolving Credit Agreement. Also in the third
quarter of 2003, the corporation entered into an arrangement with
Wachovia that permits the corporation to lock in a fixed rate of
interest for the RWG financing.

     Letters of credit are generally considered borrowings for
purposes of the Revolving Credit Agreement. A total of $29.8
million in letters of credit were outstanding at December 31,
2003, a significant portion of which is related to the Australia
SH-2G(A) program. During the second quarter of 2003, the letter of
credit for the production portion of the Australia program was
reduced to a balance of $20 million, which is expected to remain
in place until final acceptance of the aircraft by the RAN.






                             Page 25
<page>

Management's Discussion and Analysis
of Financial Condition and Results of Operations
Kaman Corporation and Subsidiaries


FORWARD-LOOKING STATEMENTS

This report contains forward-looking information relating to the
corporation's business and prospects, including the SH-2G and
K-MAX helicopter programs, aerostructures and helicopter
subcontract programs and components, advanced technology products,
the industrial distribution and music businesses, operating cash
flow, and other matters that involve a number of uncertainties
that may cause actual results to differ materially from
expectations. Those uncertainties include, but are not limited to:
1) the successful conclusion of competitions and thereafter
contract negotiations with government authorities, including
foreign governments; 2) political developments in countries where
the corporation intends to do business; 3) standard government
contract provisions permitting renegotiation of terms and
termination for the convenience of the government; 4) economic and
competitive conditions in markets served by the corporation,
particularly industrial production and commercial aviation, and
global economic conditions; 5) satisfactory completion of the
Australian SH-2G(A)program, including successful completion and
integration of the full ITAS software; 6) recovery of the
corporation's investment in the MD Helicopters, Inc. contracts; 7)
achievement of and actual costs for recertifying products and
processes in connection with start-up of the expanded Jacksonville
facility; 8) JPF program final qualification test results and
receipt of production orders; 9) achievement of enhanced business
base in the Aerospace segment in order to better absorb overhead
and general and administrative expenses; 10) successful sale or
lease of existing K-MAX inventory; 11) the condition of consumer
markets for musical instruments; 12) profitable integration of
acquired businesses into the corporation's operations; 13) changes
in supplier sales or vendor incentive policies; 14) the effect of
price increases or decreases; and 15) currency exchange rates,
taxes, changes in laws and regulations, inflation rates, general
business conditions and other factors. Any forward-looking
information should be considered with these factors in mind.












                             Page 26
<page>

Selected Quarterly Financial Data
Kaman Corporation and Subsidiaries
(In thousands except per share amounts)


<table


<s>                  <c>         <c>         <c>         <c>         <c>
                         first      second       third      fourth      total
                       quarter     quarter     quarter     quarter       year
- ------------------------------------------------------------------------------
NET SALES
   2003              $ 216,010   $ 216,311   $ 223,324   $ 238,854   $ 894,499
   2002                223,093     209,141     218,266     230,276     880,776

GROSS PROFIT
   2003              $  58,140   $  58,150   $   54,740   $ 53,319   $ 224,349
   2002                 60,410     (19,659)      57,305     59,477     157,533

NET EARNINGS (LOSS)
   2003              $  13,966   $   3,284   $    1,188   $    967   $  19,405
   2002                  5,341     (50,366)       5,572      5,852     (33,601)

PER SHARE - BASIC
   2003              $     .62   $     .15   $      .05   $    .04   $     .86
   2002                    .24       (2.25)         .25        .26       (1.50)

PER SHARE - DILUTED
   2003              $     .60    $    .15   $      .05   $    .04    $    .86
   2002                    .24       (2.25)         .25        .26       (1.50)
- --------------------------------------------------------------------------------

The calculated per share-diluted amount for the twelve months ended December 31,
2002 is anti-dilutive, therefore, amount shown is equal to the basic per share
calculation.

The quarterly per share-diluted amounts for 2003 do not equal the "Total Year"
figure due to the calculation being anti-dilutive in the third and fourth
quarters.


</table












                             Page 27
<page>

Consolidated Balance Sheets
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)

<table>
December 31                                      2003       2002
- ------------------------------------------------------------------
<s>                                          <c>        <c>
ASSETS
CURRENT ASSETS
  Cash and cash equivalents                  $   7,130  $   5,571
  Accounts receivable                          193,243    195,857
  Inventories                                  178,952    164,715
  Income taxes receivable                        1,043      5,192
  Deferred income taxes                         26,026     28,450
  Other current assets                          12,457     14,460
- ------------------------------------------------------------------
     Total current assets                      418,851    414,245
- ------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, NET              51,049     61,635
GOODWILL                                        38,638     35,973
OTHER INTANGIBLE ASSETS, NET                    14,709     15,021
OTHER ASSETS                                     5,064      8,666
- ------------------------------------------------------------------
TOTAL ASSETS                                 $ 528,311  $ 535,540
==================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Notes payable                              $   6,013  $   8,647
  Current portion of long-term debt              1,660      1,660
  Accounts payable - trade                      59,600     46,664
  Accrued salaries and wages                     8,698      8,434
  Accrued vacations                              5,885      6,434
  Accrued contract loss                         23,611     26,674
  Accrued restructuring cost                     6,109      7,594
  Advances on contracts                         19,693     22,318
  Other accruals and payables                   29,286     28,669
- ------------------------------------------------------------------
     Total current liabilities                 160,555    157,094
- ------------------------------------------------------------------













                             Page 28
<page>

Consolidated Balance Sheets
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)

December 31                                      2003       2002
- ------------------------------------------------------------------
<s>                                          <c>        <c>
LONG-TERM DEBT, EXCLUDING CURRENT PORTION       36,624     60,132
OTHER LONG-TERM LIABILITIES                     27,949     26,367

SHAREHOLDERS' EQUITY
  Capital stock, $1 par value per share:
    Preferred stock, authorized 700,000 shares:
      Series 2 preferred stock, 6.5% cumulative
         convertible, authorized 500,000 shares,
         none outstanding                            -          -
    Common stock:
      Class A, authorized 48,500,000 shares,
        nonvoting; $.10 per common share
        dividend preference; issued 23,066,260
        shares in 2003 and 2002                 23,066     23,066
      Class B, authorized 1,500,000 shares,
        voting; issued 667,814 shares
        in 2003 and 2002                           668        668
  Additional paid-in capital                    76,744     77,267
  Retained earnings                            219,401    209,932
  Unamortized restricted stock awards           (1,727)    (2,094)
  Accumulated other comprehensive income (loss) (1,311)    (1,099)
- ------------------------------------------------------------------
                                               316,841    307,740
  Less 1,103,636 shares and 1,274,091 shares
    of Class A common stock in 2003 and 2002,
    respectively, held in treasury, at cost    (13,658)   (15,793)
- ------------------------------------------------------------------
     Total shareholders' equity                303,183    291,947
- ------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 528,311  $ 535,540
==================================================================

See accompanying notes to consolidated financial statements.
</table>












                             Page 29
<page>

Consolidated Statements of Operations
Kaman Corporation and Subsidiaries
(In thousands except per share amounts)

<table>
Year ended December 31               2003        2002        2001
- ------------------------------------------------------------------
<s>                             <c>         <c>         <c>
NET SALES                       $ 894,499   $ 880,776   $ 875,869
- ------------------------------------------------------------------
COSTS AND EXPENSES
  Cost of sales (1)               670,150     723,243     673,782
  Selling, general and
    administrative expense        207,857     199,453     188,752
  Restructuring costs (2)               -       8,290           -
  Other operating income           (1,448)     (1,302)     (1,076)
  Net gain on sale of product
    lines and other assets        (18,163)     (2,299)     (2,637)
  Interest expense (income), net    3,008       2,486         623
  Other expense, net                1,265       1,831         761
- ------------------------------------------------------------------
                                  862,669     931,702     860,205
- ------------------------------------------------------------------
EARNINGS (LOSS) BEFORE
  INCOME TAXES                     31,830     (50,926)     15,664
INCOME TAXES (BENEFIT)             12,425     (17,325)      3,950
- ------------------------------------------------------------------
NET EARNINGS (LOSS)             $  19,405   $ (33,601)  $  11,714
- ------------------------------------------------------------------
PER SHARE
  Net earnings (loss) per share:
    Basic                       $     .86   $   (1.50)  $     .52
    Diluted (3)                       .86       (1.50)        .52
  Dividends declared                  .44         .44         .44
==================================================================
<fn>
(1) Cost of sales for the twelve months ended December 31, 2002
    includes the write-off of K-MAX assets of $50,000 and Moosup
    facility assets of $2,679, both of which are associated with
    the charge taken in the Aerospace segment.

(2) Restructuring costs for the twelve months ended December 31,
    2002 relate to the closure of the Moosup facility in 2003 and
    are associated with the charge taken in the Aerospace segment.

(3) The calculated diluted per share amounts for the twelve months
    ended December 31, 2002 and 2001 are anti-dilutive, therefore,
    amounts shown are equal to the basic per share calculation.

See accompanying notes to consolidated financial statements.
</fn>
</table>

                             Page 30
<page>

Consolidated Statements of Changes in Shareholders' Equity
Kaman Corporation and Subsidiaries
(In thousands except share amounts)


<table>
Year ended December 31               2003        2002       2001
- ------------------------------------------------------------------
<s>                             <c>         <c>        <c>
SERIES 2 PREFERRED STOCK        $       -   $       -  $        -
- ------------------------------------------------------------------
CLASS A COMMON STOCK               23,066      23,066      23,066
- ------------------------------------------------------------------
CLASS B COMMON STOCK                  668         668         668
- ------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL
  Balance - beginning of year      77,267      77,389      77,298
  Employee stock plans               (398)       (304)       (234)
  Restricted stock awards            (125)        182         325
- ------------------------------------------------------------------
  Balance - end of year            76,744      77,267      77,389
- ------------------------------------------------------------------
RETAINED EARNINGS
  Balance - beginning of year     209,932     253,403     251,526
  Net earnings (loss) (1)          19,405     (33,601)     11,714
  Dividends declared               (9,936)     (9,870)     (9,837)
- ------------------------------------------------------------------
  Balance - end of year           219,401     209,932     253,403
- ------------------------------------------------------------------
UNAMORTIZED RESTRICTED STOCK AWARDS
  Balance - beginning of year      (2,094)     (2,206)     (1,643)
  Stock awards issued                (529)       (832)     (1,585)
  Amortization of stock awards        896         944       1,022
- ------------------------------------------------------------------
  Balance - end of year            (1,727)     (2,094)     (2,206)
- ------------------------------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
  Balance - beginning of year      (1,099)       (919)       (749)
  Foreign currency
    translation adjustment (1)       (212)       (180)       (170)
- ------------------------------------------------------------------
  Balance - end of year            (1,311)     (1,099)       (919)
- ------------------------------------------------------------------










                             Page 31
<page>

Consolidated Statements of Changes in Shareholders' Equity
Kaman Corporation and Subsidiaries
(In thousands except share amounts)


Year ended December 31               2003        2002       2001
- ------------------------------------------------------------------
<s>                             <c>         <c>        <c>

TREASURY STOCK
  Balance - beginning of year     (15,793)    (17,820)    (18,120)
  Shares acquired in 2003 - 20,000;
     2002 - 37,300; 2001 - 211,550   (205)       (412)     (2,760)
  Shares reissued under various
     stock plans                    2,340       2,439       3,060
- ------------------------------------------------------------------
  Balance - end of year           (13,658)    (15,793)    (17,820)
- ------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY      $ 303,183   $ 291,947  $  333,581
==================================================================

<fn>
(1) Comprehensive income (loss) is $19,193, $(33,781), and $11,544
    for 2003, 2002 and 2001, respectively.

See accompanying notes to consolidated financial statements.
</fn>
</table>

























                             Page 32
<page>

Consolidated Statements of Cash Flows
Kaman Corporation and Subsidiaries
(In thousands)

<table>
Year ended December 31               2003        2002        2001
- ------------------------------------------------------------------
<s>                             <c>         <c>         <c>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net earnings (loss)           $  19,405   $ (33,601)  $  11,714
  Adjustments to reconcile net
    earnings (loss) to cash
    provided by (used in)
    operating activities:
      Depreciation and
        amortization               10,019      11,620      11,441
      Net gain on sale of product
        lines and other assets    (18,163)     (2,299)     (2,637)
      Restructuring costs               -       8,290           -
      Non-cash write-down of assets     -      52,679           -
      Deferred income taxes         5,994     (16,715)       (375)
      Other, net                    2,376       3,403       2,152
      Changes in current assets and
        liabilities, excluding effects
        of acquisitions/divestitures:
        Accounts receivable         3,231      (4,625)     32,411
        Inventories                (9,806)    (12,751)      5,407
        Income taxes receivable     4,149      (4,888)     (4,081)
        Other current assets        2,267      (2,691)     (3,680)
        Accounts payable - trade   10,106      (8,813)     (9,284)
        Accrued contract loss      (3,063)     26,674           -
        Accrued restructuring
          costs                    (1,485)       (696)          -
        Advances on contracts      (1,846)     (9,286)    (11,124)
        Accrued expenses and
          payables                  3,459     (17,470)    (11,813)
- ------------------------------------------------------------------
          Cash provided by (used in)
            operating activities   26,643     (11,169)     20,131
- ------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds from sale of product
    lines and other assets         28,339       8,034       4,047
  Expenditures for property,
    plant and equipment            (9,069)     (7,601)     (8,033)
  Acquisition of businesses,
    less cash acquired             (7,748)    (51,227)    (20,845)
  Other, net                       (1,599)      1,854        (253)
- ------------------------------------------------------------------
          Cash provided by (used in)
            investing activities    9,923     (48,940)    (25,084)
- ------------------------------------------------------------------

                             Page 33
<page>

Consolidated Statements of Cash Flows
Kaman Corporation and Subsidiaries
(In thousands)


Year ended December 31               2003        2002        2001
- ------------------------------------------------------------------
<s>                             <c>         <c>         <c>
CASH FLOWS FROM FINANCING ACTIVITIES
  Changes in notes payable         (2,664)      5,985         318
  Changes in long-term debt       (23,508)     36,906      (1,660)
  Proceeds from exercise of
    employee stock plans            1,287       1,485       1,566
  Purchases of treasury stock       (205)        (412)     (2,760)
  Dividends paid                  (9,917)      (9,850)     (9,834)
  Other                                -          732           -
- ------------------------------------------------------------------
          Cash provided by (used in)
            financing activities (35,007)     34,846      (12,370)
- ------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS             1,559     (25,263)     (17,323)
CASH AND CASH EQUIVALENTS AT
  BEGINNING OF YEAR                5,571      30,834       48,157
- ------------------------------------------------------------------
CASH AND CASH EQUIVALENTS
  AT END OF YEAR                $  7,130    $  5,571    $  30,834
==================================================================

See accompanying notes to consolidated financial statements.
</table>






















                             Page 34
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION - The accompanying consolidated
financial statements include the accounts of the parent
corporation and its subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
Certain amounts in prior year financial statements and notes
thereto have been reclassified to conform to current year
presentation.

USE OF ESTIMATES - The preparation of consolidated financial
statements in conformity with accounting principles generally
accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS - Surplus funds are invested in cash
equivalents which consist of highly liquid investments with
original maturities of three months or less.

REVENUE RECOGNITION - Sales and estimated profits under long-term
contracts are principally recognized on the percentage-of-
completion method of accounting, generally using as a measurement
basis either a ratio that costs incurred bear to estimated total
costs, after giving effect to estimates of costs to complete based
upon most recent information for each contract, or units-of-
delivery. Reviews of contracts are made regularly throughout their
lives and revisions in profit estimates are recorded in the
accounting period in which the revisions are made. Any anticipated
contract losses are charged to operations when first indicated.

     Sales and related cost of sales for products and programs not
accounted for under the percentage-of-completion method are
recognized when products are shipped to customers and title has
passed.

INVENTORIES - Inventory of merchandise for resale is stated at
cost (using the average costing method) or market, whichever is
lower. Contracts and work in process and finished goods are valued
at production cost represented by material, labor and overhead,
including general and administrative expenses where applicable.
Contracts and work in process and finished goods are not recorded
in excess of net realizable values.

                             Page 35
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


PROPERTY, PLANT AND EQUIPMENT - Depreciation of property, plant
and equipment is computed primarily on a straight-line basis over
the estimated useful lives of the assets. The estimated useful
lives for buildings range between 15 to 40 years and leasehold
improvements range between 5 to 15 years, whereas machinery,
office furniture and equipment generally range between 3 to 10
years. At the time of retirement or disposal, the acquisition cost
of the asset and related accumulated depreciation are eliminated
and any gain or loss is credited or charged against income.

     Maintenance and repair items are charged against income as
incurred, whereas renewals and betterments are capitalized and
depreciated.

GOODWILL AND OTHER INTANGIBLE ASSETS - Goodwill and intangible
assets with indefinite lives are not amortized, but are evaluated
for impairment at least annually. Intangible assets with finite
lives (presently consisting of patents) are amortized using the
straight-line method over their estimated period of benefit and
reviewed for possible impairment whenever changes in conditions
indicate carrying value may not be recoverable.

VENDOR INCENTIVES - The corporation's Industrial Distribution
segment enters into agreements with certain vendors providing for
inventory purchase incentives that are generally earned upon
achieving specified volume-purchasing levels. The segment
recognizes these incentives as a reduction in cost of goods sold.

RESEARCH AND DEVELOPMENT - Research and development costs not
specifically covered by contracts are charged against income as
incurred through selling, general and administrative expense. Such
costs amounted to $4,318 in 2003, $5,363 in 2002 and $4,673 in
2001.

INCOME TAXES - Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to temporary
differences between the financial statement carrying amounts of
assets and liabilities and their respective tax bases using
enacted tax rates expected to apply in the years in which
temporary differences are expected to be recovered or settled.

STOCK-BASED COMPENSATION - As permitted by Statement of Financial
Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" ("SFAS 123"), the corporation has elected to
continue following the guidance of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," for

                             Page 36
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


measurement and recognition of stock-based transactions with
employees. Accordingly, no compensation cost has been recognized
for its stock plans other than for the restricted stock awards and
stock appreciation rights. Under the disclosure alternative of
SFAS 123, the pro forma net earnings and earnings per share
information presented below includes the compensation cost of
stock options issued to employees based on the fair value at the
grant date and includes compensation cost for the 15% discount
offered to participants in the employees stock purchase plan.

<table>
                                     2003        2002        2001
- ------------------------------------------------------------------
<s>                             <c>         <c>         <c>
Net earnings (loss):
  As reported                   $  19,405   $ (33,601)  $  11,714
  Less stock option expense        (1,258)     (1,388)     (1,266)
  Tax effect                          491         472         319
- ------------------------------------------------------------------
  Pro forma net earnings (loss) $  18,638   $ (34,517)  $  10,767
==================================================================
Earnings (loss) per share - basic:
  As reported                         .86       (1.50)        .52
  Pro forma                           .83       (1.54)        .48
Earnings (loss) per share - diluted:
  As reported                         .86       (1.50)        .52
  Pro forma                           .83       (1.54)        .48
- ------------------------------------------------------------------
</table>
The fair value of each option grant is estimated on the date of
grant by using the Black-Scholes option-pricing model. The
following weighted-average assumptions were used for grants in
2003, 2002 and 2001:

<table>
                                   2003        2002        2001
- ----------------------------------------------------------------
<s>                             <c>         <c>         <c>
Expected dividend yield            4.4%        3.0%        2.7%
Expected volatility                 47%         45%         45%
Risk-free interest rate            3.9%        4.9%        5.1%
Expected option lives           8 years     8 years     8 years
Per share fair value of
  options granted               $  3.33     $  5.86     $  6.84
================================================================
</table>

                             Page 37
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


RECENT ACCOUNTING STANDARDS - In June 2002, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities" ("SFAS 146"). SFAS 146 requires
that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred. SFAS 146
also requires that the initial measurement of a liability be at
fair value. SFAS 146 is effective for exit or disposal activities
that are initiated after December 31, 2002. The corporation
adopted SFAS 146 effective January 1, 2003 and that adoption did
not have a material impact on its consolidated results of
operations or financial position.

     In December 2002, the FASB issued Statement of Financial
Accounting Standards No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure - an amendment of FASB
Statement No. 123" ("SFAS 148"). SFAS 148 amends FASB Statement
No. 123, "Accounting for Stock-Based Compensation" to provide
alternative methods for a voluntary change to the fair value based
method of accounting for stock-based employee compensation and
amends the disclosure requirements of Statement 123 in both annual
and interim financial statements. The provisions of SFAS 148 are
effective in fiscal years ending after December 15, 2002. The
corporation has adopted the statement in accordance with its terms
and that adoption did not have a material impact on the
corporation's consolidated results of operations or financial
position.

     In April 2003, the FASB issued Statement of Financial
Accounting Standards No. 149, "Derivative Instruments and Hedging
Activities - an amendment of FASB Statement No. 133" ("SFAS 149").
SFAS 149 amends FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities" to provide more consistent
reporting of contracts as either derivatives or hybrid
instruments. The provisions of SFAS 149 are effective for
contracts entered into or modified after June 30, 2003. The
corporation has adopted the statement in accordance with its terms
and that adoption did not have a material impact on the
corporation's consolidated results of operations or financial
position.

     In May 2003, the FASB issued Statement of Financial
Accounting Standards No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and
Equity"("SFAS 150"). SFAS 150 establishes standards for how an
issuer classifies and measures certain financial instruments with

                             Page 38
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


characteristics of both liabilities and equity. SFAS 150 is
effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003. The
corporation has adopted SFAS 150 in accordance with its terms and
that adoption did not have a material impact on the corporation's
consolidated results of operations or financial position.

     In December 2003, the FASB issued Statement of Financial
Accounting Standards No. 132 (revised 2003), "Employers'
Disclosures about Pensions and Other Postretirement Benefits"
("SFAS 132R"). SFAS 132R revises employers' disclosures about
pension plans and other postretirement benefit plans to include
information describing the types of plan assets, investment
strategy, measurement dates, plan obligations, cash flows, and
components of net periodic benefit cost recognized during interim
periods. SFAS 132R is effective for financial statements for
interim or annual periods ending after December 15, 2003. The
corporation has provided the disclosures required in accordance
with its terms as of December 31, 2003.

ACQUISITION OF BUSINESSES

During the fourth quarter of 2003, the corporation purchased a
majority of the assets and business of Industrial Supplies, Inc.
("ISI"), located in Birmingham, Alabama. ISI is a distributor of a
wide variety of bearing, conveyor, electrical, fluid power and
power transmission components used by manufacturing, mining,
steel, lumber, pulp and paper, food and other industries. ISI had
net sales of approximately $28,600 in 2002. The assets acquired,
liabilities assumed and results of operations since the
acquisition have been included in the Industrial Distribution
segment.

     In October 2002, the corporation purchased the stock of Latin
Percussion, Inc., a leading global distributor of a wide range of
latin hand percussion instruments. The assets acquired,
liabilities assumed and results of operations since the
acquisition have been included in the Music segment.

     In late July 2002, the corporation purchased the stock of RWG
Frankenjura-Industrie Flugwerklager GmbH ("RWG"), a German
aerospace bearing manufacturer that complements the corporation's
proprietary line of bearings and provides a presence in European
aerospace markets. RWG's largest customer is Airbus Industrie. The


                             Page 39
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


assets acquired, liabilities assumed and results of operations
since the acquisition have been included in the Aerospace segment.

     In July 2002, the corporation purchased the assets and
certain liabilities of Dayron (a division of DSE, Inc.), a weapons
fuze manufacturer, located in Orlando, Florida. Dayron
manufactures bomb fuzes for a variety of munitions programs, and
has the contract to develop a fuze for the U.S. Air Force and Navy
Joint Programmable Fuze (JPF) program. The assets acquired,
liabilities assumed and results of operations since the
acquisition have been included in the Aerospace segment.

     During the first quarter of 2002, the corporation acquired a
60% equity interest in Delamac de Mexico S.A. de C.V., a leading
distributor of industrial products headquartered in Mexico City.
Delamac supplies power transmission, bearings and fluid power
products. The assets acquired and liabilities assumed and results
of operations since the acquisition have been included in the
Industrial Distribution segment.

     In the aggregate, the corporation paid $7,748 and $51,227 for
acquisition of businesses in 2003 and 2002, respectively, and
there is potential for contingency payments at Dayron of up to
$25,000 over the next nine years if certain milestones are
reached. Any such contingency payments would be treated as
additional goodwill. An accrual of $1,000 was recorded as of
December 31, 2003 associated with these additional payments for
which milestones were met.

     In December 2001, the company purchased the stock of H.I.G.
Aerospace Group, Inc., parent company of Plastic Fabricating
Company, Inc. The assets acquired, liabilities assumed and results
of operations since the acquisition have been included in the
Aerospace segment.

     In September 2001, the company purchased a majority of the
assets and liabilities of A-C Supply, Inc. The assets acquired,
liabilities assumed and results of operations since the
acquisition have been included in the Industrial Distribution
segment.

     All acquisitions have been accounted for as purchases with
the purchase price being allocated to the fair value of tangible
and intangible assets acquired and liabilities assumed. The excess
of the purchase price over the estimated fair market value of net


                             Page 40
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


assets acquired has been assigned to goodwill. In accordance with
SFAS 142, the goodwill has not been amortized.

     Assuming these acquisitions had taken place on January 1,
2002, Kaman Corporation's pro forma net sales, earnings (loss)
before income taxes, net earnings (loss) and net earnings (loss)
per share for the years ended December 31, 2003 and 2002 would
have been as follows:


<table>                                            Pro forma
- ------------------------------------------------------------------
December 31 (unaudited)                         2003        2002
- ------------------------------------------------------------------
<s>                                         <c>         <c>
Net sales                                   $ 914,470   $ 942,197

Earnings (loss)
 before income taxes                           31,334     (50,351)

Net earnings (loss)                            19,103     (33,178)

Net earnings (loss) per share:
  Basic                                           .85       (1.48)
  Diluted                                         .85       (1.48)
==================================================================
</table>

The pro forma results are not necessarily indicative of the
results of operations that would have occurred had the
acquisitions actually been completed on January 1, 2002. The pro
forma results do not include future initiatives or planned
synergies, nor are they intended to be indicative of future
results. The underlying pro forma information includes interest
expense and income tax assumptions associated with the
transactions.

DIVESTITURES

In January 2003, the corporation sold its electric motor and drive
business, operating as the Electromagnetics Development Center
("EDC") within the Kaman Aerospace subsidiary, to DRS
Technologies, Inc. for $27,500. The sale resulted in a pre-tax
gain of $17,415. The EDC contributed sales of approximately
$14,000 in 2002.


                             Page 41
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


     In April 2002, the corporation sold its microwave products
line to Meggitt Safety Systems, Inc. That product line was
associated with the former Kaman Sciences Corp., a subsidiary
which was sold in 1997, being no longer core to the segment's
advanced technology business. Microwave product sales were
approximately $7,500 for the year 2001.

RESTRUCTURING COSTS

The Aerospace segment recorded pre-tax restructuring costs of
$8,290 in the second quarter of 2002 for the cost of phasing out
the company's aircraft manufacturing plant in Moosup, Connecticut.
The charges represent severance costs of $3,290 at the Moosup and
Bloomfield, Connecticut locations for approximately 400 employees
(of which $2,181 has been paid for 289 such separations as of
December 31, 2003) and costs of $5,000 for closing the facility
(including costs of an ongoing voluntary environmental remediation
program). During 2003, the corporation incurred an additional
$3,550 of period costs for moving machinery to other company
facilities and recertifying products and processes.

ASSET WRITE-DOWNS/WRITE-OFFS

During the second quarter of 2002, as a result of management's
evaluation of the K-MAX program, the Aerospace segment wrote-down
its K-MAX helicopter program assets, including $46,665 for
inventories and $3,335 for capital equipment. In addition, the
segment wrote-off Moosup facility assets of $2,679, as a result of
the previously described facility closure. These charges are
included in cost of sales for 2002.

ACCRUED CONTRACT LOSS

During the second quarter of 2002, the Aerospace segment recorded
a pre-tax charge of $25,000 for estimated cost growth on the
Australia SH-2G(A) helicopter program, which put the contract in a
loss position. Accordingly, the corporation eliminated the $6,505
profit element of previously recorded sales and recognized pre-tax
loss accruals of $18,495 for anticipated cost growth associated
with completion of the aircraft, final integration and testing of
the aircraft's advanced Integrated Tactical Avionic System
("ITAS") software.

     During the fourth quarter of 2002, the Aerospace segment
recorded an additional loss accrual for the Australia SH-2G(A)
helicopter program. This loss accrual reflects the impact of

                             Page 42
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


higher overhead rates, which were attributable to lower production
activity in the corporation's aerospace subsidiary.

ACCOUNTS RECEIVABLE

Accounts receivable consist of the following:

<table>
December 31                                     2003       2002
- ------------------------------------------------------------------
<s>                                        <c>          <c>
Trade receivables, net of allowance
 for doubtful accounts of $3,340
 in 2003, $2,853 in 2002                    $  74,816   $  72,471

U.S. Government contracts:
  Billed                                        9,355      11,607
  Recoverable costs and accrued
     profit - not billed                       10,014      21,225

Commercial and other
 government contracts:
  Billed                                       19,711      21,628
  Recoverable costs and accrued
    profit - not billed                        79,347      68,926
- ------------------------------------------------------------------
      Total                                 $ 193,243   $ 195,857
==================================================================
</table>

The allowance for doubtful accounts reflects management's best
estimate of probable losses inherent in the trade accounts
receivable balance. Management determines the allowance based on
known troubled accounts, historical experience, and other
currently available evidence.

     Recoverable costs and accrued profit-not billed represent
costs incurred on contracts which will become billable upon future
deliveries, achievement of specific contract milestones or
completion of engineering and service type contracts. Management
estimates that approximately $53,204 of such costs and accrued
profits at December 31, 2003 will be collected after one year. The
costs included in this estimate are for the corporation's programs
with the Royal Australian Navy and MD Helicopters, Inc. ("MDHI").



                             Page 43
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


     The corporation's Aerospace segment provides fuselages for
the MD Helicopters 500 and 600 series helicopters and composite
rotor blades for the MD Explorer helicopter. Total orders received
from MDHI have run at significantly lower rates than originally
anticipated due to lower than expected demand. The corporation's
investment in these contracts consists of $4.4 million in billed
receivables and $16.4 million in recoverable costs not billed
(including start-up costs and other program expenditures) as of
December 31, 2003. The corporation received payments in 2003
totaling $4.4 million, primarily for items shipped during 2003.
The recoverability of unbilled costs will depend to a significant
extent upon MDHI's future requirements through 2013. The
corporation has stopped production on these programs while working
closely with the customer to resolve overall payment issues and
establish conditions under which production could be resumed,
including the timing thereof. Based on their projected future
requirements and inventory on hand at MDHI and Kaman, this would
not be expected to occur until the second half of 2004 at the
earliest. Although the outcome is not certain, the company
understands that MDHI management is pursuing strategies to improve
its current financial and operational circumstances.

     In applying the guidance of Statement of Financial Accounting
Standards No. 5 "Accounting for Contingencies" ("SFAS 5"), the
corporation's management has concluded that some level of
impairment to the MDHI investment, while not probable, is
reasonably possible. In assessing the range of potential loss,
current program estimates project the entire amount of the
corporation's current investment to be recoverable over the full
term of the contracts, which makes the minimum end of the
potential loss range zero. Therefore, no impairment to the
carrying value of the corporation's investment in the MDHI
programs has been recorded to date.














                             Page 44
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


INVENTORIES

Inventories are comprised as follows:

<table>
December 31                                     2003       2002
- ------------------------------------------------------------------
<s>                                        <c>          <c>
Merchandise for resale                     $  94,042    $  95,056

Contracts in process:
  U.S. Government                             21,127       13,348
  Commercial                                  15,895       16,694

Other work in process (including
 certain general stock materials)             23,103       31,875

Finished goods                                24,785        7,742
- ------------------------------------------------------------------
     Total                                 $ 178,952    $ 164,715
==================================================================
</table>

     Included above in other work in process and finished goods at
December 31, 2003 and 2002 is K-MAX inventory of $33,437 and
$25,181, respectively.

     The aggregate amounts of general and administrative costs
incurred in the Aerospace segment and allocated to contracts in
process during 2003, 2002 and 2001 were $34,793, $51,845 and
$49,816, respectively.

     The estimated amounts of general and administrative costs
remaining in contracts in process at December 31, 2003 and 2002
amount to $4,118 and $4,222, respectively, and are based on the
ratio of such allocated costs to total costs incurred.

PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment are recorded at cost and summarized
as follows:






                             Page 45
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


<table>
December 31                                     2003        2002
- ------------------------------------------------------------------
<s>                                        <c>          <c>
Land                                       $   4,236    $   6,524
Buildings                                     29,070       35,077
Leasehold improvements                        13,486       11,397
Machinery, office furniture
  and equipment                              107,239      108,920
- ------------------------------------------------------------------
     Total                                   154,031      161,918

Less accumulated depreciation
 and amortization                            102,982      100,283
- ------------------------------------------------------------------
Property, plant and
  equipment, net                           $  51,049    $  61,635
==================================================================
</table>

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and other intangible assets are as follows:

<table>
December 31                                     2003        2002
- ------------------------------------------------------------------
<s>                                        <c>          <c>
Goodwill:
  Aerospace                                $  31,690    $  30,635
  Industrial Distribution                      4,277        3,197
  Music                                        2,671        2,141
- ------------------------------------------------------------------
                                           $  38,638    $  35,973
==================================================================
</table>











                             Page 46
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


<table>
December 31                                     2003        2002
- ------------------------------------------------------------------
<s>                                        <c>          <c>
Other intangible assets, net:
  Trade name - not subject
    to amortization                        $  13,819    $  13,819
  Patents, net - subject to
    amortization                                 890        1,202
- ------------------------------------------------------------------
                                           $  14,709    $  15,021
==================================================================
</table>

Intangible amortization expense was $107 in 2003 and 2002 compared
to $99 in 2001.

CREDIT ARRANGEMENTS - SHORT-TERM BORROWINGS AND LONG-TERM DEBT

REVOLVING CREDIT AGREEMENT - The corporation maintains a revolving
credit agreement (the "Revolving Credit Agreement") with several
banks that provides a $150,000 five-year commitment scheduled to
expire in November 2005. Prior to November 2003, the corporation
also maintained a $75,000 "364-day" annually renewable facility as
part of the Revolving Credit Agreement. Both portions of the
Revolving Credit Agreement provide for interest at current market
rates. In view of the longer term attractiveness of fixed rates in
the current environment and the fact that the "364-day" facility
had never been used, the corporation permitted it to expire in
November 2003.

     In the third quarter of 2003, the Revolving Credit Agreement
was amended to give potential lenders under a new fixed rate
financing of up to $75,000 the same covenant and guarantee
protections that the Revolving Credit Agreement lenders currently
possess.

     In the second quarter of 2002, the Revolving Credit Agreement
was amended to exclude the non-cash portion of the 2002 second
quarter charges, up to $52,500, from the financial covenant
calculations under the agreement.

     In general, outstanding letters of credit are considered
indebtedness under the Revolving Credit Agreement.



                             Page 47
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


SHORT-TERM BORROWINGS - Under the Revolving Credit Agreement, the
corporation has the ability to borrow funds on both a short-term
and long-term basis. The corporation also has certain other credit
arrangements with these banks to borrow funds on a short-term
basis with interest at current market rates.

Short-term borrowings outstanding are as follows:


<table>
December 31                                     2003        2002
- ------------------------------------------------------------------
<s>                                        <c>          <c>
Revolving credit agreement                 $       -    $       -
Other credit arrangements                      6,013        8,647
- ------------------------------------------------------------------
     Total                                 $   6,013    $   8,647
==================================================================

</table>

LONG-TERM DEBT - The corporation has long-term debt as follows:


<table>
December 31                                     2003        2002
- ------------------------------------------------------------------
<s>                                        <c>          <c>
Revolving credit agreement                 $   7,000    $  30,840
Euro credit agreement                          9,718        7,726
Convertible subordinated debentures           21,566       23,226
- ------------------------------------------------------------------
     Total                                    38,284       61,792

Less current portion                           1,660        1,660
- ------------------------------------------------------------------
     Total excluding current portion       $  36,624    $  60,132
==================================================================
</table>

In the third quarter of 2002, the corporation entered into a
9,500 Euro credit agreement (the "Euro Credit Agreement") with one
of the Revolving Credit Agreement lenders having offices in
London. In general, the Euro Credit Agreement contains the same
financial covenants as the Revolving Credit Agreement described
previously and the term of the Euro Credit Agreement expires at

                             Page 48
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)

the same time as the Revolving Credit Agreement. During the third
quarter of 2003, the Euro Credit Agreement was amended to conform
with the previously described amendment to the Revolving Credit
Agreement.

RESTRICTIVE COVENANTS - The most restrictive of the covenants
contained in the Revolving Credit Agreement requires the
corporation to have EBITDA, as defined, at least equal to 300% of
net interest expense, on the basis of a rolling four quarters and
a ratio of consolidated total indebtedness to total capitalization
of not more than 55%. The non-cash portion of the 2002 second
quarter charges, up to $52,500, were excluded from the financial
covenant calculations during the four quarters ended March 31,
2003.

CERTAIN LETTERS OF CREDIT - The face amounts of irrevocable
letters of credit issued under the Revolving Credit Agreement
totaled $29,769 and $50,975 at December 31, 2003 and 2002,
respectively. Of those amounts, $23,000 and $43,000, respectively,
are attributable to the Australia SH-2G(A) helicopter program.

CONVERTIBLE SUBORDINATED DEBENTURES - The corporation issued its
6% convertible subordinated debentures during 1987. The debentures
are convertible into shares of the Class A common stock of Kaman
Corporation at any time on or before March 15, 2012 at a
conversion price of $23.36 per share at the option of the holder
unless previously redeemed by the corporation. Pursuant to a
sinking fund requirement that began March 15, 1997, the
corporation redeems $1,660 of the outstanding principal amount of
the debentures annually. The debentures are subordinated to the
claims of senior debt holders and general creditors. These
debentures have a fair value of $21,350 at December 31, 2003 based
upon latest market price.

LONG-TERM DEBT ANNUAL MATURITIES - The aggregate amounts of annual
maturities of long-term debt for each of the next five years and
thereafter are approximately as follows:
<table>
- ----------------------------------------------
<s>                                 <c>
2004                                $   1,660
2005                                   18,378
2006                                    1,660
2007                                    1,660
2008                                    1,660
Thereafter                             13,266
- ----------------------------------------------
</table>
                             Page 49
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


INTEREST PAYMENTS - Cash payments for interest were $3,174, $2,668
and $2,235 for 2003, 2002 and 2001, respectively.

ADVANCES ON CONTRACTS

Advances on contracts include customer advances together with
customer payments and billings associated with the achievement of
certain contract milestones in excess of costs incurred, primarily
for the Australia SH-2G(A) helicopter contract. The customer
advances for that contract are fully secured by letters of credit.
It is anticipated that the advances on contracts along with the
face amounts of these letters of credit will remain in place until
final acceptance of the aircraft by the Royal Australian Navy,
which is expected in 2005.

INCOME TAXES

The components of income taxes are as follows:

<table>
                                     2003        2002        2001
- ------------------------------------------------------------------
<s>                             <c>         <c>         <c>
Current:
  Federal                       $   5,205   $  (1,447)  $   3,411
  State                               429         698         748
  Foreign                             797         273         166
- ------------------------------------------------------------------
                                    6,431        (476)      4,325
- ------------------------------------------------------------------
Deferred:
  Federal                           5,772     (17,111)       (353)
  State                               222         262         (22)
  Foreign                               -           -           -
- ------------------------------------------------------------------
                                    5,994     (16,849)       (375)
- ------------------------------------------------------------------
     Total                      $  12,425   $ (17,325)  $   3,950
==================================================================
</table>







                             Page 50
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


     The components of the deferred tax assets and deferred tax
liabilities are presented below:

<table>
December 31                                     2003        2002
- ------------------------------------------------------------------
<s>                                        <c>          <c>
Deferred tax assets:
  Long-term contracts                      $   9,284    $  10,066
  Deferred employee benefits                  15,559       14,195
  Inventory                                    6,970        9,311
  Restructuring costs                          2,065        2,679
  Accrued liabilities and other items          5,283        7,806
- ------------------------------------------------------------------
     Total deferred tax assets                39,161       44,057
Deferred tax liabilities:
  Depreciation and amortization               (7,124)      (6,820)
  Intangibles                                 (1,509)        (347)
  Other items                                   (898)      (1,533)
- ------------------------------------------------------------------
     Total deferred tax liabilities           (9,531)      (8,700)
- ------------------------------------------------------------------
  Net deferred tax asset
     before valuation allowance               29,630       35,357
  Valuation allowance                         (1,124)        (857)
- ------------------------------------------------------------------
    Net deferred tax asset
      after valuation allowance            $  28,506    $  34,500
==================================================================
</table>

     Valuation allowances of $1,124 and $857 at December 31, 2003
and 2002 reduced the deferred tax asset attributable to foreign
loss carryforwards to an amount that, based upon all available
information, is more likely than not to be realized. Reversal of
the valuation allowance is contingent upon the recognition of
future taxable income in the foreign country or changes in
circumstances which cause the recognition of the benefits of the
loss carryforwards to become more likely than not. The increase in
the valuation allowance of $267 is due to the generation of
additional foreign losses in 2003.

     No valuation allowance has been recorded against other
deferred tax assets because the corporation believes that these
deferred tax assets will, more likely than not, be realized. This


                             Page 51
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


determination is based largely upon the corporation's historical
earnings trend as well as its ability to carryback reversing items
within two years to offset taxes paid. In addition, the
corporation has the ability to offset deferred tax assets against
deferred tax liabilities created for such items as depreciation
and amortization.

     Income taxes have not been provided on undistributed earnings
of $3,647 from foreign subsidiaries since it is the corporation's
intention to permanently reinvest such earnings or to distribute
them only when it is tax efficient to do so. It is impracticable
to estimate the total tax liability, if any, which would be caused
by the future distribution of these earnings.

     The provisions for income taxes approximate the amounts
computed by applying the U.S. federal income tax rate to earnings
before income taxes after giving effect to state income taxes. The
consolidated effective tax rate was lower due to the reversal of
prior years' tax accruals of $329, $1,156 and $2,972 in 2003, 2002
and 2001, respectively, as a result of the corporation's ongoing
assessment of its open tax years. The reduction in 2001 included
reduced tax considerations related to the Australian SH-2G
program. Cash payments for income taxes were $2,062, $3,562 and
$8,589 in 2003, 2002 and 2001, respectively.

PENSION PLAN

The corporation has a non-contributory defined benefit pension
plan covering the full-time U.S. employees of all U.S.
subsidiaries (with the exception of certain acquired companies
that have not adopted the plan). These employees become
participants of the plan upon their completion of hours of service
requirements.  Benefits under this plan are generally based upon
an employee's years of service and compensation levels during
employment with an offset provision for social security benefits.
It is the corporation's policy to fund pension costs accrued. Plan
assets are invested in a diversified portfolio consisting of
equity and fixed income securities (including $9,707 of Class A
common stock of Kaman Corporation at December 31, 2003).  The
corporation uses a December 31 measurement date for its pension
plan.






                             Page 52
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


     The pension plan costs were computed using the projected unit
credit actuarial cost method and include the following components:

<table>
                                     2003        2002        2001
- ------------------------------------------------------------------
<s>                             <c>         <c>         <c>
Service cost for benefits
  earned during the year        $  10,000   $  10,061   $   9,757
Interest cost on projected
  benefit obligation               24,348      24,045      22,822
Expected return on
  plan assets                     (31,445)    (32,761)    (31,614)
Net amortization
 and deferral                           6      (1,382)     (3,589)
- ------------------------------------------------------------------
Net pension cost (income)       $   2,909   $     (37)  $  (2,624)
==================================================================
</table>

     The change in actuarial present value of the projected
benefit obligation is as follows:

<table>
December 31                                     2003         2002
- ------------------------------------------------------------------
<s>                                        <c>          <c>
Projected benefit obligation
  at beginning of year                     $ 361,213    $ 329,168
Service cost                                  10,000       10,061
Interest cost                                 24,348       24,045
Actuarial liability loss                      12,902       15,848
Plan amendments                                    -            -
Benefit payments                             (18,571)     (17,909)
- ------------------------------------------------------------------
Projected benefit obligation at
 end of year                               $ 389,892    $ 361,213
==================================================================
</table>

     The actuarial liability losses for 2003 and 2002 are
principally due to effect of the changes in the discount rate.





                             Page 53
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


     The change in fair value of plan assets is as follows:

<table>
December 31                                     2003         2002
- ------------------------------------------------------------------
<s>                                        <c>          <c>
Fair value of plan assets at
  beginning of year                        $ 337,813    $ 386,642
Actual return on plan assets                  66,200      (30,920)
Employer contribution                          1,406            -
Benefit payments                             (18,571)     (17,909)
- ------------------------------------------------------------------
Fair value of plan assets
  at end of year                           $ 386,848    $ 337,813
==================================================================
</table>

<table>
December 31                                     2003         2002
- ------------------------------------------------------------------
<s>                                        <c>          <c>
Excess (deficiency) of assets over
 projected benefit obligation              $  (3,044)   $ (23,400)
Unrecognized prior service cost                  570          576
Unrecognized net (gain) loss                   3,572       25,425
- ------------------------------------------------------------------
Accrued (prepaid) pension cost             $  (1,098)   $  (2,601)
==================================================================
</table>

     The accumulated benefit obligation for the pension plan was
$350,635 and $316,356 at December 31, 2003 and 2002, respectively.

     The actuarial assumptions used in determining both benefit
obligations of the pension plan are as follows:

<table>
December 31                                     2003         2002
- ------------------------------------------------------------------
<s>                                             <c>          <c>
Discount rate                                   6.5%         7.0%
Average rate of increase in
  compensation levels                           3.5%         4.0%
==================================================================
</table>


                             Page 54
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


     The actuarial assumptions used in determining the net
periodic benefit cost of the pension plan are as follows:

<table>
December 31                                     2003         2002
- ------------------------------------------------------------------
<s>                                             <c>          <c>
Discount rate                                   7.0%         7.5%
Expected return on plan assets                  8.5%         8.6%
Average rate of increase in
  compensation levels                           4.0%         4.5%
==================================================================
</table>

     The expected return on plan assets rate was determined based
upon historical returns adjusted for estimated future market
fluctuations.

     The weighted-average asset allocations by asset category are
as follows:

<table>
December 31                                     2003         2002
- ------------------------------------------------------------------
<s>                                             <c>          <c>
Equity securities                                58%          48%
Fixed income securities                          42%          52%
- ------------------------------------------------------------------
Total                                           100%         100%
==================================================================
</table>

     The investment policies and goals for pension plan assets are
a) to place assets with investment managers approved by the
Finance Committee of the Board of Directors b) to diversify across
traditional equity and fixed income asset classes to minimize the
risk of large losses and c) to seek the highest total return
(through a combination of income and asset appreciation)
consistent with prudent investment practice, and on a five-year
moving basis, not less than the actuarial earnings assumption.

     The target equity/fixed asset allocation ratio is 60%/40%
over the long term. If the ratio for any asset class moves outside
permitted ranges, the pension plan's Administrative Committee (the
management committee that is responsible for plan administration)


                             Page 55
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


will act through an immediate or gradual process, as appropriate,
to reallocate assets.

     Under the current investment policy no investment is made in
commodities, nor are short sales, margin buying hedges, covered or
uncovered call options, puts, straddles or other speculative
trading devices permitted. No manager may invest in international
securities, inflation linked treasuries, real estate, private
equities, or securities of Kaman Corporation without authorization
from the corporation. In addition, with the exception of U.S.
Government securities, managers' holdings in the securities of any
issuer, at the time of purchase, may not exceed 7.5% of the total
market value of that manager's account.

     Investment manager performance is evaluated over various time
periods in relation to peers and the following indexes: Domestic
Equity Investments, S&P 500; International Equity Investments,
Morgan Stanley EAFE; Fixed Income Investments, Lehman Brothers'
Aggregate.

     The corporation does not expect to make a contribution to the
pension plan in 2004.

     The corporation also maintains a defined contribution plan
which has been adopted by certain of its U.S. subsidiaries. All
employees of adopting employers who meet the eligibility
requirements of the plan may participate. Employer matching
contributions are currently made to the plan with respect to a
percentage of each participant's pre-tax contribution. For each
dollar that a participant contributes, up to 5% of compensation,
participating subsidiaries make employer contributions of fifty
cents ($.50). Employer contributions to the plan totaled $2,900,
$3,019 and $3,438 in 2003, 2002 and 2001, respectively.

     Certain U.S. subsidiaries acquired in 2002 and 2001 maintain
their own defined contribution plans for their eligible employees.
Employer matching contributions are made on a discretionary basis.










                             Page 56
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


OTHER LONG-TERM LIABILITIES

Other long-term liabilities consist of the following:

<table>
December 31                                     2003         2002
- ------------------------------------------------------------------
<s>                                        <c>          <c>
Supplemental employees'
 retirement plan                           $  15,199    $  13,680
Deferred compensation                          8,395        8,288
Other                                          4,355        4,399
- ------------------------------------------------------------------
     Total                                 $  27,949    $  26,367
==================================================================
</table>

COMMITMENTS AND CONTINGENCIES

Rent commitments under various leases for office space,
warehouses, land and buildings expire at varying dates from
January 2004 to December 2013. Certain annual rentals are subject
to renegotiation, with certain leases renewable for varying
periods. Lease periods for machinery and equipment vary from 1 to
5 years.

     Substantially all real estate taxes, insurance and
maintenance expenses are obligations of the corporation. It is
expected that in the normal course of business, leases that expire
will be renewed or replaced by leases on other properties.

















                             Page 57
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


     The following future minimum rental payments are required
under operating leases that have initial or remaining
noncancelable lease terms in excess of one year as of December 31,
2003:

<table>
- ---------------------------------------------
<s>                                 <c>
2004                                $ 12,978
2005                                   6,477
2006                                   3,793
2007                                   2,420
2008                                     958
Thereafter                             2,538
- ---------------------------------------------
Total                               $ 29,164
=============================================
</table>

     Lease expense for all operating leases, including leases with
terms of less than one year, amounted to $15,878, $15,172 and
$15,113 for 2003, 2002 and 2001, respectively.

     From time to time, the corporation is subject to various
claims and suits arising out of the ordinary course of business,
including commercial, employment and environmental matters. While
the ultimate result of all such matters is not presently
determinable, based upon its current knowledge, management does
not expect that their resolution will have a material adverse
effect on the corporation's consolidated financial position.

COMPUTATION OF EARNINGS (LOSS) PER SHARE

The earnings (loss) per share - basic computation is based on the
net earnings (loss) divided by the weighted average number of
shares of common stock outstanding for each year.

     The earnings (loss) per share - diluted computation assumes
that at the beginning of the year the 6% convertible subordinated
debentures are converted into Class A common stock with the
resultant reduction in interest costs net of tax. The earnings
(loss) per share - diluted computation also includes the common
stock equivalency of dilutive options granted to employees under
the Stock Incentive Plan. Excluded from the earnings (loss) per



                             Page 58
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


share - diluted calculation are options granted to employees that
are anti-dilutive based on the average stock price for the year.

<table>
                                     2003        2002        2001
- ------------------------------------------------------------------
<s>                             <c>         <c>         <c>
Earnings (loss)
  per share - basic
    Net earnings (loss)         $  19,405   $ (33,601)  $  11,714
==================================================================
    Weighted average shares
      outstanding (000)            22,561      22,408      22,364
==================================================================
    Earnings (loss)
      per share - basic         $     .86   $   (1.50)  $     .52
==================================================================
Earnings (loss)
  per share - diluted
    Net earnings (loss)         $  19,405   $ (33,601)  $   11,714
    Plus:
      After-tax interest
         savings on  convertible
         debentures                   806         918        1,093
- ------------------------------------------------------------------
  Net earnings (loss)
    assuming conversion         $  20,211   $ (32,683)  $   12,807
==================================================================
  Weighted average shares
    outstanding (000)              22,561      22,408       22,364
  Plus shares issuable on:
    Conversion of  6% convertible
      debentures                      938           -        1,080
    Exercise of dilutive options       43           -          205
- ------------------------------------------------------------------
  Weighted average  shares
    outstanding  assuming
    conversion (000)               23,542      22,408       23,649
==================================================================
    Earnings (loss)
      per share - diluted (1)   $     .86   $   (1.50)  $      .52
==================================================================
<fn>
(1) The calculated diluted earnings (loss) per share amounts for
    2002 and 2001 are anti-dilutive, therefore, amounts shown are
    equal to the basic earnings (loss) per share calculation.

                             Page 59
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


    Additional potentially diluted average shares outstanding of
    1,145,000 from the conversion of the debentures and the
    exercise of dilutive stock options for the twelve months ended
    December 31, 2002 have been excluded from the average diluted
    shares outstanding due to the loss from operations in that
    year.
</fn>
</table>

STOCK PLANS

EMPLOYEES STOCK PURCHASE PLAN - The Kaman Corporation Employees
Stock Purchase Plan allows employees to purchase Class A common
stock of the corporation, through payroll deductions, at 85% of
the market value of shares at the time of purchase. The plan
provides for the grant of rights to employees to purchase a
maximum of 1,500,000 shares of Class A common stock. There are no
charges or credits to income in connection with the plan. During
2003, 129,787 shares were issued to employees at prices ranging
from $8.02 to $11.90 per share. During 2002, 115,316 shares were
issued to employees at prices ranging from $8.59 to $15.33 per
share. During 2001, 106,921 shares were issued to employees at
prices ranging from $10.41 to $15.21 per share. At December 31,
2003, there were approximately 735,500 shares available for
offering under the plan.

STOCK INCENTIVE PLAN - Effective November 1, 2003, the
corporation's Board of Directors adopted the 2003 Stock Incentive
Plan (the "2003 Plan"). The 2003 Plan is subject to approval by
the shareholders entitled to vote thereon at the 2004 annual
meeting of shareholders.  In general, the 2003 Plan provides for
the issuance of 2,000,000 shares of Class A common stock and
includes a continuation and extension of the stock incentive
program embodied in the 1993 Stock Incentive Plan (the "1993
Plan"), which expired on October 31, 2003. As with the 1993 Plan,
the 2003 Plan provides for the grant of non-statutory stock
options, incentive stock options, restricted stock awards and
stock appreciation rights primarily to officers and other key
employees. The 2003 Plan adds a long-term incentive award feature
under which senior executives specifically designated for
participation are given the opportunity to receive award payments
in a combination of cash and stock at the end of a three-year
performance cycle. For the performance cycle, the corporation's
financial results are compared to the Russell 2000 indices using
the following specific measures: average return on total capital,
earnings per share growth and total return to shareholders. Award

                             Page 60
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


payments under this long-term incentive feature are not made
unless the corporation's performance is at least in the 50th
percentile of the designated indices. In addition, the 2003 Plan
contains provisions intended to qualify the plan under Section
162(m) of the Internal Revenue Code of 1986, as amended. At
December 31, 2003, there were 2,000,000 shares available for the
granting of stock options, subject to approval by the shareholders
entitled to vote thereon at the 2004 annual meeting of
shareholders.

     Stock options are generally granted at prices not less than
the fair market value at the date of grant. Options granted under
the plan generally expire ten years from the date of grant and are
exercisable on a cumulative basis with respect to 20% of the
optioned shares on each of the five anniversaries from the date of
grant. Restricted stock awards are generally granted with
restrictions that lapse at the rate of 20% per year and are
amortized accordingly. Stock appreciation rights generally expire
ten years from the date of grant and are exercisable on a
cumulative basis with respect to 20% of the rights on each of the
five anniversaries from the date of grant. These awards are
subject to forfeiture if a recipient separates from service with
the corporation.

     Restricted stock awards were made for 53,500 shares at prices
ranging from $9.90 to $9.91 per share in 2003, 56,000 shares at
prices ranging from $14.50 to $17.74 per share in 2002 and 100,000
shares at prices ranging from $15.63 to $16.31 per share in 2001.
At December 31, 2003, there were 176,200 shares remaining subject
to restrictions pursuant to these awards.

     Stock appreciation rights were issued for 314,300 shares at
$9.90 per share in 2003, 136,000 shares at $14.50 per share in
2002 and 205,000 shares at prices ranging from $16.28 to $16.31
per share in 2001, to be settled only for cash. The corporation
recorded expense for stock appreciation rights of $585 in 2003,
income of $440 in 2002 and expense of $575 in 2001 due to
fluctuations in the market price of the shares.









                             Page 61
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


Stock option activity is as follows:

<table>
                                                        Weighted-
                                                        average
                                                        exercise
Stock options outstanding:              Options         price
- ------------------------------------------------------------------
<s>                                     <c>             <c>
Balance at January 1, 2001              1,069,980          12.59
  Options granted                         335,000          16.27
  Options exercised                       (89,560)          9.96
  Options cancelled                       (56,290)         13.57
- ------------------------------------------------------------------
Balance at December 31, 2001            1,259,130          13.71
  Options granted                         211,500          14.50
  Options exercised                      (172,010)         11.60
  Options cancelled                       (79,820)         14.76
- ------------------------------------------------------------------
Balance at December 31, 2002            1,218,800          14.08
  Options granted                         171,500           9.90
  Options exercised                       (31,310)          9.65
  Options cancelled                       (83,320)         13.47
- ------------------------------------------------------------------
Balance at December 31, 2003            1,275,670          13.67
==================================================================
Weighted average contractual life
  remaining at December 31, 2003                        6.3 years
==================================================================
Range of exercise prices for options    $    9.50-      $  13.26-
  outstanding at December 31, 2003      $   13.25       $  17.00
- -----------------------------------------------------------------
Options outstanding                       470,340        805,330
Options exercisable                       245,480        434,690
Weighted average contractual
  remaining life of options
  outstanding                           5.9 years       6.5 years
Weighted average exercise price:
  Options outstanding                   $   10.68       $   15.41
  Options exercisable                   $   11.29       $   15.51
==================================================================
</table>

     As of December 31, 2002 and 2001, there were 553,870 and
577,450 options exercisable, respectively.


                             Page 62
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


SEGMENT INFORMATION

The corporation reports results in three business segments-
Aerospace, Industrial Distribution and Music.

     The Aerospace segment produces aircraft structures and
components for military and commercial aircraft, including
specialized aircraft bearings, manufactures and supports the SH-2G
Super Seasprite naval helicopter and the K-MAX medium-to-heavy
lift helicopter, and provides various advanced technology products
serving critical specialized markets including missile and bomb
fuzing. During the second quarter of 2002, the segment recorded a
pre-tax charge of $85,969 to cover the write-down of K-MAX
helicopter assets, principally inventories; for cost growth
associated with the Australian SH-2G(A) helicopter program; and to
phase out operations at the company's Moosup, Connecticut plant by
the end of 2003. During 2001, the segment recorded a sales and
pre-tax profit adjustment of $31,181, substantially all of which
is associated with a change in estimated cost to complete the
SH-2G(A) helicopter program for Australia. As a result of the 2002
and 2001 Australian SH-2G(A) program adjustments, the contract is
now in a loss position.

     The Industrial Distribution segment is the nation's third
largest distributor of power transmission, motion control,
material handling and electrical components and a wide range of
bearings. Products and value-added services are offered to a
customer base of more than 50,000 companies representing a highly
diversified cross-section of North American industry.

     The Music segment is the largest independent distributor of
musical instruments and accessories, offering more than 15,000
products for amateurs and professionals. Proprietary products
include Ovation (registered trademark), Takamine (registered
trademark), and Hamer (registered trademark) guitars, Latin
Percussion (registered trademark) and Toca (registered trademark)
instruments, Gibraltar (registered trademark) percussion hardware
and Gretsch (registered trademark) professional drum sets.









                             Page 63
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


Summarized financial information by business
segment is as follows:

<table>
                                     2003        2002        2001
- ------------------------------------------------------------------
<s>                             <c>         <c>         <c>
Net sales:
  Aerospace                     $ 251,161   $ 275,942   $ 301,580
  Industrial Distribution         497,895     477,156     453,718
  Music                           145,443     127,678     120,571
- ------------------------------------------------------------------
                                $ 894,499   $ 880,776   $ 875,869
==================================================================
Operating profit (loss):
  Aerospace                     $  14,848   $ (55,208)  $   6,542
  Industrial Distribution          12,672      12,344      13,217
  Music                             9,510       7,157       6,580
- ------------------------------------------------------------------
                                   37,030     (35,707)     26,339
Interest, corporate and
  other expense, net               (5,200)    (15,219)    (10,675)
- ------------------------------------------------------------------
Earnings (loss) before
  income taxes                  $  31,830   $ (50,926)  $  15,664
==================================================================
Identifiable assets:
  Aerospace                     $ 294,345   $ 308,275   $ 302,076
  Industrial Distribution         150,115     144,585     134,974
  Music                            65,704      68,448      45,783
  Corporate                        18,147      14,232      39,113
- ------------------------------------------------------------------
                                $ 528,311   $ 535,540   $ 521,946
==================================================================
</table>












                             Page 64
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


<table>
                                     2003        2002        2001
- ------------------------------------------------------------------
<s>                             <c>         <c>         <c>
Capital expenditures:
  Aerospace                     $   7,321   $   5,255   $   5,107
  Industrial Distribution           1,079       1,494       1,501
  Music                               522         515       1,018
  Corporate                           147         337         407
- ------------------------------------------------------------------
                                $   9,069   $   7,601   $   8,033
==================================================================
Depreciation and amortization:
  Aerospace                     $   6,138   $   6,773   $   6,175
  Industrial Distribution           1,989       2,457       2,742
  Music                             1,143       1,278       1,430
  Corporate                           749       1,112       1,094
- ------------------------------------------------------------------
                                $  10,019   $  11,620   $  11,441
==================================================================
</table>

<table>
                                     2003        2002        2001
- ------------------------------------------------------------------
<s>                             <c>         <c>         <c>
Geographic information - sales:
  United States                 $ 760,444   $ 758,240   $ 726,756
  Australia/New Zealand            52,453      64,071     100,121
  Canada                           31,469      28,049      27,162
  Europe                           27,400      14,933      12,319
  Mexico                           13,652       8,046       1,484
  Japan                             4,774       4,492       6,154
  Other                             4,307       2,945       1,873
- ------------------------------------------------------------------
                                $ 894,499   $ 880,776   $ 875,869
==================================================================
</table>

     Operating profit is total revenues less cost of sales and
selling, general and administrative expense other than general
corporate expense. The "Interest, corporate and other expense,
net" includes a pre-tax gain of $17,415 related to the sale of the
EDC operation in 2003, $1,928 related to the sale of the microwave
product line in 2002 and a pre-tax gain of $2,679 related to the
sale of two buildings in 2001.

                             Page 65
<page>

Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
Kaman Corporation and Subsidiaries
(In thousands except share and per share amounts)


     Identifiable assets are year-end assets at their respective
net carrying value segregated as to segment and corporate use. The
reductions in corporate assets in 2002 are principally due to the
use of cash and cash equivalents in that year.

     Net sales by the Aerospace segment made under contracts with
U.S. Government agencies (including sales to foreign governments
through foreign military sales contracts with U.S. Government
agencies) account for $91,618 in 2003, $102,241 in 2002 and
$81,106 in 2001.

     Sales made by the Aerospace segment under a contract with one
customer were $46,322, $52,029 and $76,865 in 2003, 2002 and 2001,
respectively.

































                             Page 66
<page>

REPORT OF INDEPENDENT AUDITORS
Kaman Corporation and Subsidiaries





KPMG LLP
Certified Public Accountants
One Financial Plaza
Hartford, Connecticut 06103


The Board of Directors and Shareholders
Kaman Corporation

We have audited the accompanying consolidated balance sheets of
Kaman Corporation and subsidiaries as of December 31, 2003 and
2002, and the related consolidated statements of operations,
changes in shareholders' equity and cash flows for each of the
years in the three year period ended December 31, 2003. These
consolidated financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.

     We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.

     In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Kaman Corporation and subsidiaries at
December 31, 2003 and 2002 and the results of their operations and
their cash flows for each of the years in the three year period
ended December 31, 2003 in conformity with accounting principles
generally accepted in the United States of America.

/s/ KPMG LLP

February 6, 2004





                             Page 67
<page>