To Our Shareholders

Employing the “sustainability” concept | Economic accountability | Environmental stewardship | Social responsibility | Winning top industry honors | 2004 and beyond

• Net income, using generally accepted accounting principles (GAAP), reached $890 million or $5.00 per share in 2003, compared with $473 million or $2.73 per share in 2002.
• On an adjusted basis, FPL Group’s 2003 earnings would have been $871 million or $4.89 per share, compared with $831 million or $4.80 per share in 2002. (See page 1 for a reconciliation of net income to adjusted earnings and earnings per share to adjusted earnings per share.)
• FPL Group’s management uses adjusted earnings internally for financial planning, for reporting of results to the board of directors and for the company’s incentive plan. The company also uses adjusted earnings when communicating its earnings outlook to analysts and investors. Management believes that adjusted earnings provide a more meaningful representation of FPL Group’s fundamental earnings power.
• Net income for Florida Power & Light Company, our largest business and one of the nation’s top-performing utilities, increased to $733 million in 2003 from $717 million in 2002, resulting in earnings per share contributions of $4.12 in 2003 and $4.14 in 2002. This solid performance was due primarily to continued strong growth in customer accounts and usage per customer as well as outstanding operations and maintenance cost performance.
• Net income on a GAAP basis for FPL Energy, our wholesale energy subsidiary operating outside of Florida, was $194 million in 2003 or $1.09 per share, compared with a loss of $169 million or negative $0.97 per share in 2002. On an adjusted basis, FPL Energy’s earnings would have been $175 million or $0.98 per share, compared with $126 million or $0.73 per share for 2002. (See page 1 for a reconciliation of net income to adjusted earnings and earnings per share to adjusted earnings per share.) Factors contributing to FPL Energy’s strong performance included: continued efficient, low-cost operations; portfolio additions, including nearly 1,000 megawatts of new wind power operations; strong performance at, and the full-year impact of owning the majority interest in, the Seabrook Station nuclear power plant; and ongoing asset optimization activities.

Employing the “sustainability” concept

At FPL Group, we approach our business with a long-term view. One of the ways we’ve chosen to manage and measure our progress and continue our track record of consistently growing earnings is by employing the concept of “sustainability.”

At its core, sustainability requires demonstrated attention to, and excellence in, three key areas: economic accountability, environmental stewardship and social responsibility. While our primary emphasis is on economic accountability and, in particular, growing shareholder value, we recognize that, to ensure shareholder value creation over the long term, we must also succeed in meeting our environmental and social responsibilities.

As with the ecosystems featured throughout this report, our businesses must survive and thrive amidst a variety of external constituencies and forces. Like those ecosystems, we strive at least for a peaceful coexistence with others and a mutually beneficial relationship if possible. We are constantly taking actions, large and small, to protect, enhance and sustain our long-term health and viability.

Following is a review of many of our strengths, activities and strategies, using the three elements of this sustainability concept as a framework.

Economic accountability

FPL Group continues to achieve strong financial performance and grow shareholder value.

We have a strong balance sheet, strong credit ratings, good cash flow and a disciplined approach to deploying capital. We believe our financial strength and discipline differentiate us from most of our peers and are strong competitive advantages.

During the course of the year, we raised $3.3 billion in the capital markets and through bank transactions, enabling us to meet external capital requirements, refinance existing high-cost debt, significantly extend our debt maturity profile, improve liquidity and simultaneously reduce our aggregate cost of funding. Included in these transactions were the first-ever capital markets financing of wind projects and a bank financing of natural gas-fired power plants under construction. Both of these financings were recognized by various project finance publications as outstanding transactions within the industry and received Deal of the Year honors in several categories. Our financing activities were all consistent with the plans we have previously described and helped us maintain our very strong credit ratings.

Both of our major businesses had outstanding years in 2003.

• FPL benefited from rates of growth in our customer base and in electric usage per customer that are among the highest of any electric utility. We continued outstanding operational and cost performance that places us among the best in our industry. We added more than 1,400 megawatts of generation capacity and expanded our infrastructure to meet growing demand, and we further improved the reliability of our electric system. Our two nuclear units at St. Lucie were granted 20-year license extensions by the Nuclear Regulatory Commission.
• At FPL Energy, despite a difficult business environment, we continued to capitalize on our strengths and grow the business. We added nearly 3,000 megawatts of natural gas-fired generation with project additions in New York, Alabama, Texas and California. We grew our world-leading wind portfolio by nearly 1,000 megawatts. We completed 490 days of continuous operation and a record refueling outage at our Seabrook Station nuclear power plant in New Hampshire. We continued to add value and reduce risk by actively hedging our merchant portfolio.

I’ve said many times that one of the hallmarks of FPL Group and its high performance culture is a deeply-ingrained drive for continuous improvement. We are among the top decile or quartile performers on most key industry metrics. Even so, we regularly benchmark our processes and performance against the best of our peers and U.S. industry as a means for identifying opportunities for further improvements.

We maintain a relatively low risk profile by focusing on our core business and avoiding investments other companies have made in “trends of the day.” We mitigate market risk by contracting a high percentage of expected future power output and by hedging our associated fuel requirements. We maintain a diverse fuel mix at our utility, and at FPL Energy, we’re well diversified by geography as well as by fuel type.

Last year in my letter, I articulated my strong personal commitment to unquestioned integrity and reviewed a list of tangible actions we had taken to uphold and further strengthen our outstanding record of integrity and accountability in corporate governance matters. Our company’s corporate governance practices are now ranked in the top 10 percent in our industry and in the top 15 percent in the S&P 500 by Institutional Shareholder Services, a leading independent appraiser. Another rating organization, GovernanceMetrics International, gave FPL Group 9.0 out of 10 possible points, again placing us well above average as compared to other U.S. companies and better than most energy producers. As we do in all other areas of the company, we will continue to review regularly our corporate governance practices with a goal of raising the bar even further on our practices and performance.

Environmental stewardship

Clean energy is a major focus of our business strategy. The vast majority of the power we generate is derived from clean and renewable fuels. Among the capacity additions we brought online in Florida this year was a facility at Sanford that we “repowered” to replace older oil-fired generating units with clean-burning and more efficient natural gas-fired units. We’re the world leader in wind power. We own and operate the two largest solar fields in the world — and more than 20 hydropower facilities. In 2003 alone, we invested more than $1.6 billion in developing new sources of clean and renewable energy. Through our new Sunshine Energy program, FPL residential customers now have an option to apply a small monthly premium to join us in supporting cleaner electricity generation, reducing CO2 emissions and helping build new renewable sources of electricity in Florida and surrounding states.

Over the past decade, FPL Group voluntarily has made significant reductions in plant emissions. Today, our emissions rates of carbon dioxide, nitrogen oxide and sulfur dioxide are among the lowest of companies our size in the electric power industry. In November, as a key element of our participation in EPA’s Climate Leaders program, we committed to reducing our greenhouse gas emissions rate by 18 percent between 2003 and 2008 compared to a 2001 baseline. FPL Group will achieve the 18 percent reduction through a variety of efforts, including: continuing to evaluate fuel switching and efficiency improvement opportunities at FPL’s fossil-fuel plants; improving the operating efficiency of our Seabrook nuclear power plant and increasing its output by about nine percent; building or buying power from clean natural gas-fired generation to offset older, less efficient facilities; increasing participation of FPL customers in energy management and conservation programs; continuing expansion of FPL Energy’s world-leading wind energy portfolio; and introducing the Sunshine Energy program I referred to earlier in this letter. In addition, these actions will position us well in the event that more stringent air emissions legislation becomes law.

Social responsibility

First and foremost, we make every effort to ensure the safety and security of our employees and those who interact with our people, facilities and service. Thanks to a major behavior-based training program and a safety-first mindset, safety performance across our company is at an all-time high and is approaching the best in our industry. Even one injury is one too many, however, so we will stay vigilant.

The health of our workforce is both a human issue and a business issue. Our employees have drawn great benefit from FPL WELL, our world-class health, wellness and fitness program. Health care costs continue to rise, however, and we’re taking actions to limit
further increases yet retain quality health care services for our employees.

At FPL Group, we value workplace diversity and view it broadly to include educational background, industry experience and length of service, as well as more traditional measures like ethnicity and gender. The diversity of our management team is quite impressive, and we also have a strong supplier diversity program. Social responsibility extends to collaborating with environmental and community groups on sensitive issues. The growth in our service territory presents challenges in siting new facilities; despite using state-of-the-art technology to construct and operate our facilities, people aren’t always pleased that new electric system infrastructure might be under consideration for their neighborhood. That’s why we conduct public outreach programs prior to commencing new infrastructure improvements. While we can’t always accommodate
the expressed desires of community members, we’re committed to listening and to taking their concerns into consideration in our planning.

Clearly, the most important social responsibilities we have are providing a safe, reliable and low-cost supply of electricity to all of our customers — along with great customer service. The California electricity crisis of just two years ago and the August 14, 2003 blackout in parts of the U.S. and Canada have demonstrated just how important a reliable electric system is to all of us. We’ve invested more than $5 billion between 2000
and 2003 in our electric system infrastructure and plan to invest more than $7 billion between 2004 and 2008 to support projected growth in our service territory and ongoing reliability enhancements. In 2003, the average amount of time an FPL customer was without power — a key measure of reliability — was less than half the national average.

Winning top industry honors

We consider each of these three imperatives — economic accountability, environmental stewardship and social responsibility — in our daily decision making and our longer-term strategy development.

This past year, we were delighted to be presented with the 2003 Edison Award, the electric power industry’s highest honor. In announcing the award, the Edison Electric Institute said, “FPL Group’s winning strategy clearly demonstrates that environmental excellence and outstanding financial performance can go hand in hand. FPL Group’s success is emblematic of the ingenuity and vision that are the hallmarks of our industry. Its leadership and boldness, and the ability to see what lies ahead in a constantly changing industry, are what set them apart.” In December, Platts, the energy information and market services unit of The McGraw-Hill Companies, presented FPL Group with a 2003 Global Energy Award as “Renewable Company of the Year” for our clean energy portfolio.

2004 and beyond

Going forward, we have high expectations, sound strategies and strong, tangible growth prospects. For 2004, we expect earnings per share for FPL Group in the range of $4.95 to $5.20. This includes contributions from FPL of $4.20 to $4.35 and $1.05 to $1.20 from FPL Energy, assuming normal weather, as well as an expected negative impact from Corporate & Other of $0.30 to $0.35 per share, largely due to increased interest expense. These ranges exclude the effect of adopting new accounting standards and the mark-to-market effect of non-qualifying hedges, neither of which can be determined at this time. We expect to benefit from continued growth in customer accounts and usage at FPL, ongoing productivity improvements at both FPL and FPL Energy, the full-year impact of nearly 1,000 megawatts of wind generation added in 2003, and ongoing asset optimization and risk management activities at FPL Energy.

Overall, our corporate strategies call for supporting continued growth at FPL and FPL Energy with a balanced financing plan, investigating opportunities that utilize our core strengths — those areas of the company where we have demonstrated superior performance — and financing new investments with a balance of debt and equity.

We were disappointed that Congress did not pass an energy bill in 2003. The bill was not perfect, but did include a number of provisions that would have been favorable to our company, including a wind energy production tax credit. We are hopeful Congress will
take action early in 2004 on this bill or, at a minimum, enact the wind production tax credit.

At a time when many companies are trying to correct their past missteps and find new strategies in a difficult business environment, FPL Group continues to demonstrate its sustainability and its value as a solid long-term investment.

Our base business is rock solid. Operational excellence and customer satisfaction are central to our culture, and we enjoy regulatory stability in our Florida service territory.

We have strong, tangible growth potential. FPL is among the largest and fastest-growing electric utilities in America. At FPL Energy, we fully expect to achieve continued growth — particularly in wind energy, assuming continued public policy support — and are well positioned for the recovery of wholesale markets.

We have a modest risk profile. More than 80 percent of our expected 2004 earnings will be generated by Florida Power & Light and more than 90 percent of the expected 2004 gross margin from our wholesale generation fleet at FPL Energy is now protected from fuel and power market volatility. We’re well diversified by region and by fuel source. Our modest low-risk trading business is focused almost exclusively on reducing risk and extracting maximum value from our assets. And we believe our proactive approach to environmental management has minimized our risk going forward and is a sustainable competitive advantage.

We have the flexibility to pursue opportunities. We have a solid balance sheet and strong cash flow.

Our culture and values are conservative and disciplined. We avoid investing in “trends of the day.” Integrity and accountability are at the very core of our management philosophy.

On the strength of a carefully developed strategy, a team of very talented employees and a commitment to continually raise the bar on our performance, we expect 2004 to be another year of solid financial and operating performance for FPL Group. We are confident it will also be a year in which we further enhance our reputation as one of the best companies in our business and continue to be a powerful investment.

Helping lead us toward these goals is a group of outstanding executives. Of note in 2003, Armando Olivera, a talented leader with more than 30 years of experience at our company, was named president of Florida Power & Light. Elected to the FPL Group
board of directors last year was Michael H. Thaman, chairman of the board and chief financial officer of Owens Corning, a world leader in building materials and composite systems. Armando Codina and Willard Dover retired as directors in 2003, and we thank them for their years of dedicated service. As always, we appreciate the support of you,
our shareholders, as we continue our ongoing pursuit of increasing shareholder value.

Lewis Hay, III
Chairman, President and
Chief Executive Officer

February 27, 2004