ACHIEVING RECORD EARNINGS
In 1999, we achieved record earnings of $1.3 billion.

Earnings per share as reported were $1.86. Earnings per share from operations were $1.90. It's an 8 percent increase over 1998. It also beats our 1999 goal of $1.85 per share.

We had a great year financially. The best ever.

But the stock market did not reward our performance. You and I – as owners of our company – lost share value. That's amazing. How could that happen?

I believe it's due in great part to the ongoing dot.com investing frenzy. The stock market's interest in Internet and technology companies has lessened investor interest in backbone industries like ours.

I believe it's also due to the ongoing change in our industry. Investors are sitting on the sidelines, waiting to see how it will all shake out. They no longer have a single, predictable formula by which to judge performance.

Importantly, our return was better than our industry average. And over the past 10 years, our average annual return was 11.4 percent. That compares with an industry average of 8.9 percent.

Don't get me wrong. I'm not making excuses. And I'm not happy about our return in 1999. But it does help to keep it in perspective.

AIMING TO BE THE BEST
Our overall goal has not changed. We intend to be the best investment in our industry. Everything we do is aimed at that goal.

We will continue to do the things that we feel make us a great investment. Like leading the innovation in our industry. And achieving greater than ever success. Change in our industry is a challenge for many utilities. And for investors and analysts. For us, it has been an opportunity.

We used to be a southeastern regulated utility business. We are now an international competitive energy giant with some southeastern regulated utility operations. And we're growing bigger.

More than a third of our profits come from our competitive business. In three years, we project that it will grow to 50 percent. Beyond that, the percentage should continue to grow.

Our goal is to grow earnings another 8 percent this year. Our earnings per share target for 2000 is $2.05. I believe this growth is achievable based on the investments and plans we already have in place.

Our strategy for growth is simple. We're working to be a major supplier of environmentally friendly energy in the high-growth, large-use markets that we've targeted. They include the Southeast, Northeast, California/Southwest, Midwest and Texas in North America, China and the Philippines in Asia, and the European Union countries.

We're adding more generation and making electricity cleaner. We're also taking our expertise in producing power from coal and applying it to natural gas. We've been running plants for more than 70 years. No one does it better.

UNLOCKING THE VALUE
Our growth as a competitive business has created what I believe is significant value. But that value has not been reflected in our share price.

One of my priorities is to get that value to our shareholders. That means we'll be looking at our company even more differently than we have in the past. And we'll be considering various options.

I want to unlock the value we've created.

NOT YOUR ORDINARY AVERAGE JOE
In the near term, there likely will still be some uncertainty about how to judge success in our changing industry. And the Internet and technology companies will probably continue to dominate the attention of investors. In a way, that's okay. I like to think of the exploding information age and technology boom in terms of what powers it. We do.

But in the long-term, I believe growth in earnings will be what really matters. That's why we're not your ordinary average Joe electric utility. And why I believe Southern Company is and will continue to be one heck of an investment.

Thank you for being shareholders.

A.W. Dahlberg
March 17, 2000