CONTENTS INVESTOR HIGHLIGHTS Dollars in thousands, except per share amounts I’m pleased to report another successful year for our company. For PNM Resources, 2003 was a year of solid accomplishment in all areas of our business. On the retail side, we reached new rate agreements for both our electric and our gas utility, and New Mexico finally resolved the 10-year public policy debate over industry restructuring.  In our wholesale operations, we added several new long-term contracts that boost revenues and earnings while helping guard against the uncertainties of price swings in a volatile market. In power generation, we brought on line a new coal mine that we expect will lower fuel costs at our biggest generating plant and we added our first renewable resource, a  200-megawatt wind power project in eastern New Mexico.  All across the company, our disciplined pursuit of excellence through a structured approach to process improvement helped us to better control expenses even as we achieved higher levels of customer satisfaction. Those successes all contributed to increased earnings and growing shareholder value. Net earnings for the year were $2.37 per diluted share, up from $1.61 a share in the previous year. That bottom line number included various one-time gains and charges that added a net of $0.42 per share to earnings. Another measure of PNM performance is in comparing ongoing earnings (not including one-time gains or charges) of $1.95 per share for 2003, up nearly 8 percent from the previous year. With the $0.92 per share paid in dividends and a $4.28 increase in stock price over the course of the year, PNM Resources shareholders earned a healthy 21.8 percent return on their investment in 2003. DEAR FELLOW SHAREHOLDERS, 1 Letter from President, Chairman and CEO  14 Board of Directors 15 Financial Review 90 Shareholder Information PERCENTAGE 5-YEAR ANNUAL 2003 2002 CHANGE CHANGE RATE Financial Data Operating Revenues $1,455,714 $1,118,694 30.1% 5.36%) Operating Expenses $1,337,122 $1,016,920 31.5% 5.96%) Net Earnings Available for Common $ 95,173 $ 63,686 (49.4% 2.88%) Retained Earnings $ 503,069 $ 444,651 13.1% 17.17%) Return on Average Common Equity 9.30% 6.40% 45.3% (0.21%) Common Share Data Earnings (Basic) $ 2.39 $ 1.63 46.6% 3.52%) Earnings (Diluted) $ 2.37 $ 1.61 47.2% 3.35%) Book Value $ 27.09 $ 24.90 8.8% 4.45%) Closing Price $ 28.10 $ 23.82 18.0% 11.58%) Dividends Paid $ 0.91 $ 0.86 5.8% 2.61%) Average Shares Outstanding (000) 39,747 39,118 1.6% (0.64%) Number of Employees 2,637 2,656 (-0.7%) (0.23%) NM - Not Meaningful P N M R E S O U R C E S 2 0 0 3 A n n u a l R e p o r t t o S h a r e h o l d e r s