<PAGE>

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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
(MARK ONE)

/X/   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MAY 31, 2000.

                                       OR

/ /   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________________ TO
      _________________.


                          COMMISSION FILE NUMBER 1-7806


                           FEDERAL EXPRESS CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              DELAWARE                                           71-0427007
   (STATE OR OTHER JURISDICTION OF                           (I.R.S. EMPLOYER
    INCORPORATION OR ORGANIZATION)                          IDENTIFICATION NO.)

2005 CORPORATE AVENUE, MEMPHIS, TENNESSEE                             38132
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                           (ZIP CODE)

            REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (901) 369-3600

                 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

     TITLE OF EACH CLASS               NAME OF EACH EXCHANGE ON WHICH REGISTERED
     -------------------               -----------------------------------------
          None                                         None

         SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /

     Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. /X/

     The Registrant is a wholly-owned subsidiary of FedEx Corporation, a
Delaware corporation, and there is no market for the Registrant's common stock,
par value $.10 per share ("Common Stock"). As of July 26, 2000, 1,000 shares of
the Registrant's Common Stock were outstanding.

     The Registrant meets the conditions set forth in General Instructions
I(1)(a) and (b) of Form 10-K, and is filing this form with the reduced
disclosure format pursuant to General Instruction I(2).

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--------------------------------------------------------------------------------

<PAGE>

                                      TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                                     PAGE
                                                                                                     ----
<S><C>
                                                 PART I

ITEM 1.     Business................................................................................    4
ITEM 2.     Properties..............................................................................   14
ITEM 3.     Legal Proceedings.......................................................................   18
ITEM 4.     Submission of Matters to a Vote of Security Holders.....................................   18


                                                 PART II

ITEM 5.     Market Price for the Registrant's Common Equity
              and Related Stockholder Matters.......................................................   18
ITEM 6.     Selected Financial Data.................................................................   18
ITEM 7.     Management's Discussion and Analysis of
              Results of Operations and Financial Condition.........................................   19
ITEM 7A.    Quantitative and Qualitative Disclosures About Market Risk .............................   24
ITEM 8.     Financial Statements and Supplementary Data.............................................   25
ITEM 9.     Changes in and Disagreements with Accountants
              on Accounting and Financial Disclosure................................................   25


                                                 PART III

ITEM 10.    Directors and Executive Officers of the Registrant......................................   25
ITEM 11.    Executive Compensation..................................................................   25
ITEM 12.    Security Ownership of Certain Beneficial Owners and Management..........................   25
ITEM 13.    Certain Relationships and Related Transactions..........................................   25


                                                 PART IV

ITEM 14.    Exhibits, Financial Statement Schedules and Reports on Form 8-K.........................   26

                                        FINANCIAL STATEMENTS INDEX

Report of Independent Public Accountants ...........................................................  F-1
Consolidated Balance Sheets - May 31, 2000 and 1999.................................................  F-2
Consolidated Statements of Income - Years ended May 31, 2000, 1999 and 1998.........................  F-4
Consolidated Statements of Changes in Owners' Equity and
  Comprehensive Income - Years ended May 31, 2000, 1999 and 1998....................................  F-5
Consolidated Statements of Cash Flows - Years ended May 31, 2000, 1999 and 1998.....................  F-6
Notes to Consolidated Financial Statements .........................................................  F-7


                                      2

<PAGE>

                                        FINANCIAL STATEMENT SCHEDULE INDEX

Report of Independent Public Accountants on Financial Statement Schedule............................  S-1
Schedule II - Valuation and Qualifying Accounts.....................................................  S-2


Exhibit Index.......................................................................................  E-1


</TABLE>









                                       3
<PAGE>

                                     PART I
ITEM 1.  BUSINESS

INTRODUCTION

     Federal Express Corporation ("FedEx Express") invented express distribution
in 1973 and remains the industry leader, providing rapid, reliable,
time-definite delivery of documents, packages and freight to 210 countries.
FedEx Express is a wholly owned subsidiary of FedEx Corporation ("FedEx"), which
was formed in October 1997 to serve as the holding company parent of FedEx
Express. FedEx Express offers time-certain delivery in 24 to 48 hours to markets
that generate 90 percent of the world's gross domestic product through
door-to-door, customs-cleared service, with a money-back guarantee. FedEx
Express's extensive air route authorities and transportation infrastructure,
combined with its use of leading-edge information technologies, make FedEx
Express the world's largest express-distribution company, providing fast,
reliable service for over 3.3 million shipments each business day. FedEx Express
employs more than 149,000 employees and has more than 46,000 drop-off locations,
663 aircraft and 49,000 vehicles in its integrated global network.

     FedEx Corporate Services, Inc. ("FedEx Services") was recently formed by
FedEx as part of its strategic initiative announced in January 2000 to provide a
single point of access to customers for sales, customer service, billing and
automation systems. FedEx Services sells and markets the full portfolio of
services offered by FedEx Express and other FedEx subsidiaries and provides
customer-facing solutions that meet customer needs. FedEx Services was created
by combining the marketing and sales groups at FedEx, FedEx Express and FedEx
Ground Package System, Inc. ("FedEx Ground"). FedEx Services also includes
substantially all of the information technology groups from FedEx, FedEx Express
and FedEx Ground. The majority of FedEx's e-commerce groups are also part of
FedEx Services. By forming a new subsidiary responsible for sales, marketing,
electronic commerce and customer automation systems, we can fully integrate
those vital activities to make our services more convenient and consistent. We
now speak to the customer with one voice, and provide them with a single access
point to our services while allowing the operating companies to execute the
delivery of their services at the lowest cost with the highest level of service.

     Except as otherwise indicated, references to years means the fiscal year of
FedEx Express ended May 31 of the year referenced.

DELIVERY SERVICES

     DOMESTIC

     FedEx Express offers three U.S. overnight delivery services: FedEx First
Overnight-Registered Trademark-, FedEx Priority Overnight-Registered
Trademark- and FedEx Standard Overnight-Registered Trademark-. Overnight
document and package service extends to virtually the entire United States
population. FedEx SameDay-Registered Trademark- service is for urgent
shipments up to 70 pounds to virtually any U.S. destination. Packages and
documents are either picked up from shippers by FedEx Express couriers or are
dropped off by shippers at FedEx Express sorting facilities, FedEx World
Service Centers-Registered Trademark-, FedEx-Registered Trademark- Drop Boxes,
FedEx ShipSites-Registered Trademark- or FedEx Authorized
ShipCenters-Registered Trademark- strategically located throughout the
country. Two U.S. deferred services are available for less urgent shipments:
FedEx 2Day-Registered Trademark- and FedEx Express Saver-Registered
Trademark-.


                                       4

<PAGE>

     U.S. overnight and second-day services are backed by money-back guarantees
and are primarily used by customers for shipment of time-sensitive documents and
goods, including high-value machines and machine parts, computer parts, software
and consumer items. FedEx Express handles virtually every shipment from origin
to destination.

     FedEx Express also offers express freight services to handle the needs
of the time-definite freight market, which is growing at almost twice the
rate of the non-time-definite market. FedEx Express offers customers the
option of one, two or three business day service backed by two money-back
guarantees. Shipments must be 151 lbs. to 2,200 lbs., and be forkliftable,
stackable, banded and shrinkwrapped. FedEx 1Day-SM- Freight offers 10:30 a.m.
delivery, next-business-day in many areas of the continental United States,
including Alaska. FedEx 2Day Freight-Registered Trademark- offers noon
delivery in two business days in all 50 states. No advance booking is
required. FedEx 3Day-SM- Freight offers 3:00 p.m. delivery within three
business days in every state except Alaska and Hawaii. No advance booking is
required.

     INTERNATIONAL

     FedEx Express offers various international package and document delivery
services and international freight services to 210 countries. These services
include: FedEx-Registered Trademark- International Next Flight, FedEx
International First-Registered Trademark-, FedEx International
Priority-Registered Trademark- ("IP"), FedEx International Economy-Registered
Trademark-, FedEx International Priority DirectDistribution-SM-, FedEx
International Priority Plus-Registered Trademark-, FedEx International
MailService-Registered Trademark-, FedEx International Priority-Registered
Trademark-Freight, FedEx International Economy-Registered Trademark- Freight,
FedEx International Express Freight-Registered Trademark-, FedEx
International Airport-to-Airport-SM-, and the FedEx Expressclear-SM- Electronic
Customs Clearance and FedEx International Broker Select-Registered Trademark-
service feature options.

     FedEx Express offers next business day 10:30 a.m. express cargo service
from Asia to the United States. FedEx Express has a direct flight from Osaka,
Japan to Memphis, Tennessee. The nonstop daily flight cuts transit times
across the Pacific in half for FedEx Express customers -- from 48 to 24 hours
-- who ship from Asia to North America. The FedEx Express IP service is
backed by FedEx Express's money-back guarantee. The flight schedule also
enables FedEx Express to offer its Asian customers later pickup times for
connections through FedEx Express's AsiaOne-Registered Trademark- hub in
Subic Bay, the Philippines, to 13 major Asian markets.

     International freight and express delivery markets, particularly
outbound from Asia, are growing rapidly. FedEx Express offers the most
comprehensive international freight service in the industry, backed by a
money-back guarantee, real-time tracking and advanced customs clearance. In
June 2000, FedEx Express announced the expansion of its international freight
service to provide more delivery options to more countries. Three new FedEx
International Priority-Registered Trademark- Freight delivery options were
made available for U.S. outbound and inbound shipments beginning July 1,
2000: Door to Airport (DTA), Airport to Airport (ATA) and Airport to Door
(ATD). These options were in addition to the existing Door to Door (DTD)
service. FedEx International Priority-Registered Trademark- Freight and FedEx
International Economy-Registered Trademark- Freight now provide service to
five and ten more countries, respectively. FedEx Express's enhanced
international freight services may now be used by customers to combine
pick-up, linehaul and four delivery options to meet their daily business
needs.

     In order to capitalize on the rapid traffic growth in Europe and Asia,
FedEx Express announced in June 2000 a significant strengthening of its global
network, with new connections in Europe, Asia, the Middle East and India. As a
result of the network reconfiguration, FedEx Express offers reduced transit
times, later customer pick-ups and earlier deliveries in key global markets.
FedEx Express customers in India are able to get their products to the East
Coast of the U.S. a full business day faster as a result of


                                       5
<PAGE>

the new flights. Companies in southeast Asia doing business in Europe are now
able to take orders from their customers two to three hours later in the
evening, thanks to later cut off times for FedEx Express pick-ups.

     In June 1999, the U.S. Department of Transportation ("DOT") announced a new
protocol with the Chinese government permitting FedEx Express to expand its
existing service to China. FedEx Express is currently the only U.S. all-cargo
airline with route authority to serve China, with 10 weekly flights.

     FedEx Express is ISO 9001 certified for its global operations. ISO 9001
is currently the most rigorous international standard for Quality Management
and Assurance. These quality standards were developed by the International
Organization for Standardization in Geneva, Switzerland to promote and
facilitate international trade. More than 90 countries, including European
Union members, the United States and Japan, recognize ISO standards.

     Detailed information about all of FedEx Express's delivery services can be
found on the FedEx Web site at www.fedex.com. The information on our Web site,
however, does not form part of this Report.

E-COMMERCE SERVICES

     We have played a significant role in three business revolutions that have
influenced the emergence of what is now known as e-commerce. First came the
express revolution. We anticipated the "just-in-time future," which led to the
creation of FedEx and the first integrated air/ground express transportation
network in 1973.

     Second came the automation revolution. We have been the leader in
customer automation since 1985, when FedEx Express launched the first
PC-based automated shipping system, named FedEx PowerShip-Registered
Trademark-. In 1993, FedEx Ground launched MultiShip-Registered Trademark-,
the first carrier-supplied customer automation system to process packages
shipped by other transportation providers. In 1994, the FedEx Web site,
fedex.com, became the first Web site to offer online package tracking. Two
years later, in 1996, FedEx Express launched FedEx interNetShip-Registered
Trademark-, the first shipping application for express packages on the
Internet. Customers could now prepare paperwork using formatted screens,
print the label on any laser printer, and electronically request a courier to
pick up the package.

     The third revolution, the integration revolution, is now underway. We are
empowering businesses with integrated eBusiness and complete supply chain
solutions. Many of our newest eBusiness solutions are directed toward the
rapidly growing small and medium-sized business ("SMB") market. In June 2000, we
announced an alliance with Orbit Commerce, Inc., a leading eBusiness services
platform provider, resulting in the introduction of FedEx eCommerce Builder on
our Web site. This solution provides SMB's with the ability to build and manage
an online store. FedEx eCommerce Builder integrates the core business processes
necessary for SMB's to sell online, including FedEx shipping and tracking.

     We have a comprehensive Internet strategy, driven by our desire for
customer convenience. The focal point of our Internet strategy is our fedex.com
Web site, through which our customers accomplish all of the tasks they could
otherwise accomplish with us by phone or in person. In addition, we design our
e-commerce tools and solutions so that they are easily integrated into our
customers' applications, as well as into third-party software being developed by
the leading e-procurement, systems integration and enterprise resource planning
companies. This is increasingly important given the growing customer trend
toward multi-carrier shipping platforms.


                                       6
<PAGE>

     Reflecting our emphasis on e-commerce and information technology, we have
had a lineage of distinguished Chief Information Officers, including James L.
Barksdale, who went on to serve as the President and Chief Executive Officer of
Netscape Communications Corporation, Dennis H. Jones, named by NETWORK WORLD as
"One of the 25 Most Powerful People in Networking" and by PC WEEK as "One of the
Top 10 Toughest CIOs," and current FedEx CIO Robert B. Carter, named as
INFOWORLD'S first-ever "Chief Technology Officer of the Year."

     E-SHIPPING TOOLS AND SOLUTIONS

     We offer e-shipping tools and solutions which give our customers the power
to ship, track and report from their desktops, allowing them to reduce the time
spent preparing shipments and increase efficiency and customer service levels.
These e-shipping tools can also allow customers to centralize their shipping
with back-office solutions. The following e-shipping tools and solutions are
offered by FedEx Express:

-    FedEx interNetship-Registered Trademark- - through this Web-based shipping
     application, customers can prepare FedEx Express shipping labels and
     arrange for pickup or drop-off. Customers can also cancel shipments, track
     packages and perform certain other applications for FedEx Express and FedEx
     Ground.
-    FedEx Ship-Registered Trademark- - this software, available to customers
     who have a computer, modem and laser printer, delivers point-and-click
     addressing, label printing, package tracking and easy preparation of
     shipping labels.
-    FedEx Tracking-Registered Trademark- - allows customers to track both
     FedEx Express and FedEx Ground packages at one time through the FedEx Web
     site.
-    Drop-off Locator - allows customers to easily find and view maps of FedEx
     drop-off locations through the FedEx Web site. Searches can be conducted by
     address, city, state or zip code to find one of over 46,000 full-service
     and self-service locations worldwide.
-    Rate Finder - allows customers to determine the cost of shipping packages
     from the U.S. to virtually anywhere in the world through the FedEx Web
     site.

     FedEx Express also offers the following hardware-based e-shipping tools,
designed to provide customers with centralized control over their shipping
process and to help them better manage shipping, billing and reporting:

-    FedEx PowerShipMC-Registered Trademark- - this stand-alone hardware system
     provides customers with the ability to utilize a single system for use with
     FedEx Express, FedEx Ground and other carriers. Customers can use this
     system to ship with the carrier of their choice and benefit from increased
     operational efficiency, decreased employee training time, enhanced access
     to information and better utilization of space.
-    FedEx PowerShip-Registered Trademark- - this stand-alone hardware system
     provides customers with a full range of shipping functions, enabling
     customers to handle large volumes and to automate their entire shipping
     process. FedEx PowerShip-Registered Trademark- provides package tracking,
     produces shipping labels, calculates shipping charges, invoices the
     customer daily and produces customized reports.
-    FedEx ShipAPI-TM- - allows customers to seamlessly integrate FedEx Express
     services by downloading software from the Internet, which will allow them
     to connect directly with FedEx Express when placing shipping orders and
     scheduling pickup requests.
-    FedEx DirectLink-TM- - this software allows customers to electronically
     receive, manage and remit FedEx Express invoicing data.

                                       7
<PAGE>

-    FedEx NetReturn-Registered Trademark- - uses a comprehensive Internet-based
     returns management system to allow customers to gain better control over
     the return inventory process, resulting in lower costs, improved cycle
     times and increased customer service levels.
-    FedEx EDI Electronic Invoice and Remittance - integrates with customers'
     accounts payable systems to allow them to receive FedEx invoice data
     electronically, including data regarding domestic and international
     shipments, duties and taxes.

PRICING

     FedEx Express periodically publishes list prices in its Service Guides for
the majority of its services. In general, during 2000, U.S. shipping rates were
based on the service selected, destination zone, weight, size, any ancillary
service charge and whether or not the shipment was picked up by a FedEx Express
courier or dropped off by the customer at a FedEx Express location.
International rates are based on the type of service provided and vary with
size, weight and destination. FedEx Express offers its customers volume
discounts generally based on actual or potential average daily revenue produced.
Discounts are generally determined by reference to several local and national
revenue bands developed by FedEx Express.

     In response to higher fuel costs, FedEx Express implemented a fuel
surcharge of 3% on most U.S. domestic and international services, effective
February 1, 2000. The fuel surcharge was further increased to 4%, effective
April 1, 2000. The surcharge applies to all shipments tendered within the United
States and all U.S. export shipments, where legally and contractually possible.

SERVICE REVENUES

     The following table shows the amount of revenues generated for each class
of service offered for the fiscal years ended May 31 (amounts in thousands):

<TABLE>
<CAPTION>

                                                             2000                 1999                 1998
                                                             ----                 ----                 ----
<S>                                                     <C>                    <C>                 <C>
Package:
      U.S. overnight.......................             $ 7,537,844            $7,185,462          $6,810,211
      U.S. deferred........................               2,428,002             2,271,151           2,179,188
      International Priority...............               3,551,593             3,018,828           2,731,140
Freight:
      U.S..................................                 566,259               439,855             337,098
      International........................                 492,280               530,759             597,861
Other*.....................................                 492,360               533,222             599,343
                                                        -----------           -----------         -----------
      Total................................             $15,068,338           $13,979,277         $13,254,841
                                                        ===========           ===========         ===========
-------------------------

</TABLE>

     *Includes revenues from sales of aircraft engine noise reduction kits,
      revenues generated by the specialized services summarized above under
      "E-Commerce Services," Canadian domestic revenue and charter services.


                                       8
<PAGE>

OPERATIONS

     FedEx Express's global transportation and distribution services are
provided through an extensive worldwide network consisting of numerous aviation
and ground transportation operating rights and authorities, 663 aircraft,
approximately 49,000 vehicles, sorting facilities, FedEx World Service Centers,
FedEx Drop Boxes, FedEx ShipSites and ShipCenters and sophisticated package
tracking, billing and communications systems.

     FedEx Express's primary sorting facility, the SuperHub located in Memphis,
serves as the center of FedEx Express's multiple hub-and-spoke system. A second
national hub is located in Indianapolis. In addition to these national hubs,
FedEx Express operates regional hubs in Newark, Oakland and Fort Worth and major
metropolitan sorting facilities in Los Angeles and Chicago. Facilities in
Anchorage, Paris and Subic Bay, the Philippines, serve as sorting facilities for
express package and freight traffic moving to and from Asia, Europe and North
America. Additional major sorting and freight handling facilities are located at
Narita Airport in Tokyo, Stansted Airport outside London and Pearson Airport in
Toronto. Facilities in Subic Bay and Paris are also designed to serve as
regional hubs for their respective market areas.

    Throughout its worldwide network, FedEx Express operates city stations and
employs a staff of customer service agents, cargo handlers and couriers who pick
up and deliver shipments in the station's service area. In some cities, FedEx
Express operates FedEx World Service Centers which are staffed, store-front
facilities located in high-traffic, high-density areas. Unmanned FedEx Drop
Boxes provide customers the opportunity to drop off packages at locations in
office buildings, shopping centers and corporate or industrial parks. FedEx
Express has also formed alliances with certain retailers to extend this customer
convenience network to drop-off sites in retail stores. In international regions
where low package traffic makes FedEx Express's direct presence less economical,
Global Service Participants ("GSPs") have been selected to complete deliveries
and to pick up packages.

     FedEx Express has an advanced package tracking and billing system, FedEx
COSMOS-Registered Trademark-, that utilizes hand-held electronic scanning
equipment and computer terminals. This system provides proof of delivery
information, an electronically reproduced airbill for the customer and
information regarding the location of a package within FedEx Express's
system. For international shipments, FedEx Express has developed FedEx
Expressclear-SM-, a worldwide electronic customs clearance system, which
speeds up customs clearance by allowing customs agents in destination
countries to review information about shipments before they arrive.

FUEL SUPPLIES AND COSTS

     During 2000, FedEx Express purchased aviation fuel from various suppliers
under contracts which vary in length and which provide for specific amounts of
fuel to be delivered. The fuel represented by these contracts is purchased at
market prices that may fluctuate daily.

     As a result of rising fuel prices during 2000, FedEx entered into jet
fuel hedging contracts during the second half of 2000 that are designed to
limit our exposure to fluctuations in jet fuel prices. Under these contracts,
FedEx makes (or receives) payments based on the difference between a
specified lower (or upper) limit and the market price of jet fuel, as
determined by an index of spot market prices representing various geographic
regions. The difference is recorded as an increase or decrease in fuel
expense. Under jet fuel hedging contracts, FedEx received approximately $18
million in 2000. As of May 31, 2000, FedEx had entered into jet fuel hedging
contracts for approximately one-third of FedEx Express's estimated
requirements for jet fuel in 2001. The timing and magnitude of any additional
contracts may vary due to

                                       9
<PAGE>

availability and pricing. Notwithstanding FedEx's hedging activities, during
2000, fuel costs increased by $260 million due to higher fuel prices.

     The following table sets forth FedEx Express's costs for aviation fuel and
its percentage of total operating expense for the previous five fiscal years:


<TABLE>
<CAPTION>
                                                    TOTAL COST                       PERCENTAGE OF TOTAL
           FISCAL YEAR                            (IN THOUSANDS)                      OPERATING EXPENSE
           -----------                            --------------                     -------------------
           <S>                                    <C>                                <C>
               2000                                  $ 723,584                                  5.1%
               1999                                    467,598                                  3.6
               1998                                    570,959                                  4.6
               1997                                    557,533                                  5.2
               1996                                    461,401                                  4.8

</TABLE>

     In response to higher fuel costs, FedEx Express implemented a fuel
surcharge of 3% on most U.S. domestic and international services, effective
February 1, 2000. The fuel surcharge was increased to 4%, effective April 1,
2000. The surcharge applies to all shipments tendered within the United States
and all U.S. export shipments, where legally and contractually possible. These
fuel surcharges offset the increase in fuel expense during the fourth quarter of
2000.

     Approximately 15% of FedEx Express's requirement for vehicle fuel is
purchased in bulk. The remainder of FedEx Express's requirement is satisfied by
retail purchases with various discounts.

     Management believes that, barring a substantial disruption in supplies of
crude oil, these agreements will ensure the availability of an adequate supply
of fuel for FedEx Express's needs for the immediate future. However, a
substantial reduction of oil supplies from oil producing regions or refining
capacity, or other events causing a substantial reduction in the supply of
aviation fuel, could have a significant adverse effect on FedEx Express.

COMPETITION

     The express package and freight markets are both highly competitive and
sensitive to price and service. The ability to compete effectively depends upon
price, frequency and capacity of scheduled service, ability to track packages,
extent of geographic coverage and reliability. Competitors in these markets
include other package delivery concerns, principally United Parcel Service, Inc.
("UPS"), Airborne Express, DHL Worldwide Express, passenger airlines offering
express package services, regional express delivery concerns, airfreight
forwarders and the United States Postal Service. FedEx Express's principal
competitors in the international market are DHL Worldwide Express, UPS, foreign
postal authorities such as Deutsche Poste and TNT Post Group, passenger airlines
and all-cargo airlines.

     FedEx Express currently holds certificates of authority to serve more
foreign countries than any other United States all-cargo air carrier and its
extensive, scheduled international route system allows it to offer
single-carrier service to many points not offered by its principal all-cargo
competitors. This international route system, combined with an integrated air
and ground network, enables FedEx Express to offer international customers more
extensive single-carrier service to a greater number of U.S. domestic points
than can be provided currently by competitors. Many of FedEx Express's
competitors in the international market, however, are government owned,
controlled, or subsidized carriers which may have greater resources, lower
costs, less profit sensitivity and more favorable operating conditions than
FedEx Express.

                                      10

<PAGE>

EMPLOYEES

     FedEx Express is headquartered in Memphis, Tennessee. David J. Bronczek is
the President and Chief Executive Officer of FedEx Express. As of May 31, 2000,
FedEx Express employed approximately 96,000 permanent full-time and 53,000
permanent part-time employees, of which approximately 20% are employed in
Memphis. Employees of FedEx Express's international branches and subsidiaries in
the aggregate represent approximately 13% of all employees. FedEx Express
believes its relationship with its employees is excellent.

     Since May 31, 1999, FedEx Express and the Fedex Pilots Association ("FPA")
have been operating under a five-year collective bargaining agreement which
provides, in part, for a 17% pay increase over the term of the contract (3.4%
average annual increase), enhanced retirement benefits, direct pilot input on
scheduling issues and limits on types of trips scheduled during certain times of
the day.

     Attempts by other labor organizations to organize certain other groups of
employees occur from time to time. Although FedEx Express responds to these
organization attempts, we cannot predict the outcome of these labor activities
or their effect, if any, on FedEx Express or its employees.

SEASONALITY OF BUSINESS

     FedEx Express's express package business and freight business are both
seasonal in nature. Historically, the U.S. package business experiences an
increase in late November and December. International business, particularly in
the Asia to U.S. market, peaks in October and November due to U.S. holiday
sales. The latter part of FedEx Express's third fiscal quarter and late summer,
being post winter-holiday and summer vacation seasons, have historically
exhibited lower volumes relative to other periods.

REGULATION

     AIR. Under the Federal Aviation Act of 1958, as amended, both the DOT and
the Federal Aviation Administration ("FAA") exercise regulatory authority over
FedEx Express. The DOT's authority relates primarily to economic aspects of air
transportation. The DOT's jurisdiction extends to aviation route authority and
to other regulatory matters, including the transfer of route authority between
carriers. FedEx Express holds various certificates issued by the DOT,
authorizing FedEx Express to engage in U.S. and international air transportation
of property and mail on a worldwide basis. FedEx Express's international
authority permits it to carry cargo and mail from several points in its U.S.
route system to numerous points throughout the world. The DOT regulates
international routes and practices and is authorized to investigate and take
action against discriminatory treatment of United States air carriers abroad.
The right of a United States carrier to serve foreign points is subject to the
DOT's approval and generally requires a bilateral agreement between the United
States and the foreign government. The carrier must then be granted the
permission of such foreign government to provide specific flights and services.
The regulatory environment for global aviation rights may from time to time
impair the ability of FedEx Express to operate its air network in the most
efficient manner.

     The FAA's regulatory authority relates primarily to safety and operational
aspects of air transportation, including aircraft standards and maintenance,
personnel and ground facilities, which may from time to time affect the ability
of FedEx Express to operate its aircraft in the most efficient manner. FedEx
Express holds an operating certificate granted by the FAA pursuant to Part 121
of the Federal Aviation Regulations. This certificate is of unlimited duration
and remains in effect so long as FedEx Express maintains its standards of safety
and meets the operational requirements of the regulations.


                                      11
<PAGE>

     FedEx Express participates in the Civil Reserve Air Fleet ("CRAF") program.
Under this program, the Department of Defense may requisition for military use
certain of FedEx Express's wide-bodied aircraft in the event of a declared need,
including a national emergency. FedEx Express is compensated for the operation
of any aircraft requisitioned under the CRAF program at standard contract rates
established each year in the normal course of awarding contracts. Through its
participation in the CRAF program, FedEx Express is entitled to bid on peacetime
military cargo charter business. FedEx Express, together with a consortium of
other carriers, currently contracts with the United States Government for
charter flights.

     GROUND. The ground transportation performed by FedEx Express is integral to
its air transportation services. Prior to January 1996, FedEx Express conducted
its interstate motor carrier operations pursuant to common and contract carrier
authorities issued by the Interstate Commerce Commission ("ICC"). The ICC
Termination Act of 1995 abolished the ICC and transferred responsibility for
interstate motor carrier registration to the DOT.

     The enactment of the Federal Aviation Administration Authorization Act of
1994 abrogated the authority of states to regulate the rates, routes or services
of intermodal all-cargo air carriers and most motor carriers. States may now
only exercise jurisdiction over safety and insurance. FedEx Express is
registered in those states that require registration.

     Like other interstate motor carriers, FedEx Express is subject to certain
DOT safety requirements governing interstate operations. In addition, vehicle
weight and dimensions remain subject to both federal and state regulations.

     COMMUNICATION. Because of the extensive use of radio and other
communication facilities in its aircraft and ground transportation operations,
FedEx Express is subject to the Federal Communications Commission Act of 1934,
as amended. Additionally, the Federal Communications Commission regulates and
licenses FedEx Express's activities pertaining to satellite communications.

     ENVIRONMENTAL. Pursuant to the Federal Aviation Act, the FAA, with the
assistance of the Environmental Protection Agency, is authorized to establish
standards governing aircraft noise. FedEx Express's present aircraft fleet is in
compliance with current noise standards of the Federal Aviation Regulations.
FedEx Express's aircraft are also subject to, and are in compliance with, the
regulations governing engine emissions. In addition to federal regulation of
aircraft noise, certain airport operators have local noise regulations which
limit aircraft operations by type of aircraft and time of day. These regulations
have had a restrictive effect on FedEx Express's aircraft operations in some of
the localities where they apply but do not have a material effect on any of
FedEx Express's significant markets. Congress' passage of the Airport Noise and
Capacity Act of 1990 established a National Noise Policy which enabled FedEx
Express to plan for noise reduction and better respond to local noise
constraints. FedEx Express's international operations are also subject to noise
regulations in certain of the countries in which it operates.

     FedEx Express is subject to federal, state and local environmental laws and
regulations relating to, among other things, contingency planning for spills of
petroleum products and the disposal of waste oil. Additionally, FedEx Express is
subject to numerous regulations dealing with underground fuel storage tanks,
hazardous waste handling, vehicle and equipment emissions and the discharge of
effluents from properties and equipment owned or operated by it. FedEx Express
has environmental management programs to ensure compliance with these
regulations.

                                      12
<PAGE>

     WORKPLACE. In November 1999, the U.S. Occupational Safety and Health
Administration, or OSHA, proposed regulations to mandate an ergonomics standard
that could require many businesses, including FedEx Express, to make significant
changes in the workplace in order to reduce the incidence of musculoskeletal
disorders such as lower back pain. The proposal does not specify which workplace
changes would be required in order to comply with the proposed new regulations.
We, our competitors and other affected parties have submitted comments to OSHA
challenging the economic and technical feasibility of the proposed regulations.
In July 2000, OSHA completed public hearings on the proposed regulations and is
expected to release final rules later this year.

     If OSHA adopts the proposed regulations and applies them in the same way as
it attempted unsuccessfully in the past to impose ergonomic measures under its
general authority, we would be required to make extensive changes to the layout
of our sorting facilities and hire a significant number of additional employees.
We believe that the cost of compliance would be substantial and have a material
adverse effect on our business. We expect that our competitors, along with the
rest of American industry, would also incur substantial compliance costs.

FORWARD-LOOKING STATEMENTS

     Certain statements contained in this Report or in documents that we
incorporate by reference are "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995, such as statements
relating to management's views with respect to future events and financial
performance. Such forward-looking statements are subject to risks,
uncertainties and other factors which could cause actual results to differ
materially from historical experience or from future results expressed or
implied by such forward-looking statements. Accordingly, a forward-looking
statement is not a prediction of future events or circumstances and those
future events or circumstances may not occur. A forward-looking statement is
usually identified by our use of certain terminology, including "believes,"
"expects," "may," "will," "should," "seeks," "pro forma," "anticipates,"
"intends" or "plans" or by discussions of strategies, intentions or outlook.
Potential risks and uncertainties include, but are not limited to

-  Economic conditions in the markets in which we operate, which can affect
   demand for our services.
-  The costs and complexities associated with the integration of certain of
   our sales, marketing, customer service and information technology functions .
-  Market acceptance of our new sales, marketing and branding strategies.
-  Competition from other providers of transportation and logistics services,
   including competitive responses to our new initiatives.
-  Our ability to adapt to technological change and to compete with new or
   improved services offered by our competitors.
-  Changes in customer demand patterns, including the impact of technology
   developments on demand for our services.
-  Increases in aviation and motor fuel prices.
-  Our ability to match aircraft, vehicle and sort capacity with customer
   volume levels.
-  Work stoppages, strikes or slowdowns by our employees.
-  Our ability, and that of our principal competitors, to obtain and maintain
   aviation rights in important international markets.
-  Changes in government regulation, including the adoption by OSHA of its
   proposed ergonomics standard (see "Regulation").
-  Changes in weather.
-  Availability of financing on terms acceptable to us.

                                      13
<PAGE>

-  Other uncertainties detailed herein and from time to time in the Securities
   and Exchange Commission filings of FedEx and FedEx Express.

     We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.

ITEM 2.  PROPERTIES

     FedEx Express's principal owned or leased properties include its aircraft,
vehicles, national, regional and metropolitan sorting facilities, administration
buildings, FedEx World Service Centers, FedEx Drop Boxes and data processing and
telecommunications equipment.

AIRCRAFT AND VEHICLES

     FedEx Express's aircraft fleet at May 31, 2000 consisted of the following:

<TABLE>
<CAPTION>
                                                                                              MAXIMUM GROSS
                                                                                            STRUCTURAL PAYLOAD
DESCRIPTION                                                NUMBER (1)                    (POUNDS PER AIRCRAFT)(2)
-----------                                                ----------                    ------------------------
<S>                                                        <C>                           <C>

McDonnell Douglas MD11                                          30                                195,000
McDonnell Douglas DC10-30                                       22                                176,000
McDonnell Douglas DC10-10                                       69                                139,000
Airbus A300-600                                                 36                                116,000
Airbus A310-200                                                 41                                 82,000
Boeing B727-200                                                 95                                 60,000
Boeing B727-100                                                 66                                 45,000
Fokker F27-500                                                  24                                 13,500
Fokker F27-600                                                   8                                 12,500
Shorts 3-60                                                     11                                  8,300
Cessna 208B                                                    251                                  3,400
Cessna 208                                                      10                                  3,000
                                                               ---
       Total                                                   663
-------------------------
</TABLE>

(1)    Except as described in the following sentence, all of our aircraft are
       owned. The following aircraft are subject to operating leases: MD11 (29);
       DC10-30 (17); DC10-10 (4); A300 (36); A310 (16); B727-200 (13); B727-100
       (5); and Shorts 3-60 (11).
(2)    Maximum gross structural payload includes revenue payload and container
       weight.

-    The MD11s are three-engine, wide-bodied aircraft that have a longer range
     and larger capacity than DC10s.
-    The DC10s are three-engine, wide-bodied aircraft that have been specially
     modified to meet FedEx Express's cargo requirements.
-    The A300s and A310s are two-engine, wide-bodied aircraft that have a longer
     range and more capacity than B727s.
-    The B727s are three-engine aircraft configured for cargo service.
-    The Shorts 3-60 are turbo-prop aircraft leased by FedEx Express and then
     subleased to independent operators, who are contractually obligated to
     service selected FedEx Express routes in Europe.
-    The Fokker F27 and Cessna 208 turbo-prop aircraft are owned by FedEx
     Express and leased to


                                      14
<PAGE>

     unaffiliated operators to support FedEx Express operations in areas where
     demand does not justify use of a larger aircraft.

     An inventory of spare engines and parts is maintained for each aircraft
type.

     In addition, FedEx Express "wet leases" 45 smaller piston-engine and
turbo-prop aircraft which feed packages to and from airports served by FedEx
Express's larger jet aircraft. The wet lease agreements call for the
owner-lessor to provide flight crews, insurance and maintenance, as well as fuel
and other supplies required to operate the aircraft. FedEx Express's wet lease
agreements are for terms not exceeding one year and are generally cancelable
upon 30 days' notice.

     At May 31, 2000, FedEx Express operated worldwide approximately 49,000
ground transport vehicles, including pick-up and delivery vans, larger trucks
called container transport vehicles and over-the-road tractors and trailers.

AIRCRAFT PURCHASE COMMITMENTS

     At May 31, 2000, FedEx Express was committed under various contracts to
purchase 28 MD11s, 13 DC10s (in addition to those discussed below) and 75 Ayres
ALM 200 aircraft to be delivered through 2007.

     FedEx Express has entered into agreements with two airlines to acquire 53
DC10 aircraft (49 of which have been received as of May 31, 2000), spare parts,
aircraft engines and other equipment, and maintenance services in exchange for a
combination of aircraft engine noise reduction kits and cash. Delivery of these
aircraft began in 1997 and will continue through 2001. Additionally, these
airlines may exercise put options through December 31, 2003, requiring FedEx
Express to purchase up to 11 additional DC10s, along with additional aircraft
engines and equipment.

     In April 2000, put options were exercised by an airline requiring FedEx
Express to purchase six DC10s (in addition to those discussed in the preceding
paragraph) for a total purchase price of $26.4 million. Delivery of the aircraft
is expected to be completed by April 2001.


                                      15
<PAGE>

SORTING AND HANDLING FACILITIES

      At May 31, 2000, FedEx Express operated the following sorting and handling
facilities:

<TABLE>
<CAPTION>
                                                                SORTING                                      LEASE
                                               SQUARE           CAPACITY                                   EXPIRATION
           LOCATION              ACRES          FEET           (PER HOUR)(1)            LESSOR                YEAR
           --------              -----         ------          -------------            ------                ----
<S>                              <C>           <C>             <C>                 <C>                        <C>
NATIONAL

Memphis, Tennessee                479          3,074,440         465,000         Memphis-Shelby County        2012
                                                                                 Airport
                                                                                 Authority

Indianapolis, Indiana             120            645,000         175,000         Indianapolis Airport         2016
                                                                                 Authority

REGIONAL

Fort Worth, Texas                 168            641,000          74,000         Fort Worth Alliance          2014
                                                                                 Airport Authority

Newark, New Jersey                 56            554,000         142,000         Port Authority of New        2010
                                                                                 York and
                                                                                 New Jersey

Oakland, California                66            320,000          47,500         City of Oakland              2011

METROPOLITAN

Los Angeles, California            25            305,000          54,000         City of Los Angeles          2009

Chicago, Illinois                  55            419,000          47,000         City of Chicago              2018

Anchorage, Alaska(2)               42            258,000          14,200         Alaska Department of         2013
                                                                                 Transportation and
                                                                                 Public Facilities
INTERNATIONAL

Subic Bay, Philippines(3)          18            316,000          16,000         Subic Bay Metropolitan       2007
                                                                                 Authority

Paris, France(4)                   87            861,000          48,000         Aeroports de Paris           2029
------------------------

</TABLE>

(1) Documents and packages
(2) Handles international express package and freight shipments to and from
    Asia, Europe and North America.
(3) Handles intra-Asia express package and freight shipments.
(4) Handles intra-Europe express package and freight shipments, as well as
    international express package and freight shipments to and from Europe.


                                      16
<PAGE>

     FedEx Express's facilities at the Memphis International Airport also
include aircraft hangars, flight training and fuel facilities, administrative
offices and warehouse space. FedEx Express leases these facilities from the
Memphis-Shelby County Airport Authority (the "Authority") under several leases.
The leases cover land, the administrative and sorting buildings, other
facilities, ramps and certain related equipment. FedEx Express has the option to
purchase certain equipment (but not buildings or improvements to real estate)
leased under such leases at the end of the lease term for a nominal sum. The
leases obligate FedEx Express to maintain and insure the leased property and to
pay all related taxes, assessments and other charges. The leases are subordinate
to, and FedEx Express's rights thereunder could be affected by, any future lease
or agreement between the Authority and the United States Government.

     In addition to the facilities noted above, FedEx Express has major
international sorting and freight handling facilities located at Narita Airport
in Tokyo, Japan, Stansted Airport outside London, England and Pearson Airport in
Toronto, Canada. New, larger facilities were opened in 1998 at the new Chek Lap
Kok Airport in Hong Kong, CKS International Airport in Taiwan and Dubai, United
Arab Emirates. Construction on a 204,000 square foot facility to be located at
Miami International Airport is expected to begin during 2001.

ADMINISTRATIVE AND OTHER PROPERTIES AND FACILITIES

     FedEx Express has facilities housing administrative and technical
operations on approximately 200 acres adjacent to the Memphis International
Airport. Of the seven buildings located on this site, four are subject to
long-term leases, and the other three are owned by FedEx Express. FedEx Express
also leases approximately 90 facilities in the Memphis area for its corporate
headquarters, warehouse facilities and administrative offices. FedEx Express is
building a headquarters office campus in East Shelby County, Tennessee. The
headquarters campus, which will comprise nine separate buildings with more than
1.1 million square feet of space, is designed to consolidate many administrative
and training functions currently spread throughout the Memphis metropolitan
area. Beginning in July 2000, the office campus will bring together
approximately 3,700 employees from more than 100 work groups.

     FedEx Express owns or leases 725 facilities for city station operations in
the United States. In addition, 153 city stations are owned or leased throughout
FedEx Express's international network. The majority of these leases are for
terms of five to ten years. City stations serve as the sorting and distribution
center for a particular city or region. FedEx Express believes that suitable
alternative facilities are available in each locale on satisfactory terms, if
necessary.

     As of May 31, 2000, FedEx Express owned or leased space for 387 FedEx World
Service Centers in the United States and had placed approximately 34,500 Drop
Boxes. FedEx Express also operates stand-alone mini-centers located on
leaseholds in parking lots adjacent to office buildings, shopping centers and
office parks, of which 93 were in service at May 31, 2000. As of May 31, 2000,
FedEx Express also had approximately 10,000 ShipSites and ShipCenters, which are
drop-off locations situated within certain retailers, such as Staples or Kinkos.
Internationally, FedEx Express operates 91 FedEx World Service Centers and has
over 650 FedEx Drop Boxes.


                                      17
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

     In November 1987, The Flying Tiger Line Inc. ("Flying Tigers"), a company
acquired by FedEx Express in 1989, received a notice from the United States
Environmental Protection Agency ("EPA") identifying Flying Tigers as a
potentially responsible party ("PRP") in connection with a "Superfund" site
located in Monterey Park, California. The site is a 190-acre landfill which
operated from 1948 through 1984. In June 1985, the EPA began a remedial
investigation of the site to identify the extent of contamination. The EPA
estimates that approximately 0.1% of the waste disposed at the site is
attributable to Flying Tigers. Flying Tigers participated in a partial
settlement relating to remedial actions for management of contamination and site
control. Partial consent decrees were entered in the United States District
Court for the Central District of California in 1989 and 1992 which provided, in
part, for payments of $109,000 and $230,000, respectively, by Flying Tigers and
FedEx Express to the partial-settlement escrow account. All outstanding issues
are not expected to be resolved for several years. Due to several variables
which are beyond FedEx Express's control, it is impossible to accurately
estimate FedEx Express's potential share of the remaining costs, but based on
Flying Tigers' relatively insignificant contribution of waste to the site, FedEx
Express believes that its remaining liability will not be material.

      FedEx Express and its subsidiaries are subject to other legal proceedings
and claims that arise in the ordinary course of their business. In the opinion
of management, the aggregate liability, if any, with respect to these other
actions will not materially adversely affect FedEx Express's financial position
or results of operations.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      Omitted under the reduced disclosure format pursuant to General
Instruction I(2)(c) of Form 10-K.

                                  PART II

ITEM 5.  MARKET PRICE FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS

      FedEx Express is a wholly-owned subsidiary of FedEx and there
is no market for FedEx Express's common stock.

ITEM 6.  SELECTED FINANCIAL DATA

      Omitted under the reduced disclosure format pursuant to General
Instruction I(2)(a) of Form 10-K.









                                      18
<PAGE>

ITEM 7.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
              OF OPERATIONS AND FINANCIAL CONDITION

         The following table compares revenues and operating income (in
millions) and selected statistics (in thousands, except dollar amounts) for the
years ended May 31:

<TABLE>
<CAPTION>
                                                                                                    PERCENT CHANGE
                                                                                                   ---------------
                                                                                                   2000/      1999/
                                                              2000        1999        1998         1999       1998
                                                              ----        ----        ----         ----       ----
<S>                                                       <C>         <C>         <C>              <C>        <C>
Revenues:
   Package:
       U.S. overnight................................     $  7,538    $  7,185    $  6,810          + 5        + 6
       U.S. deferred ................................        2,428       2,271       2,179          + 7        + 4
       International Priority (IP)...................        3,552       3,019       2,731          +18        +11
                                                          --------    --------    --------
         Total package revenue.......................       13,518      12,475      11,720          + 8        + 6

   Freight:
       U.S...........................................          566         440         337          +29        +30
       International.................................          492         531         598          - 7        -11
                                                          --------    --------    --------
         Total freight revenue.......................        1,058         971         935          + 9        + 4

   Other.............................................          492         533         600          - 8        -11
                                                          --------    --------    --------
         Total revenues..............................     $ 15,068    $ 13,979    $ 13,255          + 8        + 5
                                                          ========    ========    ========

Operating income.....................................     $    900    $    871    $    837          + 3        + 4
                                                          ========    ========    ========

Package:
   Average daily packages:
       U.S. overnight................................        2,020       1,957       1,886          + 3        + 4
       U.S. deferred.................................          916         894         872          + 3        + 3
       IP............................................          319         282         259          +13        + 9
                                                          --------    --------    --------
         Total packages..............................        3,255       3,133       3,017          + 4        + 4

   Revenue per package (yield):
       U.S. overnight................................     $  14.52    $  14.34    $  14.22         +  1        + 1
       U.S. deferred.................................        10.31        9.93        9.84         +  4        + 1
       IP............................................        43.36       41.87       41.45         +  4        + 1
         Composite...................................        16.16       15.56       15.30         +  4        + 2

Freight:
   Average daily pounds:
       U.S...........................................        4,693       4,332       3,356         +  8        +29
       International.................................        2,420       2,633       2,770         -  8        - 5
                                                          --------    --------    --------
         Total freight...............................        7,113       6,965       6,126         +  2        +14

   Revenue per pound (yield):
       U.S...........................................     $    .47    $    .40    $    .40          +18         --
       International.................................          .79         .79         .85           --        - 7
         Composite...................................          .58         .54         .60         +  7        -10

</TABLE>


                                      19
<PAGE>

REVENUES

       In 2000, total package revenue for FedEx Express increased 8%,
principally due to increases in international package volume and yield. List
price increases, including an average 2.8% domestic rate increase in March 1999,
the fuel surcharges implemented in the second half of the year, an ongoing yield
management program and a slight increase in average weight per package, all
contributed to the increases in revenue per package (yield) in 2000. While
growth in U.S. domestic package volume was lower than anticipated, the
higher-yielding IP services experienced strong growth, particularly in Asia and
Europe.

       Total freight revenue increased in 2000 due to higher average daily
pounds and improved yields in U.S. freight, offset by declines in international
freight pounds.

       In 1999,  FedEx Express experienced increased volume and slightly
improved yields in its U.S. overnight, U.S. deferred and IP services.  Growth
in higher-priced U.S. overnight and IP services and higher average weight per
package were the primary factors in revenue growth. List price  increases and
other yield-management actions contributed to the yield improvement in 1999.

       The U.S. deferred package growth rate declined in 1999 in large part due
to specific management actions to restrict growth of these lower-yielding
services. IP package volume and international freight pounds and yield were
negatively affected by weakness in Asian markets, especially in U.S. outbound
traffic destined for that region.

       Other revenue included Canadian domestic revenue, charter services,
logistics services, sales of engine noise reduction kits ("hushkits") and other.
Revenue from hushkit sales has continued to decline over the past three years
and is expected to be negligible hereafter.

OPERATING INCOME

       Operating income increased 3% in 2000 despite higher fuel costs and costs
associated with the corporate realignment and reorganization of the sales,
marketing and information technology functions. A 48% increase in average fuel
price per gallon had a negative impact of approximately $260 million on 2000
fuel costs, including the results of jet fuel hedging contracts entered into to
mitigate some of the increased jet fuel costs. Fuel surcharges implemented
during 2000 offset the increase in fuel costs in the fourth quarter. As
anticipated, maintenance and repairs increased in 2000 due to the timing of
scheduled maintenance and a greater number of routine cycle checks resulting
from fleet usage and certain Federal Aviation Administration directives.

       Operating income increased in 1999 compared to 1998 in spite of $81
million in strike contingency costs in 1999 and continued weakness in Asian
markets. Lower fuel prices and cost controls, including adjustments in network
expansion and aircraft deployment plans, contributed to improved results. A
decline in average jet fuel price per gallon of 23% was partially offset by an
increase in gallons consumed of 6%. Although international freight pounds and
revenue per pound continued to decline in 1999, higher yielding IP volume
continued to grow, utilizing capacity otherwise occupied by freight.

       In 1998, operating income improved as package yield increased at a higher
rate than costs. An increase in average daily packages also contributed to the
improvement in operating income. In 1998, fuel expense included amounts paid by
FedEx Express under jet fuel hedging contracts that were designed to mitigate
some of the increased jet fuel costs. Lower international freight yield, rising


                                      20

<PAGE>

expenses associated with international expansion and foreign currency
fluctuations along with expenses of $14 million related to the acquisition of
Caliber System, Inc. negatively affected 1998 results. Operating income for 1998
increased approximately $50 million related to the UPS strike. Proceeds from a
2% temporary fuel surcharge on U.S. domestic shipments through August 1, 1997
also had a favorable impact.

       Year-over-year comparisons were also affected by fluctuations in the
contribution from sales of hushkits. Operating profit from these sales declined
$50 million in 2000 and $30 million in 1999.

OUTLOOK

       We believe U.S. overnight package volumes will grow in 2001 at rates
higher than those experienced in 2000, with second half growth rates
exceeding those in the first half of 2001. We believe U.S. deferred package
volume growth rates will be lower in 2001 as we implement the strategy of
shifting a portion of these shipments to FedEx Ground. Improved domestic
yields associated with the new sales initiatives are also expected in 2001.
We expect IP package volume growth rates to remain strong in 2001. Freight
pounds are expected to continue to increase in 2001, with increases in the
U.S. partially offset by continued declines in international freight, as it
is replaced by higher-yielding priority packages.

       We also plan to continue cost containment and productivity enhancement
programs in 2001. By lowering discretionary spending and limiting staffing
additions, we expect to align controllable costs with business growth;
however, these actions will not affect plans for strategic spending in
support of long-term growth goals.

       We will continue to use the flexibility of our global network
infrastructure by reconfiguring our system and flights to meet market
demands. While long-term profitability is expected to improve, incremental
costs incurred during periods of strategic expansion and varying economic
conditions can affect short-term operating results.

       Actual results may vary depending on the successful implementation of
our reorganization and rebranding initiative, the impact of competitive
pricing changes, customer responses to yield management initiatives, the
timing and extent of network refinement, actions by our competitors,
including capacity fluctuations, jet fuel prices, regulatory conditions for
aviation rights and the rate of domestic and international economic growth.

       In the past three years, FedEx Express's worldwide aircraft fleet has
increased, resulting in a corresponding rise in maintenance expense. While we
expect a predictable pattern of aircraft maintenance and repairs expense,
unanticipated maintenance events will occasionally disrupt this pattern,
resulting in periodic fluctuations in maintenance and repairs expense.

       FedEx Express's  operating income from the sales of hushkits,  which
peaked in 1998 and declined in 1999 and 2000, is expected to become
insignificant in 2001.




                                       21

<PAGE>

FINANCIAL CONDITION

LIQUIDITY

       Cash and cash equivalents totaled $89 million at May 31, 2000 compared
to $88 million at May 31, 1999. Cash flows from operating activities during
2000 totaled $1.3 billion, compared to $1.5 billion for 1999 and $1.4 billion
for 1998.

       FedEx Express redeemed $100 million of 9.625% unsecured sinking fund
debentures on March 1, 2000. The bond redemption was financed through
borrowings from FedEx.

       In 1999, FedEx filed a $1 billion shelf registration statement with
the Securities and Exchange Commission ("SEC"), indicating that it may issue
up to that amount in one or more offerings of either unsecured debt
securities, preferred stock or common stock or a combination of such
instruments. FedEx may, at its option, direct FedEx Express to issue
guarantees of the debt securities.

       We believe that cash flow from operations and FedEx's commercial paper
program and revolving bank credit facility will adequately meet FedEx
Express's working capital needs for the foreseeable future.

CAPITAL RESOURCES

       FedEx Express's operations are capital intensive, characterized by
significant investments in aircraft, vehicles, computer and
telecommunications equipment, package handling facilities and sort equipment.
The amount and timing of capital additions depend on various factors
including volume growth, domestic and international economic conditions, new
or enhanced services, geographical expansion of services, competition,
availability of satisfactory financing and actions of regulatory authorities.

       We have historically financed our capital investments through the use
of lease, debt and equity financing in addition to the use of internally
generated cash from operations. Generally, our practice in recent years with
respect to funding new wide-bodied aircraft acquisitions has been to finance
such aircraft through long-term lease transactions that qualify as
off-balance sheet operating leases under applicable accounting rules. We have
determined that these operating leases have provided economic benefits
favorable to ownership with respect to market values, liquidity and after-tax
cash flows. In the future, other forms of secured financing may be pursued to
finance aircraft acquisitions when we determine that it best meets our needs.
We have been successful in obtaining investment capital, both domestic and
international, for long-term leases on terms acceptable to us although the
marketplace for such capital can become restricted depending on a variety of
economic factors beyond our control. See Note 4 of Notes to Consolidated
Financial Statements for additional information concerning FedEx Express's
debt facilities.

       In July 1999, approximately $231 million of pass-through certificates
were issued to finance or refinance the debt portion of leveraged operating
leases related to four A300 aircraft, which were delivered in 2000. In June
1998, approximately $833 million of pass-through certificates were issued to
finance or refinance the debt portion of leveraged operating leases related
to eight A300 and five MD11 aircraft, which were delivered in 2000. The
pass-through certificates are not direct obligations of, or guaranteed by,
FedEx Express, but amounts payable by us under the leveraged operating leases
are sufficient to pay the principal of and interest on the certificates. In
June 2000, FedEx Express filed a


                                      22

<PAGE>

shelf registration with the SEC, indicating that we may issue up to $450
million in pass-through certificates in one or more offerings to finance or
refinance leveraged operating aircraft leases.

       We believe that the capital resources available to us provide
flexibility to access the most efficient markets for financing our capital
acquisitions, including aircraft, and are adequate for FedEx Express's future
capital needs.

DEFERRED TAX ASSETS

       At May 31, 2000, FedEx Express had a net cumulative deferred tax asset
of $7 million consisting of $816 million of deferred tax assets and $809
million of deferred tax liabilities. The reversals of deferred tax assets in
future periods will be offset by similar amounts of deferred tax liabilities.

EURO CURRENCY CONVERSION

       Since the beginning of the European Union's transition to the euro on
January 1, 1999, FedEx Express has been prepared to quote rates to customers,
generate billings and accept payments, in both euro and legacy currencies.
The legacy currencies will remain legal tender through December 31, 2001. We
believe that the introduction of the euro, any price transparency brought
about by its introduction and the phasing out of the legacy currencies will
not have a material impact on our consolidated financial position, results of
operations or cash flows. Costs associated with the euro project are being
expensed as incurred and are being funded entirely by internal cash flows.

YEAR 2000 COMPLIANCE

       FedEx Express relies heavily on sophisticated information technology
for its business operations. Our Year 2000 ("Y2K") computer compliance issues
were, therefore, broad and complex. Nothing has come to FedEx Express's
attention that would cause it to believe that its Y2K compliance effort was
not successful.

       Since 1996, FedEx Express has incurred approximately $99 million on Y2K
compliance ($18 million in 2000), which was funded by internal cash flows. We do
not expect to incur any material additional Y2K-related costs. We classified
costs as Y2K for reporting purposes if they remedied only Y2K risks or resulted
in the formulation of contingency plans and would have otherwise been
unnecessary in the normal course of business. For 2000, Y2K expenditures were
less than 10% of FedEx Express's total information technology expense budget. We
believe that no significant information technology projects were deferred due to
our Y2K compliance effort.



                                      23


<PAGE>

ITEM 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES
              ABOUT MARKET RISK

      FedEx Express currently has market risk sensitive instruments related
to interest rates; however, there is no significant exposure to changing
interest rates on our long-term debt because the interest rates are fixed. As
disclosed in Note 4 of Notes to Consolidated Financial Statements, FedEx
Express has outstanding unsecured long-term debt exclusive of capital leases
of $.9 billion and $1.0 billion at May 31, 2000 and 1999, respectively.
Market risk for fixed-rate long-term debt is estimated as the potential
decrease in fair value resulting from a hypothetical 10% increase in interest
rates and amounts to approximately $46 million as of May 31, 2000 ($35
million as of May 31, 1999). The underlying fair values of our long-term debt
were estimated based on quoted market prices or on the current rates offered
for debt with similar terms and maturities. FedEx Express does not use
derivative financial instruments to manage interest rate risk.

      FedEx Express's earnings are affected by fluctuations in the value of
the U.S. dollar, as compared with foreign currencies, as a result of
transactions in foreign markets. At May 31, 2000, the result of a uniform 10%
strengthening in the value of the dollar relative to the currencies in which
FedEx Express's transactions are denominated would result in a decrease in
operating income of approximately $52 million for the year ending May 31,
2001 (the comparable amount in the prior year was $25 million). This
calculation assumes that each exchange rate would change in the same
direction relative to the U.S. dollar. In addition to the direct effects of
changes in exchange rates, which are a changed dollar value of the resulting
reported operating results, changes in exchange rates also affect the volume
of sales or the foreign currency sales price as competitors' services become
more or less attractive. FedEx Express's sensitivity analysis of the effects
of changes in foreign currency exchange rates does not factor in a potential
change in sales levels or local currency prices.

       FedEx has entered into jet fuel hedging contracts on behalf of FedEx
Express which are designed to limit its exposure to fluctuations in jet fuel
prices. Under these contracts, FedEx makes (or receives) payments based on
the difference between a fixed price and the market price of jet fuel, as
determined by an index of spot market prices representing various geographic
regions. The difference is recorded as an increase or decrease in fuel
expense. Market risk for jet fuel is estimated as the potential decrease in
earnings resulting from a hypothetical 10% increase in jet fuel prices
applied to projected 2001 usage and amounts to approximately $49 million, net
of hedging settlements, as of May 31, 2000. There were no such jet fuel
hedging contracts at May 31, 1999. As of May 31, 2000, jet fuel hedging
contracts cover approximately one-third of the estimated usage in 2001. See
Notes 2 and 10 of Notes to Consolidated Financial Statements for accounting
policy and additional information regarding jet fuel hedging contracts.

      FedEx Express does not purchase or hold any derivative financial
instruments for trading purposes.




                                      24

<PAGE>

ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The following financial statements are filed with this Report:
<TABLE>
<CAPTION>

                                                                         PAGE
                                                                         ----
<S>                                                                      <C>
Report of Independent Public Accountants................................  F-1

Consolidated Balance Sheets
       May 31, 2000 and 1999............................................  F-2

Consolidated Statements of Income
       Years Ended May 31, 2000, 1999 and 1998..........................  F-4

Consolidated Statements of Changes
       in Owner's Equity and Comprehensive Income
       Years Ended May 31, 2000, 1999 and 1998..........................  F-5

Consolidated Statements of Cash Flows
       Years Ended May 31, 2000, 1999 and 1998..........................  F-6

Notes to Consolidated Financial Statements..............................  F-7
</TABLE>


ITEM 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
              ON ACCOUNTING AND FINANCIAL DISCLOSURE

      None.

                                      PART III

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      Omitted under the reduced disclosure format pursuant to General
Instruction I(2)(c) of Form 10-K.

ITEM 11.   EXECUTIVE COMPENSATION

      Omitted under the reduced disclosure format pursuant to General
Instruction I(2)(c) of Form 10-K.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                OWNERS AND MANAGEMENT

      Omitted under the reduced disclosure format pursuant to General
Instruction I(2)(c) of Form 10-K.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Omitted under the reduced disclosure format pursuant to General
Instruction I(2)(c) of Form 10-K.


                                      25

<PAGE>

                                           PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

 (a) 1.  FINANCIAL STATEMENTS

    The consolidated financial statements required by this item are listed in
Item 8, "Financial Statements and Supplementary Data" herein and are included on
pages F-1 to F-20 herein.

     2.    FINANCIAL STATEMENT SCHEDULE

      The following financial statement schedule is filed with this Report:
<TABLE>
<CAPTION>
                                                                              PAGE
                                                                              ----
<S>                                                                           <C>
Report of Independent Public Accountants on Financial Statement Schedule...... S-1

Schedule II - Valuation and Qualifying Accounts............................... S-2
</TABLE>

     All other financial statement schedules have been omitted because they are
not applicable or the required information is included in the consolidated
financial statements, or the notes thereto, contained herein.

     3.   EXHIBITS

     Exhibits 3.1, 3.2, 10.1 through 10.61, 12, 23, 24 and 27 are being
filed in connection  with this Report or incorporated herein by reference.

     The Exhibit Index on pages E-1 through E-7 is incorporated herein by
reference.

(b)  REPORTS ON FORM 8-K

      No reports on Form 8-K were filed during the fourth quarter of the fiscal
year ended May 31, 2000.


                                      26

<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
14th day of August, 2000.

                                        FEDERAL EXPRESS CORPORATION



                                        BY: /S/ MICHAEL W. HILLARD
                                            ---------------------------------
                                                Michael W. Hillard
                                                Vice President and Controller
                                               (PRINCIPAL ACCOUNTING OFFICER)


      Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf of
the Registrant in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

                  SIGNATURE                                     CAPACITY                            DATE
<S>                                          <C>                                            <C>
/S/ FREDERICK W. SMITH*                            Chairman of the Board of Directors
----------------------------------
Frederick W. Smith


/S/ DAVID J. BRONCZEK*                             President, Chief Executive Officer
----------------------------------                            and Director
David J. Bronczek                                     (PRINCIPAL EXECUTIVE OFFICER)


/S/ ROBERT B. CARTER                                            Director                        August 14, 2000
----------------------------------
Robert B. Carter


/S/ MICHAEL L. DUCKER*                          Executive Vice President - International
----------------------------------                       and Director
Michael L. Ducker


/S/ T. MICHAEL GLENN*                                           Director
----------------------------------
T. Michael Glenn


/S/ ALAN B. GRAF, JR.*                                          Director
----------------------------------
Alan B. Graf, Jr.


/S/ GEORGE W. HEARN*                                            Director
----------------------------------
George W. Hearn


/S/ MICHAEL W. HILLARD                          Vice President and Controller
----------------------------------              (PRINCIPAL ACCOUNTING OFFICER)
Michael W. Hillard                                                                              August 14, 2000



                                      27

<PAGE>

/S/ KENNETH R. MASTERSON*                                       Director
----------------------------------
Kenneth R. Masterson


/S/ DAVID F. REBHOLZ*                             Executive Vice President - Operations
----------------------------------                  and Systems Support and Director
David F. Rebholz


/S/ TRACY G. SCHMIDT*                                Senior Vice President and Chief
----------------------------------                          Financial Officer
Tracy G. Schmidt                                      (PRINCIPAL FINANCIAL OFFICER)


/S/ THEODORE L. WEISE*                                          Director
----------------------------------
Theodore L. Weise



*By:  /S/ MICHAEL W. HILLARD
----------------------------------
         Michael W. Hillard
          Attorney-in-Fact                                                                  August 14, 2000
</TABLE>


                                      28

<PAGE>

                          REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Stockholder of Federal Express Corporation:

       We have audited the accompanying consolidated balance sheets of Federal
Express Corporation (a Delaware corporation) and subsidiaries as of May 31, 2000
and 1999, and the related consolidated statements of income, changes in owner's
equity and comprehensive income and cash flows for each of the three years in
the period ended May 31, 2000. These financial statements are the responsibility
of FedEx Express's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

       We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 financial statements referred to above present
fairly, in all material respects, the financial position of Federal Express
Corporation and subsidiaries as of May 31, 2000 and 1999, and the results of its
operations and its cash flows for each of the three years in the period ended
May 31, 2000, in conformity with accounting principles generally accepted in the
United States.




                                               /s/ARTHUR ANDERSEN LLP
                                               -----------------------
                                                 Arthur Andersen LLP



Memphis, Tennessee
June 27, 2000


                                      F-1

<PAGE>

                                            FEDERAL EXPRESS CORPORATION
                                            CONSOLIDATED BALANCE SHEETS



<TABLE>
<CAPTION>

ASSETS

                                                                                           MAY 31,
                                                                          ---------------------------------------
                                                                                2000                  1999
                                                                          ----------------      -----------------
                                                                                       (In thousands)
<S>                                                                       <C>                   <C>
CURRENT ASSETS
     Cash and cash equivalents                                              $       88,630        $       88,238
     Receivables, less allowances of $56,517,000
         and $45,432,000                                                         2,088,854             1,840,613
     Spare parts, supplies and fuel                                                247,372               272,614
     Deferred income taxes                                                         247,802               220,709
     Prepaid expenses and other                                                     69,139                56,241
                                                                           ---------------       ---------------
         Total current assets                                                    2,741,797             2,478,415


PROPERTY AND EQUIPMENT, AT COST
     Flight equipment                                                            4,960,204             4,556,747
     Package handling and ground support equipment                               3,430,316             3,193,620
     Computer and electronic equipment                                           2,088,510             2,114,492
     Other                                                                       2,479,540             2,332,227
                                                                             -------------         -------------
                                                                                12,958,570            12,197,086
     Less accumulated depreciation and amortization                              6,846,647             6,454,579
                                                                             -------------         -------------
         Net property and equipment                                              6,111,923             5,742,507


OTHER ASSETS
     Goodwill                                                                      327,765               339,425
     Equipment deposits and other assets                                           559,054               555,628
                                                                            --------------        --------------
         Total other assets                                                        886,819               895,053
                                                                            ---------------       --------------

                                                                              $  9,740,539          $  9,115,975
                                                                              ============          ============

</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.



                                      F-2


<PAGE>

                                            FEDERAL EXPRESS CORPORATION
                                            CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

LIABILITIES AND OWNER'S EQUITY

                                                                                             MAY 31,
                                                                                --------------------------------
                                                                                      2000              1999
                                                                                -------------      -------------
                                                                                           (In thousands)
<S>                                                                             <C>                <C>
CURRENT LIABILITIES
     Current portion of long-term debt                                          $       6,339       $     14,938
     Accrued salaries and employee benefits                                           636,375            615,247
     Accounts payable                                                                 956,929            983,350
     Accrued expenses                                                                 805,800            692,599
     Due to parent company                                                             16,425             62,720
                                                                                -------------      -------------
         Total current liabilities                                                  2,421,868          2,368,854

LONG-TERM DEBT, LESS CURRENT PORTION                                                1,054,430          1,159,126

DEFERRED INCOME TAXES                                                                 240,569            221,509

OTHER LIABILITIES                                                                   1,657,405          1,502,481

COMMITMENTS AND CONTINGENCIES (NOTES 5, 10 AND 11)

OWNER'S EQUITY
     Common stock, $.10 par value; 1,000 shares
         authorized, issued and outstanding                                                --                 --
     Additional paid-in capital                                                       894,718            894,718
     Retained earnings                                                              3,505,422          2,995,076
     Accumulated other comprehensive income                                           (33,873)           (25,789)
                                                                                -------------      -------------
         Total owner's equity                                                       4,366,267          3,864,005
                                                                                -------------      -------------
                                                                                   $9,740,539         $9,115,975
                                                                                =============      =============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.




                                      F-3
<PAGE>

<TABLE>
<CAPTION>


                                              FEDERAL EXPRESS CORPORATION
                                           CONSOLIDATED STATEMENTS OF INCOME


                                                                       YEARS ENDED MAY 31,
                                                 -----------------------------------------------------------
                                                        2000                  1999                1998
                                                 -----------------     -----------------    ----------------
                                                                         (In thousands)
<S>                                              <C>                   <C>                  <C>
REVENUES                                               $15,068,338           $13,979,277         $13,254,841

OPERATING EXPENSES
     Salaries and employee benefits                      6,635,048             6,224,709           5,832,363
     Rentals and landing fees                            1,429,399             1,318,242           1,221,377
     Depreciation and amortization                         997,735               912,002             844,606
     Maintenance and repairs                             1,026,260               887,799             807,767
     Fuel                                                  888,337               593,661             709,424
     Other                                               3,191,949             3,171,388           3,002,571
                                                     -------------         -------------       -------------
                                                        14,168,728            13,107,801          12,418,108
                                                      ------------          ------------        ------------

OPERATING INCOME                                           899,610               871,476             836,733

OTHER INCOME (EXPENSE)
     Interest, net                                         (75,580)              (86,080)           (110,110)
     Other, net                                             19,517               (14,696)              8,590
                                                   ---------------       ---------------    ----------------
                                                           (56,063)             (100,776)           (101,520)
                                                   ---------------        --------------      --------------

INCOME BEFORE INCOME TAXES                                 843,547               770,700             735,213

PROVISION FOR INCOME TAXES                                 333,201               312,134             314,670
                                                    --------------        --------------      --------------

NET INCOME                                           $     510,346         $     458,566       $     420,543
                                                     =============         =============       =============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.


                                      F-4

<PAGE>

                                         FEDERAL EXPRESS CORPORATION
                                    CONSOLIDATED STATEMENTS OF CHANGES IN
                                   OWNER'S EQUITY AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                                                            Accumulated
                                                           Additional                          Other             Total
                                            Common          Paid-in         Retained       Comprehensive         Owner's
                                             Stock           Capital        Earnings           Income            Equity
                                          -----------     ------------     ----------      --------------   --------------
                                                                        (In thousands)
<S>                                       <C>            <C>            <C>              <C>               <C>
BALANCE AT MAY 31, 1997                   $    --         $ 844,499      $2,114,996       $     3,019        $2,962,514

Net income                                     --                --         420,543                --           420,543
Foreign currency translation
     adjustment, net of deferred
     tax benefit of $2,793,000                 --                --              --           (30,296)          (30,296)
                                                                                                             ----------
       TOTAL COMPREHENSIVE INCOME                                                                               390,247
Net activity under employee
     incentive plans(1)                        --            48,970              (2)               --            48,968
                                          -------         ---------      ----------       -----------        ----------

BALANCE AT MAY 31, 1998                        --           893,469       2,535,537           (27,277)        3,401,729

Net income                                     --                --         458,566                --           458,566
Foreign currency translation
     adjustment, net of deferred
     tax benefit of $959,000                   --                --              --             1,488             1,488
                                                                                                             ----------
       TOTAL COMPREHENSIVE INCOME                                                                               460,054
Net activity under employee
     incentive plans(1)                        --             1,249              --                --             1,249
Other                                          --                --             973                --               973
                                          -------         ---------      ----------       -----------        ----------

BALANCE AT MAY 31, 1999                        --           894,718       2,995,076           (25,789)        3,864,005

Net income                                     --                --         510,346                --           510,346
Foreign currency translation
     adjustment, net of deferred
     tax benefit of $1,881,000                 --                --              --            (8,084)           (8,084)
                                                                                                             ----------
       TOTAL COMPREHENSIVE INCOME                                                                               502,262
                                          -------         ---------      ----------       -----------        ----------

BALANCE AT MAY 31, 2000                   $    --         $ 894,718      $3,505,422       $   (33,873)       $4,366,267
                                          =======         =========      ==========       ===========        ==========
</TABLE>

(1)Represents net activity or certain tax benefits related to such activity
under employee incentive plans prior to FedEx Express becoming a wholly-owned
subsidiary of FedEx Corporation as of January 27, 1998.

The accompanying notes are an integral part of these consolidated financial
statements.


                                      F-5

<PAGE>

                                            FEDERAL EXPRESS CORPORATION
                                    CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                          YEARS ENDED MAY 31,
                                                                        -----------------------------------------------------
                                                                             2000               1999                1998
                                                                        --------------     ---------------    ---------------
                                                                                            (In thousands)
<S>                                                                    <C>                 <C>                <C>
OPERATING ACTIVITIES

Net income                                                                 $   510,346       $     458,566      $     420,543
Adjustments to reconcile net income to cash
    provided by operating activities:
       Depreciation and amortization                                           997,735             912,002            844,606
       Provision for uncollectible accounts                                     57,711              47,527             59,616
       Deferred income taxes and other noncash items                           (55,511)            (49,949)             6,519
       Gain from disposals of property and equipment                           (16,592)             (1,599)            (5,166)
       Changes in operating assets and liabilities:
              Increase in receivables                                         (363,454)           (245,155)          (292,837)
              Decrease (increase) in other current assets                       71,006            (167,667)           (93,348)
              Increase in accounts payable
                 and other operating liabilities                                65,035             539,488            478,095
       Other, net                                                                5,634               9,735            (20,068)
                                                                           -----------       -------------      -------------
Cash provided by operating activities                                        1,271,910           1,502,948          1,397,960

INVESTING ACTIVITIES

Purchases of property and equipment, including deposits on
       aircraft of $1,500,000, $1,200,000 and $70,359,000                   (1,330,904)         (1,550,161)        (1,761,963)
Proceeds from dispositions of property and equipment:
    Sale-leaseback transactions                                                     --              80,995            322,852
    Reimbursements of A300 and MD11 deposits                                    24,377              67,269            106,991
    Other dispositions                                                         154,696             178,422             43,100
Other, net                                                                         878               4,784             (4,484)
                                                                           -----------       -------------      -------------
Cash used in investing activities                                           (1,150,953)         (1,218,691)        (1,293,504)

FINANCING ACTIVITIES

Proceeds from debt issuances                                                        --                  --            267,105
Principal payments on debt                                                    (114,936)           (269,280)          (353,502)
Payments to parent company                                                      (5,629)            (31,345)           (49,919)
Other, net                                                                          --                  --             14,443
                                                                           -----------       -------------      -------------
Cash used in financing activities                                             (120,565)           (300,625)          (121,873)
                                                                           -----------       -------------      -------------

CASH AND CASH EQUIVALENTS
              `
Increase (decrease) during the year                                                392             (16,368)           (17,417)
Balance at beginning of year                                                    88,238             104,606            122,023
                                                                           -----------       -------------      -------------
Balance at end of year                                                     $    88,630       $      88,238       $    104,606
                                                                           ===========       =============       ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.


                                      F-6

<PAGE>

                                            FEDERAL EXPRESS CORPORATION
                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1: BASIS OF PRESENTATION

On January 27, 1998, Federal Express Corporation (together with its
subsidiaries, "FedEx Express") became a wholly-owned subsidiary of FDX
Corporation in connection with its acquisition of Caliber System, Inc.
("Caliber"). The acquisition was accounted for as a pooling of interests. FDX
Corporation exchanged 0.8 shares of its common stock for each share of
Caliber common stock. Each share of FedEx Express's common stock was
automatically converted into one share of FDX Corporation common stock. As a
part of the transaction, FedEx Express was recapitalized with 1,000 shares of
common stock, $.10 par value. Effective January 19, 2000, the name of FedEx
Express's parent company was changed from FDX Corporation to FedEx
Corporation.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION.  The consolidated  financial  statements include
the accounts of FedEx Express and its subsidiaries.  All significant
intercompany accounts and transactions have been eliminated.

PROPERTY AND EQUIPMENT. Expenditures for major additions, improvements,
flight equipment modifications and certain equipment overhaul costs are
capitalized. Maintenance and repairs are charged to expense as incurred. The
cost and accumulated depreciation of property and equipment disposed of are
removed from the related accounts, and any gain or loss is reflected in the
results of operations.

For financial reporting purposes, depreciation and amortization of property
and equipment is provided on a straight-line basis over the asset's service
life or related lease term as follows:

Flight equipment                                                5 to 20 years
Package handling, ground support equipment and vehicles         3 to 30 years
Computer and electronic equipment                               3 to 10 years
Other                                                           2 to 30 years

Aircraft airframes and engines are assigned residual values ranging from 10% to
20% of asset cost. All other property and equipment have no material residual
values. Vehicles are depreciated on a straight-line basis over five to 10 years.

For income tax purposes, depreciation is generally computed using accelerated
methods.

DEFERRED GAINS. Gains on the sale and leaseback of aircraft and other property
and equipment are deferred and amortized over the life of the lease as a
reduction of rent expense. Included in other liabilities at May 31, 2000 and
1999, were deferred gains of $533,371,000 and $429,488,000, respectively.


                                       F-7

<PAGE>

DEFERRED LEASE OBLIGATIONS. While certain of FedEx Express's aircraft and
facility leases contain fluctuating or escalating payments, the related rent
expense is recorded on a straight-line basis over the lease term. Included in
other liabilities at May 31, 2000 and 1999, were $352,207,000 and
$321,248,000, respectively, representing the cumulative difference between
rent expense and rent payments.

SELF-INSURANCE ACCRUALS. FedEx Express is self-insured up to certain levels
for workers' compensation, employee health care and vehicle liabilities.
Accruals are based on the actuarially estimated undiscounted cost of claims.
Included in other liabilities at May 31, 2000 and 1999 were $302,000,000, and
$258,000,000, respectively, representing the long-term portion of
self-insurance accruals for FedEx Express's workers' compensation and vehicle
liabilities.

CAPITALIZED INTEREST. Interest on funds used to finance the acquisition and
modification of aircraft, construction of certain facilities, and development
of certain software up to the date the asset is placed in service is
capitalized and included in the cost of the asset. Capitalized interest was
$30,168,000, $35,152,000 and $31,443,000 for 2000, 1999 and 1998,
respectively.

ADVERTISING.  Advertising  costs are generally  expensed as incurred and are
included in other operating  expenses. Advertising expenses were
$214,161,000, $193,253,000 and $176,393,000 in 2000, 1999 and 1998,
respectively.

CASH EQUIVALENTS. Cash equivalents in excess of current operating
requirements are invested in short-term, interest-bearing instruments with
maturities of three months or less at the date of purchase and are stated at
cost, which approximates market value. Interest income was $6,066,000,
$4,514,000 and $7,616,000, in 2000, 1999 and 1998, respectively.

SPARE PARTS, SUPPLIES AND FUEL. Spare parts are stated  principally at
weighted-average  cost;  supplies and fuel are stated principally at standard
cost, which  approximates  actual cost on a first-in,  first-out basis.
Neither method values inventory in excess of current replacement cost.

GOODWILL. Goodwill is the excess of the purchase price over the fair value of
net assets of businesses acquired. It is amortized on a straight-line basis
over periods generally ranging up to 40 years. Accumulated amortization was
$156,804,000 and $154,145,000 at May 31, 2000 and 1999, respectively.

IMPAIRMENT OF LONG-LIVED ASSETS. FedEx Express reviews long-lived assets for
impairment when circumstances indicate the carrying value of an asset may not
be recoverable. If an impairment exists, an adjustment is made to write the
asset down to its fair value, and a loss is recorded as the difference
between the carrying value and the fair value.

FOREIGN CURRENCY TRANSLATION. Translation gains and losses of FedEx Express's
foreign operations that use local currencies as the functional currency are
accumulated and reported, net of related deferred income taxes, as a
component of accumulated other comprehensive income within owner's equity.
Transaction gains and losses that arise from exchange rate fluctuations on
transactions denominated in a currency other than the local functional
currency are included in the results of operations.


                                      F-8

<PAGE>

INCOME TAXES. Deferred income taxes are provided for the tax effect of temporary
differences between the tax basis of assets and liabilities and their reported
amounts in the financial statements. FedEx Express uses the liability method to
account for income taxes, which requires deferred taxes to be recorded at the
statutory rate expected to be in effect when the taxes are paid.

FedEx Express has not provided for U.S. federal income taxes on its foreign
subsidiaries' earnings deemed to be permanently reinvested. Quantification of
the deferred tax liability, if any, associated with permanently reinvested
earnings is not practicable.

REVENUE RECOGNITION. Revenue is recorded based on the percentage of service
completed at the balance sheet date.

RECENT PRONOUNCEMENTS. Statement of Financial Accounting Standards ("SFAS")
No. 133, "Accounting for Derivative Instruments and Hedging Activities," was
issued in June 1998, was subsequently amended by SFAS No. 137, and is now
effective for fiscal years beginning after June 15, 2000 (2002 for FedEx
Express). The Statement requires an entity to recognize all derivatives as
either assets or liabilities in the balance sheet and to measure those
instruments at fair value. The impact, if any, on earnings, comprehensive
income and financial position of the adoption of SFAS No. 133 will depend on
the amount, timing and nature of any agreements entered into by FedEx
Express. As of May 31, 2000, FedEx Express has not adopted the provisions of
SFAS No. 133.

SFAS No. 138,  "Accounting for Certain Derivative  Instruments and Certain
Hedging  Activities," was issued in June 2000,  and amends SFAS No. 133. SFAS
No. 138 must be adopted  concurrently  with FedEx  Express's  adoption of
SFAS No. 133.  FedEx Express does not believe the amendment will affect its
implementation of SFAS No. 133.

RECLASSIFICATIONS. Certain prior year amounts have been reclassified to
conform to the 2000 presentation.

USE OF ESTIMATES. The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles 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.


                                      F-9

<PAGE>

NOTE 3: ACCRUED SALARIES AND EMPLOYEE BENEFITS AND ACCRUED EXPENSES

The components of accrued salaries and employee benefits and accrued expenses
were as follows:

<TABLE>
<CAPTION>
                                                                                                  MAY 31,
                                                                                        --------------------------
                                                                                         2000              1999
                                                                                        ----------       ---------
                                                                                             (In thousands)
<S>                                                                                     <C>              <C>
Salaries                                                                                 $142,593         $119,061
Employee benefits                                                                         184,532          210,449
Compensated absences                                                                      309,250          285,737
                                                                                         --------         --------
   Total accrued salaries and employee benefits                                          $636,375         $615,247
                                                                                         ========         ========

Insurance                                                                                $302,453         $287,471
Taxes other than income taxes                                                             219,388          209,416
Other                                                                                     283,959          195,712
                                                                                         --------         --------
   Total accrued expenses                                                                $805,800         $692,599
                                                                                         ========         ========
</TABLE>

NOTE 4: LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                                                                   MAY 31,
                                                                                       ----------------------------
                                                                                        2000              1999
                                                                                       ----------         ---------
                                                                                               (In thousands)
<S>                                                                                    <C>             <C>

Senior debt, interest rates of 9.65% to 9.88%, due through 2013                        $  473,970       $  473,779
Bonds, interest rate of 7.60%, due in 2098                                                239,382          239,376
Medium term notes, interest rates of 9.95% to 10.57%, due through 2007                     62,510           74,965
                                                                                       ----------       ----------
                                                                                          775,862          788,120

Unsecured sinking fund debentures, interest rate
     of 9.63%, originally due through 2020, called during 2000                                --            98,598

Capital lease obligations and tax exempt bonds,
     interest rates of 5.35% to 7.88%, due through 2017                                   253,425          253,425
       Less bond reserves                                                                   9,024            9,024
                                                                                       ----------       ----------
                                                                                          244,401          244,401

Other debt, interest rates of 9.68% to 9.98%                                               40,506           42,945
                                                                                       ----------       ----------
                                                                                        1,060,769        1,174,064
       Less current portion                                                                 6,339           14,938
                                                                                       ----------       ----------
                                                                                       $1,054,430       $1,159,126
                                                                                       ==========       ==========
</TABLE>

Tax exempt bonds were issued by the Memphis-Shelby County Airport Authority
("MSCAA") and the City of Indianapolis. Lease agreements with the MSCAA and a
loan agreement with the City of Indianapolis covering the facilities and
equipment financed with the bond proceeds obligate FedEx Express to pay rentals
and loan payments, respectively, equal to the principal and interest due on the
bonds.

Unsecured sinking fund debentures in the amount of $100,000,000, originally due
through 2020, were redeemed by FedEx Express on March 1, 2000. Other income
(expense) includes a charge of approximately $6,000,000 which represents the
premiums paid to the holders of the bonds retired and the write-off of the
related unamortized deferred finance charges and discount.

                                       F-10
<PAGE>

Scheduled annual principal maturities of long-term debt for the five years
subsequent to May 31, 2000, are as follows: $6,300,000 in 2001; $202,100,000
in 2002; $5,900,000 in 2003; $25,000,000 in 2004; and $5,500,000 in 2005.

At May 31, FedEx Express's long-term debt, exclusive of capital leases, had a
carrying value of $863,000,000, which approximates fair value at that date.
The carrying value at May 31, 1999 was $975,000,000 compared with a fair
value of $1,046,000,000 at that date. The estimated fair values were
determined based on quoted market prices or on the current rates offered for
debt with similar terms and maturities.

NOTE 5: LEASE COMMITMENTS

FedEx Express utilizes certain aircraft, land, facilities and equipment under
capital and operating leases that expire at various dates through 2027. In
addition, supplemental aircraft are leased under agreements that generally
provide for cancellation upon 30 days' notice.

The components of property and equipment recorded under capital leases were
as follows:

<TABLE>
<CAPTION>
                                                                                               MAY 31
                                                                                    ---------------------------
                                                                                       2000             1999
                                                                                    -----------      ----------
                                                                                           (In thousands)
<S>                                                                               <C>             <C>
Package handling and ground support equipment                                         $226,580         $245,041
Facilities                                                                             133,435          133,435
Computer and electronic equipment and other                                              6,471            6,496
                                                                                      --------         --------
                                                                                       366,486          384,972
       Less accumulated amortization                                                   259,718          267,968
                                                                                      --------         --------
                                                                                      $106,768         $117,004
                                                                                      ========         ========
</TABLE>

Rent expense under operating leases for the years ended May 31 was as follows:

<TABLE>
<CAPTION>
                                                                       2000             1999             1998
                                                                    ----------      -------------    -----------
                                                                                   (In thousands)
<S>                                                                 <C>               <C>            <C>
Minimum rentals                                                     $1,203,211        $1,167,500     $1,071,290
Contingent rentals                                                      98,572            59,839         60,925
                                                                    ----------        ----------     ----------
                                                                    $1,301,783        $1,227,339     $1,132,215
                                                                    ==========        ==========     ==========
</TABLE>

Contingent rentals are based on hours flown under supplemental aircraft leases.


                                      F-11

<PAGE>

A summary of future minimum lease payments under capital leases and
noncancellable operating leases (principally aircraft and facilities) with an
initial or remaining term in excess of one year at May 31, 2000 is as follows:

<TABLE>
<CAPTION>

                                                                         Capital                  Operating
                                                                         Leases                     Leases
                                                                       ----------               -------------
                                                                                  (In thousands)
<S>                                                                    <C>                      <C>
2001                                                                     $ 14,828                $  1,184,540
2002                                                                       14,828                   1,038,607
2003                                                                       14,828                     952,049
2004                                                                       14,828                     900,178
2005                                                                       14,828                     858,006
Thereafter                                                                287,675                   9,180,552
                                                                         --------                 -----------
                                                                         $361,815                 $14,113,932
                                                                         ========                 ===========
</TABLE>

At May 31, 2000, the present value of future minimum lease payments for capital
lease obligations, including certain tax exempt bonds, was $199,401,000.

FedEx Express makes payments under certain leveraged operating leases that are
sufficient to pay principal and interest on certain pass-through certificates.
The pass-through certificates are not direct obligations of, or guaranteed by,
FedEx Express.

NOTE 6: INCOME TAXES

The operations of FedEx Express are included in the consolidated federal income
tax return of FedEx Corporation. The income tax provision for FedEx Express
approximates the amount which would have been recorded on a separate return
basis. The components of the provision for income taxes for the years ended May
31 were as follows:

<TABLE>
<CAPTION>
                                                                   2000              1999             1998
                                                                ----------        ----------      -----------
                                                                                (In thousands)
<S>                                                             <C>              <C>              <C>
Current provision:
   Domestic
       Federal                                                    $282,025          $281,721         $229,661
       State and local                                              39,588            36,300           30,416
   Foreign                                                          39,619            23,077           36,543
                                                                  --------          --------         --------
                                                                   361,232           341,098          296,620
                                                                  --------          --------         --------
Deferred provision (credit):
   Domestic
       Federal                                                     (24,542)          (23,933)          16,756
       State and local                                              (2,050)           (3,160)           1,051
   Foreign                                                          (1,439)           (1,871)             243
                                                                  --------          --------         --------
                                                                   (28,031)          (28,964)          18,050
                                                                  --------          --------         --------
                                                                  $333,201          $312,134         $314,670
                                                                  ========          ========         ========
</TABLE>


                                       F-12

<PAGE>

Income taxes have been provided for foreign operations based upon the various
tax laws and rates of the countries in which FedEx Express's operations are
conducted. There is no direct relationship between FedEx Express's overall
foreign income tax provision and foreign pretax book income due to the
different methods of taxation used by countries throughout the world. In
1998, FedEx Express entities in foreign locations reported a net foreign
pretax loss of $98,000,000, comprising foreign pretax income of $206,000,000
and foreign pretax losses of $304,000,000.

A reconciliation of the statutory federal income tax rate to FedEx Express's
effective income tax rate for the years ended May 31 is as follows:

<TABLE>
<CAPTION>
                                                                   2000             1999              1998
                                                                 --------         --------          --------
<S>                                                              <C>              <C>               <C>
Statutory U.S. income tax rate                                      35.0%            35.0%             35.0%
Increase resulting from:
     State and local income taxes, net of
       federal benefit                                               2.9              2.8               2.8
     Nonrecurring item (1998 Caliber acquisition)                     --               --               0.8
     Other, net                                                      1.6              2.7               4.2
                                                                 -------          -------           -------
Effective tax rate                                                  39.5%            40.5%             42.8%
                                                                 =======          =======           =======
Effective tax rate (excluding
     nonrecurring item)                                             39.5%            40.5%             42.0%
                                                                 =======          =======           =======
</TABLE>

The significant components of deferred tax assets and liabilities as of May 31
were as follows:

<TABLE>
<CAPTION>
                                                   2000                                       1999
                                      ----------------------------------       -----------------------------------
                                                                 (In thousands)

                                       Deferred             Deferred            Deferred              Deferred
                                      Tax Assets         Tax Liabilities       Tax Assets          Tax Liabilities
                                      ----------         ---------------       ----------          ---------------
<S>                                 <C>                  <C>                   <C>                 <C>
Property, equipment and leases          $206,239                $631,506         $122,515                 $561,338
Employee benefits                        192,641                  81,131          181,472                   47,191
Self-insurance accruals                  210,870                      --          192,858                       --
Other                                    206,683                  96,563          206,017                   95,133
                                        --------                --------         --------                 --------
                                        $816,433                $809,200         $702,862                 $703,662
                                        ========                ========         ========                 ========
</TABLE>

NOTE 7: EMPLOYEE BENEFIT PLANS

PENSION PLANS. FedEx Express sponsors defined benefit pension plans covering a
majority of employees. The largest plan covers certain U.S. employees age 21 and
over, with at least one year of service and provides benefits based on average
earnings and years of service. Plan funding is actuarially determined, and is
also subject to certain tax law limitations. International defined benefit
pension plans provide benefits primarily based on final earnings and years of
service and are funded in accordance with local laws and income tax regulations.
Plan assets consist primarily of marketable equity securities and fixed income
instruments. During 1999, benefits provided under certain of FedEx Express's
pension plans were enhanced, principally in connection with the ratification on
February 4,


                                      F-13

<PAGE>

1999, of a collective bargaining agreement between FedEx Express and the Fedex
Pilots Association ("FPA"). These benefit enhancements are reflected in the
funded status of the plans at May 31, 2000 and 1999, but did not materially
affect pension cost in either year.

POSTRETIREMENT HEALTH CARE PLANS. FedEx Express offers medical and dental
coverage to eligible U.S. retirees and their eligible dependents. Vision
coverage is provided for retirees, but not their dependents. Substantially all
U.S. employees become eligible for these benefits at age 55 and older, if they
have permanent, continuous service with FedEx Express of at least 10 years after
attainment of age 45 if hired prior to January 1, 1988, or at least 20 years
after attainment of age 35 if hired on or after January 1, 1988. Life insurance
benefits are provided only to retirees of the former Tiger International, Inc.
who retired prior to acquisition.


                                      F-14

<PAGE>

The following table provides a reconciliation of the changes in the pension and
postretirement health care plans' benefit obligations and fair value of assets
over the two-year period ended May 31, 2000 and a statement of the funded status
as of May 31, 2000 and 1999:

<TABLE>
<CAPTION>
                                                                                             Postretirement
                                                          Pension Plans                     Health Care Plans
                                                    ----------------------------       ---------------------------
                                                       2000              1999             2000             1999
                                                    ----------        ----------       ----------       ----------
                                                                           (In thousands)
<S>                                                 <C>               <C>              <C>              <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year             $4,104,887        $3,848,485       $  237,572       $  209,488
  Service cost                                         321,360           316,448           25,404           22,815
  Interest cost                                        314,723           269,521           18,841           16,375
  Amendments and benefit enhancements                    9,316           116,291               --            1,681
  Actuarial gain                                      (478,637)         (403,740)         (28,765)          (7,204)
  Plan participant contributions                            --                --            1,077              627
  Foreign currency exchange rate changes                  (618)            3,111               --               --
  Benefits paid                                        (56,882)          (45,229)          (8,860)          (6,210)
                                                   -----------        ----------       ----------       ----------
Benefit obligation at end of year                  $ 4,214,149        $4,104,887       $  245,269       $  237,572
                                                   ===========        ==========       ==========       ==========


CHANGE IN PLAN ASSETS
Fair value of plan assets at
     beginning of year                             $ 4,461,228        $3,989,131       $       --       $       --
  Actual return on plan assets                         576,881           399,932               --               --
  Foreign currency exchange rate changes                (5,192)           (1,283)              --               --
  Company contributions                                214,327           118,677            7,783            5,583
  Plan participant contributions                            --                --            1,077              627
  Benefits paid                                        (56,882)          (45,229)          (8,860)          (6,210)
                                                   -----------        ----------        ---------        ---------
Fair value of plan assets at end of year           $ 5,190,362        $4,461,228        $      --        $      --
                                                   ===========        ==========        =========        =========

FUNDED STATUS OF THE PLANS                         $   976,213        $  356,341        $(245,269)       $(237,572)
  Unrecognized actuarial gain                       (1,000,308)         (446,258)         (46,071)         (17,306)
  Unrecognized prior service cost                       97,256           107,940            1,557            1,681
  Unrecognized transition amount                         2,119             2,201               --               --
                                                   -----------        ----------        ---------        ---------
Prepaid (accrued) benefit cost                     $    75,280        $   20,224        $(289,783)       $(253,197)
                                                   ===========        ==========        =========        =========

AMOUNTS RECOGNIZED IN THE
BALANCE SHEET AT MAY 31:
  Prepaid benefit cost                             $   172,381        $   87,198        $      --        $      --
  Accrued benefit liability                            (97,101)          (66,974)        (289,783)        (253,197)
  Minimum pension liability                            (12,662)          (86,000)              --               --
  Intangible asset                                      12,662            86,000               --               --
                                                   -----------        ----------        ---------        ---------
Prepaid (accrued) benefit cost                     $    75,280        $   20,224        $(289,783)       $(253,197)
                                                   ===========        ==========        =========        =========

</TABLE>


                                      F-15

<PAGE>

Net periodic benefit cost for the years ended May 31 was as follows:

<TABLE>
<CAPTION>
                                                                                              Postretirement
                                                     Pension Plans                           Health Care Plans
                                          -----------------------------------        ----------------------------------
                                            2000         1999         1998             2000         1999         1998
                                          ---------    ---------    ---------        -------       -------      -------
                                                                         (In thousands)
<S>                                       <C>          <C>          <C>              <C>           <C>          <C>
Service cost                              $ 321,360    $ 316,448    $ 241,151        $25,404       $22,815      $17,758
Interest cost                               314,723      269,521      229,947         18,841        16,375       14,359
Expected return on plan assets             (492,894)    (436,735)    (345,795)            --            --           --
Net amortization and deferral                11,541        3,008        1,085            124            --         (414)
                                          ---------    ---------    ---------        -------       -------      -------
                                          $ 154,730    $ 152,242    $ 126,388        $44,369       $39,190      $31,703
                                          =========    =========    =========        =======       =======      =======

WEIGHTED-AVERAGE ACTUARIAL ASSUMPTIONS

                                              2000         1999         1998            2000         1999         1998
                                             ------       ------       ------          ------       ------       ------

Discount rate                                 8.5%         7.5%         7.0%           8.3%         7.3%          7.2%
Rate of increase in future
  compensation levels                         5.0          4.6          4.6              -            -             -
Expected long-term rate of
  return on assets                           10.9         10.9         10.5              -            -             -
</TABLE>

The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for the pension plans with accumulated benefit obligations in
excess of plan assets were $134,000,000, $94,800,000 and $2,700,000,
respectively, as of May 31, 2000, and $169,600,000, $147,900,000 and $2,600,000,
respectively, as of May 31, 1999. The minimum pension liability and
corresponding intangible asset recognized in the balance sheet at May 31, 1999
relate principally to the collective bargaining agreement between FedEx Express
and the FPA. During 2000, FedEx Express obtained the necessary approvals to fund
a substantial portion of these benefits in the qualified pension plan, and the
minimum liability and related intangible asset have been reduced accordingly.

FedEx Express's future medical benefit costs were estimated to increase at an
annual rate of 8.5% during 2001, decreasing to an annual growth rate of 6.3% in
2006 and thereafter. Future dental benefit costs were estimated to increase at
an annual rate of 7.5% during 2001, decreasing to an annual growth rate of 6.3%
in 2006 and thereafter. FedEx Express's cost is capped at 150% of the 1993
employer cost and, therefore, will not be subject to medical and dental trends
after the capped cost is attained, projected to be in 2001. A 1% change in these
annual trend rates would not have a significant impact on the accumulated
postretirement benefit obligation of FedEx Express at May 31, 2000, or 2000
benefit expense. Claims are paid as incurred.

PROFIT SHARING PLANS. The profit sharing plan covers a majority of U.S.
employees age 21 and over, with at least one year of service with FedEx Express
as of the contribution date. The plan provides for discretionary employer
contributions, which are determined annually by the Board of Directors. Profit
sharing expense was $108,700,000 in 2000, $119,300,000 in 1999 and $105,700,000
in 1998. Included in these expense amounts are cash distributions made directly
to employees of $33,800,000, $37,100,000 and $43,100,000 in 2000, 1999 and 1998,
respectively.


                                       F-16

<PAGE>

NOTE 8: BUSINESS SEGMENT INFORMATION

FedEx Express is in a single line of business and operates in one business
segment - the worldwide express transportation and distribution of goods and
documents.

The following table presents FedEx Express's revenue by service type and
geographic information for the years ended or as of May 31:

<TABLE>
<CAPTION>

REVENUE BY SERVICE TYPE
                                              2000                  1999                  1998
                                           -----------           -----------           -----------
                                                               (In thousands)
<S>                                        <C>                   <C>                   <C>
Package:
       U.S. overnight                      $ 7,537,844           $ 7,185,462           $ 6,810,211
       U.S. deferred                         2,428,002             2,271,151             2,179,188
       International priority                3,551,593             3,018,828             2,731,140
Freight:
       U.S.                                    566,259               439,855               337,098
       International                           492,280               530,759               597,861
Other                                          492,360               533,222               599,343
                                           -----------           -----------           -----------
                                           $15,068,338           $13,979,277           $13,254,841
                                           ===========           ===========           ===========

GEOGRAPHIC INFORMATION (1)

Revenues:
       U.S.                                $10,712,195           $10,170,950           $ 9,665,342
       International                         4,356,143             3,808,327             3,589,499
                                           -----------           -----------           -----------
                                           $15,068,338           $13,979,277           $13,254,841
                                           ===========           ===========           ===========

Long-lived assets:
       U.S.                                $ 5,987,059           $ 5,640,776
       International                         1,011,683               996,784
                                           -----------           -----------
                                           $ 6,998,742           $ 6,637,560
                                           ===========           ===========
</TABLE>

(1) International revenue includes shipments that either originate in or are
destined to locations outside the United States. Long-lived assets include
property and equipment, goodwill and other long-term assets. Flight equipment is
allocated between geographic areas based on usage.


                                      F-17

<PAGE>

NOTE 9: SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for interest expense and income taxes for the years ended May 31 was
as follows:

<TABLE>
<CAPTION>
                                                             2000             1999             1998
                                                           --------         --------         --------
                                                                               (In thousands)
<S>                                                        <C>              <C>              <C>
Interest (net of capitalized interest)                     $ 83,159         $ 94,235         $111,417
Income taxes                                                266,766          313,515          316,718
</TABLE>

Noncash investing and financing activities for the years ended May 31 were as
follows:

<TABLE>
<CAPTION>
                                                             2000             1999             1998
                                                           --------         --------         --------
                                                                         (In thousands)
<S>                                                        <C>              <C>              <C>
Fair value of assets surrendered under exchange
       agreements (with two airlines)                      $19,450          $48,248          $90,428
Fair value of assets acquired under
       exchange agreements                                  28,018           34,580           78,148
                                                           -------          -------          -------
Fair value of assets surrendered (under) over
       fair value of assets acquired                       $(8,568)         $13,668          $12,280
                                                           =======          =======          =======
</TABLE>

NOTE 10: COMMITMENTS AND CONTINGENCIES

FedEx Express's annual purchase commitments under various contracts as of May
31, 2000, were as follows (in thousands):


<TABLE>
<CAPTION>
                                                 Aircraft-
                             Aircraft            Related (1)          Other (2)           Total
                             --------            ----------           ---------         --------
<S>                          <C>                  <C>                 <C>               <C>
2001                         $222,500              $427,600           $301,600          $951,700
2002                          252,000               381,300             18,300           651,600
2003                          441,700               456,900              7,600           906,200
2004                          235,000               446,500              7,600           689,100
2005                          165,400               452,200              7,600           625,200
</TABLE>

(1) Primarily aircraft modifications, rotables, spare parts and spare engines.
(2) Primarily facilities, vehicles, computer and other equipment.

At May 31, 2000, FedEx Express was committed to purchase 28 MD11s, 13 DC10s (in
addition to those discussed in the following paragraph) and 75 Ayres ALM 200s to
be delivered through 2007. Deposits and progress payments of $7,100,000 have
been made toward these purchases.

FedEx Express has agreements with two airlines to acquire 53 DC10 aircraft (49
of which had been received as of May 31, 2000), spare parts, aircraft engines
and other equipment, and maintenance services in exchange for a combination of
aircraft engine noise reduction kits and cash. Delivery of these aircraft began
in 1997 and will continue through 2001. Additionally, these airlines may
exercise put options through December 31, 2003, requiring FedEx Express to
purchase up to 11 additional DC10s along with additional aircraft engines and
equipment.

In April 2000, put options were exercised by an airline requiring FedEx Express
to purchase six DC10s (in addition to those discussed in the preceding
paragraph) for a total purchase price of $26,400,000. Delivery of the aircraft
is expected to be completed by April 2001.

In January 1999, put options were exercised by an airline requiring FedEx
Express to purchase six


                                      F-18

<PAGE>

DC10s (in addition to those discussed above) for a total purchase price of
$21,150,000. Delivery of five of the aircraft was completed by August 1999,
and the commitment to purchase the sixth aircraft has been cancelled.

FedEx Corporation, FedEx Express's parent, has entered into jet fuel hedging
contracts on behalf of FedEx Express, which are designed to limit its
exposure to fluctuations in jet fuel prices. Under these jet fuel hedging
contracts, FedEx Corporation makes (or receives) payments based on the
difference between a fixed price and the market price of jet fuel, as
determined by an index of spot market prices representing various geographic
regions. The difference is recorded as an increase or decrease in fuel
expense. Under jet fuel hedging contracts, FedEx Express received $18,512,000
in 2000 and made payments of $28,764,000 in 1998. There was no jet fuel
hedging activity in 1999. As of May 31, 2000, jet fuel hedging contracts in
place to fix the price of jet fuel cover a total notional volume of
352,822,000 gallons or approximately one-third of the estimated usage in
2001. Based on current market prices, the fair value of these jet fuel
hedging contracts, which have no carrying value, was an asset of
approximately $51,060,000 at May 31, 2000. There were no such jet fuel
hedging contracts in place at May 31, 1999.

NOTE 11: LEGAL PROCEEDINGS

FedEx Express is subject to legal proceedings and claims that arise in the
ordinary course of its business. In the opinion of management, the aggregate
liability, if any, with respect to these actions will not materially
adversely affect FedEx Express's financial position or results of operations.

NOTE 12: OTHER EVENTS

In 2000, FedEx Express recorded nonoperating gains of approximately
$11,000,000 from the sale of securities and approximately $12,000,000 from
the insurance settlement for a leased MD11 destroyed in October 1999.

To avoid service interruptions related to a threatened strike by the FPA in
November 1998, FedEx Express and its parent company, FedEx Corporation,
implemented strike contingency plans including entering into agreements for
additional third-party air and ground transportation and establishing special
financing arrangements. Subsequently, a five-year collective bargaining
agreement was ratified by the FPA membership in February 1999 and became
effective May 31, 1999. Costs associated with these contingency plans were
approximately $91,000,000. Of these costs, approximately $81,000,000,
primarily the cost of contracts for supplemental airlift and ground
transportation, was included in operating expenses. The remaining $10,000,000
was included in nonoperating expenses and represents the costs associated
with obtaining additional short-term financing capabilities.

In 1998, FedEx Express realized a net gain of $17,000,000 from the insurance
settlement and the release from certain related liabilities on a leased MD11
aircraft destroyed in an accident in July 1997. The gain was recorded in
operating and nonoperating income in substantially equal amounts.


                                      F-19

<PAGE>

NOTE 13: SUMMARY OF QUARTERLY OPERATING RESULTS (Unaudited)

<TABLE>
<CAPTION>
                                        First           Second             Third           Fourth
                                       Quarter          Quarter           Quarter          Quarter
                                      ----------       ----------        ----------       ----------
                                                             (In thousands)
<S>                                   <C>              <C>               <C>              <C>
2000
----
Revenues                              $3,586,806       $3,736,027        $3,757,833       $3,987,672
Operating income                         208,943          211,216           143,394          336,057
Income before income taxes               188,770          195,909           131,387          327,481
Net income                               114,206          118,525            79,489          198,126

1999 (1)
--------
Revenues                              $3,417,183       $3,482,236        $3,430,708       $3,649,150
Operating income                         219,072          250,939            95,274          306,191
Income before income taxes               192,682          228,313            65,244          284,461
Net income                               112,719          133,563            43,030          169,254
</TABLE>

(1) Third quarter 1999 results included approximately $91,000,000 of expenses
($54,100,000 net of tax) for contingency plans made by FedEx Express related to
the threatened strike by the FPA.

NOTE 14: RELATED PARTY TRANSACTIONS

As of May 31, 2000 and 1999, FedEx Express had net amounts due from its parent,
FedEx Corporation, of $70,465,000 and $18,541,000, respectively. The 2000 amount
comprises an intercompany operating payable of $16,425,000 included in Current
Liabilities and $86,890,000 included in Other Assets. The 1999 amount comprises
an intercompany operating payable of $62,720,000 included in Current Liabilities
and $81,300,000 included in Other Assets. At May 31, 2000, FedEx Express also
has a net receivable due from a subsidiary of FedEx Corporation of $9,652,000
included in Current Assets. The long-term amounts primarily represent the net
activity from participation in FedEx Corporation's consolidated cash management
program.


                                      F-20

<PAGE>

                       REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                           ON FINANCIAL STATEMENT SCHEDULE



To Federal Express Corporation:

We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Federal Express Corporation included in
this Form 10-K, and have issued our report thereon dated June 27, 2000. Our
audit was made for the purpose of forming an opinion on those statements
taken as a whole. The financial statement schedule on page S-2 is the
responsibility of Federal Express Corporation's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. The
financial statement schedule has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.

                                                   /s/ ARTHUR ANDERSEN LLP
                                                   -----------------------
                                                     Arthur Andersen LLP


Memphis, Tennessee
June 27, 2000




                                       S-1

<PAGE>

                                                                    SCHEDULE II


                         FEDERAL EXPRESS CORPORATION
                      VALUATION AND QUALIFYING ACCOUNTS
                      FOR THE YEARS ENDED MAY 31, 2000,
                         1999 AND 1998 (In thousands)

<TABLE>
<CAPTION>
                                                               ADDITIONS
                                                    -------------------------------
                                 BALANCE AT          CHARGED TO          CHARGED TO                                 BALANCE AT
                                  BEGINNING          COSTS AND             OTHER                                      END OF
DESCRIPTION                        OF YEAR            EXPENSES            ACCOUNTS           DEDUCTIONS                YEAR
-----------                     ------------        -------------    ---------------         -----------           -------------
<S>                             <C>                 <C>              <C>                     <C>                   <C>
Accounts Receivable
Allowances
----------
2000..........................     $45,432            $57,711               $9,706 (A)        $56,332 (B)             $56,517
                                   =======            =======               ======            =======                 =======

1999..........................     $43,245            $47,527               $    --           $45,340 (B)             $45,432
                                   =======            =======               =======           =======                 =======

1998..........................     $36,175            $59,616               $    --           $52,546 (B)             $43,245
                                   =======            =======               =======           =======                 =======


Reserve Related to
Merger of FedEx
Express and Caliber
-------------------
1999....................           $   411            $    --               $    --           $   411 (C)             $    --
                                   =======            =======               =======           =======                 =======

1998....................           $    --            $14,000               $    --           $13,589 (C)             $   411
                                   =======            =======               =======           =======                 =======
</TABLE>

(A) Reclassifications.
(B) Uncollectible accounts written off, net of recoveries.
(C) Amounts paid and charged to reserve.


                                       S-2

<PAGE>

                                         EXHIBIT INDEX

EXHIBIT
NUMBER                               DESCRIPTION OF EXHIBIT

3.1              Restated Certificate of Incorporation of FedEx Express,
                 as amended (Filed as Exhibit 3.1 to FedEx Express's FY98
                 Third Quarter Report on Form 10-Q, and incorporated herein by
                 reference.)

3.2              By-laws of FedEx Express (Filed as Exhibit 3.2 to FedEx
                 Express's FY93 Annual Report on Form 10-K, and incorporated
                 herein by reference.)

10.1             Consolidated and Restated Lease Agreement dated as of
                 August 1, 1979 between the Memphis-Shelby County Airport
                 Authority (the "Authority") and FedEx Express. (Refiled as
                 Exhibit 10.12 to FedEx Express's FY90 Annual Report on Form
                 10-K, and incorporated herein by reference.)

10.2             First Supplemental Lease Agreement dated as of April 1,
                 1981 between the Authority and FedEx Express. (Filed
                 as Exhibit 10.13 to FedEx Express's FY92 Annual Report
                 on Form  10-K, and incorporated herein by reference.)

10.3             Second Supplemental Lease Agreement dated as of May 1, 1982
                 between the Authority and FedEx Express. (Refiled as
                 Exhibit 10.14 to FedEx Express's FY93 Annual Report on Form
                 10-K, and incorporated herein by reference.)

10.4             Third Supplemental Lease Agreement dated November 1,
                 1982 between the Authority and FedEx Express. Filed as
                 Exhibit 28.22 to FedEx Express's FY93 Second Quarter Report
                 on Form 10-Q, and incorporated herein by reference.)

10.5             Fourth Supplemental Lease Agreement dated July 1, 1983
                 between the Authority and FedEx Express. (Filed as Exhibit
                 28.23 to FedEx Express's FY93 Second Quarter Report on Form
                 10-Q, and incorporated herein by reference.)

10.6             Fifth Supplemental Lease Agreement dated February 1, 1984
                 between the Authority and FedEx Express. (Filed as Exhibit
                 28.24 to FedEx Express's FY93 Second Quarter Report on
                 Form 10-Q, and incorporated herein by reference.)

10.7             Sixth Supplemental Lease Agreement dated April 1, 1984
                 between the Authority and FedEx Express. (Filed as Exhibit
                 28.25 to FedEx Express's FY93 Second Quarter Report on
                 Form 10-Q, and incorporated herein by reference.)

10.8             Seventh Supplemental Lease Agreement dated June 1, 1984 between
                 the Authority and FedEx Express. (Filed as Exhibit 28.26 to
                 FedEx Express's FY93 Second Quarter Report on Form 10-Q, and
                 incorporated herein by reference.)

10.9             Eighth Supplemental Lease Agreement dated July 1, 1988
                 between the Authority and FedEx Express. (Filed as Exhibit
                 28.27 to FedEx Express's FY93 Second Quarter Report on
                 Form 10-Q, and incorporated herein by reference.)


                                       E-1

<PAGE>

10.10            Ninth Supplemental Lease Agreement dated July 12, 1989
                 between the Authority and FedEx Express. (Filed as Exhibit
                 28.28 to FedEx Express's FY93 Second Quarter Report on
                 Form 10-Q, and incorporated herein by reference.)

10.11            Tenth Supplemental Lease Agreement dated October 1, 1991
                 between the Authority and FedEx Express. (Filed as Exhibit
                 28.29 to FedEx Express's FY93 Second Quarter Report on
                 Form 10-Q, and incorporated herein by reference.)

10.12            Eleventh Supplemental Lease Agreement dated as of July 1,
                 1994 between the Authority and FedEx Express. (Filed as
                 Exhibit 10.21 to FedEx Express's FY96 Annual Report on
                 Form 10-K, and incorporated herein by reference.)

10.13            Twelfth Supplemental Lease Agreement dated July 1, 1993
                 between the Authority and FedEx Express. (Filed as Exhibit
                 10.23 to FedEx Express's FY93 Annual Report on Form 10-K,
                 and incorporated herein by reference.)

10.14            Thirteenth Supplemental Lease Agreement dated as of June 1,
                 1995 between the Authority and FedEx Express. (Filed as
                 Exhibit 10.23 to FedEx Express's FY96 Annual Report on
                 Form 10-K, and incorporated herein by reference.)

10.15            Fourteenth Supplemental Lease  Agreement dated as of January
                 1, 1996 between the Authority and FedEx Express. (Filed as
                 Exhibit 10.24 to FedEx Express's FY96 Annual Report on
                 Form 10-K, and incorporated herein by reference.)

10.16            Fifteenth Supplemental Lease Agreement dated as of January
                 1, 1997 between the Authority and FedEx Express. (Filed as
                 Exhibit 10.1 to FedEx Express's FY97 Third Quarter Report
                 on Form 10-Q, and incorporated herein by reference.)

10.17            Sixteenth Supplemental Lease Agreement dated as of April 1,
                 1997 between the Authority and FedEx Express. (Filed as
                 Exhibit 10.28 to FedEx Express's FY97 Annual Report on
                 Form 10-K, and incorporated herein by reference.)

10.18            Seventeenth Supplemental Lease Agreement dated as of May 1,
                 1997 between the Authority and FedEx Express. (Filed as
                 Exhibit 10.29 to FedEx Express's FY97 Annual Report on
                 Form 10-K, and incorporated herein by reference.)

10.19            Eighteenth Supplemental Lease Agreement dated as of July 1,
                 1997 between the Authority and FedEx Express. (Filed as
                 Exhibit 10.2 to FedEx Express's FY98 First Quarter Report on
                 Form 10-Q, and incorporated herein by reference.)

10.20            Nineteenth Supplemental Lease Agreement dated as of September
                 1, 1998 between the Authority and FedEx Express. (Filed as
                 Exhibit 10.1 to FedEx Express's FY99 Second Quarter Report on
                 Form 10-Q, and incorporated herein by reference.)

10.21            Twentieth Supplemental Lease Agreement dated as of April 1,
                 2000 between the Authority and FedEx Express. (Filed as
                 Exhibit 10.21 to FedEx's FY2000 Annual Report on Form 10-K,
                 and incorporated herein by reference.)


                                       E-2

<PAGE>

10.22            Twenty-First Supplemental Lease Agreement dated as of May 15,
                 2000 between the Authority and FedEx Express. (Filed as
                 Exhibit 10.22 to FedEx's FY2000 Annual Report on Form 10-K,
                 and incorporated herein by reference.)

10.23            Second Special Facility Supplemental Lease Agreement
                 dated as of November 1, 1982 between the Authority and
                 FedEx Express. (Filed as Exhibit 10.26 to FedEx Express's
                 FY93 Annual Report on Form 10-K, and incorporated herein
                 by reference.)

10.24            Third Special Facility Supplemental Lease Agreement dated
                 as of December 1, 1984 between the Authority and FedEx
                 Express. (Refiled as Exhibit 10.25 to FedEx Express's
                 FY95 Annual Report on Form 10-K, and incorporated herein
                 by reference.)

10.25            Fourth Special Facility Supplemental Lease Agreement
                 dated as of July 1, 1992 between the Authority and FedEx
                 Express. (Filed as Exhibit 10.20 to FedEx Express's FY92
                 Annual Report on Form 10-K, and incorporated herein by
                 reference.)

10.26            Fifth Special Facility Supplemental Lease Agreement dated
                 as of July 1, 1997 between the Authority and FedEx
                 Express. (Filed as Exhibit 10.35 to FedEx Express's FY97
                 Annual Report on Form 10-K, and incorporated herein by
                 reference.)

10.27            Special Facility Lease Agreement dated as of July 1, 1993
                 between the Authority and FedEx Express. (Filed as
                 Exhibit 10.29 to FedEx Express's FY93 Annual Report on
                 Form 10-K, and incorporated herein by reference.)

10.28            Special Facility Ground Lease Agreement dated as of July
                 1, 1993 between the  Authority and FedEx Express. (Filed
                 as Exhibit 10.30 to FedEx Express's FY93 Annual Report on
                 Form 10-K, and incorporated herein by reference.)

10.29            Sales Agreement dated April 7, 1995 between FedEx Express and
                 American Airlines, Inc. for the purchase of MD11 aircraft.
                 Confidential treatment has been granted for confidential
                 commercial and financial information, pursuant to Rule 24b-2
                 under the Securities Exchange Act of 1934. (Filed as Exhibit
                 10.79 to FedEx Express's FY95 Annual Report on Form 10-K, and
                 incorporated herein by reference.)

10.30            Amendment No. 1, dated September 19, 1996, to Sales
                 Agreement dated April 7, 1995 between FedEx Express and
                 American Airlines, Inc. (Filed as Exhibit 10.93 to FedEx
                 Express's FY97 Annual Report on Form 10-K, and
                 incorporated herein by reference.)

10.31            Amendments dated March 19, 1998 and January 1999, amending the
                 Sales Agreement dated April 7, 1995, between American Airlines,
                 Inc. and FedEx Express. Confidential treatment has been granted
                 for confidential commercial and financial information, pursuant
                 to Rule 24b-2 under the Securities Exchange Act of 1934, as
                 amended. (Filed as Exhibits 10.1 and 10.2, to FedEx Express's
                 FY99 Third Quarter Report on Form 10-Q, and incorporated herein
                 by reference.)

10.32            Modification Services Agreement dated September 16, 1996
                 between McDonnell Douglas Corporation and FedEx Express.
                 Confidential treatment has been granted for confidential
                 commercial and financial information contained in this exhibit
                 pursuant to Rule 24b-2 under the Securities Exchange Act of
                 1934, as amended. (Filed as Exhibit 10.6 to FedEx Express's
                 FY97 Second Quarter Report on Form 10-Q, and incorporated
                 herein by reference.)


                                        E-3

<PAGE>

10.33            Letter Agreement No. 3 dated July 15, 1997, amending the
                 Modification Services Agreement dated September 16, 1996,
                 between McDonnell Douglas and FedEx Express. Confidential
                 treatment has been granted for confidential commercial and
                 financial information contained in this exhibit pursuant to
                 Rule 24b-2 under the Securities Exchange Act of 1934, as
                 amended. (Filed as Exhibit 10.1 to FedEx Express's FY98 First
                 Quarter Report on Form 10-Q, and incorporated herein by
                 reference.)

10.34            Letter Agreement Nos. 5-7 dated January 12, 1998, March 16,
                 1998 and February 26, 1998, respectively, amending the
                 Modification Services Agreement dated September 16, 1996,
                 between McDonnell Douglas Corporation and FedEx Express.
                 Confidential treatment has been granted for confidential
                 commercial and financial information, pursuant to Rule 24b-2
                 under the Securities Exchange Act of 1934, as amended. (Filed
                 as Exhibits 10.1 through 10.3 to FedEx Express's FY98 Second
                 Quarter Report on Form 10-Q, and incorporated herein by
                 reference.)

10.35            Letter Agreement No. 9 dated January 27, 1999, amending the
                 Modification Services Agreement dated September 16, 1996,
                 between McDonnell Douglas Corporation and FedEx Express.
                 Confidential treatment has been granted for confidential
                 commercial and financial information, pursuant to Rule 24b-2
                 under the Securities Exchange Act of 1934, as amended. (Filed
                 as Exhibit 10.3 to FedEx Express's FY99 Third Quarter Report on
                 Form 10-Q, and incorporated herein by reference.)

10.36            Amendment No. 1 dated January 22, 1999, amending the
                 Modification Services Agreement dated September 16, 1996,
                 between McDonnell Douglas Corporation and FedEx Express.
                 Confidential treatment has been granted for confidential
                 commercial and financial information, pursuant to Rule 24b-2
                 under the Securities Exchange Act of 1934, as amended. (Filed
                 as Exhibit 10.4 to FedEx Express's FY99 Third Quarter Report on
                 Form 10-Q, and incorporated herein by reference.)

10.37            Letter Agreement Nos. 8, 11, 13, 14 and 15 dated January 14,
                 2000, January 14, 2000, December 1, 1999, November 18, 1999 and
                 October 30, 1999, respectively, amending the Modification
                 Services Agreement dated September 16, 1996, between McDonnell
                 Douglas Corporation and FedEx Express. Confidential treatment
                 has been requested for confidential commercial and financial
                 information, pursuant to Rule 24b-2 under the Securities
                 Exchange Act of 1934, as amended. (Filed as Exhibit 10.37 to
                 FedEx's FY2000 Annual Report on Form 10-K, and incorporated
                 herein by reference.)

10.38            Credit Agreement dated January 15, 1998 among FedEx and The
                 First National Bank of Chicago, individually and as agent, and
                 certain lenders. (Filed as Exhibit 10.1 to FedEx's FY98 Third
                 Quarter Report on Form 10-Q, and incorporated herein by
                 reference.)

10.39            Amendment No. 1 dated as of December 10, 1998 to Credit
                 Agreement dated as of January 15, 1998 among FedEx, The
                 First National Bank of Chicago, as Agent, and certain
                 Lenders. (Filed as Exhibit 10.2 to FedEx's FY99 Second Quarter
                 Report on Form 10-Q, and incorporated herein by reference.)


                                        E-4

<PAGE>

10.40            Extension Agreement dated as of October 15, 1999 to
                 Credit Agreement dated as of January 15, 1998 among
                 FedEx, The First National Bank of Chicago, as Agent,
                 and certain Lenders. (Filed as Exhibit 10.1 to FedEx's
                 FY00 Second Quarter Report on Form 10-Q, and incorporated
                 herein by reference.)

                 FedEx Express is not filing any other instruments
                 evidencing any indebtedness because the total amount of
                 securities authorized under any single such instrument does
                 not exceed 10% of the total assets of FedEx Express and
                 its subsidiaries on a consolidated basis. Copies of such
                 instruments will be furnished to the Securities and Exchange
                 Commission upon request.

10.41            1987 Stock Incentive Plan and Form of Stock Option
                 Agreement pursuant to 1987 Stock Incentive Plan, as
                 amended. (Filed as an exhibit to FedEx Express's
                 Registration Statement No. 33-20138 on Form S-8 and
                 incorporated herein by reference.)

10.42            1989 Stock Incentive Plan and Form of Stock Option
                 Agreement pursuant to 1989 Stock Incentive Plan, as
                 amended. (Filed as Exhibit 10.26 to FedEx Express's  FY90
                 Annual Report on Form 10-K, and incorporated herein by
                 reference.)

10.43            1993 Stock Incentive Plan and Form of Stock Option Agreement
                 pursuant to 1993 Stock Incentive Plan, as amended. (1993 Stock
                 Incentive Plan was filed as Exhibit A to FedEx Express's FY93
                 Definitive Proxy Statement, Commission File No. 1-7806, and
                 incorporated herein by reference, and the form of stock option
                 agreement was filed as Exhibit 10.61 to FedEx Express's FY94
                 Annual Report on Form 10-K, and incorporated herein by
                 reference.)

10.44            Amendment to FedEx Express's 1980, 1983, 1984, 1987 and
                 1989 Stock Incentive Plans. (Filed as Exhibit 10.27 to
                 FedEx Express's FY90 Annual Report on Form 10-K, and
                 incorporated herein by reference.)

10.45            Amendment to FedEx Express's 1983, 1984, 1987, 1989 and
                 1993 Stock Incentive Plans. (Filed as Exhibit 10.63 to
                 FedEx Express's FY94 Annual Report on Form 10-K, and
                 incorporated herein by reference.)

10.46            1995 Stock Incentive Plan and Form of Stock Option Agreement
                 pursuant to 1995 Stock Incentive Plan. (1995 Stock Incentive
                 Plan was filed as Exhibit A to FedEx Express's FY95 Definitive
                 Proxy Statement, and incorporated herein by reference, and the
                 form of stock option agreement was filed as Exhibit 99.2 to
                 FedEx Express's Registration Statement No. 333-03443 on Form
                 S-8, and incorporated herein by reference.)

10.47            Amendment to FedEx Express's 1980, 1983, 1984, 1987,
                 1989, 1993 and 1995 Stock Incentive Plans. (Filed as
                 Exhibit 10.79 to FedEx Express's FY97 Annual Report on
                 Form 10-K, and incorporated herein by reference.)

10.48            1997 Stock Incentive Plan and Form of Stock Option Agreement
                 pursuant to 1997 Stock Incentive Plan. (1997 Stock Incentive
                 Plan was filed as Annex E to Joint Proxy Statement/Prospectus
                 contained in Amendment No. 1 to FedEx's Registration Statement
                 on Form S-4, Commission File No. 333-39483, and incorporated
                 herein by reference, and the form of stock option agreement was
                 filed as Exhibit 99.2 to FedEx Express's Registration Statement
                 No. 333-03443 on Form S-8, and incorporated herein by
                 reference.)


                                        E-5

<PAGE>

10.49            Amendment to 1997 Stock Incentive Plan. (Filed as Exhibit
                 A to FedEx's FY98 Definitive Proxy Statement, and incorporated
                 herein by reference.)

10.50            1999 Stock Incentive Plan and Form of Stock Option Agreement
                 pursuant to 1999 Stock Incentive Plan. (1999 Stock Incentive
                 Plan was filed as Exhibit 4.3 to FedEx's Registration Statement
                 No. 333-34934 on Form S-8, and incorporated herein by
                 reference, and the form of stock option agreement was filed as
                 Exhibit 4.4 to FedEx's Registration Statement No. 333-34934 on
                 Form S-8, and incorporated herein by reference.)

10.51            1986 Restricted Stock Plan and Form of Restricted Stock
                 Agreement pursuant to 1986 Restricted Stock Plan. (Filed
                 as Exhibit 10.28 to FedEx Express's FY90 Annual Report on
                 Form 10-K, and incorporated herein by reference.)

10.52            1995 Restricted Stock Plan and Form of Restricted Stock
                 Agreement pursuant to 1995 Restricted Stock Plan. (1995
                 Restricted Stock Plan filed as Exhibit B to FedEx Express's
                 FY95 Definitive Proxy Statement, and incorporated herein by
                 reference, and the Form of Restricted Stock Agreement was filed
                 as Exhibit 10.80 to FedEx Express's FY96 Annual Report on Form
                 10-K, and incorporated herein by reference.)

10.53            1997 Restricted Stock Plan and Form of Restricted Stock
                 Agreement pursuant to 1997 Restricted Stock Plan. (Filed
                 as Exhibit 10.82 to FedEx Express's FY97 Annual Report on
                 Form 10-K, and incorporated herein by reference.)

10.54            FedEx Express's Retirement Parity Pension Plan, as
                 amended and restated effective June 1, 1999. (Filed as
                 Exhibit 10.54 to FedEx's FY2000 Annual Report on Form 10-K,
                 and incorporated herein by reference.)

10.55            Description of Management Performance Bonus Plan. (Filed as
                 Exhibit 10.55 to FedEx's FY2000 Annual Report on Form 10-K,
                 and incorporated herein by reference.)

10.56            Description of Long-Term Performance Bonus Plan. (Filed as
                 Exhibit 10.56 to FedEx's FY2000 Annual Report on Form 10-K,
                 and incorporated herein by reference.)

10.57            FedEx's Retirement Plan for Outside Directors. (Filed as
                 Exhibit 10.85 to FedEx Express's FY97 Annual Report
                 on Form 10-K, and incorporated herein by reference.)

10.58            First Amendment to FedEx's Retirement Plan for Outside
                 Directors. (Filed as Exhibit 10.86 to FedEx Express's FY97
                 Annual Report on Form 10-K, and incorporated herein by
                 reference.)

10.59            FedEx's Amended and Restated Retirement Plan for Outside
                 Directors. (Filed as Exhibit 10.87 to FedEx Express's
                 FY97 Annual Report on Form 10-K, and incorporated herein
                 by reference.)

10.60            Form of Management Retention Agreement, dated May 2000,
                 entered into between FedEx and each of Frederick W. Smith,
                 Robert B. Carter, T. Michael Glenn, Alan B. Graf, Jr. and
                 Kenneth R. Masterson. (Filed as Exhibit 10.60 to FedEx's
                 FY2000 Annual Report on Form 10-K, and incorporated herein
                 by reference.)


                                        E-6

<PAGE>

10.61            Consulting Agreement, dated as of July 14, 2000, by and
                 between FedEx Corporation and Dennis H. Jones. (Filed as
                 Exhibit 10.61 to FedEx's FY2000 Annual Report on Form 10-K,
                 and incorporated herein by reference.)

*12              Statement re Computation of Ratio of Earnings to Fixed Charges.

*23              Consent of Independent Public Accountants.

*24              Powers of Attorney.

*27              Financial Data Schedule (electronic filing only).


----------------------

* Filed herewith.


                                        E-7