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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

|(Mark One)
|----------
|ý         
|OR        
|o         

Commission file number 1-7806

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FEDERAL EXPRESS CORPORATION(Exact Name of Registrant as Specified in its Charter)

|Delaware(State or Other Jurisdiction of Incorporation or Organization)           |  | 71-0427007(I.R.S. Employer Identification No.)
|-------------------------------------------------------------------------------- |  | ----------------------------------------------
|3610 Hacks Cross Road
Memphis, Tennessee(Address of Principal Executive Offices) |  | 38125(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  ý    No  o

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 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.    ý

Indicate
by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act.)
Yes  o    No  ý

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 $0.10 per share ("Common
Stock"). As of July 7, 2003, 1,000 shares of the Registrant's Common Stock were outstanding.

The Registrant meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this Form with
the reduced disclosure format permitted by General Instruction I(2).

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TABLE OF CONTENTS

PART I

|         |  |                                                                                                |  | Page
|-------- |  | ---------------------------------------------------------------------------------------------- |  | ----
|Item 1.  |  | Business                                                                                       |  | 4   
|Item 2.  |  | Properties                                                                                     |  | 13  
|Item 3.  |  | Legal Proceedings                                                                              |  | 17  
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                            |  | 17  
|PART II 
|Item 5.  |  | Market for Registrant's Common Equity and Related Stockholder Matters                          |  | 17  
|Item 6.  |  | Selected Financial Data                                                                        |  | 17  
|Item 7.  |  | Management's Discussion and Analysis of Results of Operations and Financial Condition          |  | 18  
|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  
|Item 9A. |  | Controls and Procedures                                                                        |  | 25  
|PART III
|Item 10. |  | Directors and Executive Officers of the Registrant                                             |  | 26  
|Item 11. |  | Executive Compensation                                                                         |  | 26  
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |  | 26  
|Item 13. |  | Certain Relationships and Related Transactions                                                 |  | 26  
|Item 14. |  | Principal Accountant Fees and Services                                                         |  | 26  
|PART IV 
|Item 15. |  | Exhibits, Financial Statement Schedules and Reports on Form 8-K                                |  | 28  

|FINANCIAL STATEMENTS                                                                                                 
|---------------------------------------------------------------------------------------------------------------------
|Report of Ernst & Young LLP, Independent Auditors                                                                    
|Report of Arthur Andersen LLP, Independent Public Accountants                                                        
|Consolidated Balance SheetsMay 31, 2003 and 2002                                                                    
|Consolidated Statements of IncomeYears ended May 31, 2003, 2002 and 2001                                            
|Consolidated Statements of Changes in Owner's Equity and Comprehensive IncomeYears ended
May 31, 2003, 2002 and 2001
|Consolidated Statements of Cash FlowsYears ended May 31, 2003, 2002 and 2001                                        
|Notes to Consolidated Financial Statements                                                                           

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|FINANCIAL STATEMENT SCHEDULE                                                                  
|----------------------------------------------------------------------------------------------
|Report of Ernst & Young LLP, Independent Auditors, on Financial Statement Schedule            
|Report of Arthur Andersen LLP, Independent Public Accountants, on Financial Statement Schedule
|Schedule IIValuation and Qualifying Accounts                                                 
|EXHIBITS                                                                                      
|Exhibit Index                                                                                 

3

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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 packages, documents and freight to 214 countries. FedEx Express is a wholly owned subsidiary of FedEx Corporation ("FedEx"), which was incorporated in Delaware on
October 2, 1997 to serve as the holding company parent of FedEx Express. We offer time-certain delivery within one to three business days, serving markets that comprise more than
90% of the world's gross domestic product through door-to-door, customs-cleared service, with a money-back guarantee. We provide our customers with late
on-call and regular pickup services, as well as convenient drop-off locations. Our extensive air route authorities and transportation infrastructure, combined with our
leading-edge information technologies, make us the world's largest express transportation company. We employ more than 134,000 employees and operate approximately 53,500
drop-off locations, 643 aircraft and 48,000 vehicles and trailers in our integrated global network.

FedEx
Corporate Services, Inc. ("FedEx Services"), a wholly owned subsidiary of FedEx, provides a convenient single point of access for many customer support functions, such as
customer service, sales and automation. Much of the sales, marketing and information technology support for FedEx Express and FedEx Ground Package System, Inc. ("FedEx Ground"), a wholly owned
subsidiary of FedEx, have been combined under FedEx Services to more effectively sell the entire portfolio of express, ground and e-commerce services. FedEx Services sells and markets the
full portfolio of services offered by us and other FedEx subsidiaries and provides customer-facing solutions that meet customer needs. 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.

Except
as otherwise specified, any reference to a year indicates our fiscal year ended May 31 of the year referenced.

Delivery Services



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

Domestic
shipments are backed by money-back guarantees and are used by customers primarily for shipment of time-sensitive documents and goods, including
high-value machines and machine parts, computer parts, software and consumer items. We handle virtually every shipment from origin to destination.

We
also offer express freight services to handle the needs of the time-definite freight market. We offer customers the option of one-, two- or
three-business day service backed by two money-back guarantees. Shipments must weigh 151 lbs. to 2,200 lbs., and be forkliftable, stackable, banded and

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shrinkwrapped.
FedEx 1DaySM Freight offers 10:30 a.m. delivery on the next business day in many areas of the continental United States, including Alaska. FedEx 2Day
Freight® offers noon delivery in two business days in all 50 states. FedEx 3Day® Freight offers 3:00 p.m. delivery within three business days in every state except
Alaska and Hawaii.



We offer various international package and document delivery services to 214 countries, as well as international freight services. These services include:
FedEx® International Next Flight, FedEx International First®, FedEx International Priority® ("IP"), FedEx International
Economy®, FedEx International Priority DirectDistribution®, FedEx International Priority Plus®, FedEx International MailService®, FedEx International
Priority® Freight, FedEx International Economy® Freight, FedEx International Express Freight®, FedEx International
Airport-to-AirportSM, and the FedEx ExpressclearSM Electronic Customs Clearance and FedEx International Broker Select® service feature
options. All services, except FedEx International Express Freight® and FedEx International Airport-to-AirportSM, are backed by our money-back
guarantee.

Our
super express freighter (Super X) routing offers next-business-day 10:30 a.m. express cargo service from Asia to the United States. The routing
features a non-stop flight from Osaka, Japan to Memphis, Tennessee, which has made later cutoff times and shorter transit times available to markets in the South Pacific and areas in
Western Japan. In addition, our customers enjoy later cutoff times and next-business-day service among 27 major Asian markets, because of our intra-Asian flights connecting
through our AsiaOne® hub in Subic Bay, Philippines. During 2003, we began utilizing recently awarded interim frequencies to Hong Kong, allowing us to offer even greater access to Asia from
the U.S. and Europe as well as within the Asia-Pacific region.

Responding
to growing demand for reduced transit times, later customer pickups and earlier deliveries in key global markets, we reconfigured our international express transportation
network during 2003. In one example of these service enhancements, we increased our capacity for heavyweight shipments between Asia and Europe. This change enables us to offer later cutoff times for
shipments to Western Europe and earlier flight arrivals to Paris, thereby providing more extensive connectivity through our EuroOne® network to various European destinations for Asian
shippers.

We
offer the most comprehensive international freight service in the industry, backed by a money-back guarantee, real-time tracking and advanced customs
clearance. Our international freight services may be used by customers to combine pickup, linehaul and delivery options to meet their daily business needs. The following FedEx International
Priority® Freight delivery options are available for worldwide shipments: Door to Airport (DTA); Airport to Airport (ATA); Airport to Door (ATD); and Door to Door (DTD). FedEx
International Priority® Freight and FedEx International Economy® Freight provide service to approximately 55 and 45 countries, respectively.

Through
an alliance with the Parcels and Logistics Holding Company of the La Poste Group ("La Poste"), one of the world's leading postal organizations, customers of Chronopost
International, a subsidiary of La Poste, have access to our air network. Additionally, our customers in France and Belgium have benefited from the enhanced ground infrastructure of La Poste.

We
provide our customers with a high level of service quality, as evidenced by our ISO 9001 certification for our global operations. ISO 9001 registration is required by thousands of
customers around the world. Our global certification solidifies our reputation as the quality leader in the transportation industry. ISO 9001 is currently the most rigorous international standard for
Quality Management and Assurance. ISO standards were developed by the International Organization for

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Standardization
in Geneva, Switzerland to promote and facilitate international trade. More than 150 countries, including European Union members, the United States and Japan, recognize ISO standards.

Detailed
information about all of our delivery services can be found below (see "ShippingManagement Solutions") and on the FedEx Web site at fedex.com. The information on the FedEx Web site, however, does
not form part of this Report.

E-Business Revolution

We have played a significant role in two business revolutions that have influenced the emergence of what is now known as e-commerce. First came the
automation revolution. At a time when the world was waking up to the power of computing technology, we led the charge to automate shipping for our customers. This technology has afforded key
advantages to both our customers and our transportation operations. We have been the leader in shipping automation since 1985, when we launched the first PC-based automated shipping
system, named FedEx PowerShip®. In 1994, the FedEx Web site,fedex.com, became the first Web site to offer online package tracking. Two
years later, in 1996, we launched FedEx® Ship Manager@fedex.com, the first shipping application for express packages on the Internet. Today, approximately 70% of our shipments are
automated.

The
second revolution, the integration revolution, is now underway. We are enabling e-commerce by empowering businesses with integration and supply chain capabilities that
give them added efficiency improvements, supply chain cost reductions, and the ability to provide better customer service. These solutions include our FedEx® Ship Manager solution suite,
FedEx NetReturn® and FedEx InsightSM, a revolutionary Web-based application that offers visibility of current status on inbound, outbound and third-party payor
shipments. During 2003 FedEx Services and Motorola began introducing FedEx® PowerPad, a Microsoft Windows-Powered Pocket PC designed to enhance customer service by providing our couriers
with online, near real-time, wireless access to the FedEx network.

Reflecting
our emphasis on e-commerce and information technology, during 2003 FedEx Chief Information Officer, Robert B. Carter, receivedCIO
Magazine's"CIO 20/20 Vision Award," and FedEx received the magazine's CIO-100 award. In 2002,eWeekmagazine ranked
FedEx No. 2 in its annual FastTrack 500 list of leading e-business innovators. In June 2003,Wiredmagazine ranked FedEx
No. 12 on "The Wired 40," an index of 40 companies that are "reshaping the global economy." The top-40 list recognizes companies that demonstrate five business attributes critical
to success in today's high-tech, borderless world: innovation, intelligent use of new tools, strategic vision, global reach and networked communication.

Shipping-Management Solutions

Our comprehensive e-shipping strategy is driven by our desire for customer satisfaction. Through FedEx Services, we strive to build solutions that
will solve our customers' business problems with simplicity, convenience, speed and reliability. The focal point of our strategy is the award-winning FedEx Web site, along with our integration
solutions.

Atfedex.com, our customers ship packages, determine international documentation requirements, track package status, pay invoices and
more. During 2002, we launched MyFedEx.com, a customer portal that goes beyond simple tracking and tracing capabilities to offer personalized services for registered users. In 2003, we unveiled the
first carrier-provided, online duty and tax estimator, available through FedEx® Global Trade
Manager. FedEx has extended the reach of thefedex.comWeb site to be accessible from most types of hand-held devices, making it faster and
easier for U.S. customers to access real-time package status tracking information and to identify the nearest drop-off locations. This service is available through most
Web-enabled devices, including mobile telephones, personal digital assistants and two-way pagers.

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For
the third consecutive year,fedex.comwas honored with the Best Transportation Web Site award, as well as Standard of Excellence
honors, at the Web Marketing Association's WebAwards held during 2003. FedEx received the Best Transportation Web Site award for FedEx InsightSM (www.fedex.com/insight) and the Standard of
Excellence award for FedEx® Global Trade Manager in the international Web site category. FedEx® Global Trade
Manager was also recognized byComputerworldmagazine during 2002 as one of the ten most innovative information technology projects.

Our
integration solutions include FedEx® Ship Manager API and Server, FedEx NetReturn API and FedEx NetReturn®. We design our e-commerce
tools and solutions so they are easily integrated into our customers' applications, as well as into third-party software being developed by leading e-procurement, systems integration and
enterprise resource planning companies. This is increasingly important, given the growing customer trend toward sophisticated multi-carrier shipping platforms.

The
FedEx® Ship Manager suite of solutions offers a wide range of options to help our customers manage their shipping and associated processes. At their core, these solutions
all offer time-saving shipment processing and printing capabilities, address books, reporting and tracking. The following summarizes the shipping-management solutions offered for use with
FedEx Express:



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Marketing

The FedEx brand name is a symbol for high-quality service, reliability and speed. FedEx is one of the most widely recognized brands in the world.
Special emphasis is placed on promoting and protecting the FedEx brand, one of our most important assets. In addition to traditional print and broadcast advertising, we promote the FedEx brand through
corporate sponsorships and special events. For example, FedEx is the "Official Worldwide Delivery Service Sponsor" of the National Football League. In addition, FedEx sponsors:



From
time to time, FedEx also undertakes special projects that help to publicize FedEx's service, such as the delivery in April 2003 of two giant pandas from Beijing, China to
their new home at the Memphis Zoo. In addition to emphasizing FedEx's reputation for fast, reliable service to and from Asia through its extensive global transportation network, this mission
highlighted FedEx's ability to ship unusual items.

U.S. Postal Service Agreements

Under two agreements with the U.S. Postal Service that run through August 2008one for domestic air transportation of postal shipments, and the
other for placement of FedEx Drop Boxes at U.S. Post Offices:



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Pricing

We periodically publish list prices in our Service Guides for the majority of our services. In general, during 2003, U.S. shipping rates were based on the service
selected, destination zone, weight, size, any ancillary service charge and whether 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. We offer our customers discounts generally based on actual or potential average daily revenue
produced.

We
have a dynamic fuel surcharge for all U.S. domestic and U.S. outbound shipments and for shipments originating internationally, where legally and contractually possible. The surcharge
percentage is subject to monthly adjustment based on the spot price for jet fuel. For example, the fuel surcharge for June 2003 was based on the spot price for jet fuel published for
April 2003. Changes to our fuel surcharge, when calculated according to the spot price for jet fuel and FedEx Express trigger points, are applied effective from the first Monday of the month.
These trigger points may change from time to time, but information on the fuel surcharge for each month is available atfedex.comtwo weeks before the
surcharge is applicable.

Operations

Our global transportation and distribution services are provided through an extensive worldwide network consisting of numerous aviation and ground transportation
operating rights and authorities, 643 aircraft, approximately 48,000 vehicles and trailers, sorting facilities, FedEx World Service Centers, FedEx Drop Boxes, FedEx ShipSites and FedEx Authorized
ShipCenters, as well as sophisticated package tracking, billing and communications systems.

Our
primary sorting facility, located in Memphis, serves as the center of our multiple hub-and-spoke system. A second national hub is located in Indianapolis. In
addition to these national hubs, we operate 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, 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
our worldwide network, we operate city stations and employ 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, we operate 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, corporate or industrial parks and outside U.S. Post Offices. We have 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 our direct
presence less economical, Global Service Participants have been selected to complete deliveries and to pick up packages.

We
are beginning to equip our couriers with the new FedEx® PowerPad to provide wireless access to the FedEx network. FedEx® PowerPad, which uses Bluetooth
wireless technology, enhances and accelerates the package information available to customers by enabling couriers to wirelessly send and

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receive
near real-time information and updates from any location. Every time a package is scanned, the FedEx® PowerPad immediately uploads information into FedEx
COSMOS®, our advanced package tracking and tracing system. FedEx COSMOS® provides proof-of-delivery information, an electronically reproduced airbill
for the customer and information regarding the location of a package within our system. For international shipments, we have developed FedEx ExpressclearSM, 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 2003, we purchased aviation fuel from various suppliers under contracts that 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.

The
following table sets forth our costs for aviation fuel and its percentage of total operating expenses for the last five fiscal years:

Fiscal Year

Total Cost
(in millions)

Percentage of Total
Operating Expenses2003

$
1,058

6.8
%2002


852

5.92001


872

5.92000


724

5.11999


468

3.6


In 2002, we implemented a dynamic fuel surcharge, which applies to all shipments tendered within the United States, all U.S. export shipments and
shipments originating internationally, where legally and contractually possible. For a description of the dynamic fuel surcharge, see "Pricing." In past years, FedEx entered into jet fuel hedging
contracts, which were designed to limit our exposure to fluctuations in jet fuel prices. Under these contracts, FedEx made (or received) payments based on the difference between a specified price and
the market price of jet fuel, as determined by an index of spot market prices representing various geographic regions. The difference was recorded as an increase or decrease in fuel expense. FedEx
effectively closed its hedge positions during the fourth quarter of 2001 and did not enter into any jet fuel hedging contracts during 2002 or 2003. To date, our dynamic fuel surcharge has obviated the
need for jet fuel hedging contracts.

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

We
believe that, barring a substantial disruption in supplies of crude oil, our fuel purchase contracts will ensure the availability of an adequate supply of fuel for our needs for the
immediate future. 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,
however, could have a significant adverse effect on us.

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, reliability and innovative service offerings. Competitors include other package delivery
concerns, principally United Parcel Service, Inc.

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("UPS"),
DHL Worldwide Express, Airborne Express, passenger airlines offering express package services, regional express delivery concerns, airfreight forwarders and the U.S. Postal Service. Our
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.

We
currently hold certificates of authority to serve more foreign countries than any other United States all-cargo air carrier and our extensive, scheduled international
route system allows us to offer single-carrier service to many points not served by our principal all-cargo competitors. This international route system, combined with an integrated air
and ground network, enables us 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
our 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 we do.

Employees

We are headquartered in Memphis, Tennessee. David J. Bronczek is our President and Chief Executive Officer. As of May 31, 2003, we employed approximately
86,000 permanent full-time and 48,000 permanent part-time employees, of which approximately 19% are employed in the Memphis area. Employees of our international branches and
subsidiaries in the aggregate represent approximately 16% of all employees. We believe our relationship with our employees is excellent.

We
and our pilots, who are currently represented by the Air Line Pilots Association, International ("ALPA"), have been operating under a five-year collective bargaining
agreement since May 31, 1999. The agreement 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 these organizing attempts have not resulted in any certification of
a U.S. domestic collective bargaining representative (other than ALPA), we cannot predict the outcome of these labor activities or their effect, if any, on us or our employees.

Regulation

Air.Under the Federal Aviation Act of 1958, as amended, both the U.S. Department of Transportation
("DOT") and the Federal Aviation Administration ("FAA") exercise regulatory authority over us.

The
FAA's regulatory authority relates primarily to operational aspects of air transportation, including aircraft standards and maintenance, personnel and ground facilities, which may
from time to time affect our ability to operate our aircraft in the most efficient manner. We hold an air carrier certificate granted by the FAA pursuant to Part 119 of the federal aviation
regulations. This certificate is of unlimited duration and remains in effect so long as we maintain our standards of safety and meet the operational requirements of the regulations.

The
DOT's authority relates primarily to economic and security 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. We hold various certificates issued by the DOT, authorizing us to engage in U.S. and international air transportation of property and mail
on a worldwide basis. Our international authority permits us to carry cargo and mail from several points in our U.S. route system to numerous points throughout the world. The DOT regulates
international routes and practices and is

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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 our ability to operate our air network in the most efficient manner.

On
November 19, 2001, President Bush signed into law the Aviation and Transportation Security Act, which, among other things, transferred responsibility for aviation security from
the FAA to the new Transportation Security Administration ("TSA") within the DOT, and ultimately, the new Department of Homeland Security. The TSA has adopted and may in the future adopt
security-related regulations, including new requirements for cargo security, which could impact our air operations or otherwise increase our costs.

We
participate in the Civil Reserve Air Fleet ("CRAF") program. Under this program, the U.S. Department of Defense may requisition for military use certain of our wide-bodied
aircraft in the event of a declared need, including a national emergency. We are 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 our participation in the CRAF program, we are entitled to bid on peacetime military cargo charter business. We, together with
a consortium of other carriers, currently contract with the United States Government for charter flights.

Ground.The ground transportation performed by us is integral to our air transportation services. 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. We are registered in those states that require registration.

Like
other interstate motor carriers, we are 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 our
aircraft and ground transportation operations, we are subject to the Federal Communications Commission Act of 1934, as amended. Additionally, the Federal Communications Commission regulates and
licenses our activities pertaining to satellite communications.

Environmental.Pursuant to the Federal Aviation Act, the FAA, with the assistance of the U.S.
Environmental Protection Agency, is authorized to establish standards governing aircraft noise. Our present aircraft fleet is in compliance with current noise standards of the federal aviation
regulations. Our 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 our aircraft operations in some of the localities
where they apply but do not have a material effect on any of our significant markets. Congress's passage of the Airport Noise and Capacity Act of 1990 established a National Noise Policy, which
enabled us to plan for noise reduction and better respond to local noise constraints. Our international operations are also subject to noise regulations in certain of the countries in which we
operate.

We
are 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, we are subject to numerous regulations dealing with underground fuel storage tanks, hazardous waste

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handling,
vehicle and equipment emissions and the discharge of effluents from properties and equipment owned or operated by us. We have environmental management programs to ensure compliance with
these regulations.

Item 2.    Properties

Our principal owned and leased properties include our 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

Our operating aircraft fleet at May 31, 2003 consisted of the following:

|Description         |       | Owned |     | Leased |     | Total |     | Maximum Operational
Revenue Payload
(Pounds per Aircraft)(1)
|------------------- | ----- | ----- | --- | ------ | --- | ----- | --- | ------------------------------------------------------------
|Boeing MD11         |       | 8     |     | 34     |     | 42    |     | 155,800                                                     
|Boeing MD10-30(2)   |       | 3     |     | 2      |     | 5     |     | 128,900                                                     
|Boeing DC10-30      |       | 2     |     | 15     |     | 17    |     | 128,900                                                     
|Boeing MD10-10(2)   |       | 19    |     | 0      |     | 19    |     | 117,800                                                     
|Boeing DC10-10      |       | 44    |     | 4      |     | 48    | (3) | 117,800                                                     
|Airbus A300-600     |       | 7     |     | 36     |     | 43    |     | 91,000                                                      
|Airbus A310-200/300 |       | 35    |     | 16     |     | 51    | (4) | 69,800                                                      
|Boeing B727-200     |       | 81    |     | 13     |     | 94    |     | 43,100                                                      
|Boeing B727-100     |       | 28    |     | 0      |     | 28    | (5) | 31,100                                                      
|Fokker F27-500      |       | 22    |     | 0      |     | 22    |     | 12,500                                                      
|ATR 42-320          |       | 8     |     | 0      |     | 8     |     | 12,000                                                      
|Fokker F27-600      |       | 8     |     | 0      |     | 8     |     | 11,500                                                      
|Shorts 3-60         |       | 0     |     | 1      |     | 1     | (6) | 8,300                                                       
|Cessna 208B         |       | 247   |     | 0      |     | 247   |     | 3,400                                                       
|Cessna 208A         |       | 10    |     | 0      |     | 10    |     | 3,000                                                       
|                    |       |       |     |        |     |       |     |                                                             
|                    | Total |       | 522 |        | 121 |       | 643 |                                                             
|                    |       |       |     |        |     |       |     |                                                             

13

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

In
addition, we "wet lease" 47 smaller piston-engine and turbo-prop aircraft which feed packages to and from airports served by our 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. Our wet lease agreements are for terms not
exceeding one year and are generally cancelable upon 30 days' notice.

At
May 31, 2003, we operated worldwide approximately 48,000 ground transport vehicles, including pickup and delivery vans, larger trucks called container transport vehicles and
over-the-road tractors and trailers.

Aircraft Purchase Commitments

We are committed to purchase one A300, two A310s, ten A380s and 19 ATRs to be delivered through 2012. Deposits and progress payments of $27 million have
been made toward these purchases and other planned aircraft-related transactions.

The
Airbus A380 aircraft is a new high-capacity, long-range aircraft. We will take delivery of three of the ten aircraft in each of 2009, 2010 and 2011 and the
remaining one in 2012. We also hold options for ten additional Airbus A380 aircraft.

Also
see Note 13 of the accompanying audited financial statements for more information about our purchase commitments.

14

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Sorting and Handling Facilities

At May 31, 2003, we operated the following sorting and handling facilities:

|Location                  |  | Acres |  | Square
Feet |  | Sorting
Capacity
(per hour)(1) |  | Lessor                                                    |  | Lease
Expiration
Year
|------------------------- |  | ----- |  | ----------- |  | ------------------------------ |  | --------------------------------------------------------- |  | ---------------------
|National                  |  |       |  |             |  |                                |  |                                                           |  |                      
|Memphis, Tennessee        |  | 525   |  | 3,074,000   |  | 465,000                        |  | Memphis-Shelby County Airport Authority                   |  | 2012                 
|Indianapolis, Indiana     |  | 215   |  | 1,895,000   |  | 191,000                        |  | Indianapolis Airport Authority                            |  | 2016                 
|Regional                  |  |       |  |             |  |                                |  |                                                           |  |                      
|Fort Worth, Texas         |  | 168   |  | 977,000     |  | 76,000                         |  | Fort Worth Alliance Airport Authority                     |  | 2014                 
|Newark, New Jersey        |  | 64    |  | 595,000     |  | 154,000                        |  | Port Authority of New York and New Jersey                 |  | 2010                 
|Oakland, California       |  | 66    |  | 320,000     |  | 53,000                         |  | City of Oakland                                           |  | 2011                 
|Metropolitan              |  |       |  |             |  |                                |  |                                                           |  |                      
|Los Angeles, California   |  | 25    |  | 305,000     |  | 57,000                         |  | City of Los Angeles                                       |  | 2009                 
|Chicago, Illinois         |  | 55    |  | 419,000     |  | 52,000                         |  | City of Chicago                                           |  | 2018                 
|International             |  |       |  |             |  |                                |  |                                                           |  |                      
|Anchorage, Alaska(2)      |  | 42    |  | 258,000     |  | 17,000                         |  | Alaska Department of Transportation and Public Facilities |  | 2023                 
|Subic Bay, Philippines(3) |  | 18    |  | 316,000     |  | 22,000                         |  | Subic Bay Metropolitan Authority                          |  | 2007                 
|Paris, France(4)          |  | 87    |  | 861,000     |  | 48,000                         |  | Aeroports de Paris                                        |  | 2029                 

15

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Our facilities at the Memphis International Airport also include aircraft maintenance hangars, flight training and fuel facilities, administrative
offices and warehouse space. We lease these facilities from the Memphis-Shelby County Airport Authority (the "Authority") under several leases. The leases cover land, administrative and sorting
buildings, other facilities, ramps and certain related equipment. We have 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 us to maintain and insure the leased property and to pay all related taxes, assessments and other charges. The leases are subordinate to,
and our 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, we have 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. We also have a substantial presence at Chek Lap Kok Airport in Hong Kong, CKS International Airport in Taiwan, Dubai, United Arab Emirates, and
Frankfurt, Germany.

Administrative and Other Properties and Facilities

Our world headquarters are located in southeastern Shelby County, Tennessee. The headquarters campus, which comprises eight separate buildings with more than
1.1 million square feet of space, was designed to consolidate many administrative and training functions that had previously been spread throughout the Memphis metropolitan area. The office
campus brings together approximately 2,600 employees. We also have facilities housing administrative and technical operations on approximately 200 acres adjacent to the Memphis International Airport.
Of the eight buildings located on this site, four are subject to long-term leases and the other four are owned by us. We also lease approximately 50 facilities in the Memphis area for
administrative offices and warehouses.

We
lease state-of-the-art technology centers in Collierville, Tennessee, Irving, Texas and Colorado Springs, Colorado. These facilities house our
personnel and FedEx Services' personnel responsible for strategic software development and other functions that support FedEx's technology and e-commerce solutions.

We
own or lease 679 facilities for city station operations in the United States. In addition, 198 city stations are owned or leased throughout our 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. We believe that suitable alternative facilities are
available in each locale on satisfactory terms, if necessary.

As
of May 31, 2003, we owned or leased space for 296 FedEx World Service Centers in the United States and had approximately 40,500 Drop Boxes, including 5,000 Drop Boxes outside
U.S. Post Offices. We also operate stand-alone mini-centers located on leaseholds in parking lots adjacent to office buildings, shopping centers and office parks, of which 42 were in
service at May 31, 2003. As of May 31, 2003, we also had approximately 10,800 FedEx ShipSites and FedEx ShipCenters, which are drop-off locations situated within certain
retailers, such as OfficeMax or Kinkos. Internationally, we have approximately 2,000 drop-off locations, including 48 FedEx World Service Centers.

16

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Item 3.    Legal Proceedings

FedEx Express and its subsidiaries are subject to 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 actions will not materially adversely affect our financial position, results of operations or cash flows.

Item 4.    Submission of Matters to a Vote of Security Holders

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

PART II

Item 5.    Market for 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 permitted by General Instruction I(2)(a) of Form 10-K.

17

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Item 7.    Management's Discussion and Analysis of Results of Operations and Financial Condition

GENERAL

The following management's discussion and analysis, which describes the principal factors affecting the results of operations of FedEx Express, is abbreviated
pursuant to General Instruction I(2)(a) of Form 10-K. This discussion should be read in conjunction with the accompanying audited financial statements, which include additional
information about our significant accounting policies, practices and the transactions that underlie our financial results. For additional information, including a discussion of liquidity, capital
resources, critical accounting policies and outlook, see the Annual Report on Form 10-K for the fiscal year ended May 31, 2003 of our parent company, FedEx.

FedEx
Services provides the customer-facing sales, marketing and information technology functions of FedEx Express and our sister company FedEx Ground. The costs for these activities are
allocated based on metrics such as relative revenues and estimated services provided. These allocations materially approximate the cost of providing these functions. The line item "Intercompany
charges" on the financial summary below represents an allocation primarily of salaries, wages and benefits, depreciation and other costs for the sales, marketing and information technology functions
provided to us by FedEx Services. In addition, "Intercompany charges" also includes allocated charges from our parent for management fees related to services received for general corporate oversight,
executive officers and certain legal and finance functions. We believe the total amounts allocated reasonably reflect the cost of providing such services.

The
key factors that affect our operating results are the volume of shipments transported through our network, as measured by our average daily volume; the mix of services purchased by
our customers; the prices we obtain for our services, as measured by average revenue per package (yield); our ability to manage our cost structure for capital expenditures and operating expenses such
as salaries, wages and benefits, fuel and maintenance; and our ability to match operating costs to shifting volume levels.

Except
as otherwise specified, references to years indicate our fiscal year ended May 31, 2003 or ended May 31 of the year referenced and comparisons are to the prior year.

Seasonality of Business

Our express package and freight businesses are seasonal in nature. Historically, the U.S. express package business experiences an increase in volumes 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. Our first and third fiscal quarters, because they are
summer vacation and post winter-holiday seasons, have historically exhibited lower volumes relative to other periods.

The
transportation industry is affected directly by the state of the overall domestic and international economies. Seasonal fluctuations affect tonnage, revenues and earnings. Shipment
levels, operating costs and earnings can also be adversely affected by inclement weather.

New Accounting Pronouncements

A number of new accounting pronouncements were enacted during 2003, mostly in connection with attempts to improve the transparency of financial reporting. None of
these new pronouncements had a material effect on our financial position or results of operations during 2003. See Note 2 to the accompanying audited financial statements for discussion of
these recent accounting pronouncements.

18

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RESULTS OF OPERATIONS

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

|                    |                                     | 2003                        |                                     | 2002                               |       | Percent
Change
|------------------- | ----------------------------------- | --------------------------- | ----------------------------------- | ---------------------------------- | ----- | --------------
|Revenues:           |                                     |                             |                                     |                                    |       |               
|                    | Package:                            |                             |                                     |                                    |       |               
|                    |                                     | U.S. overnight box          |                                     | $                                  | 5,432 |               
|                    |                                     | U.S. overnight envelope     |                                     |                                    | 1,715 |               
|                    |                                     | U.S. deferred               |                                     |                                    | 2,510 |               
|                    |                                     |                             |                                     |                                    |       |               
|                    |                                     |                             | Total U.S. domestic package revenue |                                    |       | 9,657         
|                    |                                     | International Priority (IP) |                                     |                                    | 4,367 |               
|                    |                                     |                             |                                     |                                    |       |               
|                    |                                     |                             |                                     | Total package revenue              |       |               
|                    | Freight:                            |                             |                                     |                                    |       |               
|                    |                                     | U.S.                        |                                     |                                    | 1,564 |               
|                    |                                     | International               |                                     |                                    | 400   |               
|                    |                                     |                             |                                     |                                    |       |               
|                    |                                     |                             |                                     | Total freight revenue              |       |               
|                    | Other                               |                             |                                     | 363                                |       |               
|                    |                                     |                             |                                     |                                    |       |               
|                    |                                     |                             |                                     | Total revenues                     |       |               
|Operating expenses: |                                     |                             |                                     |                                    |       |               
|                    | Salaries and employee benefits      |                             |                                     | 6,855                              |       |               
|                    | Purchased transportation            |                             |                                     | 608                                |       |               
|                    | Rentals and landing fees            |                             |                                     | 1,548                              |       |               
|                    | Depreciation and amortization       |                             |                                     | 801                                |       |               
|                    | Fuel                                |                             |                                     | 1,231                              |       |               
|                    | Maintenance and repairs             |                             |                                     | 1,084                              |       |               
|                    | Airline stabilization compensation  |                             |                                     |                                   |       |               
|                    | Intercompany charges                |                             |                                     | 1,347                              |       |               
|                    | Other                               |                             |                                     | 2,091                              |       |               
|                    |                                     |                             |                                     |                                    |       |               
|                    |                                     |                             |                                     | Total operating expenses           |       |               
|                    |                                     |                             |                                     |                                    |       |               
|Operating income    |                                     | $                           | 786                                 |                                    | $     | 811           
|                    |                                     |                             |                                     |                                    |       |               
|Operating margin    |                                     |                             | 4.8                                 | %                                  |       | 5.3           
|Package statistics: |                                     |                             |                                     |                                    |       |               
|                    | Average daily package volume (ADV): |                             |                                     |                                    |       |               
|                    |                                     | U.S. overnight box          |                                     |                                    | 1,176 |               
|                    |                                     | U.S. overnight envelope     |                                     |                                    | 679   |               
|                    |                                     | U.S. deferred               |                                     |                                    | 897   |               
|                    |                                     |                             |                                     |                                    |       |               
|                    |                                     |                             |                                     | Total U.S. domestic ADV            |       |               
|                    |                                     | IP                          |                                     |                                    | 369   |               
|                    |                                     |                             |                                     |                                    |       |               
|                    |                                     |                             |                                     | Total ADV                          |       |               
|                    |                                     |                             |                                     |                                    |       |               
|                    | Revenue per package (yield):        |                             |                                     |                                    |       |               
|                    |                                     | U.S. overnight box          |                                     | $                                  | 18.18 |               
|                    |                                     | U.S. overnight envelope     |                                     |                                    | 9.95  |               
|                    |                                     | U.S. deferred               |                                     |                                    | 11.02 |               
|                    |                                     |                             |                                     | U.S. domestic composite            |       |               
|                    |                                     | IP                          |                                     |                                    | 46.59 |               
|                    |                                     |                             |                                     | Composite package yield            |       |               
|Freight statistics: |                                     |                             |                                     |                                    |       |               
|                    | Average daily freight pounds:       |                             |                                     |                                    |       |               
|                    |                                     | U.S.                        |                                     |                                    | 8,969 |               
|                    |                                     | International               |                                     |                                    | 2,174 |               
|                    |                                     |                             |                                     |                                    |       |               
|                    |                                     |                             |                                     | Total average daily freight pounds |       |               
|                    |                                     |                             |                                     |                                    |       |               
|                    | Revenue per pound (yield):          |                             |                                     |                                    |       |               
|                    |                                     | U.S.                        |                                     | $                                  | .69   |               
|                    |                                     | International               |                                     |                                    | .72   |               
|                    |                                     |                             | Composite freight yield             |                                    |       | .69           

19

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Revenues

Total revenues increased 7% in 2003, largely due to increased IP and U.S. freight revenues. Year-over-year revenue comparisons reflect the
impact in 2002 of the terrorist attacks on September 11, 2001, which adversely affected both U.S. outbound international shipments and U.S. domestic shipments, and the economic decline that
began in calendar 2001. Higher U.S. freight revenues from increased average daily pounds during 2003 also affected year-over-year revenue comparisons, as we benefited from a
full twelve months of operations and higher shipping levels under our transportation contract with the U.S. Postal Service ("USPS").

During
2003, total package revenue increased 5%, due to increases in IP volumes and yield. IP volume growth occurred predominantly in Asia and Europe, which experienced average daily
volume growth rates of 21% and 11%, respectively, during 2003. In the United States, package revenue increased 2% in 2003 due to higher yield and volumes in the U.S. deferred and U.S. overnight box
categories. Total average daily package volumes for 2003 were at levels experienced in 1998.

Yields
increased in 2003 in nearly all service categories and composite average weight per package was flat. The increase in U.S. domestic package yield during 2003 was due to higher
fuel surcharge revenue and average list price increases. For U.S. domestic shipments and U.S. outbound international shipments, an average list price increase of 3.5% became effective
January 6, 2003. IP yield improvements during 2003 were due to favorable exchange rate differences, increased fuel surcharge revenue and growth in higher-yielding lanes.

Fuel
surcharge revenue was higher in 2003 due to higher jet fuel prices and the introduction of a dynamic international fuel surcharge in September 2002. Our fuel surcharge is
based on the spot price for jet fuel. Using this index, the U.S. domestic fuel surcharge ranged between 2.0% and 5.5% during 2003 and between 0% and 3% from November 2001 through
May 2002. International fuel surcharges were as high as 6% during 2003.

Total
freight revenue for 2003 increased significantly due to higher U.S. freight volume and yield, reflecting the impact of the USPS transportation agreement, which began in
August 2001 and runs through August 2008. During 2003, we entered into a third addendum to the transportation agreement with the USPS, allowing us to continue carrying incremental pounds
of mail through May 29, 2004 at higher committed volumes than required under the original agreement.

Operating Income

During 2003, the 3% decrease in operating income and the decline in operating margin was attributable to increased employee benefit costs, higher maintenance
expenses and, to a lesser extent, the net impact of higher
fuel costs in an economic environment of sluggish U.S. domestic average daily package volumes. The decrease in operating income was also somewhat attributable to one fewer operating day during the
year. Operating results during 2003 were impacted by unusually inclement weather during the winter and spring, which decreased business shipping, reduced operational efficiency and increased certain
operating costs, such as for snow removal and de-icing.

Salaries,
wages and benefits were higher during 2003 due to wage rate increases and higher pension and healthcare costs. Also, the increase was partially the result of cost increases
related to the USPS contract. Incentive compensation provisions declined in 2003 based on below-plan performance.

20

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Fuel
consumption was higher in 2003, primarily due to an increase in aircraft usage as a result of incremental U.S. freight pounds transported under the USPS agreement and IP volume
growth. During 2003, fuel costs were higher, due to a 16% increase in the average price per gallon of aircraft fuel. Higher net fuel costs negatively affected operating income during 2003 by
$24 million, as fuel surcharge revenue increases were not sufficient to offset higher jet fuel prices.

Maintenance
expenses were higher during 2003, primarily due to the timing of scheduled maintenance events. Depreciation and amortization expense declined during 2003 reflecting a trend
of decreasing levels of capital spending, as well as changes in estimated useful lives and salvage values.

During
2003, other operating expenses also increased. In the prior year, reimbursements from the USPS for network expansion costs were reflected as credits to other operating expenses.
These reimbursements, however, had no effect on operating income, as they represented the recovery of incremental costs incurred. Partially offsetting operating costs during 2003 was a gain from the
insurance settlement on an aircraft destroyed in an accident in July 2002 that resulted in a net $8 million favorable impact on operating income. During 2002, other operating expenses
included $27 million from the favorable resolution of certain state tax matters.

Income Taxes

Our effective tax rate was 37.5% in 2003 and 37.0% in 2002. The 37.5% effective tax rate in 2003 was higher due to lower state taxes in 2002. The 2002 rate was
favorably impacted by the cessation of goodwill amortization and by several other factors, none of which were individually significant. The effective tax rate exceeds the statutory U.S. federal tax
rate primarily because of state income taxes.

For
2004, we expect the effective tax rate to be approximately 37.5%. The actual rate, however, will depend on a number of factors, including the amount and source of operating income.

Airline Stabilization Compensation

Operations in 2002 were significantly affected by the terrorist attacks on September 11, 2001. During 2002, we recognized a total of $119 million of
compensation under the Air Transportation Safety and System Stabilization Act (the "Act"), of which $101 million has been received as of May 31, 2003. The amounts recognized were for our
estimate of losses we incurred as a result of the mandatory grounding of our aircraft and for incremental losses incurred through December 31, 2001. All amounts recognized were reflected as
reduction of operating expense under the caption "Airline stabilization compensation."

In
the fourth quarter of 2003, the Department of Transportation ("DOT") asserted that we were overpaid by $31.6 million and has demanded repayment. We have filed requests for
administrative and judicial review of this determination. We believe that we have complied with all aspects of the Act, that it is probable we will ultimately collect the remaining $18 million
receivable and that we will not be required to pay any portion of the DOT's $31.6 million demand. We cannot be assured of the ultimate outcome; however, it is reasonably possible that a
material reduction to the $119 million of compensation we have previously recognized under the Act could occur.

Cost Savings Initiatives

On June 2, 2003, we announced that we will offer voluntary early retirement and severance programs during 2004 to continue resizing our U.S. organization
and improving profitability. The first program will offer voluntary early retirement incentives, with enhanced pension and postretirement healthcare benefits, to certain groups of employees who are
age 50 or older. The second program will offer voluntary severance incentives to eligible employees. Both programs are limited to eligible U.S. salaried staff employees and managers at FedEx Express.

Depending
on employee acceptance rates, the pretax charge for these programs is estimated to be $230 million to $290 million in 2004, with most of the charge to be incurred
in the first half of the year. Approximately one-third of the pretax charge will be cash. The remainder of the costs relate primarily to pension and postretirement healthcare liabilities.
The cost of these programs will be reflected as a separate component of operating expenses. The estimated savings from these programs are expected to be $100 million to $130 million in
2004, primarily in the second half of the year. Thus, the net cost of these programs in 2004 is expected to be $130 million to $160 million. In 2005 and beyond, the estimated annual
savings from these programs are expected to be $150 million to $190 million. The savings from these programs will be reflected primarily in lower ongoing salaries, wages and benefit
costs.

21

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Over
the past few years, we have taken many steps to bring our expense growth in line with revenue growth, while maintaining our industry-leading service levels. We have significantly
decreased capital expenditures by reducing aircraft orders, consolidating facilities and discontinuing low-value programs. The voluntary early retirement and severance programs are another
step in this ongoing process of reducing our cost structure in order to increase our competitiveness, meet the future needs of our employees and provide the expected financial returns for FedEx's
shareholders.

Outlook

We expect revenue to increase during 2004, in both the domestic and international markets. During 2004, we expect the U.S. economy to remain sluggish at least
through our first fiscal quarter, with year-over-year improvement expected to be evident in our second half results. We believe the fundamentals for domestic economic
acceleration in the U.S. economy are in place and, as a result, we expect to see improvements in both yields and volumes. Pension, healthcare and maintenance expenses are expected to continue to
increase at a faster rate than revenue growth.

On
June 2, 2003, we announced that we will offer voluntary early retirement and severance programs during 2004 to continue resizing our U.S. organization and improving
profitability. See "Cost Savings Initiatives" for further discussion of these programs.

While
the net cost of these programs is expected to negatively impact operating margin in 2004, we expect margins will begin to increase in 2005 due to these and other efforts. Our
expectation of improved performance is based upon continued aggressive cost management actions and a return to solid growth in our U.S. overnight box volumes related to anticipated improvements in the
economy. These cost management actions and improved volumes, along with a sharp focus on productivity, are expected to produce improved operational efficiency as volume growth is absorbed with minimal
increases in operating costs.

22

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FORWARD-LOOKING STATEMENTS

Certain statements in this report, including (but not limited to) those contained in "Outlook," "Airline Stabilization Compensation" and "Cost Savings
Initiatives" are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, cash flows,
plans, objectives, future performance and business of FedEx Express. Forward-looking statements include those preceded by, followed by or that include the words "may," "could," "would," "should,"
"believes," "expects," "anticipates," "plans," "estimates," "targets," "projects," "intends" or similar expressions. These forward-looking statements involve risks and uncertainties. Actual results
may differ materially from those contemplated (expressed or implied) by such forward-looking statements, because of, among other things, potential risks and uncertainties, such as:



23

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As
a result of these and other factors, no assurance can be given as to our future results and achievements. Accordingly, a forward-looking statement is neither a prediction nor a
guarantee of future events or circumstances and those future events or circumstances may not occur. You should not place undue reliance on the forward-looking statements, which speak only as of the
date of this report. We are under no obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or
otherwise.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

While we currently have market risk sensitive instruments related to interest rates, we have no significant exposure to changing interest rates on our
long-term debt because the interest rates are fixed. As disclosed in Note 5 to the accompanying audited financial statements, we have outstanding long-term debt
(exclusive of capital leases) of $650 million at May 31, 2003 and 2002. 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 $30 million as of May 31, 2003 and $33 million as of May 31, 2002. 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. Currently, derivative
instruments are not used to manage interest rate risk.

While
we are a global provider of transportation services, the substantial majority of our transactions are denominated in U.S. dollars. The distribution of our foreign currency
denominated transactions is such that currency declines in some areas of the world are often offset by currency gains of equal magnitude in other areas of the world. The principal foreign currency
exchange rate risks to which we are exposed are in the euro, British pound sterling, Canadian dollar and Japanese yen. Foreign currency fluctuations during 2003 did not have a material effect on our
results of operations. At May 31, 2003, the result of a uniform 10% strengthening in the value of the dollar relative to the currencies in which our transactions are denominated would result in
a decrease in operating income of approximately $38 million for 2004 (the comparable amount in the prior year was approximately $30 million). This calculation assumes that each exchange
rate would change in the same direction relative to the U.S. dollar.

In
practice, our experience is that exchange rates in the principal foreign markets where we have foreign currency denominated transactions tend to have offsetting fluctuations.
Therefore, the calculation above is not indicative of our actual experience in foreign currency transactions. 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. The 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.

We
have market risk for changes in the price of jet fuel; however, this risk is largely mitigated by revenue from our fuel surcharge. In 2002, we implemented a new index for calculating
our U.S. domestic fuel surcharge, which more closely links the fuel surcharge to prevailing market prices for jet fuel. In 2003, we implemented this methodology for determining a fuel surcharge on
international shipments as well. Therefore, a hypothetical 10% change in the price of fuel would not be expected to materially affect our earnings. However, our fuel surcharge has a lag that exists
before it is adjusted for changes in jet fuel prices and fuel prices can fluctuate within certain ranges before resulting in a change in our fuel surcharges. Therefore, our operating income may be
affected should the spot price of jet fuel suddenly change by a significant amount or change by amounts that do not result in a change in our fuel surcharges.

We
do not purchase or hold any derivative financial instruments for trading purposes.

24

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Item 8.    Financial Statements and Supplementary Data

The following financial statements are filed with this Report:

Page
NumberReport of Ernst & Young LLP, Independent Auditors

F-1Report of Arthur Andersen LLP, Independent Public Accountants

F-2Consolidated Balance SheetsMay 31, 2003 and 2002

F-3Consolidated Statements of IncomeYears ended May 31, 2003, 2002 and 2001

F-5Consolidated Statements of Changes in Owner's Equity and Comprehensive IncomeYears ended
May 31, 2003, 2002 and 2001

F-6Consolidated Statements of Cash FlowsYears ended May 31, 2003, 2002 and 2001

F-7Notes to Consolidated Financial Statements

F-8


Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

FedEx Express engaged the services of Ernst & Young LLP as its independent auditors to replace Arthur Andersen LLP, effective April 12, 2002. For
additional information, see FedEx Express's Current Report on Form 8-K dated March 11, 2002 (as amended by the Form 8-K/A filed on April 12, 2002).

Item 9A.    Controls and Procedures

We maintain rigorous disclosure controls and procedures and internal control over financial reporting designed to ensure that our assets are adequately
safeguarded and the information required to be disclosed in our filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in
the Securities and Exchange Commission's rules and forms. We perform a quarterly assessment of these procedures and controls requiring certification by our principal executive and financial officers.

We
maintain appropriate policies, procedures and systems to support the timely and accurate reporting of our financial results. Our corporate forecasting and accounting close reporting
processes form the foundation to ensure that all relevant information about our financial results is available to management. In addition, FedEx maintains a thorough quarterly and annual public
financial reporting process that ensures all key members of management have direct and meaningful input into our financial disclosures.

FedEx
has controls that include the presence of an extensive internal audit function staffed by professional auditors that review the operational and financial effectiveness of our
internal control systems on a global basis. In addition, our control environment is evaluated on an ongoing basis by our financial management and annually by our external auditors in connection with
their audit of our financial statements.

25

---

While
we believe our disclosure controls and procedures and our internal control over financial reporting are adequate, no system of controls can prevent all error and all fraud. A
control system, no matter how well designed and operated, can provide only reasonable assurance that the objectives of the control system are met. Additionally, controls can be circumvented by the
individual acts of some persons or by collusion of two or more people.

Our
principal executive and financial officers have evaluated our disclosure controls and procedures and, based on such evaluation, have determined that such disclosure controls and
procedures were effective as of May 31, 2003 (the end of the period covered by this Annual Report on Form 10-K).

During
our fiscal quarter ended May 31, 2003, no change occurred in our internal control over financial reporting that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.

PART III

Item 10.    Directors and Executive Officers of the Registrant

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

Item 11.    Executive Compensation

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

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

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

Item 13.    Certain Relationships and Related Transactions

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

Item 14.    Principal Accountant Fees and Services

Of
the fees Ernst & Young LLP billed FedEx for services provided during 2003 and 2002, we estimate that the following amounts were for services related to FedEx Express. These
amounts represent the fees that Ernst & Young directly billed to FedEx Express, as well as that portion of Ernst & Young's fees that FedEx allocated to FedEx Express through management
fees.

2003

2002Audit fees

$
4,390,000

$
3,868,000Audit-related fees


293,000


90,000Tax fees


1,544,000


468,000All other fees


14,000


669,000Total

$
6,241,000

$
5,095,000




26

---



To
help ensure the independence of our independent auditor, the Audit Committee of the Board of Directors of FedEx has approved and adopted a Policy on Engagement of Independent Auditor,
which is available on FedEx's Web site athttp://fdx.client.shareholder.com/governance.cfm.

Pursuant
to the Policy on Engagement of Independent Auditor, the Audit Committee is directly responsible for the appointment, compensation and oversight of the independent auditor. The
Audit Committee preapproves all audit services and non-audit services to be provided by our independent auditor. The Audit Committee may delegate to one or more of its members the
authority to grant the required approvals, provided that any exercise of such authority is presented at the next Audit Committee meeting.

Each
audit or non-audit service that is approved by the Audit Committee (excluding tax services performed in the ordinary course of our business) will be reflected in a
written engagement letter or writing specifying the services to be performed and the cost of such services, which will be signed by either a member of the Audit Committee or by an officer of FedEx
authorized by the Audit Committee to sign on behalf of FedEx.

The
Audit Committee will not approve any prohibited non-audit service or any non-audit service that individually or in the aggregate may impair, in the Audit
Committee's opinion, the independence of our independent auditor.

In
addition, beginning on January 1, 2004, our independent auditor may not provide any services to FedEx officers or Audit Committee members, including financial counseling and
tax services.

27

---

PART IV

Item 15.    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-25 herein.

2.    Financial Statement Schedules

The following financial statement schedule is filed with this Report:

|                                                                                               |  | Page Number
|---------------------------------------------------------------------------------------------- |  | -----------
|Report of Ernst & Young LLP, Independent Auditors, on Financial Statement Schedule             |  | S-1.1      
|Report of Arthur Andersen LLP, Independent Public Accountants, on Financial Statement Schedule |  | S-1.2      
|Schedule IIValuation and Qualifying Accounts                                                  |  | S-2        

All
other financial statement schedules have been omitted because they are not applicable or the required information is included in the accompanying audited financial statements.

3.    Exhibits

Exhibits 3.1, 3.2, 10.1 through 10.49, 12, 23.1, 23.2, 24 and 99.1 through 99.4 are being filed or furnished 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 Current Reports on Form 8-K were filed during the fourth quarter of the fiscal year ended May 31, 2003.

28

---



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.

|                     |  | FEDERAL EXPRESS CORPORATION
|-------------------- |  | ---------------------------
|Dated: July 17, 2003 |  | By:                        

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.

|Signature                                    |  | Capacity                                                                        |  | Date         
|-------------------------------------------- |  | ------------------------------------------------------------------------------- |  | -------------
|                                             |  |                                                                                 |  |              
|/s/DAVID J. BRONCZEKDavid J. Bronczek        |  | President, Chief Executive Officer
and Director (Principal Executive Officer)   |  | July 17, 2003
|/s/TRACY G. SCHMIDTTracy G. Schmidt          |  | Senior Vice President and Chief Financial Officer (Principal Financial Officer) |  | July 17, 2003
|/s/MICHAEL W. HILLARDMichael W. Hillard      |  | Vice President and Controller (Principal Accounting Officer)                    |  | July 17, 2003
|/s/FREDERICK W. SMITH*Frederick W. Smith     |  | Chairman of the Board of Directors                                              |  | July 17, 2003
|/s/ROBERT B. CARTER*Robert B. Carter         |  | Director                                                                        |  | July 17, 2003
|/s/MICHAEL L. DUCKER*Michael L. Ducker       |  | Executive Vice President
International and Director                            |  | July 17, 2003
|/s/T. MICHAEL GLENN*T. Michael Glenn         |  | Director                                                                        |  | July 17, 2003
|/s/ALAN B. GRAF, JR.*Alan B. Graf, Jr.       |  | Director                                                                        |  | July 17, 2003
|/s/KENNETH R. MASTERSON*Kenneth R. Masterson |  | Director                                                                        |  | July 17, 2003

29

---

|Signature                                      |  | Capacity                                                             |  | Date         
|---------------------------------------------- |  | -------------------------------------------------------------------- |  | -------------
|                                               |  |                                                                      |  |              
|/s/DAVID F. REBHOLZ*David F. Rebholz           |  | Executive Vice PresidentOperations
and Systems Support and Director |  | July 17, 2003
|/s/CHRISTINE P. RICHARDS*Christine P. Richards |  | Director                                                             |  | July 17, 2003

|*By: |  | /s/MICHAEL W. HILLARDMichael W. Hillard Attorney-in-Fact |  |  |  | July 17, 2003
|---- |  | -------------------------------------------------------- |  |  |  | -------------

30

---



REPORT OF INDEPENDENT AUDITORS

The
Board of Directors and Stockholder
Federal Express Corporation

We
have audited the accompanying consolidated balance sheets of Federal Express Corporation as of May 31, 2003 and 2002, and the related consolidated statements of income, changes in owner's
equity and comprehensive income, and cash flows for each of the two years in the period ended May 31, 2003. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audits. The consolidated financial statements of Federal Express Corporation as of May 31, 2001 and for the
year then ended, were audited by other auditors who have ceased operations and whose report dated June 27, 2001, expressed an unqualified opinion on those statements.

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 2003 and 2002 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Federal Express Corporation as of
May 31, 2003 and 2002, and the consolidated results of its operations and its cash flows for each of the two years in the period ended May 31, 2003, in conformity with accounting
principles generally accepted in the United States.

As
discussed in Note 3 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, in 2002.



Memphis,
Tennessee
June 23, 2003

F-1

---

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, 2001 and 2000, 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, 2001. These financial statements are
the responsibility of the Company'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, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended May 31, 2001, in conformity with accounting principles
generally accepted in the United States.



Memphis,
Tennessee
June 27, 2001

This is a copy of the audit report previously issued by Arthur Andersen LLP in connection with Federal Express Corporation's filing on Form 10-K for the year
ended May 31, 2001. This audit report has not been reissued by Arthur Andersen LLP in connection with this filing on Form 10-K. See Exhibit 23.2 for further
discussion.

F-2

---



FEDERAL EXPRESS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)

ASSETS

|                                |                                                                 | May 31,                     
|------------------------------- | --------------------------------------------------------------- | ----------------------------
|
|CURRENT ASSETS                  |                                                                 |                             
|                                | Cash and cash equivalents                                       |                             
|                                | Receivables, less allowances of $122 and $107                   |                             
|                                | Spare parts, supplies and fuel, less allowances of $101 and $91 |                             
|                                | Deferred income taxes                                           |                             
|                                | Prepaid expenses and other                                      |                             
|                                | Due from parent company and other FedEx subsidiaries            |                             
|                                |                                                                 |                             
|                                |                                                                 | Total current assets        
|PROPERTY AND EQUIPMENT, AT COST |                                                                 |                             
|                                | Aircraft and related equipment                                  |                             
|                                | Package handling and ground support equipment and vehicles      |                             
|                                | Computer and electronic equipment                               |                             
|                                | Other                                                           |                             
|                                |                                                                 |                             
|                                |                                                                 |                             
|                                | Less accumulated depreciation and amortization                  |                             
|                                |                                                                 |                             
|                                |                                                                 | Net property and equipment  
|OTHER LONG-TERM ASSETS          |                                                                 |                             
|                                | Goodwill                                                        |                             
|                                | Due from parent company                                         |                             
|                                | Other assets                                                    |                             
|                                |                                                                 |                             
|                                |                                                                 | Total other long-term assets
|                                |                                                                 |                             
|                                |                                                                 | $                           
|                                |                                                                 |                             

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

F-3

---

FEDERAL EXPRESS CORPORATION  CONSOLIDATED BALANCE SHEETS  (IN MILLIONS, EXCEPT SHARE DATA)

LIABILITIES AND OWNER'S EQUITY

|                                     |                                                                               | May 31,                           |       
|------------------------------------ | ----------------------------------------------------------------------------- | --------------------------------- | ------
|
|CURRENT LIABILITIES                  |                                                                               |                                   |       
|                                     | Current portion of long-term debt                                             |                                   | $     
|                                     | Accrued salaries and employee benefits                                        |                                   |       
|                                     | Accounts payable                                                              |                                   |       
|                                     | Accrued expenses                                                              |                                   |       
|                                     | Due to parent company and other FedEx subsidiaries                            |                                   |       
|                                     |                                                                               |                                   |       
|                                     |                                                                               | Total current liabilities         |       
|LONG-TERM DEBT, LESS CURRENT PORTION |                                                                               |                                   | 1,009 
|OTHER LONG-TERM LIABILITIES          |                                                                               |                                   |       
|                                     | Deferred income taxes                                                         |                                   |       
|                                     | Pension, postretirement healthcare and other benefit obligations              |                                   |       
|                                     | Self-insurance accruals                                                       |                                   |       
|                                     | Deferred lease obligations                                                    |                                   |       
|                                     | Deferred gains, principally related to aircraft transactions                  |                                   |       
|                                     | Other                                                                         |                                   |       
|                                     |                                                                               |                                   |       
|                                     |                                                                               | Total other long-term liabilities |       
|COMMITMENTS AND CONTINGENCIES        |                                                                               |                                   |       
|OWNER'S EQUITY                       |                                                                               |                                   |       
|                                     | Common stock, $.10 par value; 1,000 shares authorized, issued and outstanding |                                   |       
|                                     | Additional paid-in capital                                                    |                                   |       
|                                     | Retained earnings                                                             |                                   |       
|                                     | Accumulated other comprehensive loss                                          |                                   |       
|                                     |                                                                               |                                   |       
|                                     |                                                                               | Total owner's equity              |       
|                                     |                                                                               |                                   |       
|                                     |                                                                               | $                                 | 10,963
|                                     |                                                                               |                                   |       

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

F-4

---



FEDERAL EXPRESS CORPORATION  CONSOLIDATED STATEMENTS OF INCOME  (IN MILLIONS)

|                           |                                    | Years ended May 31, |       
|-------------------------- | ---------------------------------- | ------------------- | ------
|
|REVENUES                   |                                    | $                   | 16,351
|OPERATING EXPENSES         |                                    |                     |       
|                           | Salaries and employee benefits     |                     |       
|                           | Purchased transportation           |                     |       
|                           | Rentals and landing fees           |                     |       
|                           | Depreciation and amortization      |                     |       
|                           | Fuel                               |                     |       
|                           | Maintenance and repairs            |                     |       
|                           | Airline stabilization compensation |                     |       
|                           | Intercompany charges, net          |                     |       
|                           | Other                              |                     |       
|                           |                                    |                     |       
|                           |                                    |                     | 15,565
|                           |                                    |                     |       
|OPERATING INCOME           |                                    |                     | 786   
|OTHER INCOME (EXPENSE)     |                                    |                     |       
|                           | Interest, net                      |                     |       
|                           | Other, net                         |                     |       
|                           |                                    |                     |       
|                           |                                    |                     | (97   
|                           |                                    |                     |       
|INCOME BEFORE INCOME TAXES |                                    |                     | 689   
|PROVISION FOR INCOME TAXES |                                    |                     | 258   
|                           |                                    |                     |       
|NET INCOME                 |                                    | $                   | 431   
|                           |                                    |                     |       

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

F-5

---

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

|                                                                           |                            | Common
Stock |   | Additional
Paid
Capital |   | Retained
Earnings |   | Accumulated
Other
Comprehensive
Loss |       | Total
Owner's
Equity |  
|-------------------------------------------------------------------------- | -------------------------- | ------------ | - | ----------------------- | - | ----------------- | - | ------------------------------------ | ----- | -------------------- | -
|BALANCE AT MAY 31, 2000                                                    |                            | $            |  |                         | $ | 895               |   | $                                    | 3,505 |                      | $
|Net income                                                                 |                            |              |  |                         |   |                  |   |                                      | 499   |                      |  
|Foreign currency translation adjustment, net of deferred tax benefit of $7 |                            |              |  |                         |   |                  |   |                                      |      |                      |  
|                                                                           |                            |              |   |                         |   |                   |   |                                      |       |                      |  
|                                                                           | Total comprehensive income |              |   |                         |   |                   |   |                                      |       |                      |  
|Assets transferred to form FedEx Services                                  |                            |              |  |                         |   | (597              | ) |                                      |      |                      |  
|                                                                           |                            |              |   |                         |   |                   |   |                                      |       |                      |  
|BALANCE AT MAY 31, 2001                                                    |                            |              |  |                         |   | 298               |   |                                      | 4,004 |                      |  
|Net income                                                                 |                            |              |  |                         |   |                  |   |                                      | 443   |                      |  
|Foreign currency translation adjustment, net of deferred taxes of $1       |                            |              |  |                         |   |                  |   |                                      |      |                      |  
|                                                                           |                            |              |   |                         |   |                   |   |                                      |       |                      |  
|                                                                           | Total comprehensive income |              |   |                         |   |                   |   |                                      |       |                      |  
|Net liabilities transferred from affiliate                                 |                            |              |  |                         |   |                  |   |                                      | (25   | )                    |  
|                                                                           |                            |              |   |                         |   |                   |   |                                      |       |                      |  
|BALANCE AT MAY 31, 2002                                                    |                            |              |  |                         |   | 298               |   |                                      | 4,422 |                      |  
|Net income                                                                 |                            |              |  |                         |   |                  |   |                                      | 431   |                      |  
|Foreign currency translation adjustment, net of deferred taxes of $8       |                            |              |  |                         |   |                  |   |                                      |      |                      |  
|Minimum pension liability adjustment, net of deferred tax benefit of $9    |                            |              |  |                         |   |                  |   |                                      |      |                      |  
|                                                                           |                            |              |   |                         |   |                   |   |                                      |       |                      |  
|                                                                           | Total comprehensive income |              |   |                         |   |                   |   |                                      |       |                      |  
|                                                                           |                            |              |   |                         |   |                   |   |                                      |       |                      |  
|BALANCE AT MAY 31, 2003                                                    |                            | $            |  |                         | $ | 298               |   | $                                    | 4,853 |                      | $
|                                                                           |                            |              |   |                         |   |                   |   |                                      |       |                      |  

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

F-6

---

FEDERAL EXPRESS CORPORATION  CONSOLIDATED STATEMENTS OF CASH FLOWS  (IN MILLIONS)

|                                                                              |                                                  | Years ended May 31,                                                     |      
|----------------------------------------------------------------------------- | ------------------------------------------------ | ----------------------------------------------------------------------- | -----
|
|OPERATING ACTIVITIES                                                          |                                                  |                                                                         |      
|Net income                                                                    |                                                  | $                                                                       | 431  
|Adjustments to reconcile net income to cash provided by operating activities: |                                                  |                                                                         |      
|                                                                              | Depreciation and amortization                    |                                                                         |      
|                                                                              | Provision for uncollectible accounts             |                                                                         |      
|                                                                              | Aircraft-related (recoveries) impairment charges |                                                                         |      
|                                                                              | Deferred income taxes and other noncash items    |                                                                         |      
|                                                                              | Changes in operating assets and liabilities:     |                                                                         |      
|                                                                              |                                                  | (Increase) decrease in receivables                                      |      
|                                                                              |                                                  | Decrease (increase) in other current assets                             |      
|                                                                              |                                                  | Increase (decrease) in accounts payable and other operating liabilities |      
|                                                                              |                                                  | Other, net                                                              |      
|                                                                              |                                                  |                                                                         |      
|Cash provided by operating activities                                         |                                                  |                                                                         | 1,394
|INVESTING ACTIVITIES                                                          |                                                  |                                                                         |      
|Capital expenditures                                                          |                                                  |                                                                         | (903 
|Proceeds from:                                                                |                                                  |                                                                         |      
|                                                                              | Sale-leaseback transactions                      |                                                                         |      
|                                                                              | Asset dispositions                               |                                                                         |      
|Business acquisitions, net of cash acquired                                   |                                                  |                                                                         |     
|Other, net                                                                    |                                                  |                                                                         |     
|                                                                              |                                                  |                                                                         |      
|Cash used in investing activities                                             |                                                  |                                                                         | (900 
|FINANCING ACTIVITIES                                                          |                                                  |                                                                         |      
|Principal payments on debt                                                    |                                                  |                                                                         | (9   
|Net payments to parent company                                                |                                                  |                                                                         | (464 
|Other, net                                                                    |                                                  |                                                                         | (2   
|                                                                              |                                                  |                                                                         |      
|Cash used in financing activities                                             |                                                  |                                                                         | (475 
|                                                                              |                                                  |                                                                         |      
|CASH AND CASH EQUIVALENTS                                                     |                                                  |                                                                         |      
|Increase in cash and cash equivalents                                         |                                                  |                                                                         | 19   
|Balance at beginning of year                                                  |                                                  |                                                                         | 118  
|                                                                              |                                                  |                                                                         |      
|Balance at end of year                                                        |                                                  | $                                                                       | 137  
|                                                                              |                                                  |                                                                         |      

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

F-7

---



FEDERAL EXPRESS CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1:    Description of Business and Summary of Significant Accounting Policies

Description of Business.Federal Express Corporation ("FedEx Express") is the world's largest express transportation company
and a wholly-owned subsidiary of FedEx Corporation ("FedEx").

Fiscal Years.Except as otherwise specified, references to years indicate our fiscal year ended May 31, 2003 or ended
May 31 of the year referenced.

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.

Credit Risk.We routinely grant credit to many of our customers for transportation services without collateral. The risk of
credit loss in our trade receivables is substantially mitigated by our credit evaluation process, short collection terms, and sales to a large number of customers, as well as the low revenue per
transaction for most of our transportation services. Allowances for potential credit losses are determined based on historical experience, current evaluation of the composition of accounts receivable
and expected credit trends. Historically, credit losses have been within management's expectations.

Revenue Recognition.Revenue is recognized upon delivery of shipments. For shipments in transit, revenue is recorded based on
the percentage of service completed at the balance sheet date. Estimates for future billing adjustments to revenue and accounts receivable are recognized at the time of shipment for certain discounts,
money-back service guarantees and billing corrections. Delivery costs are accrued as incurred.

Advertising.Advertising costs are expensed as incurred and are classified in other operating expenses. Advertising expenses
were $64 million, $62 million and $67 million in 2003, 2002 and 2001, respectively. In addition, FedEx Corporate Services, Inc. ("FedEx Services") performs marketing
functions for us and the related charges are allocated to us and are reflected on the line item "Intercompany charges" on the consolidated statements of income. We believe the total amounts allocated
reasonably reflect the costs of providing such services.

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 $2 million,
$3 million and $5 million in 2003, 2002 and 2001, 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. Allowances for obsolescence are provided, over the estimated useful life of the
related aircraft and engines, for spare parts expected to be on hand at the date the aircraft are retired from service, plus allowances for spare parts currently identified as excess or obsolete.
These allowances are based on management estimates, which are subject to change.

Property and Equipment.Expenditures for major additions, improvements, flight equipment modifications and certain equipment
overhaul costs are capitalized when such costs are determined to extend the useful life of the asset. Maintenance and repairs are charged to expense as incurred, except for certain

F-8

---

aircraft-related
costs, which are capitalized and amortized over their estimated service lives. 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. Gains and losses on sales of property used in operations are classified with depreciation and amortization.

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:

RangeAircraft and related equipment

5 to 25 yearsPackage handling and ground support equipment and vehicles

3 to 30 yearsComputer and electronic equipment

3 to 10 yearsOther

2 to 30 years


Substantially
all property and equipment have no material residual values. The majority of aircraft costs are depreciated on a straight-line basis over 15 to 18 years,
while vehicles are depreciated on a straight-line basis over five to ten years. We periodically evaluate the estimated service lives and residual values used to depreciate our aircraft and
other equipment. This evaluation may result in changes in the estimated lives and residual values. The changes did not materially affect depreciation expense in any period presented. Depreciation
expense, excluding gains and losses on sales of property and equipment used in operations, was $797 million, $796 million and $779 million in 2003, 2002 and 2001, respectively.
Depreciation and amortization expense includes amortization of assets under capital lease.

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

Capitalized Interest.Interest on funds used to finance the acquisition and modification of aircraft and construction of
certain facilities up to the date the asset is ready for its intended use is capitalized and included in the cost of the asset. Capitalized interest was $13 million in 2003 and
$23 million in both 2002 and 2001.

Impairment of Long-Lived Assets.Long-lived assets are reviewed for impairment when circumstances
indicate the carrying value of an asset may not be recoverable. For assets that are to be held and used, an impairment is recognized when the estimated undiscounted cash flows associated with the
asset or group of assets is less than their carrying value. If 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 fair value. Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried
at the lower of carrying value or estimated net realizable value.

Pension and Postretirement Medical Plans.These defined benefit plans are measured as of February 28 of each year
using actuarial techniques which reflect estimates for mortality, turnover and expected retirement. In addition, management makes assumptions concerning future salary increases, future expected
long-term returns on plan assets and future increases in healthcare costs. Generally, discount rates are established as of the measurement date using theoretical bond models that select
high-grade corporate bonds with maturities or coupons that correlate to the expected payouts of the applicable liabilities. Assets for funded plans are displayed at fair value at the measurement date
in the accompanying footnotes. Generally, we do not fund defined benefit plans when such funding provides no current tax deduction.

F-9

---

Goodwill.Goodwill is recognized for the excess of the purchase price over the fair value of tangible and identifiable
intangible net assets of businesses acquired. Prior to the adoption of Statement of Financial Accounting Standards No. ("SFAS") 142, "Goodwill and Other Intangible Assets" in June 2001,
goodwill was amortized over the estimated period of benefit on a straight-line basis over periods generally ranging from 15 to 40 years, and was reviewed for impairment under the
policy for other long-lived assets. Since adoption of SFAS 142 in June 2001, amortization of goodwill was discontinued and goodwill is reviewed at least annually for
impairment. Unless circumstances otherwise dictate, we perform our annual impairment testing in the fourth quarter. Accumulated amortization was $174 million at both May 31, 2003 and
2002.

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. The liability method is used to account for income taxes, which requires deferred taxes to be recorded at the statutory rate to
be in effect when the taxes are paid.

We
have not recognized deferred taxes for U.S. federal income taxes on foreign subsidiaries' earnings that are deemed to be permanently reinvested and any related taxes associated with
such earnings are not material. Pretax earnings of foreign operations for 2003 were approximately $145 million, which represent only a portion of total results associated with international
shipments.

Self-Insurance Accruals.We are primarily self-insured for workers' compensation, employee healthcare
and vehicle liabilities. Accruals are primarily based on the actuarially estimated, undiscounted cost of claims, which includes incurred-but-not-reported claims.
Current workers' compensation, employee healthcare claims and vehicle liabilities are included in accrued expenses.

Deferred Lease Obligations.While certain aircraft and facility leases contain fluctuating or escalating payments, the
related rent expense is recorded on a straight-line basis over the lease term. The deferred lease obligation is the cumulative excess of rent expense over rent payments.

Deferred Gains.Gains on the sale and leaseback of aircraft and other property and equipment are deferred and amortized
ratably over the life of the lease as a reduction of rent expense. Substantially all of these deferred gains were related to aircraft transactions.

Stock Compensation.We participate in the stock-based compensation plans of our parent, FedEx. Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and its related interpretations are applied by FedEx to measure expense for stock-based compensation plans.

Derivative Instruments.Effective June 1, 2001, we adopted SFAS 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended. SFAS 133 requires an entity to recognize all derivatives as either assets or liabilities in the balance sheet and to measure those instruments at fair value.
All jet fuel hedging contracts were entered into on our behalf by FedEx. Prior to adoption of SFAS 133, jet fuel hedging contracts were accounted for under SFAS 80, "Accounting for Futures
Contracts." Under SFAS 80, no asset or liability for the hedges was recorded and the income statement effect was recognized in fuel expense upon settlement of the contract. In the past, FedEx had jet
fuel hedging contracts that would have qualified under SFAS 133 as cash flow hedges. However, during 2001 all outstanding jet fuel hedging contracts were effectively closed by entering into
offsetting contracts. The net value of those contracts of $15 million ($9 million, net of tax) was recognized by FedEx as a deferred charge in the May 31, 2001 balance sheet.
Effective June 1, 2001, under the SFAS 133 transition rules, the deferred charge was reclassified by FedEx to be included as a component of its accumulated other comprehensive loss. This
entire charge was transferred to us and recognized in our fuel expense in 2002 as the related fuel was purchased. FedEx did not enter into any new jet fuel hedging contracts on our behalf during 2003
or 2002 and had no derivative instruments outstanding at May 31, 2003.

F-10

---

Foreign Currency Translation.Translation gains and losses of foreign operations that use local currencies as the functional
currency are accumulated and reported, net of applicable deferred income taxes, as a component of accumulated other comprehensive loss 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. Cumulative net foreign currency
translation losses in accumulated other comprehensive loss were $17 million, $47 million and $54 million at May 31, 2003, 2002 and 2001, respectively.

Reclassifications.Certain reclassifications have been made to prior year financial statements to conform to the current year
presentation.

Use of Estimates.The preparation of our consolidated financial statements requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses and the disclosure of contingent liabilities. Management makes its best estimate of the ultimate
outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting
rules for the estimate, which is typically in the period when new information becomes available to management. Areas where the nature of the estimate makes it reasonably possible that actual results
could materially differ from amounts estimated include: impairment assessments on long-lived assets (including goodwill); obsolescence of spare parts; income tax liabilities;
self-insurance accruals; airline stabilization compensation; employee retirement plan obligations; and contingent liabilities.

Note 2:    Recent Accounting Pronouncements

Variable Interest Entities.Effective February 1, 2003, we adopted Financial Accounting Standards Board ("FASB")
Interpretation No. ("FIN") 46, "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51."
FIN 46 requires a variable interest entity ("VIE") to be consolidated by the primary beneficiary of the entity under certain circumstances. FIN 46 is effective for all new VIEs created or acquired
after January 31, 2003. For VIEs created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after
June 15, 2003. The adoption of this interpretation did not have any effect on our financial position or results of operations. Our VIE disclosure is included in Note 12.

Guarantees and Indemnifications.Effective January 1, 2003, we adopted FIN 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." FIN 45 elaborates on the disclosures that must be made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees and indemnities. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value
of the obligation undertaken in issuing the guarantee. The adoption of this interpretation did not have any effect on our financial position or results of operations. Disclosure of our guarantees and
indemnifications is included in Note 11.

Asset Retirement Obligations, Impairment and Disposal of Long-Lived Assets and Accounting for Exit Costs.In 2003, we adopted
SFAS 143, "Accounting for Asset Retirement Obligations;" SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets;" and SFAS 146, "Accounting for
Costs Associated with Exit or Disposal Activities." The adoption of these statements did not have any effect on our financial position or results of operations.

F-11

---

Note 3:    Goodwill and Intangibles

Effective
June 1, 2001, we adopted SFAS 142, "Goodwill and Other Intangible Assets," which establishes new accounting and reporting requirements for goodwill and other
intangible assets. Under SFAS 142, all goodwill amortization ceased effective June 1, 2001 and goodwill was tested for impairment by comparing the fair value to the carrying value. Fair
value was determined using a discounted cash flow methodology. These impairment tests are required to be performed at adoption of SFAS 142 and at least annually thereafter. Based on our initial
impairment tests, no impairment charges were recognized in 2002. The carrying amount of goodwill during the year ended May 31, 2003 and at May 31, 2003 and 2002 was $340 million.

On
March 1, 2002, a subsidiary of FedEx acquired for cash certain assets of Fritz Companies, Inc. that provide essential customs clearance services exclusively for us in
three U.S. locations, at a cost of $36.5 million ($14 million of which was paid by us and recorded as goodwill.) Goodwill for tax purposes associated with this transaction will be
deductible over 15 years.

In
connection with adopting SFAS 142, we also reassessed the useful lives and the classification of our identifiable intangible assets other than goodwill and determined that they
were appropriate. The components of our amortizing intangible assets, included in other long-term assets on the accompanying balance sheets, were as follows (in millions):

|               |  | May 31, 2003 |    | May 31, 2002 |  
|-------------- |  | ------------ | -- | ------------ | -
|
|Contract based |  | $            | 73 |              | $

Amortization
expense for intangible assets other than goodwill was $5 million for 2003 and 2002. Estimated amortization expense is $5 million for each of the five
succeeding fiscal years.

Actual
results of operations for 2003, 2002 and 2001 and pro forma results of operations for 2001 had we applied the nonamortization provisions of SFAS 142 in that period were as
follows (in millions):

|                                       |  | Years ended May 31,
|-------------------------------------- |  | -------------------
|
|Reported net income                    |  | $                  
|Add: Goodwill amortization, net of tax |  |                    
|                                       |  |                    
|Adjusted net income                    |  | $                  
|                                       |  |                    

F-12

---

Note 4:    Selected Current Liabilities

The components of selected current liability captions were as follows (in millions):

May 31,2003

2002Accrued Salaries and Employee Benefits:Salaries

$
80

$
73Employee benefits


124


157Compensated absences


319


307$
523

$
537Accrued Expenses:Self-insurance accruals

$
285

$
261Taxes other than income taxes


237


215Other


223


242$
745

$
718


Note 5:    Long-Term Debt and Other Financing Arrangements

The components of our long-term debt were as follows (in millions):

May 31,2003

2002Senior debt, interest rate of 9.65%, due in 2013

$
299

$
299Bonds, interest rate of 7.60%, due in 2098


239


239Medium term notes, interest rates of 9.95% to 10.57%, due through 2007


44


44582


582Capital lease obligations


420


204Other debt, interest rates of 6.80% to 9.98%, due through 2017


65


711,067


857Less current portion


58


6$
1,009

$
851


Capital
lease obligations include certain special facility revenue bonds, which have been issued by municipalities primarily to finance the acquisition and construction of various
airport facilities and equipment. These bonds require interest payments at least annually with principal payments due at the end of the related lease agreements. In addition, during the fourth quarter
of 2003, we amended four leases for MD11 aircraft, which now commit us to firm purchase obligations for two of these aircraft during both 2005 and 2006. As a result, these amended leases are now
accounted for as capital leases ($216 million at May 31, 2003).

We
incur other commercial commitments in the normal course of business to support our operations. Letters of credit at May 31, 2003 were $310 million. These instruments are
generally required under certain U.S. domestic self-insurance programs and are used in the normal course of international operations. The underlying liabilities are reflected in the
balance sheet. Therefore, no additional liability is reflected for the letters of credit.

F-13

---

Scheduled
annual principal maturities of debt, exclusive of capital leases, for the five years subsequent to May 31, 2003, are as follows (in millions):

Amount2004

$
252005


52006


72007


262008





Long-term
debt, exclusive of capital leases, had carrying values of approximately $650 million at each of May 31, 2003 and 2002, compared with estimated fair
values of $831 million and $743 million at those respective dates. 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 6:    Lease Commitments

We utilize certain aircraft, land, facilities and equipment under capital and operating leases that expire at various dates through 2039. 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 (in millions):

May 31,2003

2002Aircraft

$
221

$
Package handling and ground support equipment and vehicles


207


189Other, principally facilities


135


135563


324Less accumulated amortization


267


237$
296

$
87


During
the fourth quarter of 2003, we amended four leases for MD11 aircraft, which now commit us to firm purchase obligations for two of these aircraft during both 2005 and 2006. As a
result, these amended leases are now accounted for as capital leases.

Rent
expense under operating leases for the years ended May 31 was as follows (in millions):

2003

2002

2001Minimum rentals

$
1,271

$
1,243

$
1,189Contingent rentals


107


132


92$
1,378

$
1,375

$
1,281


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

F-14

---

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, 2003 is as follows (in millions):

Capital
Leases

Operating
Leases2004

$
44

$
1,1872005


125


1,1342006


102


1,0742007


10


1,0432008


10


962Thereafter


237


7,854528

$
13,254Less amount representing interest


108Present value of net minimum lease payments

$
420


We
make 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, us.

Note 7:    Income Taxes

Our operations are included in the consolidated federal income tax return of FedEx. Our income tax provision 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 (in millions):

2003

2002

2001Current provision (credit):Domestic:Federal

$
(22
)
$
132

$
255State and local


10


22


38Foreign


38


38


3526


192


328Deferred provision (credit):Domestic:Federal


216


68


(37
)State and local


16


2


(3
)Foreign





(2
)

(1
)232


68


(41
)$
258

$
260

$
287


F-15

---

A
reconciliation of the statutory federal income tax rate to the effective income tax rate for the years ended May 31 was as follows:

2003

2002

2001Statutory U.S. income tax rate

35.0
%
35.0
%
35.0
%Increase resulting from:State and local income taxes, net of federal benefit

2.4

2.2

2.8Foreign operations

(0.3
)
0.2

(2.4
)Other, net

0.4

(0.4
)
1.1Effective tax rate

37.5
%
37.0
%
36.5
%


The
significant components of deferred tax assets and liabilities as of May 31 were as follows (in millions):

2003

2002Deferred
Tax Assets

Deferred
Tax Liabilities

Deferred
Tax Assets

Deferred
Tax LiabilitiesProperty, equipment and leases

$
301

$
742

$
266

$
668Employee benefits


233


42


241


52Self-insurance accruals


217





236


Other


214


330


182


105$
965

$
1,114

$
925

$
825


In
connection with an Internal Revenue Service ("IRS") audit for the tax years 1993 and 1994, the IRS proposed adjustments characterizing routine jet engine maintenance costs as capital
expenditures that must be recovered over seven years, rather than as expenses that are deducted immediately, as has been our practice. We filed an administrative protest of these adjustments and
engaged in discussions with the Appeals office of the IRS. After these discussions failed to result in a settlement, in 2001 we paid $70 million in tax and interest and filed suit in Federal
District Court for a complete refund of the amounts paid, plus interest. The trial was conducted in the U.S. District Court in Memphis and concluded on May 28, 2003. The Court has not indicated
when it might render its decision.

The
IRS has continued to assert its position in audits for the years 1995 through 1998 with respect to maintenance costs for jet engines and rotable aircraft parts. Based on these
audits, the total proposed deficiency for the 1995 to 1998 period, including tax and interest through May 31, 2003, was approximately $202 million (representing $107 million of
tax and $95 million of interest). In addition, we have continued to expense these types of maintenance costs subsequent to 1998. Previously, the IRS made similar attempts to require
capitalization of airframe maintenance costs. In December 2000, the IRS issued a revenue ruling which permitted current deductions for routine airframe maintenance costs. As a result, the IRS
conceded 100% of the airframe issue for 1993 to 1994 and we anticipate a similar result for all future years.

We
believe that our practice of expensing these types of maintenance costs is correct and consistent with industry practice and certain IRS rulings. We intend to vigorously contest the
adjustments and do not believe it is probable that we will be required to pay $202 million to the IRS. Additionally, we expect to fully recover the amounts previously paid in litigation.
Because the proposed adjustments relate solely to the timing of the income tax deduction for the above expenditures for federal income tax purposes, any adverse determination in this matter would not
have an impact on our total income tax expense. Accordingly, we have not recognized any provision for the tax portion of the proposed deficiency. The income statement consequences if we do not prevail
in the litigation on this matter would be for interest on the income taxes

F-16

---

that
would be payable upon assessment. The IRS has not assessed penalties on this matter. We do not expect any amounts that may ultimately be payable on this matter to be material to our financial
position, results of operations or cash flows.

Note 8:    Employee Benefit Plans

Pension Plans. A majority of our employees are covered by the FedEx Corporation Employees' Pension Plan, a defined
benefit pension plan sponsored by our parent, FedEx. The 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. Our employees make up in excess of 85% of the participants in this plan. For more information about this plan and the related accounting assumptions, refer to the financial statements of
FedEx included in its Form 10-K for the year ended May 31, 2003. Prior to 2001, we were the sponsor of a similar predecessor plan. Information regarding the funded status of
the FedEx plan was as follows (in millions):

May 31,2003

2002Projected benefit obligation

$
6,724

$
5,886Accumulated benefit obligation


5,665


4,791Fair value of plan assets


5,685


5,381


The
weighted average actuarial assumptions for the FedEx plan were as follows:

2003

2002

2001Discount rate

6.99
%
7.11
%
7.74
%Rate of increase in future compensation levels

3.15

3.25

4.00Expected long-term rate of return on assets

10.10
*
10.90

10.90


In
addition, we incurred a net periodic benefit cost of $161 million, $98 million and $39 million in 2003, 2002 and 2001, respectively, for our participation in the
FedEx Corporation Employees' Pension Plan. The increase in our 2003 expense is a result of a lower discount rate, a lower expected long-term rate of return and a reduction in the value of plan assets.
A significant increase is also expected for 2004. This expense is included in the salaries and employee benefits caption on the accompanying statements of income.

We
also sponsor or participate in nonqualified benefit plans covering certain of our U.S. employee groups and other pension plans covering certain of our international employees. The
nonqualified benefit plans are not funded because such funding provides no current tax benefit. The 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.

During
2003, we announced to our employees that the FedEx Corporation Employees' Pension Plan would be amended to add a cash balance feature, called the Portable Pension Account.
Eligible employees as of May 31, 2003 may make a one-time election to accrue future pension benefits under either the new cash balance formula or the traditional pension benefit
formula. This election is entirely optional. In either case, employees will retain all benefits previously accrued under the traditional pension benefit formula and will continue to receive the
benefit of future salary increases on benefits accrued as of May 31, 2003. Eligible employees hired after May 31, 2003 will participate in the Portable Pension Account.

Postretirement Healthcare Plans.We sponsor a plan offering medical, dental and vision coverage to eligible U.S. retirees and
their eligible dependents. U.S. employees become eligible for these benefits at age 55 and older, if they have permanent, continuous service 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.

F-17

---

The following table provides a reconciliation of the changes in the pension and postretirement healthcare plans' benefit obligations and fair value of assets over the
two-year period ended May 31, 2003 and a statement of the funded status as of May 31, 2003 and 2002 for the plans currently sponsored by us (in millions):

|                                                   |                                            | Pension Plans |      | Postretirement
Healthcare Plans |  
|-------------------------------------------------- | ------------------------------------------ | ------------- | ---- | ------------------------------- | -
|
|Change in Projected Benefit Obligation             |                                            |               |      |                                 |  
|Projected benefit obligation at beginning of year  |                                            | $             | 213  |                                 | $
|                                                   | Service cost                               |               |      | 11                              |  
|                                                   | Interest cost                              |               |      | 9                               |  
|                                                   | Actuarial loss (gain)                      |               |      | 7                               |  
|                                                   | Transfers of plan to parent                |               |      | (54                             | )
|                                                   | Benefits paid                              |               |      | (6                              | )
|                                                   | Amendments, benefit enhancements and other |               |      | 13                              |  
|                                                   |                                            |               |      |                                 |  
|Projected benefit obligation at end of year        |                                            | $             | 193  |                                 | $
|                                                   |                                            |               |      |                                 |  
|Accumulated Benefit Obligation                     |                                            | $             | 164  |                                 | $
|                                                   |                                            |               |      |                                 |  
|Change in Plan Assets                              |                                            |               |      |                                 |  
|Fair value of plan assets at beginning of year     |                                            | $             | 78   |                                 | $
|                                                   | Actual loss on plan assets                 |               |      | (14                             | )
|                                                   | Company contributions                      |               |      | 10                              |  
|                                                   | Benefits paid                              |               |      | (6                              | )
|                                                   | Other                                      |               |      | 10                              |  
|                                                   |                                            |               |      |                                 |  
|Fair value of plan assets at end of year           |                                            | $             | 78   |                                 | $
|                                                   |                                            |               |      |                                 |  
|Funded Status of the Plans                         |                                            | $             | (115 | )                               | $
|                                                   | Unrecognized actuarial loss (gain)         |               |      | 26                              |  
|                                                   | Unamortized prior service cost             |               |      | 4                               |  
|                                                   | Unrecognized transition amount             |               |      | 1                               |  
|                                                   |                                            |               |      |                                 |  
|Prepaid (accrued) benefit cost                     |                                            | $             | (84  | )                               | $
|                                                   |                                            |               |      |                                 |  
|Amounts Recognized in the Balance Sheet at May 31: |                                            |               |      |                                 |  
|                                                   | Prepaid benefit cost                       |               | $    | 11                              |  
|                                                   | Accrued benefit liability                  |               |      | (95                             | )
|                                                   | Minimum pension liability                  |               |      | (28                             | )
|                                                   | Accumulated other comprehensive income     |               |      | 25                              |  
|                                                   | Intangible asset                           |               |      | 3                               |  
|                                                   |                                            |               |      |                                 |  
|Prepaid (accrued) benefit cost                     |                                            | $             | (84  | )                               | $
|                                                   |                                            |               |      |                                 |  

F-18

---

The
projected benefit obligation ("PBO") is the actuarial present value of benefits attributable to employee service rendered to date, including the effects of estimated future pay
increases. The accumulated benefit obligation ("ABO") also reflects the actuarial present value of benefits attributable to employee service rendered
to date, but does not include the effects of estimated future pay increases. Therefore, the ABO as compared to plan assets is an indication of the assets currently available to fund vested and
nonvested benefits accrued through May 31.

The
Federal Express Corporation Retirement Parity Pension Plan was transferred to FedEx in March 2003. The portion of ABO representing our employees for 2002 was $46 million.

Net
periodic benefit cost for the three years ended May 31 was as follows (in millions) for the plans currently sponsored by us:

|                               |  | Pension Plans |    | Postretirement
Healthcare Plans |  
|------------------------------ |  | ------------- | -- | ------------------------------- | -
|
|Service cost                   |  | $             | 11 |                                 | $
|Interest cost                  |  |               | 9  |                                 |  
|Expected return on plan assets |  |               | (5 | )                               |  
|Net amortization and deferral  |  |               | (1 | )                               |  
|                               |  |               |    |                                 |  
|                               |  | $             | 14 |                                 | $
|                               |  |               |    |                                 |  

WEIGHTED-AVERAGE ACTUARIAL ASSUMPTIONS

|                                               |  | Pension Plans |   | Postretirement
Healthcare Plans |  
|---------------------------------------------- |  | ------------- | - | ------------------------------- | -
|
|Discount rate                                  |  | 5.09          | % | 5.91                            | %
|Rate of increase in future compensation levels |  | 3.01          |   | 3.15                            |  
|Expected long-term rate of return on assets    |  | 5.69          |   | 6.06                            |  

Future medical benefit costs are estimated to increase at an annual rate of 12.50% during 2004, decreasing to an annual growth rate of 5.25% in
2010 and thereafter. Future dental benefit costs are estimated to increase at an annual rate of 7.50% during 2004, decreasing to an annual growth rate of 5.25% in 2009 and thereafter. Our
postretirement healthcare cost is capped at 150% of the 1993 employer cost and, therefore, is not subject to medical and dental trends after the capped cost is attained. Therefore, a 1% change in
these annual trend rates would not have a significant impact on the accumulated postretirement benefit obligation at May 31, 2003, or 2003 benefit expense.

Defined Contribution Plans.Profit sharing and other defined contribution plans are in place covering a majority of U.S.
employees. Profit sharing plans provide for discretionary employer contributions, which are determined annually by our Board of Directors. Other plans provide matching funds based on employee
contributions to 401(k) plans. Expense under these plans was $32 million in 2003 and 2002 and $72 million in 2001. There were no cash distributions made directly to employees in 2003 and
2002, and there were $38 million in 2001.

Note 9:    Business Segment Information

We are in a single line of business and operate in one business segmentthe worldwide express transportation and distribution of goods and documents.

F-19

---

The
following table presents revenue by service type and geographic information for the years ended or as of May 31 (in millions):

REVENUE BY SERVICE TYPE

|                          |          | 2003                    |                                | 2002                  |        | 2001  
|------------------------- | -------- | ----------------------- | ------------------------------ | --------------------- | ------ | ------
|                          | Package: |                         |                                |                       |        |       
|                          |          | U.S. overnight box      |                                | $                     | 5,432  |       
|                          |          | U.S. overnight envelope |                                |                       | 1,715  |       
|                          |          | U.S. deferred           |                                |                       | 2,510  |       
|                          |          |                         |                                |                       |        |       
|                          |          |                         | Total domestic package revenue |                       |        | 9,657 
|                          |          | International priority  |                                |                       | 4,367  |       
|                          |          |                         |                                |                       |        |       
|                          |          |                         |                                | Total package revenue |        |       
|                          | Freight: |                         |                                |                       |        |       
|                          |          | U.S.(1)                 |                                |                       | 1,564  |       
|                          |          | International           |                                |                       | 400    |       
|                          |          |                         |                                |                       |        |       
|                          |          |                         | Total freight revenue          |                       |        | 1,964 
|                          | Other    |                         |                                | 363                   |        |       
|                          |          |                         |                                |                       |        |       
|                          |          | $                       | 16,351                         |                       | $      | 15,327
|                          |          |                         |                                |                       |        |       
|GEOGRAPHIC INFORMATION(2) |          |                         |                                |                       |        |       
|Revenues:                 |          |                         |                                |                       |        |       
|                          |          | U.S.                    |                                | $                     | 11,238 |       
|                          |          | International           |                                |                       | 5,113  |       
|                          |          |                         |                                |                       |        |       
|                          |          | $                       | 16,351                         |                       | $      | 15,327
|                          |          |                         |                                |                       |        |       
|Long-lived assets:        |          |                         |                                |                       |        |       
|                          |          | U.S.                    |                                | $                     | 6,493  |       
|                          |          | International           |                                |                       | 1,512  |       
|                          |          |                         |                                |                       |        |       
|                          |          | $                       | 8,005                          |                       | $      | 7,184 
|                          |          |                         |                                |                       |        |       

Note 10:    Supplemental Cash Flow Information

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

|                                          |  | 2003 |    | 2002 |   | 2001
|----------------------------------------- |  | ---- | -- | ---- | - | ----
|Interest (net of capitalized interest)    |  | $    | 58 |      | $ | 76  
|Income taxes (principally paid to parent) |  |      | 83 |      |   | 167 

Noncash investing and financing activities for the year ended May 31, 2003 included $221 million related to the fair value of assets
acquired under capital leases.

F-20

---

Note 11:    Guarantees and Indemnifications

We adopted FIN 45 effective January 1, 2003. The initial recognition and measurement provisions of FIN 45 apply on a prospective basis to certain
guarantees and indemnifications issued or modified after December 31, 2002. Accordingly, any contractual guarantees or indemnifications we issue or modify subsequent to December 31, 2002
will be evaluated and, if required, a liability for the fair value of the obligation undertaken will be recognized. Our adoption of FIN 45 did not have any effect on our financial position or results
of operations during 2003.

Substantially
all of our guarantees and indemnifications were entered into prior to December 31, 2002 and have not been modified since then. Therefore, no amounts have been
recognized in our financial statements for the underlying fair value of these agreements. With the exception of residual value guarantees in certain operating leases, a maximum obligation is generally
not specified in our guarantees and indemnifications. As a result, the overall maximum potential amount of the obligation under such guarantees and indemnifications cannot be reasonably estimated.
Historically, we have not been required to make significant payments under our guarantee or indemnification obligations.

Operating Leases.We have guarantees under certain operating leases, amounting to $104 million as of May 31,
2003, for the residual values of aircraft and vehicles at the end of the respective operating lease periods. Under these leases, if the fair market value of the leased asset at the end of the lease
term is less than an agreed-upon value as set forth in the related operating lease agreement, we will be responsible to the lessor for the amount of such deficiency. Based upon our
expectation that none of these leased assets will have a residual value at the end of the lease term that is materially less than the value specified in the related operating lease agreement, we do
not believe it is probable that we will be required to fund any amounts under the terms of these guarantee arrangements. Accordingly, no accruals have been recognized for these guarantees.

Certain
of our operating leases contain other indemnification obligations to the lessor, which are considered ordinary and customary (e.g., use and environmental indemnifications), the
terms of which range in duration and often are not limited. Such indemnification obligations continue until and, in many cases, after expiration of the respective lease.

Other Contracts.In conjunction with certain transactions, primarily sales or purchases of operating assets or services in
the ordinary course of business, we sometimes provide routine indemnifications (e.g., environmental, tax and employee liabilities), the terms of which range in duration and often are not limited.

Intra-Company Guarantees.We provide guarantees on certain FedEx unsecured debt instruments aggregating approximately
$950 million at May 31, 2003, jointly and severally with other affiliated companies in the FedEx consolidated group. In addition, we guarantee, jointly and severally with other
affiliated companies in the FedEx consolidated group, FedEx's $1 billion revolving credit agreements, which back its commercial paper program. At May 31, 2003, no commercial paper was
outstanding and the entire $1 billion under the revolving credit agreements was available for future borrowings. The guarantees are full and unconditional and are required by the lenders since
FedEx has no independent assets or operations.

F-21

---

Special Facitlity Revenue Bonds.Special facility revenue bonds have been issued by certain municipalities primarily to
finance the acquisition and construction of various airport facilities and equipment. In certain cases, the bond proceeds were loaned to us and are included in long-term debt and, in other
cases, the related lease agreements are accounted for as either capital leases or operating leases. Approximately $800 million in principal of these bonds (with total future principal and
interest payments of approximately $1.5 billion as of May 31, 2003) is unconditionally guaranteed by us. Of the $800 million bond principal, $45 million was in
long-term debt and $204 million was in capital lease obligations at May 31, 2003.

Note 12:    Variable Interest Entities

We entered into a lease in July 2001 for two MD11 aircraft. These assets are held by a separate entity, which was established and is owned by independent
third parties who provide financing through debt and equity participation. This lease is accounted for as an operating lease. Under current accounting principles generally accepted in the United
States, the assets and the related obligations are excluded from the consolidated balance sheet and the entity is not consolidated. The original cost of the assets under the lease was approximately
$150 million.

This
lease contains residual value guarantees that obligate us, not the third-party owners, to absorb the majority of the losses, if any, of the entity. The lease also provides us with
the right to receive any residual returns of the entity if they occur. At May 31, 2003, the residual value guarantee associated with this lease, which represents the maximum exposure to loss,
was $89 million (included in the $104 million operating lease residual value guarantees disclosed in Note 11). Under FIN 46, we will be required to consolidate the separate entity
that owns the two MD11 aircraft beginning September 1, 2003. Since the entity was created before February 1, 2003, we will initially measure the assets and liabilities at their carrying
amounts, which are the amounts at which they would have been recorded in the consolidated financial statements if FIN 46 had been effective at the inception of the lease. Accordingly, our
long-term assets and long-term liabilities will increase by approximately $140 million at September 1, 2003. The consolidation of this VIE will not have a
material effect on our results of operations.

Note 13:    Commitments and Contingencies

Annual purchase commitments under various contracts as of May 31, 2003, were as follows (in millions):

|           |  | Aircraft |       | Aircraft-
Related(1) |   | Other(2) |  | Total
|---------- |  | -------- | ----- | -------------------- | - | -------- |  | -----
|2004       |  | $        | 31    |                      | $ | 129      |  | $    
|2005       |  |          | 8     |                      |   | 183      |  |      
|2006       |  |          | 13    |                      |   | 156      |  |      
|2007       |  |          | 111   |                      |   | 141      |  |      
|2008       |  |          | 131   |                      |   | 86       |  |      
|Thereafter |  |          | 1,709 |                      |   | 95       |  |      

We are committed to purchase one A300, two A310s, ten A380s and 19 ATR42s to be delivered through 2012. Deposits and progress payments of
$27 million have been made toward these purchases and other planned aircraft-related transactions.

F-22

---

Operations
in 2002 were significantly affected by the terrorist attacks on September 11, 2001. During 2002, we recognized a total of $119 million of compensation under the
Air Transportation Safety and System Stabilization Act (the "Act"), of which $101 million has been received as of May 31, 2003. The amounts recognized were for our estimate of losses we
incurred as a result of the mandatory grounding of our aircraft and for incremental losses incurred through December 31, 2001. All amounts recognized were reflected as reduction of operating
expense under the caption "Airline stabilization compensation."

In
the fourth quarter of 2003, the Department of Transportation ("DOT") asserted that we were overpaid by $31.6 million and has demanded repayment. We have filed requests for
administrative and judicial review of this determination. We believe that we have complied with all aspects of the Act, that it is probable we will ultimately collect the remaining $18 million
receivable and that we will not be required to pay any portion of the DOT's $31.6 million demand. We cannot be assured of the ultimate outcome; however, it is reasonably possible that a
material reduction to the $119 million of compensation we have previously recognized under the Act could occur.

Note 14:    Legal Proceedings

A class action lawsuit is pending in Federal District Court in San Diego, California against us generally alleging that customers who had late deliveries during
the 1997 Teamsters strike at United Parcel Service were entitled to a full refund of shipping charges pursuant to our money-back guarantee, regardless of whether they gave timely notice of
their claim. At the hearing on the plaintiffs' motion for summary judgment, the court ruled against us. Including accrued interest through May 31, 2003 and fees for the plaintiffs' attorney,
the judgment totals approximately $70 million. We have denied any liability with respect to this claim and intend to vigorously defend ourselves in this case. We have appealed the judgment to
the U.S. Court of Appeals for the 9th Circuit and oral argument is scheduled for July 2003. We expect a ruling in the next nine months. No accrual has been recorded as we believe the case is
without merit and it is probable we will prevail upon appeal.

The
Illinois state court has approved a settlement of the Illinois fuel surcharge class action matter. The lawsuit alleges that we imposed a fuel surcharge in a manner that is not
consistent with the terms and conditions of our contracts with customers. Under the terms of the settlement, we will issue coupons to qualifying class members toward the purchase of future shipping
services with us. The coupons will be subject to certain terms and conditions and will be redeemable for a period of one year from issuance. All appeals that were filed by class members have been
resolved. Coupons will be issued to participating class members in early July 2003. The ultimate cost to us under the settlement agreement will not be material.

Also,
see Notes 7 and 13 for discussion of other legal proceedings.

We
are subject to other legal proceedings that arise in the ordinary course of business. In the opinion of management, the aggregate liability, if any, with respect to these other
actions will not materially adversely affect our financial position, results of operations or cash flows.

F-23

---

Note 15:    Asset Impairments

Asset impairment adjustments of $102 million were recorded in the fourth quarter of 2001. Impaired assets were adjusted to fair value based on estimated
fair market values. All charges relating to asset impairments were reflected as other operating expenses in the Consolidated Statements of Income. The asset impairment charge consisted of two parts
(in millions):

|Certain assets related to the MD10 aircraft program |  | $ | 93 
|--------------------------------------------------- |  | - | ---
|Ayres program deposits and other                    |  |   | 9  
|                                                    |  |  
|                                                    |  | $ | 102
|                                                    |  |  

These aircraft procurement programs were in place to ensure adequate aircraft capacity for future volume growth. Due to lowered capacity
requirements, it became evident during the fourth quarter of 2001 that we had more aircraft capacity commitments than required. Certain aircraft awaiting modification under the MD10 program, which
were not yet in service and were not being depreciated, and the purchase commitments for the Ayres aircraft were evaluated and determined to be impaired.

The
MD10 program charge was comprised primarily of the write-down of impaired DC10 airframes, engines and parts to a nominal estimated salvage value. Costs relating to the
disposal of the assets were also recorded. The disposal was substantially completed during 2002 and a $9 million credit was recognized in operating income in 2002. The Ayres program charge was
comprised primarily of the write-off of deposits for aircraft purchases. Capitalized interest and other costs estimated to be unrecoverable in connection with the bankruptcy of Ayres
Corporation were also expensed.

Note 16:    Related Party Transactions

Affiliate company balances that are currently receivable or payable relate to charges for services provided by or to other FedEx affiliates and are settled on a
monthly basis. The noncurrent intercompany balance amounts at May 31, 2003 and 2002 primarily represent the net activity from participation in FedEx's consolidated cash
management program. These net amounts are reflected as financing activities on the statements of cash flows. In addition, we are allocated net interest on these amounts at market rates.

The
formation of FedEx Services at the beginning of 2001 represented the implementation of a business strategy that combined our sales, marketing and information technology functions
with FedEx Ground Package System, Inc. ("FedEx Ground") to form a shared services company that supports the package businesses for both of us. FedEx Services provides our customers with
a single point of contact for all express services. Prior to the formation of FedEx Services, each business had its own self-contained sales, marketing and information technology
functions. The line item "Intercompany charges" on the consolidated statements of income represents an allocation primarily of the costs of the services that FedEx Services provided for us. The costs
for these activities are allocated based on metrics such as relative revenues and estimated services provided. We believe the total amounts allocated reasonably reflect the cost of providing such
services. In addition, associated assets of the sales, marketing and IT departments were transferred to FedEx for the formation of FedEx Services and are reflected as a distribution in the
consolidated statements of changes in owner's equity and comprehensive income. The related depreciation and amortization for those assets is now allocated to these operating segments as "Intercompany
charges."

We
also receive allocated charges from our parent for management fees related to services received for general corporate oversight, executive officers and certain legal and finance
functions. We believe the total amounts allocated reasonably reflect the cost of providing such services.

In
connection with the formation of FedEx Services, certain customers doing business with both us and FedEx Ground are provided the ability to receive a single invoice for their shipping
charges. Revenue is recognized by the operating company performing the transportation services and the corresponding total receivable is recorded and collected by us. The net customer balances for
transportation services performed by FedEx Ground are reflected in trade receivables on our balance sheet and totaled $278 million at May 31, 2003 and $140 million at
May 31, 2002.

F-24

---

Note 17:    Other Events

On June 2, 2003, we announced we will offer voluntary early retirement and severance programs during 2004 to continue resizing our U.S. organization and
improving profitability. The first program will offer voluntary early retirement incentives, with enhanced pension and postretirement healthcare benefits, to certain groups of employees who are age 50
or older. The second program will offer voluntary severance incentives to eligible employees. Both programs are limited to eligible U.S. salaried staff employees and managers.

Depending
on employee acceptance rates, the pretax charge for these programs is estimated to be $230 million to $290 million in 2004, with most of the charge to be incurred
in the first half of the year. Approximately one-third of the pretax charge will be cash. The remainder of the costs relate primarily to pension and postretirement healthcare liabilities.
The cost of these programs will be reflected as a separate component of operating expenses.

Note 18:    Summary of Quarterly Operating Results (Unaudited)

|                 |  | First
Quarter |       | Second
Quarter |   | Third
Quarter |  | Fourth
Quarter
|---------------- |  | ------------- | ----- | -------------- | - | ------------- |  | --------------
|
|2003             |  |               |       |                |   |               |  |               
|Revenues         |  | $             | 3,934 |                | $ | 4,098         |  | $             
|Operating income |  |               | 128   |                |   | 228           |  |               
|Net income       |  |               | 67    |                |   | 127           |  |               
|2002             |  |               |       |                |   |               |  |               
|Revenues         |  | $             | 3,738 |                | $ | 3,814         |  | $             
|Operating income |  |               | 121   |                |   | 309           |  |               
|Net income       |  |               | 64    |                |   | 178           |  |               

F-25

---



REPORT OF INDEPENDENT AUDITORS

The
Board of Directors and Stockholder
Federal Express Corporation

We
have audited the consolidated financial statements of Federal Express Corporation as of May 31, 2003 and 2002, and for each of the two years in the period ended May 31, 2003, and have
issued our report thereon dated June 23, 2003 (included elsewhere in this Annual Report on Form 10-K). Our audits also included Schedule IIValuation and
Qualifying Accounts as of May 31, 2003 and 2002, and for each of the two years in the period ended May 31, 2003, included in this Annual Report on Form 10-K. This
schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. The financial statement schedule of Federal Express Corporation as of
May 31, 2001 and for the year then ended was subjected to auditing procedures applied by other auditors, who have ceased operations, in their audit of the consolidated financial statements and
whose report dated June 27, 2001, indicated that such financial statement schedule fairly stated in all material respects the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.

In
our opinion, the financial statement schedule as of May 31, 2003 and 2002 and for each of the two years in the period ended May 31, 2003, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects the information set forth therein.



Memphis,
Tennessee
June 23, 2003

S-1.1

---

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS  ON FINANCIAL STATEMENT SCHEDULE

To
Federal Express Corporation:

We
have audited in accordance with auditing standards generally accepted in the United States, the consolidated financial statements of Federal Express Corporation included in this
Form 10-K, and have issued our report thereon dated June 27, 2001. 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 consolidated financial statements. The financial statement schedule has been subjected to the auditing procedures applied in the audit of the consolidated
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.



Memphis,
Tennessee
June 27, 2001

This is a copy of the audit report previously issued by Arthur Andersen LLP in connection with Federal Express Corporation's filing on Form 10-K for the year
ended May 31, 2001. This audit report has not been reissued by Arthur Andersen LLP in connection with this filing on Form 10-K. See Exhibit 23.2 for further
discussion.

S-1.2

---



SCHEDULE II

FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES  VALUATION AND QUALIFYING ACCOUNTS  FOR THE YEARS ENDED MAY 31, 2003, 2002 AND 2001  (In millions)

|                               |                                    |      |  | Additions |    |  |   |   
|------------------------------ | ---------------------------------- | ---- |  | --------- | -- |  | - | --
|
|Accounts Receivable Reserves:  |                                    |      |  |           |    |  |   |   
|                               | Allowance for Doubtful Accounts    |      |  |           |    |  |   |   
|                               |                                    | 2003 |  | $         | 58 |  | $ | 78
|                               |                                    | 2002 |  | $         | 60 |  | $ | 81
|                               |                                    | 2001 |  | $         | 57 |  | $ | 91
|                               | Sales Returns and Other Allowances |      |  |           |    |  |   |   
|                               |                                    | 2003 |  | $         | 49 |  | $ |  
|                               |                                    | 2002 |  | $         | 42 |  | $ |  
|                               |                                    | 2001 |  | $         | 44 |  | $ |  
|Inventory Valuation Allowance: |                                    |      |  |           |    |  |   |   
|                               |                                    | 2003 |  | $         | 91 |  | $ | 12
|                               |                                    | 2002 |  | $         | 78 |  | $ | 14
|                               |                                    | 2001 |  | $         | 69 |  | $ | 11

S-2

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EXHIBIT INDEX

|Exhibit
Number |  | Description of Exhibit                                                                                                                                                                                                                                                          
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |  | Certificate of Incorporation and Bylaws                                                                                                                                                                                                                                         
|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.)                                                                                                                                      
|               |  | Facility Lease Agreements                                                                                                                                                                                                                                                       
|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. (Filed 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. (Filed 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.)                                                     
|               |  |                                                                                                                                                                                                                                                                                 

E-1

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|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.)              
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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

---

|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 |  | Twenty-Second Supplemental Lease Agreement dated as of March 15, 2001 between the Authority and FedEx Express. (Filed as Exhibit 10.23 to FedEx's FY01 Annual Report on Form 10-K, and incorporated herein by reference.)                    
|10.24 |  | Twenty-Third Supplemental Lease Agreement dated as of March 1, 2002 between the Authority and FedEx Express. (Filed as Exhibit 10.1 to FedEx's FY03 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)               
|10.25 |  | Twenty-Fourth Supplemental Lease Agreement dated as of May 1, 2003 between the Authority and FedEx Express. (Filed as Exhibit 10.25 to FedEx's FY03 Annual Report on Form 10-K, and incorporated herein by reference.)                       
|10.26 |  | 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.)
|10.27 |  | Third Special Facility Supplemental Lease Agreement dated as of December 1, 1984 between the Authority and FedEx Express. (Filed as Exhibit 10.25 to FedEx Express's FY95 Annual Report on Form 10-K, and incorporated herein by reference.) 
|10.28 |  | 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.)    
|10.29 |  | 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.)     
|10.30 |  | Sixth Special Facility Supplemental Lease Agreement dated as of December 1, 2001 between the Authority and FedEx Express. (Filed as Exhibit 10.28 to FedEx's FY02 Annual Report on Form 10-K, and incorporated herein by reference.)         
|10.31 |  | Seventh Special Facility Supplemental Lease Agreement dated as of June 1, 2002 between the Authority and FedEx Express. (Filed as Exhibit 10.3 to FedEx's FY03 First Quarter Report on Form 10-Q, and incorporated herein by reference.)     
|10.32 |  | 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.)                        
|10.33 |  | 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.)                 
|      |  |                                                                                                                                                                                                                                              

E-3

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|      |  | Aircraft-Related Agreements                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.34 |  | Airbus A380-800F Purchase Agreement dated as of July 12, 2002 between AVSA, S.A.R.L. and FedEx Express and related agreements, including letter agreements 1 through 21. 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 10.1 to FedEx's FY03 First Quarter Report on Form 10-Q, and incorporated herein by reference.)                     
|10.35 |  | Amended Section 5.5.2 of Airbus A380-800F Purchase Agreement dated as of July 12, 2002 between AVSA, S.A.R.L. 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's FY03 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)                                                            
|      |  | U.S. Postal Service Agreements                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10.36 |  | Transportation Agreement dated January 10, 2001 between The United States Postal Service 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 10.1 to FedEx Express's Current Report on Form 8-K dated January 10, 2001, and incorporated herein by reference.)                                                               
|10.37 |  | Retail Agreement dated January 10, 2001 between The United States Postal Service 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 10.2 to FedEx Express's Current Report on Form 8-K dated January 10, 2001, and incorporated herein by reference.)                                                                       
|10.38 |  | Addendum dated December 13, 2001 to the Transportation Agreement dated January 10, 2001, as amended, between The United States Postal Service 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 10.1 to FedEx Express's Current Report on Form 8-K dated December 13, 2001, and incorporated herein by reference.)         
|10.39 |  | Amendment dated December 13, 2001 to the Transportation Agreement dated January 10, 2001, as amended, between The United States Postal Service 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 10.2 to FedEx Express's Current Report on Form 8-K dated December 13, 2001, and incorporated herein by reference.)        
|10.40 |  | Letter Amendment dated September 26, 2001 to the Transportation Agreement dated January 10, 2001, as amended, between The United States Postal Service 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 Current Report on Form 8-K dated December 13, 2001, and incorporated herein by reference.)
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

E-4

---

|10.41 |  | Amendment dated August 31, 2001 to the Transportation Agreement dated January 10, 2001, as amended, between The United States Postal Service 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 Current Report on Form 8-K dated December 13, 2001, and incorporated herein by reference.)                                                                                                      
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.42 |  | Amendment dated August 28, 2001 to the Transportation Agreement dated January 10, 2001, as amended, between The United States Postal Service 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 10.5 to FedEx Express's Current Report on Form 8-K dated December 13, 2001, and incorporated herein by reference.)                                                                                                      
|10.43 |  | First Amendment to Addendum dated April 3, 2002, Second Amendment to Addendum dated April 26, 2002 and Second Addendum dated August 29, 2002, each amending the Transportation Agreement dated January 10, 2001, as amended, between The United States
Postal Service 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 10.2 to FedEx's FY03
First Quarter Report on Form 10-Q, and incorporated herein by reference.) 
|10.44 |  | First Amendment to Second Addendum dated December 4, 2002, amending the Transportation Agreement dated January 10, 2001, as amended, between The United States Postal Service 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 10.2 to FedEx's FY03 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)                                                                                        
|10.45 |  | Amendment dated June 12, 2002, Investigative and Security Procedures Addendum dated January 9, 2003 and Third Addendum dated January 30, 2003, each amending the Transportation Agreement dated January 10, 2001, as amended, between The United States
Postal Service 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 10.1 to FedEx's FY03
Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
|10.46 |  | Amendment dated May 28, 2003 and First Amendment to Third Addendum dated June 4, 2003, each amending the Transportation Agreement dated January 10, 2001, as amended, between The United States Postal Service 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 10.46 to FedEx's FY03 Annual Report on Form 10-K, and incorporated herein
by reference.)                                                            
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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|      |  | Financing Agreements                                                                                                                                                                                                                                                                                                                                                        
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.47 |  | Five-Year Credit Agreement dated as of September 28, 2001 among FedEx, JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), individually and as administrative agent, and certain lenders. (Filed as Exhibit 10.1 to FedEx's FY02 First
Quarter Report on Form 10-Q, and incorporated herein by reference.)                                                    
|10.48 |  | First Amendment dated as of September 27, 2002 to Five-Year Credit Agreement dated as of September 28, 2001 among FedEx, JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), individually and as administrative agent, and certain lenders.
(Filed as Exhibit 10.4 to FedEx's FY03 First Quarter Report on Form 10-Q, and incorporated herein by reference.)  
|10.49 |  | Amended and Restated 364-Day Credit Agreement dated as of September 27, 2002 among FedEx, JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), individually and as administrative agent, and certain lenders. (Filed as Exhibit 10.5 to
FedEx's FY03 First 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.
|      |  | Other Exhibits                                                                                                                                                                                                                                                                                                                                                              
|*12   |  | Statement re Computation of Ratio of Earnings to Fixed Charges.                                                                                                                                                                                                                                                                                                             
|*23.1 |  | Consent of Ernst & Young LLP, Independent Auditors.                                                                                                                                                                                                                                                                                                                         
|*23.2 |  | Information Regarding Consent of Arthur Andersen LLP.                                                                                                                                                                                                                                                                                                                       
|*24   |  | Powers of Attorney.                                                                                                                                                                                                                                                                                                                                                         
|      |  |                                                                                                                                                                                                                                                                                                                                                                             

E-6

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|*99.1 |  | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*99.2 |  | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|*99.3 |  | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                 
|*99.4 |  | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                 

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