As our independent operating companies and unique global networks continue to find new and better ways to compete collectively, demand for the entire portfolio of FedEx services has steadily grown. Over the past five years, FedEx Corporation revenue has increased to $29.4 billion in FY05 from $18.3 billion in FY00, thanks to solid volume growth, strategic acquisitions, new services and steady pricing discipline. Our continued focus on productivity across the corporation has helped us also drive sustainable improvement in operating margin in recent years, growing to 8.4 percent in FY05 from 6.7 percent in FY00. And during that same time period net income has more than doubled — increasing to $1.4 billion in FY05 from $688 million in FY00. We view this as a very strong indication that our operating strategy is working.

*Shows the value, at the end of each of the last five fiscal years, of $100 invested in FedEx stock or the relevant index on May 31, 2000, and assumes reinvestment of dividends. Fiscal year ended May 31.

In response to the growing demand for our services, we've taken a very disciplined approach to investing in the business to increase capacity for future growth. We've been able to hold our capital expenditures to within 5 to 8 percent of revenue in recent years, and the $2.5 billion in capital spending forecasted for FY06 remains within that range. Additionally, solid improvement in operating cash flow allowed us to repay nearly $800 million in debt in FY05, and for the second straight year we have more than $1 billion in cash on the balance sheet.

This consistent performance and ongoing focus on our financial goals have also paid off for our shareowners. For the third straight year we increased our dividend payment, boosting our quarterly dividend by 14 percent to 8 cents per share on May 27, 2005. Even more significantly, for the five-year period ending May 31, 2005, our total cumulative return to shareowners is up more than 150 percent — outpacing the S&P 500 and the Dow Jones Transportation Index.

But not all of our financial goals deal with dollars. Another critical focus for FedEx is our long-standing commitment to integrity, transparency and excellent internal controls. In FY05, that commitment was demonstrated by more than 1,200 FedEx employees who spent nearly 100,000 hours ensuring we fully comply with the requirements of Section 404 of the Sarbanes-Oxley Act. Thanks to their hard work, internal controls were strengthened with the documentation of approximately 225 key financial processes, which are supported by more than 200 financial IT systems. Our intention was not only to comply with the law but also to build upon a process that will further enhance a strong controls mindset across all of FedEx — today and into the future.

Our outstanding results in FY05 followed several years of consistently strong performance. Now, thanks to carefully planned expansion we are financially well positioned to take advantage of the host of future growth opportunities in the global marketplace.

Alan B. Graf, Jr.
Executive Vice President and Chief Financial Officer