North. South. East.

West Forward

Fedex annual report 2013

In 40 years of doing business !e"#e experien$ed dyna%i$ e$ono%i$ so$ial and te$hnologi$al $hanges fe! $ould ha#e en#isioned. &et !e"#e stayed the $ourse guided by a steadfast $o%%it%ent to our $usto%ers tea% %e%bers and shareo!ners. 'egardless of !hat"s happening in the !orld you $an $ount on FedEx to approa$h our business as !e al!ays ha#e( %o#ing in %any dire$tions to $onne$t the !orld !hether it"s ad)usting our net!or*s to %eet $usto%ers" needs or by pro#iding %ore inno#ati#e and sustainable !ays of !or*ing. North. South. East. West + they point in one dire$tion. Forward.

Forward /hin*ing
To our shareowners,
In F&13 !e too* aggressi#e a$tion to boost future profitability and better align our global net!or*s !ith $usto%er de%and in a sluggish !orld e$ono%y. I a% pleased to say the profit i%pro#e%ent progra%s !e announ$ed in 0$tober 2012 are on tra$* and ahead of s$hedule in %any areas. /han*s to a boost fro% e1$o%%er$e FedEx 2round posted another stellar year !ith industry1leading %argins. 'e#enue share has no! in$reased for 34 $onse$uti#e 4uarters + an outstanding perfor%an$e dri#en by superior ser#i$e that"s faster to %ore lo$ations than any other ground ser#i$e. /he FedEx 2round outloo* is ex$ellent as re#enues are expe$ted to $ontinue to in$rease in F&14 led by #olu%e gro!th a$ross all our %a)or ser#i$es. We !ill $ontinue to expand our $apa$ity to *eep up !ith the de%and for our ground ser#i$es and the gro!ing popularity of online shopping. FedEx Freight %ade solid progress in F&13 follo!ing its return to profit in F&12. 'e#enues in$reased due to higher yield and a#erage daily ship%ents. .t FedEx Express a$4uisitions in 5ra6il Fran$e 7oland 8exi$o and India are on $ourse to deli#er solid returns in these *ey %ar*ets. We also signed a ne! se#en1 year $ontra$t !ith the 9nited States 7ostal Ser#i$e a testa%ent to the 4uality of ser#i$e and the strong relationship !e"#e built during the past de$ade. 0n$e again !e !ere honored by F0'/9NE %aga6ine as one of the !orld"s 10 %ost ad%ired $o%panies. /hese positi#e a$$o%plish%ents ho!e#er did not offset the effe$t of lo!er1than1expe$ted international export yields resulting fro% in$reasing $usto%er use of slo!er less $ostly international shipping ser#i$es. FedEx is ta$*ling these $hallenges head1on and !e are $onfident our plans !ill position us for profitable long1 ter% gro!th.
%ore , fedex.$o%-.nnualreport2013 1

:e//er fro% /he ;h.ir%.n

<FedEx 2round $learly has an outstanding business %odel as e#iden$ed by its gro!th and industry1leading %argins.=

our goals are set .ll indi$ators suggest that a lo!1gro!th global e$ono%y !ill persist gi#en high fuel $osts and poli$y de$isions by %a)or !orld go#ern%ents that i%pede global trade. E#en so our profit i%pro#e%ent progra%s announ$ed in F&13 are targeting annual profitability i%pro#e%ent of >1.? billion at FedEx Express by the end of F&1? fro% the full1year F&13 ad)usted operating in$o%e le#el. ;olle$ti#ely these initiati#es are expe$ted to in$rease %argins i%pro#e $ash flo!s and in$rease our $o%petiti#eness. In this regard !e expe$t to begin reali6ing a portion of the benefits fro% the profit i%pro#e%ent progra%s gradually in F&14. @o!e#er the %a)ority of the benefits in$luding those fro% our #oluntary buyout progra% !ill not be fully reali6ed until F&13 and F&1?. our way forward is clear FedEx is be$o%ing a %ore effi$ient business and !e"re %ore $o%petiti#e than e#er as !e expand solutions for $usto%ers. 0ur balan$e sheet is strong and %ost i%portantly our 300 000 tea% %e%bers are dedi$ated to i%ple%enting our plans !ith the $an1do attitude you"d expe$t fro% our 7urple 7ro%ise( <I !ill %a*e e#ery FedEx experien$e outstanding.= @ere"s a snapshot of the profit i%pro#e%ent progra%s !e began during F&13 and the progress !e"#e %ade(
FedEx Express: Five pillars to increasing profitability 1 Make staff functions and processes ore efficient 8ultiple initiati#es a$ross FedEx Express and

$apa$ity as the 8D10s !e are retiring !ith i%pro#ed reliability and about a 301per$ent in$rease in fuel effi$ien$y.

FedEx Ser#i$es are per%anently redu$ing our o#erall $ost stru$ture. We ha#e $o%pleted a #oluntary progra% offering $ash buyouts to eligible 9.S.1based e%ployees in $ertain staff fun$tions and approxi%ately 3 ?00 e%ployees ha#e #oluntarily left or !ill be lea#ing the $o%pany by the end of F&14. We are also $apitali6ing on strategi$ sour$ing opportunities strea%lining support fun$tions and eli%inating redundant syste%s and pro$esses. In$reased use of infor%ation1 te$hnology ser#i$e pro#iders and $loud1$o%puting resour$es !ill signifi$antly redu$e $osts.
2 Moderni!e our air fleet

'epla$ing older less effi$ient air$raft is lo!ering operating $osts globally. In F&13 !e de$ided to per%anently retire or a$$elerate retire%ent of nearly A0 air$raft as !e $ontinue to %oderni6e our air$raft fleet. In Bune FedEx Express $o%pleted the final retire%ent of the 5C2C fleet. /he 5C3C is signifi$antly %ore fuel effi$ient per pound of payload and has 201per$ent additional payload $apa$ity than the 5C2C it repla$es. 0ur ne! 5oeing C?Cs !ill pro#ide si%ilar

3 Transfor
".#. do estic network

our

We"re $losing and realigning regional and distri$t fa$ilities and strea%lining pi$*up and deli#ery operations !hile %aintaining outstanding ser#i$e le#els. For exa%ple !e %erged fi#e stations in @ouston into t!o and eli%inated a regional pa$*age sort in .tlanta thus $onsolidating %ore than 100 !ee*ly surfa$e routes. We"re also i%pro#ing flight s$heduling on1road effi$ien$y refining air$raft %aintenan$e pro$esses and i%pro#ing fuel effi$ien$y in our #ehi$le fleets.
4 $ prove
international profits

!e are opti%i6ing our net!or*s by using other lift alternati#es to %o#e E$ono%y traffi$ and %a*ing better use of $apa$ity !ithin the FedEx Express international net!or* for our 7riority ser#i$es. 'e$ent a$4uisitions in 5ra6il Fran$e 7oland 8exi$o and India helped dri#e signifi$ant in$reases in international do%esti$ re#enues in F&13 and !e expe$t the profitability of these a$4uisitions to i%pro#e as their integrations near $o%pletion. We also opened do6ens of European fa$ilities to better ser#e $usto%ers i%pro#e the density of our European net!or* and lo!er $osts. FedEx /rade Net!or*s our fast1gro!ing air and o$ean freight for!arding ar% !ill also add to our profitability as it $ontinues to gro!. We re$ently opened ne! offi$es in :atin .%eri$a Europe and .siaE expanded our allian$es !ith regional ser#i$e pro#idersE and laun$hed ne! freight for!arding ser#i$e options.
3 Expand service offerings

;apitali6ing on the reliability of our 9.S. do%esti$ air net!or* !e expanded our FedEx Express First 0#ernight pa$*age and freight offerings and no! ser#e %ore than 3 000 additional FI7 $odes earlier in the %orning. I%pro#ed ser#i$e offerings targeting s%all and %ediu% shippers and $onsignees as !ell as #alue added ser#i$es for #erti$al industries su$h as health$are and aerospa$e !ill further align the uni4ue $apabilities of FedEx Express !ith spe$ifi$ $usto%er needs. our focus is on custo ers Dis$rete $usto%er needs are at the heart of our strategy to operate fo$used syste%s GFedEx Express FedEx 2round FedEx FreightH that operate independently $o%pete

0ur international profit i%pro#e%ent progra%s are fo$used on expanding our European footprint to build s$ale effi$ien$y to lo!er unit $osts expand our portfolio through ne! offerings redu$e o#erhead expenses and gro! the $apabilities of FedEx /rade Net!or*s. 8aintaining leadership in the 7riority %ar*et spa$e and %at$hing our net!or* $ost1to1ser#e !ith E$ono%y shipping yields are top priorities as $usto%ers $ontinue to trade speed for pri$e in a lo!1gro!th global e$ono%y. .$$ordingly

$olle$ti#ely and are %anaged $ollaborati#ely. 0ur uni4ue %odel enables us to fine1tune our net!or*s !ithout other $o%pro%ising ser#i$e to our $usto%ers. Not only are our and solutions superior but !e $an respond to %ar*etpla$e for four $hanges 4ui$*ly and effi$iently. opti%isti$
FedEx %round $learly has an outstanding business

our future is bright Exe$uting our profit i%pro#e%ent progra%s and our long1ter% strategies !ill re4uire the sa%e fo$us dis$ipline that has %ade FedEx an industry leader de$ades. We"re proud of our su$$ess and are

about the future. 2ood things happen !hen FedEx pro#ides greater a$$ess to %ar*ets and ne! opportunities. /he %odel as e#iden$ed by its gro!th and industry1leading re$ord is $lear. 5usinesses gro!E )obs in$reaseE and people"s %argins e#en in a greater ti%e of flexibility slo! e$ono%i$ ad#antage gi#es $usto%ers in theirgro!th. 0ur speed li#es i%pro#e. supply $hain and %a*es in#entory %anage%ent %ore Far%ers and #illagers in northern India *no! firsthand !hat effi$ient. Sin$e 2003 !e ha#e in$reased the speed of this %eans. When Jrishan 2uptaa ;E0 of 0rgani$ India %ore than re)u#enated a on$e1struggling brand by relaun$hing it in the IC 000 lanes by at least a full day. .nd !e"re not done yet. global %ar*etpla$e he !as able to pay higher !ages to /housands %ore lanes !ill be a$$elerated in F&14. FedEx far%ers !ho gre! tea and herbs to supply his operations. 2round also $ontinues to benefit fro% dra%ati$ double1digit /oday the 0rgani$ India Foundation pro#ides free e1$o%%er$e gro!th !hi$h led to a 221per$ent in$rease in health$are to thousands of lo$al #illagers. FedEx S%art7ost ship%ents during F&13. 0ur su$$ess !ould not be possible !ithout the personal FedEx Express and FedEx %round residential dedi$ation of our 300 000 tea% %e%bers !orld!ide. $usto%ers are en)oying %ore $on#enien$e than e#er !ith /hey earn the trust of $usto%ers li*e 0rgani$ India e#ery the ability to $usto%i6e deli#eries to their ho%e !ith FedEx day by deli#ering on our 7urple 7ro%ise. Fe! ha#e done a Deli#ery 8anager introdu$ed this spring. No! $usto%ers better )ob at that than Da#e 'ebhol6 !ho retired this year $an re4uest deli#ery dates lo$ations and ti%es a$$ording as to their needs. /hey $an also re4uest that their pa$*ages ;E0 of FedEx 2round after 3C years of ser#i$e to FedEx. be held for pi$*up at %ore than 1 I00 FedEx 0ffi$e @e lea#es !ith our gratitude and respe$t for his lo$ations. outstanding a$hie#e%ents. Da#e is su$$eeded by @enry 8aier !hose %ore than 30 years of experien$e in the FedEx Freight $usto%ers are e%bra$ing the !ay !e"#e transportation industry in$luding %ore than 23 years at si%plified less1than1tru$*load G:/:H shipping. .bout I0 FedEx $o%panies !ill pro#ide steady leadership for per$ent of FedEx Freight $usto%ers use both our 7riority $ontinued gro!th at FedEx 2round. and E$ono%y ser#i$es through a single uni4ue pi$*up1and1 deli#ery net!or*. 0ur strategy !as #alidated by a re$ent &ou $an $ount on FedEx based on 40 years of operations sur#ey in :ogisti$s 8anage%ent %aga6ine !hi$h ran*ed as of .pril to $ontinue doing !hat"s right for our FedEx Freight as best1in1$lass in both the %ultiregional and shareo!ners $usto%ers tea% %e%bers and the national :/: se$tors. /o i%pro#e perfor%an$e auto%ated $o%%unities !e ser#e. We are dedi$ated to $ontinuing to syste%s help FedEx Freight deter%ine the %ost effi$ient %a*e a better and %ore prosperous !orld as a result. routing for ship%ents. /oday about 13 per$ent of our line1 haul %iles ha#e %o#ed to rail a de$ision that"s lo!ered our $osts !ithout sa$rifi$ing reliability. Frederi$* W. S%ith

;hair%an 7resident and ;E0

onl$nE #&o''$n%: fue: for gro!/h

/he largest dri#ing for$e in the global e$ono%y is e1$o%%er$e !hi$h is pro)e$ted to rea$h >1 trillion in sales by 201?. /he internet shopping boo% is translating into signifi$ant gro!th at FedEx and it"s easy to see !hy. 0ur spe$iali6ed e1 $o%%er$e ser#i$es and tools are helping transfor% the 9.S. retail industry !here online sales are gro!ing %ore than three ti%es faster than offline sales. /!o notable $hanges are po!ering this trend a$$ording to Forrester 'esear$h( 8obile de#i$es su$h as s%artphones and tablets %a*e it easier for shoppers to a$$ess the !eb on the go Ga$$ounting for 11 per$ent of online transa$tions says $o%S$oreH. .nd rather than ris* losing sales to $o%petitors traditional retailers are hea#ily in#esting in their !eb di#isions.

For retailers ( services that sell

What does this %ean for FedExK We *no! a sale isn"t $o%plete until the pa$*age is in the $onsu%er"s hands. Sin$e deli#ering our first FedEx Express e1 $o%%er$e pa$*age !e"#e been syste%ati$ally building a suite of ser#i$es and tools that %eet retailers" and shoppers" needs for $ost and ser#i$e options.
$n )*** we launched FedEx &o e delivery, the

ship%ents %a*ing it easier for the% to pro%ote free shipping as a %ar*eting tool. In fa$t about 30 per$ent of

first dedi$ated residential deli#ery ser#i$e in our industry. /he ser#i$e !hi$h offers Saturday deli#ery at no extra $harge set a one1day re$ord for deli#eries outside the pea* shipping season by deli#ering 1.C %illion residential pa$*ages this year on the Saturday before 8other"s Day.
#ince its introduction in )**+, FedEx # art'ost

has $hanged the e1$o%%er$e deli#ery ga%e and $ontinues to gro! rapidly. It"s an e$ono%i$al option that"s helped online retailers redu$e $osts for light!eight

online pur$hases $o%e !ith free shipping. :ast year FedEx S%art7ost re#enue soared %ore than 1I per$ent.
FedEx #a eday, -ity, dedi$ated to lo$al deli#ery !ithin hours !as first offered

in 200C and enhan$ed this year in 13 9.S. %etro areas Gsee page ?H.
FedEx Express #aturday delivery ser#i$e no! $o#ers %ore than A0 per$ent of the

9.S. population so !e $an better ser#e e1$o%%er$e $usto%ers.

our network of 1,.** FedEx office locations and ore than /** FedEx Express service centers $an se$urely hold pa$*ages for $onsu%ers to pi$* up at their

$on#enien$e. 7lus the ser#i$e $uts our $osts by redu$ing redeli#ery atte%pts. 0ur e1$o%%er$e strategy ser#es FedEx as !ell as $usto%ers be$ause the right pa$*age in the right net!or* %a*es us %ore effi$ient and profitable.

>

tril

42 1 1 0
L
out of
7ro)e$ted in$rease in 9.S. online spending by 201C fro% >2?2 billion in 2013 to >3C1 billion in 201C. .%ount of 9.S. retail dollars pro)e$ted to be spent shopping online by 201C.
Sour$es( forrester resear$h

lion
7ro)e$ted global e1$o%%er$e sales by 201? representing 1 per$ent of global 2D7.

For recipients ( FedEx delivery Manager

We are $onfident that our ne! FedEx Deli#ery 8anager ser#i$e options !ill enhan$e the residential deli#ery experien$e as po!erfully as our online tra$*ing did de$ades ago. 5y signing up at fedex.co $usto%ers $an be notified !hen FedEx pa$*ages are en route to their ho%es. 'e$ipients $an then personali6e their deli#ery experien$e by re4uesting a ti%e date or lo$ation that suits their needs. ;usto%ers ha#e responded !ell to the ser#i$e. :arge e1$o%%er$e shippers #alue the $on#enien$e flexibility and options FedEx Deli#ery 8anager pro#ides. It helps No! re$ipients $an be part of the solution by re4uesting deli#eries tailored to their s$hedules(

the% satisf their $usto%er and lo!e their $usto%er ser#i$e $osts. Bus as i%portant

the ser#i$ e also strea% lines our operati ons by redu$i

ng the nu%ber of ti%es !e atte%pt deli#eries !hen re$ipients aren"t ho%e.

S$hedule your deli#ery Deli#er to another address @old at FedEx lo$ation

Sign for a pa$*age 7ro#ide deli#ery instru$tions 'e4uest #a$ation hold

$nnovaT$on: fu/ure for!.rd

What do infor%ation te$hnology sustainability and $usto%er solutions ha#e in $o%%onK .t FedEx the ans!er is inno#ation. It"s a state of %ind that $onne$ts e#erything !e do. Inno#ation not only %a*es life easier for $usto%ers but it also helps us !or* %ore effi$iently and redu$es our en#iron%ental i%pa$t on the planet. 0ur $o%%it%ent to a $reati#e open $ulture propels the de#elop%ent of ideas ser#i$es and solutions that help our $usto%ers $o%pete !orld!ide. Whether it"s biofuel resear$h or speedy sa%e1day deli#ery in sele$t %etro areas !e approa$h inno#ation as a dis$iplined strategi$ business pra$ti$e. It %a*es us e#en %ore $o%petiti#e !hile sa#ing %illions of dollars for years to $o%e.

'etailers $an no! sa#e lo$al $usto%ers a trip a$ross to!n by offering deli#ery !ithin hours using FedEx Sa%eDay ;ity. It !or*s the sa%e !ay for business1to1business pa$*ages. Shippers re$ei#e $onfir%ation of deli#ery the %o%ent a pa$*age arri#es. /

4A
day

%illion gallons

1 000

%iles a

30

L
goal

More sustainable practices

Energy is top of %ind at FedEx. We"re %oti#ated to $onne$t the !orld responsibly and resour$efully understanding the $hallenges that fa$e our planet. /hat"s !hy FedEx !or*s to a$hie#e our goals through EarthS%artM. It"s our road %ap to find or $reate %ore inno#ati#e !ays to i%pro#e our o!n en#iron%ental perfor%an$e and to lead the !ay for others.

our Fuel #ense progra

loo*s for e#ery possible !ay to sa#e fuel and redu$e e%issions in air$raft operations. :ast year about 40 progra%s sa#ed 4A %illion gallons of fuel a#oiding 4?? 000 %etri$ tons of ;02 e%issions. We"re s$ouring e#ery phase of air$raft operations fro% redu$ing the ti%e an air$raft has to !ait on the run!ay !ith its engines running to $reating ne! $o%puter te$hnology that deter%ines the %ost effi$ient speed of an air$raft during tra#el.

alternative energy sources are a focus across FedEx.

In a beta test FedEx Freight tra$tors po!ered by li4uefied natural gas G:N2H are logging about 1 000 %iles a day. FedEx Freight also su$$essfully tested a syntheti$ diesel fuel deri#ed fro% bio%ass. We"re !or*ing !ith /he Nature ;onser#an$y to $reate a biofuels road %ap for the long1distan$e transportation industry. 0ur o!n goal is a 301per$ent use of alternati#e fuels in our air$raft by 2030.

To help eet our new goal to increase FedEx Express vehicle fuel efficiency

30 per$ent by 2020 !e no! operate the largest fleet of light!eight $o%posite1body #ehi$les in the industry. In addition !e"#e gro!n the FedEx Express alternati#e1 #ehi$le fleet by 1I per$ent and $lean diesel #ans no! $o%prise 33 per$ent of our fleet. .t FedEx 2round !e"re i%pro#ing effi$ien$y by digitally s$anning ea$h pa$*age to deter%ine exa$tly ho! %u$h roo% it !ill ta*e up during ship%ent. We"#e eli%inated 2 300 trailers fro% the road so far.

# arter custo er solutions

FedEx !as laun$hed !ith a big idea 40 years ago and !e ha#en"t stopped loo*ing for!ard. 0ur %oti#ation is si%ple( $usto%ers depend on us to stay ahead of the ga%e so they $an $onne$t to opportunity !hether it"s in their o!n $ity or another $ountry.

sensors in one

L
hours e%issions offset
anyone using FedEx carbon1neutral envelope shipping has our assuran$e that

leading the way in sensor1based logistics is #enseaware,, a

FedEx #a eday -ity is changing custo er expectations by offering priority

s%all %ulti1sensor de#i$e that $an sense and trans%it data about six *ey ship%ent #ariables( te%perature light exposure hu%idity baro%etri$ pressure sho$* and lo$ation. Initially de#eloped for 9.S. ship%ents Sense.!are $an no! help $usto%ers %onitor #aluable ship%ents and in#entory in 1A $ountries. We"#e also %ade it a#ailable to a gro!ing list of air and ground transportation $arriers.

pi$*up and deli#ery ser#i$e in as little as three hours. /he ne! ser#i$e is ideal for businesses !hose produ$ts %ust rea$h their lo$al $usto%ers !ithin the sa%e day. /he enhan$ed ser#i$e is no! offered in 13 9.S. %etro areas and is popular !ith online and bri$*1 and1%ortar retailers the %edi$al industry %anufa$turers and businesses that rely on the 4ui$* turnaround of pa$*ages. We"re planning to expand the ser#i$e to %ore 9.S. $ities in the $o%ing year.

all $arbon dioxide G;02H e%issions asso$iated !ith their ship%ent !ill be offset. FedEx is the first global express transportation $o%pany to offer $arbon1neutral shipping at no extra $ost to our $usto%ers. We"#e gi#en $usto%ers other earth1friendly options as !ell su$h as FedEx 0ffi$e 7rint N 2o. It"s easy to send a digital file fro% a !eb1$onne$ted de#i$e or flash dri#e to be printed in the pla$e !here it"s needed + a digital alternati#e to shipping do$u%ents.

$ndustry1leading technology
.s global $hange a$$elerates our ability to turn on a di%e !ill differentiate us fro% the $o%petition. 0ur transition to hybrid $loud ar$hite$ture is big be$ause it gi#es us the agility !e need to gro! and to allo$ate $ru$ial resour$es on de%and. . $loud platfor% deli#ers $o%puting and

;I0

100 .!ard

storage $apa$ity to a $o%%unity of appli$ations and users as they need it. It"s a %u$h %ore effi$ient and flexible !ay of !or*ing.

30

L
faster

-$o aga!ine recogni!ed FedEx with its )*12 -$o 1** award for FedEx Web Ser#i$es a strea%lined e1$o%%er$e $onne$tion for businesses and $onsu%ers around the !orld that handles %ore than 23 %illion tra$*ing re4uests per day. Infor%ationWee* 300 ran*ed FedEx ;orp. No. 33 a%ong top 9.S. te$hnology inno#ators for our 7latinu% ;ore progra% !hi$h enables an auto%ated enterprise!ide release of hard!are and soft!are so I/ $an respond %ore 4ui$*ly to business needs.

%ore , fedex.$o%-.nnualreport2013

Thank s to our ove to hybrid cloud co p uting, FedEx $usto%e rs $an no! en)oy a 301per$ent redu$tion in ti%e to ship a pa$*age fro% fedex.co . /e$hnology i%pro#e%en ts ha#e strea%lined our syste%s and helped us introdu$e ne! ser#i$es.

Finan$ial @ig@lig@ts
(in millions, except earnings per share)

2013G1H

7er$ent ;hange

3evenue 6in billions7

200A 2010 >33.3 >34.C >3A.3 >42.C 8++.2

2012 0perating 'esults 'e#enues 0perating in$o%e 0perating %argin Net in$o%e
G2H

> 44 2IC > 42 ?I0 2 331 3 1I? 3.IL C.3L 1 3?1 2 032 Diluted earnings per $o%%on share 4.A1 ?.41 .#erage $o%%on and $o%%on e4ui#alent shares 31C 31C ;apital expenditures 3 3C3 4 00C

4 G20H G1C0Hbp G23H G23H O G1?H

2011 2012 )*12

9perating Margin
200A G4H 2010 2011 G3H 2012 G2H )*12 G1H 2.1L 3.IL ?.1L C.3L :..;

Finan$ial 7osition ;ash and $ash e4ui#alents /otal assets :ong1ter% debt in$luding $urrent portion ;o%%on sto$*holders" in#est%ent

> 4 A1C > 2 I43 33 3?C 2 AA0 1C 3AI 2A A03 1 ??C 14 C2C

C3 12 CA 1I
200AG4H 2010 2011G3H 2012G2H )*12G1H

<iluted Earnings 'er #hare

>0.31 >3.C? >4.3C >?.41 8+.=1

3eturn on 4verage E5uity

-o parison of Five1>ear -u ulative Total 3eturn?

>140 >120 >100 >I0 >?0 >40 3-0I 3-0A 3-10 3-11 3-12 3-13

200A G4H 2010 2011 G3H 2012 G2H )*12 G1H

0.CL I.?L 10.0L 13.?L =.0;

<ebt to Total -apitali!ation

200A 2010 2011 2012 )*12 13.AL 12.3L 10.0L 10.2L 1+.0;

200A

>33.43 >I3.4A >A3.?4 >IA.14 8=/.2+

*$100 invested on 5/31/08 in stock or index, including reinvestment o dividends! "iscal #ear ending $a# 31! (1) %esults or &013 include $5'0 million ($353 million, net o tax or $1!11 per diluted share) o (usiness realignment costs and a $100 million ($'3 million, net o tax, or $0!&0 per diluted share) impairment charge resulting rom the decision to retire 10 aircra t and related engines at "ed)x )xpress! (&) %esults or &01& include a $13* million ($8* million, net o tax or $0!&' per diluted share) impairment charge resulting rom the decision to retire &* aircra t and related engines at "ed)x )xpress and the reversal o a $'' million legal reserve initiall# recorded in &011! (3) %esults or &011 include charges o approximatel# $1++ million ($10* million, net o tax and applica(le varia(le incentive compensation impacts, or $0!33 per diluted share) or the com(ination o our "ed)x "reight and "ed)x ,ational -.- operations and a $'' million reserve associated /ith a legal matter at "ed)x )xpress! (*) %esults or &00+ include a charge o $1!& (illion ($1!1 (illion, net o tax, or $3!*5 per diluted share) primaril# or impairment charges associated /ith good/ill and aircra t!

2010 2011 2012 )*12

8.N.2E8EN/"S DIS;9SSI0N .ND .N.:&SIS 0f rES9:/S 0f 07Er./I0NS .ND fIN.N;I.: ;0NDI/I0N

0PE'PIEW 0F FIN.N;I.: SE;/I0N

/he finan$ial se$tion of the FedEx ;orporation G<FedEx=H .nnual 'eport G<.nnual 'eport=H $onsists of the follo!ing 8anage%ent"s Dis$ussion and .nalysis of 'esults of 0perations and Finan$ial ;ondition G<8DN.=H the ;onsolidated Finan$ial State%ents and the notes to the ;onsolidated Finan$ial State%ents and 0ther Finan$ial Infor%ation all of !hi$h in$lude infor%ation about our signifi$ant a$$ounting poli$ies pra$ti$es and the transa$tions that underlie our finan$ial results. /he follo!ing 8DN. des$ribes the prin$ipal fa$tors affe$ting the results of operations li4uidity $apital resour$es $ontra$tual $ash obligations and the $riti$al a$$ounting esti%ates of FedEx. /he dis$ussion in the finan$ial se$tion should be read in $on)un$tion !ith the other se$tions of this .nnual 'eport and our detailed dis$ussion of ris* fa$tors in$luded in this 8DN..

transportation $o%panyE FedEx 2round 7a$*age Syste% In$. G<FedEx 2round=H a leading North .%eri$an pro#ider of s%all1pa$*age ground deli#ery ser#i$esE and FedEx Freight In$. G<FedEx Freight=H a leading North .%eri$an pro#ider of less1than1tru$*load G<:/:=H freight ser#i$es. /hese $o%panies represent our %a)or ser#i$e lines and along !ith FedEx ;orporate Ser#i$es In$. G<FedEx Ser#i$es=H for% the $ore of our reportable seg%ents. 0ur FedEx Ser#i$es seg%ent pro#ides sales %ar*eting infor%ation te$hnology $o%%uni$ations and ba$*1offi$e support to our transportation seg%ents. In addition the FedEx Ser#i$es seg%ent pro#ides $usto%ers !ith retail a$$ess to FedEx Express and FedEx 2round shipping ser#i$es through FedEx 0ffi$e and 7rint Ser#i$es In$. G<FedEx 0ffi$e=H and pro#ides $usto%er ser#i$e te$hni$al support and billing and $olle$tion ser#i$es through FedEx /e$h;onne$t In$. G<FedEx /e$h;onne$t=H. See <'eportable Seg%ents= for further dis$ussion. /he *ey indi$ators ne$essary to understand our operating results in$lude( @ the o#erall $usto%er de%and for our #arious ser#i$es based on %a$ro1e$ono%i$ fa$tors and the global e$ono%yE @ the #olu%es of transportation ser#i$es pro#ided through our net!or*s pri%arily %easured by our a#erage daily #olu%e and ship%ent !eightE @ the %ix of ser#i$es pur$hased by our $usto%ersE @ the pri$es !e obtain for our ser#i$es pri%arily %easured by yield Gre#enue per pa$*age or pound or re#enue per hundred!eight for :/: freight ship%entsHE @ our ability to %anage our $ost stru$ture G$apital expenditures and operating expensesH to %at$h shifting #olu%e le#elsE and @ the ti%ing and a%ount of flu$tuations in fuel pri$es and our ability to re$o#er in$re%ental fuel $osts through our fuel sur$harges. /he %a)ority of our operating expenses are dire$tly i%pa$ted by re#enue and #olu%e le#els. .$$ordingly !e expe$t these operating expenses to flu$tuate on a year1o#er1year basis $onsistent !ith the $hange in re#enues and #olu%es. /herefore the dis$ussion of operating expense $aptions fo$uses on the *ey dri#ers and trends i%pa$ting expenses other than $hanges in re#enues and #olu%e. Ex$ept as other!ise spe$ified referen$es to years indi$ate our fis$al year ended 8ay 31 2013 or ended 8ay 31 of the year referen$ed and $o%parisons are to the prior year. 'eferen$es to our transportation seg%ents in$lude $olle$ti#ely our FedEx Express FedEx 2round and FedEx Freight seg%ents.

0rgani6ation of Infor%ation
0ur 8DN. is $o%posed of three %a)or se$tions( 'esults of 0perations Finan$ial ;ondition and ;riti$al .$$ounting Esti%ates. /hese se$tions in$lude the follo!ing infor%ation( @ 'esults of operations in$ludes an o#er#ie! of our $onsolidated 2013 results $o%pared to 2012 and 2012 results $o%pared to 2011. /his se$tion also in$ludes a dis$ussion of *ey a$tions and e#ents that i%pa$ted our results as !ell as our outloo* for 2014. @ /he o#er#ie! is follo!ed by a finan$ial su%%ary and analysis Gin$luding a dis$ussion of both histori$al operating results and our outloo* for 2014H for ea$h of our reportable transportation seg%ents. @ 0ur finan$ial $ondition is re#ie!ed through an analysis of *ey ele%ents of our li4uidity $apital resour$es and $ontra$tual $ash obligations in$luding a dis$ussion of our $ash flo!s and our finan1 $ial $o%%it%ents. @ ;riti$al a$$ounting esti%ates dis$usses those finan$ial state%ent ele%ents that !e belie#e are i%portant to understanding $ertain of the %aterial )udg%ents and assu%ptions in$orporated in our finan$ial results. @ We $on$lude !ith a dis$ussion of ris*s and un$ertainties that %ay i%pa$t our finan$ial and operating results.

Des$ription of 5usiness
We pro#ide a broad portfolio of transportation e1$o%%er$e and business ser#i$es through $o%panies $o%peting $olle$ti#ely operating independently and %anaged $ollaborati#ely under the respe$ted FedEx brand. 0ur pri%ary operating $o%panies are Federal Express ;orporation G<FedEx Express=H the !orld"s largest express

8anage8ent"s dis$ussion and analysis

'ES9:/S 0F 07E'./I0NS
;onsolidated 'esults
/he follo!ing table $o%pares su%%ary operating results Gdollars in %illions ex$ept per share a%ountsH for the years ended 8ay 31(

'e#enues 0perating in$o%e 0perating %argin Net in$o%e Diluted earnings per share

2013 > 44 2IC 2 331 3.IL > 1 3?1 > 4.A1

G1H

2012 > 42 ?I0 3 1I? C.3L > 2 032 > ?.41

G2H

2011 > 3A 304 2 3CI ?.1L > 1 432 > 4.3C

G3H

7er$ent ;hange 2012-2011 2013-2012 A 4 G20H 34 G1C0Hbp 140b p40 G23H G23H 40

(1) 0perating expenses include $5'0 million or (usiness realignment costs and a $100 million impairment charge resulting rom the decision to retire 10 aircra t and related engines at "ed)x )xpress! (&) 0perating expenses include an impairment charge o $13* million resulting rom the decision to retire &* aircra t and related engines at "ed)x )xpress and the reversal o a $'' million legal reserve /hich /as initiall# recorded in &011 at "ed)x )xpress! (3) 0perating expenses include $133 million in costs associated /ith the com(ination o our "ed)x "reight and "ed)x ,ational -.- operations, e ective 1anuar# 30, &011, and a $'' million legal reserve at "ed)x )xpress!

/he follo!ing table sho!s $hanges in re#enues and operating in$o%e by reportable seg%ent for 2013 $o%pared to 2012 and 2012 $o%pared to 2011 Gdollars in %illionsH(

FedEx Express seg%entG1H FedEx 2round seg%entG2H FedEx Freight seg%entG3H FedEx Ser#i$es seg%ent 0ther and eli%inations

'e#enues Dollar ;hange 7er$ent ;hange 2013-2012 2012-2011 2013-2012 2012-2011 > ?3? > 1 A34 2 I 1 003 1 0II 10 13 11A 3C1 2 I GA1H G13H G3H G1H GI2H G4H N8 N8 > 1 ?0C > 3 3C? 4 A

(1) "ed)x )xpress segment &013 operating expenses include $*05 million o retire 10 aircra t and related engines! 2dditionall#, "ed)x )xpress segment &01& operating expenses include an impairment charge o $13* million resulting rom the decision to retire &* aircra t and related engines and the reversal o a $'' million legal reserve that /as initiall# recorded in &011! (&) "ed)x 3round segment &013 operating expenses include $105 million o allocated (usiness realignment costs! (3) "ed)x "reight segment &013 operating expenses include $50 million o direct and allocated (usiness realignment costs! 2dditionall#, "ed)x "reight segment &011 operating expenses include $133 million in costs associated /ith the com(ination o our "ed)x "reight and "ed)x ,ational -.- operations, e ective 1anuar# 30, &011!

0perating In$o%e Dollar ;hange 7er$ent ;hange 2013-2012 2012-2011 2013-2012 2012-2011 > GC03H > 32 G3?H 3 24 43A 1 33 4? 33C 2I 1A3 O O O O O O O O > G?33H > G20H 34 I0I direct and allocated (usiness realignment costs and an impairment charge o $100 million resulting rom the decision to

8anage8ent"s dis$ussion and analysis

9verview
0ur results for 2013 refle$t a signifi$ant i%pa$t of $ertain $harges Gdes$ribed belo!H !hi$h negati#ely i%pa$ted our earnings by >1.31 per diluted share. 5eyond these fa$tors our results for 2013 benefited fro% the strong perfor%an$e of FedEx 2round !hi$h $ontinued to gro! %ar*et share and ongoing profit i%pro#e%ent at FedEx Freight. @o!e#er a de$line in profitability !as experien$ed at our FedEx Express seg%ent resulting fro% ongoing shifts in de%and fro% our priority international ser#i$es to e$ono%y international ser#i$es !hi$h $ould not be fully offset by net!or* $ost and $apa$ity redu$tions in 2013. 0ur 2013 results in$lude business realign%ent $osts of >3?0 %illion pri%arily related to our #oluntary $ash buyout progra% Gsee <5usiness 'ealign%ent I%pair%ent and 0ther ;harges= for additional infor%ationH. Further%ore in 8ay 2013 !e %ade the de$ision to

retire fro% ser#i$e 10 air$raft and related engines !hi$h resulted in a non$ash asset i%pair%ent $harge of >100 %illion. In addition a$tions in 2012 at FedEx Express related to fleet %odern1 i6ation resulted in the a$$elerated retire%ent of $ertain air$raft !hi$h negati#ely i%pa$ted our 2013 results by >?A %illion due to additional depre$iation re$orded for the shortened li#es of the air$raft. 0ur 2012 re#enues operating in$o%e and operating %argins refle$ted the ex$eptional perfor%an$e of our FedEx 2round seg%ent i%pro#ed profitability at FedEx Freight and in$reased yields a$ross all our operating seg%ents. 0ur results signifi$antly benefited in 2012 fro% the ti%ing lag that exists bet!een !hen fuel pri$es $hange and !hen indexed fuel sur$harges auto%ati$ally ad)ust. 0ur 2012 results in$luded the re#ersal of a >?? %illion legal reser#e initially re$orded in 2011 and an air$raft i%pair%ent $harge of >134 %illion at FedEx Express.

/he follo!ing graphs for FedEx Express FedEx 2round and FedEx Freight sho! sele$ted #olu%e trends Gin thousandsH for the years ended 8ay 31(
FedEx Express 9.S. Do%esti$ .#erage Daily 7a$*age Polu%e
2 I00 1 200 1 000 I00 2 3CC 2 343 2 300 200 2 400 2010 2011 2012 2013 0 2011 International export 2012 2013 International do%esti$ ?00 400 323 31I 3C3 34I 33A 4A3 3C? CI3

FedEx Express InternationalG1H .#erage Daily 7a$*age Polu%e

2 C00 2 ?3I 2 ?00

2 ?I4

2010

FedEx 2round .#erage Daily 7a$*age Polu%e

4 300 4 000 3 323 4 300 4 0030 C 4? 3 300 3 000 2 300 2 000 1 300 1 000 2010 1 000 2011 2010 2012 2011 2013 2012 S%art7ost 2013 C3.0 1 432 1 222 1 ?A2 2 03I I0.0 3 A0C 3 323 I3.0 3 C4? 4 222 3 A0C 4 222 A0.0

FedEx Freight .#erage Daily :/: Ship%ents

I?.0 I4.A I2.3 I3.C

3 000 2 300 2 000 1 300

2010

2011

2012

2013

FedEx 2round

FedEx Express and FedEx 2round /otal .#erage Daily 7a$*age Polu%e
10 300 10 1I4 10 000 1A0 300 A 000 I 300 IA 000 2010 I CI3

(1) 4nternational domestic average dail# package volume includes our international intra5countr# express operations, including ac6uisitions in 4ndia ("e(ruar# &011), $exico (1ul# &011), 7oland (1une &01&), "rance (1ul# &01&) and 8ra9il (1ul# &01&)!

A 230

10 1I4

I 224 I CI3 2011

A 230

2012

2013

8anage8ent"s dis$ussion and analysis

I 224 I 000 2010 2011 2012 2013

11

8anage8ent"s dis$ussion and analysis

2010 2012 2013 /he follo!ing graphs for FedEx Express FedEx 2round and FedEx Freight sho! sele$ted yield trends for 2011 the years ended 8ay 31(

FedEx Express 9.S. Do%esti$ 'e#enue per 7a$*age O &ield

>1A.00 >1I.00 >1C.12 >1C.00 >1?.00 >14.?1 >13.00 >14.00 2010 >13.00 2012101 0 2010 2012201 1 2011 2013 2013 >13.3A >14.?1 >13.3A >1C>.313C. 12 >1C.12 >1C.33 >C0.00 >?0.00 >30.00 >40.00 >30.00 >20.00 >10.00 >0

FedEx Express International 'e#enue per 7a$*age O &ield

>C0.00 >33.10 >?0.00 >30.00 >40.00 >30.00 >20.00 >C.14 >10.00 2010 >0 >C.3I >C.14 2011 >?.C4 >C.3I 2012 >?.AA >?.C4 2013 >?.AA >?0.I3 >3?.0I >3I.C2

2012301 2 2012

International export $o%posite International do%esti$ International export $o%posite International do%esti$

FedEx 2round 'e#enue per 7a$*age O &ield

>10.00 >I.1C >I.00 >?.00 >4.00 >2.00 >0 FedEx 2round 2010 2011 S%art7ost FedEx 2round 2012 S%art7ost 2013 >1.3? >1.C2 >1.I1 >1.CC >C.C3 >20.00 >I.CC >I.A4 >22.00

FedEx Freight :/: 'e#enue per @undred!eight O &ield

>1A.A4 >1A.3C >1I.24

>1I.00 >1C.0C

>1?.00

2010

2011

2012

2013

3evenue
'e#enues in$reased 4L in 2013 pri%arily dri#en by in$reases in international do%esti$ re#enue at FedEx Express and #olu%e gro!th at FedEx 2round. .t FedEx 2round re#enues in$reased 10L in 2013 pri%arily due to #olu%e gro!th fro% %ar*et share gains. .t FedEx Express re#enues in$reased 2L due to in$reases in international do%esti$ re#enues fro% re$ent a$4uisitions and gro!th in our freight1for!arding business at FedEx /rade Net!or*s. 5ase re#enue gro!th at FedEx Express in 2013 !as $onstrained by global e$ono%i$ $onditions as shifts in de%and fro% our priority international ser#i$es to our e$ono%y international ser#i$es and lo!er rates resulted in de$lines in international export pa$*age yields. .t FedEx Freight re#enues in$reased 2L as a result of higher yield and a#erage daily :/: ship%ents.

During 2012 re#enues in$reased AL due to yield gro!th a$ross all our transportation seg%ents. .t FedEx Express re#enues in$reased IL in 2012 led by higher 9.S. do%esti$ and international export pa$*age yields. @o!e#er 9.S. do%esti$ pa$*age and international export pa$*age #olu%es de$lined due to !ea*ening global e$ono%i$ $onditions. 'e#enues in$reased 13L during 2012 at our FedEx 2round seg%ent due to higher yields and strong de%and for all our %a)or ser#i$es. .t FedEx Freight re#enues in$reased IL during 2012 due to higher :/: yield as a result of higher fuel sur$harges and yield %anage%ent progra%s despite a de$rease in #olu%e.

1)

9perating $nco e
/he follo!ing tables $o%pare operating expenses expressed as dollar a%ounts Gin %illionsH and as a per$ent of re#enue for the years ended 8ay 31(

in$reases in pension and group health insuran$e $osts partially offset by lo!er in$enti#e $o%pensation a$$ruals. 0ther expenses in$reased 3L in 2013 pri%arily due to the i%pa$t of business a$4uisitions and the re#ersal in 2012 of a legal reser#e. /he follo!ing graph for our transportation seg%ents sho!s our a#erage $ost of )et and #ehi$le fuel per gallon for the years ended 8ay 31(
.#erage Fuel ;ost per 2allon
>3.00 >4.00 >3.23 >3.I0 >3.I1

2013

2012

2011

>22.00

0perating expenses( Salaries and e%ployee benefits > 1? 3C0 > 1? 0AA > 13 2C? 7ur$hased transportation C 2C2 ? 333 3 ?C4 'entals and landing fees 2 321 2 4IC 2 4?2 Depre$iation and a%orti6ation 1 AC3 Fuel >1A.3C 2 3I?
>1A.A4

2 113 4 A3?

>20.00

>1I.00

8aintenan$e>1I.24 and repairs 1 AI0 1 ACA 5usiness realign%ent i%pair%ent >1aCn.0dC other $harges ??0G1H 134G2H G3H IA 0ther G4H 3 ?C2 3 3A0 3 322 2/0o10tal operat2in01g1 expenses2012 > 4210 1C33? > 3A 4A4 > 3? A2? 7er$ent of 'e#enue 2013 2012 2011 0perating expenses( Salaries and e%ployee benefits 7ur$hased transportation 'entals and landing fees Depre$iation and a%orti6ation Fuel 8aintenan$e and repairs 5usiness realign%ent i%pair%ent and other $harges 0.2G3H 0ther G4H /otal operating expenses 0perating %argin ?.1L 3C.4L 1?.4 3.C 3.4 10.C 4.3 1.3G1H 12.I A4.2 3.IL 3C.CL 14.A 3.I 3.0 11.? 4.? 0.3G2H 12.? A2.3 C.3L 3I.AL 14.4 ?.3 3.0 10.? 3.0

4 C4? 4 131 1 A0A

>3.00

>2.?A >2.?? >2.13

>3.31

>3.22

>2.00

>1.00

2010

2011 Pehi$le

2012 Bet

2013

international ser#i$es to e$ono%y international ser#i$es and lo!er rates resulted in a substantial de$line in profitability at FedEx Express. 7ur$hased transportation in$reased 13L in 2013 due to #olu%e gro!th at FedEx 2round re$ent international business a$4uisitions and the expansion of our freight for!arding business at FedEx /rade Net!or*s. Salaries and benefits in$reased 3L in 2013 pri%arily due to

13.3 A3.A

(1) 4ncludes predominantl# severance costs associated /ith our voluntar# (u#out program and charges resulting rom the decision to retire 10 aircra t and related engines at "ed)x )xpress! (&) %epresents charges resulting rom the decision to retire &* aircra t and related engines at "ed)x )xpress! (3) %epresents charges associated /ith the com(ination o our "ed)x "reight and "ed)x ,ational -.- operations e ective 1anuar# 30, &011! (*) 4ncludes the &01& reversal o a $'' million legal reserve at "ed)x )xpress that /as initiall# recorded in &011!

0ur 2013 operating in$o%e and operating %argin de$reased pri%arily due to the i%pa$t of business realign%ent $osts air$raft i%pair%ent $harges and a$$elerated air$raft depre$iation Gsee <0#er#ie!= se$tion abo#eH. 5eyond these fa$tors operating in$o%e !as positi#ely i%pa$ted in 2013 by higher #olu%es and in$reased yields at our FedEx 2round seg%ent and by in$reased yields and higher #olu%es at our FedEx Freight seg%ent. @o!e#er the ongoing shifts in de%and fro% priority

Fuel expense de$reased 4L during 2013 pri%arily due to lo!er )et fuel pri$es and lo!er air$raft fuel usage. 0ur fuel sur$harges !hi$h are %ore fully des$ribed in the <Quantitati#e and Qualitati#e Dis$losures .bout 8ar*et 'is*= se$tion of this 8DN. ha#e a ti%ing lag and are designed to pass through the pri$e of fuel not in$luded in our base shipping rates to our $usto%ers. 5ased on a stati$ analysis of the i%pa$t to operating in$o%e of year1o#er1year $hanges in fuel pri$es $o%pared to year1o#er1year $hanges in fuel sur$harges fuel had a negati#e i%pa$t on operating in$o%e in 2013. 0ur analysis $onsiders the esti%ated i%pa$t of the redu$tion in fuel sur$harges in$luded in the base rates $harged for FedEx Express and FedEx 2round ser#i$es. @o!e#er this analysis does not $onsider the negati#e effe$ts that fuel sur$harge le#els %ay ha#e on our business in$luding redu$ed de%and and shifts by our $usto%ers to lo!er1 yielding ser#i$es. While flu$tuations in fuel sur$harge rates $an be signifi$ant fro% period to period fuel sur$harges represent one of the %any indi#idual $o%ponents of our pri$ing stru$ture that i%pa$t our o#erall re#enue and yield. .dditional $o%ponents in$lude the %ix of ser#i$es sold the base pri$e and extra ser#i$e $harges !e obtain for these ser#i$es and the le#el of pri$ing dis$ounts offered. In order to pro#ide infor%ation about the i%pa$t of fuel sur$harges on the trend in re#enue and yield gro!th !e ha#e in$luded the $o%parati#e fuel sur$harge rates in effe$t for 2013 2012 and 2011 in the a$$o%panying dis$ussions of ea$h of our transportation seg%ents. In 2012 operating in$o%e in$reased 34L and operating %argin in$reased 140 basis points dri#en by higher yields a$ross all our transportation seg%ents due to higher fuel sur$harges and our yield %anage%ent progra%s. 0ur results also signifi$antly benefited in 2012 fro% the ti%ing lag that exists bet!een !hen fuel pri$es $hange and !hen indexed fuel sur$harges auto%ati$ally ad)ust. FedEx 2round seg%ent operating in$o%e in$reased >43A %illion in 2012 dri#en by higher yields and strong de%and for all our %a)or ser#i$es. .t our FedEx Freight seg%ent operating in$o%e in$reased >33C %illion due to higher :/: yield and effi$ien$ies gained fro% the $o%bination of our :/: operations in 2011.

Salaries and benefits in$reased 3L in 2012 pri%arily due to higher in$enti#e $o%pensation $osts and the full reinstate%ent of 401G*H $o%pany1%at$hing $ontributions effe$ti#e Banuary 1 2011. 7ur$hased transportation $osts in$reased 12L in 2012 due to #olu%e gro!th and higher fuel sur$harges at FedEx 2round $osts asso$iated !ith the expansion of our freight for!arding business at FedEx /rade Net!or*s and higher utili6ation of third1party transportation pro#iders in international lo$ations pri%arily due to business a$4uisitions at FedEx Express. Fuel expense in$reased 1AL during 2012 pri%arily due to pri$e in$reases. 5ased on a stati$ analysis of the i%pa$t to operating in$o%e of year1o#er1year $hanges in fuel pri$es $o%pared to year1 o#er1year $hanges in fuel sur$harges fuel sur$harges signifi$antly ex$eeded in$re%ental fuel $osts in 2012.

3?4

9ther $nco e and Expense

Interest expense in$reased >30 %illion in 2013 pri%arily due to a redu$tion in $apitali6ed interest and in$reased interest expense fro% 2013 debt issuan$es. 0ther expense in$reased in 2013 dri#en by foreign $urren$y translation due to global $urren$y #olatility. Interest expense de$reased >34 %illion in 2012 due to debt %aturities an in$rease in $apitali6ed interest related to the ti%ing of progress pay1 %ents on air$raft pur$hases and lo!er finan$ing fees.

$nco e Taxes
0ur effe$ti#e tax rate !as 3?.4L in 2013 33.3L in 2012 and 33.AL in 2011. 0ur 2012 rate !as fa#orably i%pa$ted by the $on$lusion of the Internal 'e#enue Ser#i$e G<I'S=H audit of our 200C1 200A $onsoli1 dated in$o%e tax returns. 0ur per%anent rein#est%ent strategy !ith respe$t to unre%itted earnings of our foreign subsidiaries pro#ided a 1.2L benefit to our 2013 effe$ti#e tax rate. 0ur total per%anently rein#ested foreign earnings !ere >1.3 billion at the end of 2013 and >1.0 billion at the end of 2012. 0ur $urrent federal in$o%e tax expenses in 2013 2012 and 2011 !ere signifi$antly redu$ed by a$$elerated depre$iation dedu$tions !e $lai%ed under pro#isions of the .%eri$an /axpayer 'elief .$t of 2013 and the /ax 'elief and the S%all 5usiness Bobs .$ts of 2010. /hose .$ts designed to sti%ulate ne! business in#est%ent in the 9.S. a$$elerated our depre$iation dedu$tions for 4ualifying in#est%ents su$h as our 5oeing CCC Freighter G<5CCCF=H air$raft. /hese !ere ti%ing benefits only in that depre$iation a$$elerated into an earlier year is foregone in later years. 0ur 2013 $urrent pro#ision for federal in$o%e taxes !as therefore higher than in 2012 and 2011. /he $o%ponents of the pro#ision for federal in$o%e taxes for the years ended 8ay 31 !ere as follo!s Gin %illionsH(

;urrent Deferred /otal Federal 7ro#ision

2013 > 312 1C3 > ?IC

2012 > G120H A4C > I2C

2011 > CA 4I3 >

For 2014 !e expe$t our effe$ti#e tax rate to be bet!een 3?.3L and 3C.0L. /he a$tual rate ho!e#er !ill depend on a nu%ber of fa$tors in$luding the a%ount and sour$e of operating in$o%e. We also expe$t our $urrent federal in$o%e tax expense !ill in$rease in 2014 due to lo!er a$$elerated depre$iation benefits than in prior years. .dditional infor%ation on in$o%e taxes in$luding our effe$ti#e tax rate re$on$iliation liabilities for un$ertain tax positions and our global tax profile $an be found in Note 12 of the a$$o%panying $onsolidated finan$ial state%ents.

Ausiness 4c5uisitions
During 2013 !e expanded the international ser#i$e offerings of FedEx Express by $o%pleting the follo!ing business a$4uisitions( @ 'apidRo ;o%eta :ogSsti$a e /ransporte S... a 5ra6ilian transporta1 tion and logisti$s $o%pany for >3AI %illion in $ash fro% operations on Buly 4 2012 @ /./ET a Fren$h express transportation $o%pany for >33 %illion in $ash fro% operations on Buly 3 2012 @ 0pe* Sp. 6 o.o. a 7olish do%esti$ express pa$*age deli#ery $o%1 pany for >34 %illion in $ash fro% operations on Bune 13 2012 /hese a$4uisitions gi#e us %ore robust transportation net!or*s !ithin these $ountries and added $apabilities in these i%portant interna1 tional %ar*ets. See Note 3 of the a$$o%panying $onsolidated finan$ial state%ents for further dis$ussion of these a$4uisitions. In 2012 !e $o%pleted our a$4uisition of Ser#i$ios Na$ionales 8upa S... de ;.P. G8ulti7a$*H a 8exi$an do%esti$ express pa$*age deli#ery $o%pany for >12I %illion in $ash fro% operations on Buly 23 2011. In 2011 !e $o%pleted the a$4uisition of the Indian logisti$s distribution and express businesses of .F: 7#t. :td. and its affiliate 9nifreight India 7#t. :td. for >A? %illion in $ash fro% operations on February 22 2011. /he finan$ial results of these a$4uired businesses are in$luded in the FedEx Express seg%ent fro% the date of a$4uisition and !ere not %aterial indi#idually or in the aggregate to our results of operations and therefore pro for%a finan$ial infor%ation has not been presented. Substantially all of the pur$hase pri$e in ea$h of these a$4uisitions !as allo$ated to good!ill !hi$h !as entirely attributed to our FedEx Express reporting unit. 0n Bune 20 2013 !e signed agree%ents to a$4uire the businesses operated by our $urrent ser#i$e pro#ider Supas!ift G7tyH :td. in fi#e $ountries in Southern .fri$a. /he a$4uisition !ill be funded !ith $ash fro% operations and is expe$ted to be $o%pleted in the se$ond half of 2014 sub)e$t to $usto%ary $losing $onditions. /he finan$ial results of the a$4uired businesses !ill be in$luded in the FedEx Express seg%ent fro% the date of a$4uisition and !ill be i%%aterial to our 2014 results.

Ausiness 3ealign ent, $ pair ent and 9ther -harges

During 2013 !e announ$ed profit i%pro#e%ent progra%s pri%arily through initiati#es at FedEx Express and FedEx Ser#i$es that in$lude the follo!ing( @ ;ost redu$tions in selling general and ad%inistrati#e fun$tions through head$ount redu$tions strea%lining of pro$esses and eli%i1 nation of less essential !or* as !ell as deri#ing greater #alue fro% strategi$ sour$ing @ 8oderni6ation of our air$raft fleet transfor%ation of the 9.S. do%esti$ operations and international profit i%pro#e%ents at FedEx Express @ I%pro#ed effi$ien$ies and lo!er $osts of infor%ation te$hnology at FedEx Ser#i$es During 2013 !e $ondu$ted a progra% to offer #oluntary $ash buyouts to eligible 9.S.1based e%ployees in $ertain staff fun$tions. /he #oluntary buyout progra% in$ludes #oluntary se#eran$e pay%ents and funding to health$are rei%burse%ent a$$ounts !ith the #oluntary se#eran$e $al$ulated based on four !ee*s of gross base salary for e#ery year of FedEx ser#i$e up to a %axi%u% pay%ent of t!o years of pay. /his progra% !as $o%pleted in the fourth 4uarter and approxi%ately 3 ?00 e%ployees ha#e left or !ill be #oluntarily lea#ing the $o%pany by the end of 2014. Eligible e%ployees are s$heduled to #a$ate positions in phases to ensure a s%ooth transition in the i%pa$ted fun$tions so that !e %aintain ser#i$e le#els to our $usto%1 ers. 0f the total population lea#ing the $o%pany approxi%ately 40L of the e%ployees #a$ated positions on 8ay 31 2013. .n additional 33L !ill depart throughout 2014 and approxi%ately 23L of this popu1 lation !ill re%ain until 8ay 31 2014. ;osts of the benefits pro#ided under the #oluntary progra% !ere re$ogni6ed as spe$ial ter%ination benefits in the period that eligible e%ployees a$$epted their offers. We in$urred $osts of >3?0 %illion G>333 %illion net of tax or >1.11 per diluted shareH during 2013 asso$iated !ith our business realign1 %ent a$ti#ities. /hese $osts related pri%arily to se#eran$e for e%ployees !ho a$$epted #oluntary buyouts in the third and fourth 4uarters of 2013. 7ay%ents !ill be %ade at the ti%e of departure. .pproxi%ately >1I0 %illion !as paid under this progra% during 2013. /he $ost of the buyout progra% is in$luded in the $aption <5usiness realign%ent i%pair%ent and other $harges= in our $onsolidated state%ents of in$o%e. .lso in$luded in that $aption are other external $osts dire$tly attributable to our business realign%ent a$ti#ities su$h as professional fees. In addition a$tions in 2012 at FedEx Express related to fleet %odern1 i6ation resulted in a$$elerated depre$iation of >?A %illion in 2013 in$luded in the $aption <Depre$iation and a%orti6ation= in our $onsolidated state%ents of in$o%e as !e shortened the li#es of $ertain air$raft. In 8ay 2013 !e %ade the de$ision to retire fro% ser#i$e t!o .irbus .3101200 air$raft and four related engines three .irbus .3101300 air$raft and t!o related engines and fi#e 5oeing 8D101 10 air$raft and 13 related engines. .s a $onse4uen$e of this

de$ision a non$ash i%pair%ent $harge of >100 %illion G>?3 %illion net of tax or >0.20

per diluted shareH !as re$orded in the fourth 4uarter. /he de$ision to retire these air$raft !hi$h !ere te%porarily idled and not in re#enue ser#i$e aligns !ith the plans of FedEx Express to %oderni6e its air$raft fleet and i%pro#e its global net!or*. In 8ay 2012 !e retired fro% ser#i$e 24 air$raft and related engines the %a)ority of !hi$h !ere te%porarily idled and not in re#enue ser1 #i$e. .s a $onse4uen$e of this de$ision a non$ash i%pair%ent $harge of >134 %illion G>I4 %illion net of tax or >0.2? per diluted shareH !as re$orded in the fourth 4uarter of 2012. See the <:ong1li#ed .ssets= se$tion of our <;riti$al .$$ounting Esti%ates= for a dis$ussion of our a$$ounting for air$raft retire%ent de$isions.

2014 $apital pro)e$ts refer to the <;apital 'esour$es= and <:i4uidity 0utloo*= se$tions of this 8DN..

9utlook
We anti$ipate re#enue and earnings gro!th in 2014 dri#en by the $ontinued strong perfor%an$e of our FedEx 2round and FedEx Freight businesses and i%pro#ing perfor%an$e at FedEx Express. 0ur expe$ted results for 2014 !ill be $onstrained by %oderate gro!th in the global e$ono%y and $ontinued $hallenges fro% the de%and shift trend fro% our priority international ser#i$es to our e$ono%y interna1 tional ser#i$es. In response to these trends !e !ill be e#aluating additional $apa$ity redu$tions and other a$tions in 2014. During 2014 !e !ill in$ur in$re%ental $osts to transfor% our infor%ation te$hnol1 ogy operations at FedEx Ser#i$es in $onne$tion !ith our profit i%pro#e%ent progra%s !hi$h !ill in$rease the $osts allo$ated to our transportation seg%ents. In 8ay 2013 in $on)un$tion !ith the retire%ent of air$raft FedEx Express shortened the depre$iable li#es of C? air$raft and related engines. .s a result of this de$ision and the 2012 de$ision to shorten the depre$iable li#es of 34 air$raft !e expe$t to in$ur additional year1o#er1year a$$elerated depre$iation expense of >C4 %illion in 2014. @o!e#er lo!er pension expense in 2014 !ill positi#ely i%pa$t our operating results. In addition to $ontinued profit i%pro#e%ents in the base businesses at FedEx 2round and FedEx Freight our profit i%pro#e%ent progra%s announ$ed in 2013 are targeting annual profitability i%pro#e%ent of >1.? billion at FedEx Express by the end of 201? Gfro% the full year 2013 base businessH. ;olle$ti#ely these initiati#es are expe$ted to in$rease %argins i%pro#e $ash flo!s and in$rease our $o%petiti#e1 ness. @o!e#er the a%ount of benefit ulti%ately reali6ed !ill #ary depending upon future $usto%er de%and parti$ularly for priority international ser#i$es. We expe$t to begin reali6ing a portion of the benefits of these progra%s in 2014E ho!e#er the %a)ority of the benefits in$luding those fro% our #oluntary se#eran$e progra% !ill not o$$ur until 2013 and 201?. 0ur $apital expenditures for 2014 are expe$ted to in$rease to approxi1 %ately >4.0 billion for additional air$raft deli#eries in 2014 to support our fleet %oderni6ation progra% and $ontinued expansion of the FedEx 2round net!or*. We !ill $ontinue to e#aluate our in#est%ents in $riti$al long1ter% strategi$ pro)e$ts to ensure our $apital expenditures generate high returns on in#est%ents and are balan$ed !ith our outloo* for global e$ono%i$ $onditions. For additional details on *ey

0ur outloo* is dependent upon a stable pri$ing en#iron%ent for fuel as #olatility in fuel pri$es i%pa$ts our fuel sur$harge le#els fuel expense and de%and for our ser#i$es. @istori$ally our fuel sur$harges ha#e largely offset in$re%ental fuel $ostsE ho!e#er #olatility in fuel $osts %ay i%pa$t earnings be$ause ad)ust%ents to our fuel sur$harges lag $hanges in a$tual fuel pri$es paid. /herefore the trailing i%pa$t of ad)ust%ents to our fuel sur$harges $an signifi$antly affe$t our earnings either positi#ely or negati#ely in the short1ter%. .s des$ribed in Note 1I of the a$$o%panying $onsolidated finan$ial state%ents and the <Independent ;ontra$tor 8odel= se$tion of our FedEx 2round seg%ent 8DN. !e are in#ol#ed in a nu%ber of la!suits and other pro$eedings that $hallenge the status of FedEx 2round"s o!ner1operators as independent $ontra$tors. FedEx 2round anti$ipates $ontinuing $hanges to its relationships !ith its o!ner1 operators. /he nature ti%ing and a%ount of any $hanges are dependent on the out$o%e of nu%erous future e#ents. We $annot reasonably esti%ate the potential i%pa$t of any su$h $hanges or a %eaningful range of potential out$o%es although they $ould be %aterial. @o!e#er !e do not belie#e that any su$h $hanges !ill i%pair our ability to operate and profitably gro! our FedEx 2round business. See <'is* Fa$tors= for a dis$ussion of these and other potential ris*s and un$ertainties that $ould %aterially affe$t our future perfor%an$e.

'e$ent .$$ounting 2uidan$e

Ne! a$$ounting rules and dis$losure re4uire%ents $an signifi$antly i%pa$t our reported results and the $o%parability of our finan$ial state%ents. 0n Bune 1 2012 !e adopted the authoritati#e guidan$e issued by the Finan$ial .$$ounting Standards 5oard G<F.S5=H on the presentation of $o%prehensi#e in$o%e. /he ne! guidan$e re4uires $o%panies to report $o%ponents of $o%prehensi#e in$o%e by in$luding $o%pre1 hensi#e in$o%e on the fa$e of the in$o%e state%ent or in a separate state%ent of $o%prehensi#e in$o%e. We ha#e adopted this guidan$e by in$luding a separate state%ent of $o%prehensi#e in$o%e GlossH for the three years ending 8ay 31 2013 and by in$luding expanded a$$u%ulated other $o%prehensi#e in$o%e dis$losure re4uire%ents in the notes to our $onsolidated finan$ial state%ents. In addition on Bune 1 2012 !e adopted the F.S5"s a%end%ents to the fair #alue %easure%ents and dis$losure re4uire%ents !hi$h expanded existing dis$losure re4uire%ents regarding the fair #alue of our long1ter% debt. In February 2013 the F.S5 issued ne! guidan$e re4uiring additional infor%ation about re$lassifi$ation ad)ust%ents out of $o%prehensi#e in$o%e in$luding $hanges in $o%prehensi#e in$o%e balan$es by $o%ponent and signifi$ant ite%s re$lassified out of $o%prehensi#e in$o%e. /his ne! standard is effe$ti#e for our fis$al year ending 8ay 31 2014 and !ill ha#e no i%pa$t on our finan$ial $ondition or results of operations. In 8ay 2013 the F.S5 issued a re#ised exposure draft outlining proposed $hanges to the a$$ounting for leases. 9nder the re#ised exposure draft the re$ognition %easure%ent and presentation of expenses and $ash flo!s arising fro% a lease !ould depend pri%arily on !hether the lessee is expe$ted to $onsu%e %ore than an insig1 nifi$ant portion of the e$ono%i$ benefits e%bedded in the underlying asset. . right1of1use asset and a liability to %a*e lease pay%ents !ill be re$ogni6ed on the balan$e sheet for all leases Gex$ept short1 ter% leasesH. /he ena$t%ent of this proposal !ill ha#e a signifi$ant i%pa$t on our a$$ounting and finan$ial reporting. /he F.S5 has not yet proposed an effe$ti#e date of this proposal. We belie#e that no other ne! a$$ounting guidan$e !as adopted or issued during 2013 that is rele#ant to the readers of our finan$ial state%ents. @o!e#er there are nu%erous ne! proposals under de#el1 op%ent !hi$h if and !hen ena$ted %ay ha#e a signifi$ant i%pa$t on our finan$ial reporting.

#easonality of Ausiness
0ur businesses are $y$li$al in nature as seasonal flu$tuations affe$t #olu%es re#enues and earnings. @istori$ally the 9.S. express pa$*1 age business experien$es an in$rease in #olu%es in late No#e%ber and De$e%ber. International business parti$ularly in the .sia1to19.S. %ar*et pea*s in 0$tober and No#e%ber in ad#an$e of the 9.S. holi1 day sales season. 0ur first and third fis$al 4uarters be$ause they are su%%er #a$ation and post !inter1holiday seasons ha#e histori$ally experien$ed lo!er #olu%es relati#e to other periods. Nor%ally the fall is the busiest shipping period for FedEx 2round !hile late De$e%ber Bune and Buly are the slo!est periods. For FedEx Freight the spring and fall are the busiest periods and the latter part of De$e%ber through February is the slo!est period. For FedEx 0ffi$e the su%%er %onths are nor%ally the slo!est periods. Ship%ent le#els operating $osts and earnings for ea$h of our $o%panies $an also be ad#ersely affe$ted by in$le%ent !eather parti$ularly the i%pa$t of se#ere !inter !eather in our third fis$al 4uarter.

'eportable Seg%ents
FedEx Express FedEx 2round and FedEx Freight represent our %a)or ser#i$e lines and along !ith FedEx Ser#i$es for% the $ore of our reportable seg%ents. 0ur reportable seg%ents in$lude the follo!ing businesses(
FedEx Express Seg%ent

FedEx 2round Seg%ent

@ FedEx Express Gexpress transportationH @ FedEx /rade Net!or*s Gair and o$ean freight for!arding and $usto%s bro*erageH @ FedEx Supply;hain Syste%s Glogisti$s ser#i$esH @ FedEx 2round Gs%all1pa$*age ground deli#eryH @ FedEx S%art7ost Gs%all1par$el $onsolidatorH

/he FedEx Ser#i$es seg%ent pro#ides dire$t and indire$t support to our transportation businesses and !e allo$ate all of the net operat1 ing $osts of the FedEx Ser#i$es seg%ent Gin$luding the net operating results of FedEx 0ffi$eH to refle$t the full $ost of operating our transportation businesses in the results of those seg%ents. Within the FedEx Ser#i$es seg%ent allo$ation the net operating results of FedEx 0ffi$e !hi$h are an i%%aterial $o%ponent of our allo$ations are allo$ated to FedEx Express and FedEx 2round. /he allo$ations of net operating $osts are based on %etri$s su$h as relati#e re#1 enues or esti%ated ser#i$es pro#ided. We belie#e these allo$ations approxi%ate the net $ost of pro#iding these fun$tions. We re#ie! and e#aluate the perfor%an$e of our transportation seg%ents based on operating in$o%e Gin$lusi#e of FedEx Ser#i$es seg%ent allo$ationsH. For the FedEx Ser#i$es seg%ent perfor%an$e is e#aluated based on the i%pa$t of its total allo$ated net operating $osts on our transporta1 tion seg%ents. /he operating expenses line ite% <Inter$o%pany $harges= on the a$$o%panying unaudited finan$ial su%%aries of our transportation seg%ents refle$ts the allo$ations fro% the FedEx Ser#i$es seg%ent to the respe$ti#e transportation seg%ents. /he <Inter$o%pany $harges= $aption also in$ludes $harges and $redits for ad%inistrati#e ser#i$es pro#ided bet!een operating $o%panies and $ertain other $osts su$h as $orporate %anage%ent fees related to ser#i$es re$ei#ed for gen1 eral $orporate o#ersight in$luding exe$uti#e offi$ers and $ertain legal and finan$e fun$tions. We belie#e these allo$ations approxi%ate the net $ost of pro#iding these fun$tions.

@ FedEx Freight G:/: freight transportationH @ FedEx ;usto% ;riti$al Gti%e1$riti$al transportationH FedEx Ser#i$es Seg%ent @ FedEx Ser#i$es Gsales %ar*eting infor%ation te$hnology $o%%uni$ations and ba$*1offi$e fun$tionsH @ FedEx /e$h;onne$t G$usto%er ser#i$e te$hni$al support billings and $olle$tionsH @ FedEx 0ffi$e Gdo$u%ent and business ser#i$es and pa$*age a$$eptan$eH
FedEx Freight Seg%ent

0ther Interseg%ent /ransa$tions

;ertain FedEx operating $o%panies pro#ide transportation and related ser#i$es for other FedEx $o%panies outside their reportable seg%ent. 5illings for su$h ser#i$es are based on negotiated rates !hi$h !e belie#e approxi%ate fair #alue and are refle$ted as re#enues of the billing seg%ent. /hese rates are ad)usted fro% ti%e to ti%e based on %ar*et $onditions. Su$h interseg%ent re#enues and expenses are eli%inated in our $onsolidated results and are not separately identi1 fied in the follo!ing seg%ent infor%ation be$ause the a%ounts are not %aterial.

FedEx Ser#i$es Seg%ent

/he FedEx Ser#i$es seg%ent operates $o%bined sales %ar*eting ad%inistrati#e and infor%ation te$hnology fun$tions in shared ser1 #i$es operations that support our transportation businesses and allo! us to obtain synergies fro% the $o%bination of these fun$tions. For the international regions of FedEx Express so%e of these fun$tions are perfor%ed on a regional basis by FedEx Express and reported in the FedEx Express seg%ent in their natural expense line ite%s. /he FedEx Ser#i$es seg%ent in$ludes( FedEx Ser#i$es !hi$h pro#ides sales %ar*eting infor%ation te$hnology $o%%uni$ations and ba$*1 offi$e support to our other $o%paniesE FedEx /e$h;onne$t !hi$h is responsible for $usto%er ser#i$e te$hni$al support billings and $olle$tions for 9.S. $usto%ers of our %a)or business unitsE and FedEx 0ffi$e !hi$h pro#ides an array of do$u%ent and business ser#i$es and retail a$$ess to our $usto%ers for our pa$*age transportation businesses.

FedEx Express Seg%ent

FedEx Express offers a !ide range of 9.S. do%esti$ and international shipping ser#i$es for deli#ery of pa$*ages and freight in$luding priority ser#i$es !hi$h pro#ide ti%e1definite deli#ery !ithin one t!o or three business days !orld!ide and deferred or e$ono%y ser#i$es !hi$h pro#ide ti%e1definite deli#ery !ithin fi#e business days !orld!ide.

expenses as a per$ent of re#enue operating in$o%e and operating %argin Gdollars in %illionsH for the years ended 8ay 31(

2013

2012

2011

2013 2011 'e#enues( 7a$*age( 9.S. o#ernight box > ? 313 9.S. o#ernight en#elope 1 C03 9.S. deferred 3 020 /otal 9.S. do%esti$ pa$*age re#enue 11 23I International priority ? 3I? International e$ono%y 2 04? /otal international export pa$*age re#enue I ?32 G1H International do%esti$ 1 3AI /otal pa$*age re#enue 21 2?I Freight( 9.S. 2 3?2 International priority 1 ?CI International airfreight 2C? /otal freight re#enue 4 31? 0therG2H 1 3IC /otal re#enues 2C 1C1 0perating expenses( Salaries and e%ployee benefits 10 043 7ur$hased transportation 2 331 'entals and landing fees 1 ?I4 Depre$iation and a%orti6ation 1 330 Fuel 4 130 8aintenan$e and repairs 1 244 5usiness realign%ent i%pair%ent and other $hargesG3H 243 Inter$o%pany $hargesG4H 2 3CA 0therG3H 3 210 /otal operating expenses 2? ?1? 0perating in$o%e > 333 0perating %argin
G?H

2012

0perating expenses( 7er$ent Salaries and e%ployee benefits ;hange 7ur$hased transportation 2013- 2012'entals and landing fees 2012 2011 Depre$iation and a%orti6ation Fuel G1H G2H 1 O G4H 10 G1H ?4 2 C 1 C ? 1 2C ? 31 C 14 ? I 10 23 I

3C.0L I.? ?.2 3.0 13.2

3?.4L ?.A ?.3 4.4 1?.2 3.0 0.3 I.3 11.2 A3.2 4.IL

3C.4L ?.4 ?.I 4.3 14.4 3.3 O I.3 11.A A3.0 3.0L

> ? 34? > ? 12I 1 C4C 1 C3? 3 001 2 I03 11 2A4 ? I4A 1 I3A I C0I I33 20 I33 2 4AI 1 I2C 30C 4 ?32 1 02I 2? 313 10 ??A ? C?0 1 4?I I 22I ?33 1A 330

8aintenan$e and repairs 4.? 5usiness realign%ent i%pair%ent and other $hargesG3H 0.A Inter$o%pany $hargesG4H I.C 0therG3H 11.I /otal operating expenses AI.0 0perating %arginG?H 2.0L

2 1II 3 1 C22 GIH 2I3 G10H 4 1A3 G3H I3I 33 24 3I1 2

(1) 4nternational domestic revenues include our international intra5countr# express operations including ac6uisitions in 4ndia ("e(ruar# &011), $exico (1ul# &011), 7oland (1une &01&), "rance (1ul# &01&) and 8ra9il (1ul# &01&)! (&) 4ncludes "ed)x .rade ,et/orks and "ed)x :uppl#;hain :#stems! (3) &013 includes $1*3 million o predominantl# severance costs associated /ith our voluntar# (u#out program and a $100 million impairment charge resulting rom the decision to retire 10 aircra t and related engines! &01& represents impairment charges resulting rom the decision to retire &* aircra t and related engines! (*) 4ncludes allocations o $&'& million in &013 or (usiness realignment costs! (5) 4ncludes the &01& reversal o a $'' million legal reserve that /as initiall# recorded in &011! (') .he direct and indirect charges descri(ed in notes (3) and (*) a(ove reduced &013 operating margin (# 1+0 (asis points! .he charges and credit descri(ed in notes (3) and (5) a(ove reduced &01& operating margin (# &0 (asis points!

A ?3C 1 I2I 1 ?I0 1 1?A 4 304 1 332

A 1I3 1 3C3 1 ?C2 1 03A 3 333 1 333

4 2I O 13 G4H GCH

3 1? O 10 21 G2H

134 2 1A3 2 A3I 23 233

O N8 2 043 I 2 A1C A 23 333 3

N8 C 1 I

2.0L

> 1 2?0 > 1 22I G3?H 3 4.IL 3.0L G2I0Hbp G20Hbp

/he follo!ing table $o%pares sele$ted statisti$s Gin thousands ex$ept yield a%ountsH for the years ended 8ay 31(

FedEx Express #eg ent 3evenues

FedEx Express seg%ent re#enues in$reased 2L in 2013 pri%arily due to the i%pa$t of ne! business a$4uisitions and gro!th in our freight1 for!arding business at FedEx /rade Net!or*s. ;ore re#enue gro!th !as $onstrained by global e$ono%i$ $onditions as re#enue gro!th fro% higher international export #olu%e !as offset by de$reased yields due to shifts in de%and fro% our priority international ser#i$es to our e$ono%y international ser#i$es as !ell as lo!er rates. In 2013 international do%esti$ re#enues in$reased ?4L due to re$ent a$4uisi1 tions in 5ra6il Fran$e and 7oland. International export re#enues !ere do!n in 2013 as re#enue per pa$*age de$reased 3L due to the de%and shift to our lo!er1yielding e$ono%y ser#i$es and lo!er rates !hile #olu%e in$reased 3L dri#en by our e$ono%y ser#i$es. . de$rease

2013 2012 7a$*age Statisti$sG1H .#erage daily pa$*age #olu%e G.DPH( 9.S. o#ernight box 9.S. o#ernight en#elope 1 134 1 14? 1 1I4 9.S. deferred /otal 9.S. do%esti$ .DP 23C4 343 23I? 3CC 2?2C ?I4 I33 I43 IC3 International priority 421 421 43A International e$ono%y 133 13I 11? /otal international export .DP 3C? 33A 3C3 International do%esti$G2H CI3 4A3 34I /otal .DP 3 A04 3 ?31 3 ?0C 1 'e#enue per pa$*age GyieldH( 9.S. o#ernight box > 22.32 > 22.31 > 20.2A 10 9.S. o#ernight en#elope 11.?? 11.?3 10.I? 9.S. deferred 14.1I 13.IC 12.?0 9.S. do%esti$ $o%posite 1C.33 1C.12 13.3A International priority ?1.2I ?3.4C 3C.?I International e$ono%y 31.CC 32.CC 4A.C? International export $o%posite 3I.C2 ?0.I3 3?.0I G2H International do%esti$ ?.AA ?.C4 C.3I ;o%posite pa$*age yield 21.3? 22.44 21.23 Freight Statisti$sG1H .#erage daily freight pounds( 9.S. C ?12 C 4IC C 340

7er$ent ;hange 2013- 20122011 2012 2011

G1H G2H G1H G1H O 12 3 3A I

G3H GCH G4H G3H GIH 1A

in 9.S. do%esti$ pa$*age #olu%es %ore than offset an in$rease in 9.S. do%esti$ pa$*age yield resulting in slightly lo!er 9.S. do%esti$ G3H pa$*age re#enues in 2013. /otal a#erage daily freight pounds 42 de$reased 2L in 2013 due to !ea*ness in e$ono%i$ global $onditions.

1 O 2 1 G3H G2H G3H 4 G3H

FedEx Express seg%ent re#enues in$reased IL in 2012 pri%arily due to an in$rease in 9.S. do%esti$ and international export pa$*age yields partially offset by de$reases in 9.S. do%esti$ and interna1 tional export pa$*age #olu%es. In 2012 9.S. do%esti$ pa$*age yields in$reased 10L due to higher fuel sur$harges and C in$reased rate per pound. International export pa$*age yields 10 in$reased IL in 2012 due to higher fuel sur$harges in$reased 10 pa$*age !eights and in$reased rate per pound. ;ontinued softness 10 in the global e$ono%y resulted in de$reased de%and for our 9.S. do%esti$ and international ? export pa$*age ser#i$es in 2012. International export re#enue gro!th !as negati#ely i%pa$ted by a lo!er1yielding %ix of ser#i$es I $onsisting of gro!th in deferred ser#i$es and de$lines in pre%iu% GAH ser#i$es.

0ur fuel sur$harges are indexed to the spot pri$e for )et fuel. 9sing this index the 9.S. do%esti$ and outbound fuel sur$harge and the international fuel sur$harges ranged as follo!s for the years ended 8ay 31(

2013 9.S. Do%esti$ and 0utbound Fuel Sur$harge(

2012

2011

Low 7.00%
International priority International airfreight /otal a#erage daily freight pounds 3 04I 3 303 3 1I4 1 0?? 1 1C1 1 233 11 C2? 11 A?1 11 C3A 2 1.30 > 2.1? 1.02 1.31 1.1C 2.12 0.A0 1.40 2 O G1H O GIH GAH G2H 4 G3H @igh Weighted1a#erage

10.00% 11.50%
14.30 1?.30 13.30 11.I4 14.23 A.C C include our international intra5countr# express operations,

(&) 4nternational domestic statistics including ac6uisitions in 4ndia ("e(ruar# &011), $exico (1ul# &011), 7oland (1une &01&), "rance (1ul# &01&) and 8ra9il (1ul# &01&)!

'e#enue per pound GyieldH( 9.S. > 1.32 > International priority 2.1? International airfreight 1.01 ;o%posite freight yield 1.31

11 2 13 I

(1) 7ackage and reight statistics include onl# the operations o "ed)x )xpress!

International Fuel Sur$harges( :o! @igh Weighted1a#erage 12.00 13.30 C.00 20.30 23.00 21.00 1C.02 1C.43 12.3?

In both Banuary 2013 and 2012 !e i%ple%ented a 3.AL a#erage list pri$e in$rease for FedEx Express 9.S. do%esti$ 9.S. export and 9.S. i%port ser#i$es !hile !e lo!ered our fuel sur$harge index by t!o per$entage points.

FedEx Express #eg ent 9perating $nco e

FedEx Express seg%ent operating results !ere negati#ely i%pa$ted by >403 %illion of $osts asso$iated !ith our business realign%ent progra% both dire$tly and through inter$o%pany allo$ations. .dditionally results for 2013 !ere negati#ely i%pa$ted by a >100 %illion i%pair%ent $harge as a result of the de$ision to retire 10 air$raft and related engines fro% ser#i$e. FedEx Express in$urred >?A %illion in year1o#er1year in$re%ental depre$iation $osts in 2013 due to the de$ision in 2012 to a$$elerate the retire%ent of $ertain air$raft. 0perating in$o%e and operating %argin also de$reased in 2013 due to the de%and shift to!ard lo!er1yielding international ser#i$es. 0perating $o%parisons !ere also i%pa$ted by an air$raft i%pair%ent $harge in 2012 and a legal reser#e a$$rual re#ersal as dis$ussed belo!. 7ur$hased transportation $osts in$reased 2IL in 2013 due to re$ent business a$4uisitions and $osts asso$iated !ith the expansion of our freight for!arding business at FedEx /rade Net!or*s. Salaries and benefits in$reased 4L in 2013 due to re$ent a$4uisitions and higher pension $osts partially offset by lo!er in$enti#e $o%pensation a$$ruals. 0ther operating expenses in$reased AL due to the i%pa$t of re$ent business a$4uisitions and the negati#e year1o#er1year $o%1 parison of the legal reser#e a$$rual re#ersal in 2012. Depre$iation and a%orti6ation expense in$reased 13L in 2013 as a result of air$raft re$ently pla$ed into ser#i$e and a$$elerated depre$iation due to the shortened life of $ertain air$raft. FedEx Express air$raft %aintenan$e and repairs $osts are largely dri#en by air$raft utili6ation and re4uired periodi$ %aintenan$e e#ents. When ne!er air$raft are introdu$ed into our operating fleet less %aintenan$e $osts are in$urred. .s a part of our fleet %oderni6ation progra% FedEx Express has retired older less effi$ient air$raft prior to re4uired periodi$ %aintenan$e e#ents and has introdu$ed ne!ly %anufa$tured air$raft into the fleet. .s a result a de$rease in %aintenan$e and repairs $osts !as experien$ed in 2013 and 2012. Fuel $osts de$reased 4L in 2013 due to lo!er )et fuel pri$es and lo!er air$raft fuel usage. 5ased on a stati$ analysis of the net i%pa$t of year1 o#er1year $hanges in fuel pri$es $o%pared to year1o#er1year $hanges in fuel sur$harges fuel had a slightly positi#e i%pa$t in 2013. /his analysis $onsiders the esti%ated i%pa$t of the redu$tion in fuel sur$harges in$luded in the base rates $harged for FedEx Express ser#i$es. FedEx Express seg%ent operating in$o%e in$reased 3L in 2012 pri%arily due to the benefit fro% the ti%ing lag that exists bet!een !hen fuel pri$es $hange and !hen indexed fuel sur$harges auto%ati1 $ally ad)ust and 9.S. do%esti$ and international export pa$*age yield i%pro#e%ents. 'esults of the FedEx Express seg%ent refle$t the i%pa$t of t!o one1ti%e ite%s in 2012. FedEx Express seg%ent results for 2012 !ere negati#ely i%pa$ted by >134 %illion as a result of the de$ision to retire fro% ser#i$e 1I .irbus .3101200 air$raft and 2? related engines as !ell as six 5oeing 8D10110 air$raft and 1C related engines to better align the 9.S. do%esti$ air net!or* $apa$ity of FedEx Express to %at$h $urrent and anti$ipated ship%ent #olu%es. /he 2012 operating results at the FedEx Express seg%ent !ere fa#orably i%pa$ted by the re#ersal of a legal reser#e

of >?? %illion that !as initially re$orded in 2011. FedEx Express seg%ent results also benefited fro% a %ilder !inter $o%pared to the negati#e i%pa$t of unusually se#ere !inter !eather in 2011.

Salaries and e%ployee benefits in$reased 3L in 2012 due to higher in$enti#e $o%pensation a$$ruals and the full reinstate%ent of 401G*H $o%pany1%at$hing $ontributions effe$ti#e Banuary 1 2011. 7ur$hased transportation $osts in$reased 1?L in 2012 due to $osts asso$iated !ith the expansion of our freight for!arding business at FedEx /rade Net!or*s business a$4uisitions in India and 8exi$o and higher utili6ation of third1 party transportation pro#iders pri%arily in Europe. Inter$o%pany $harges in$reased CL in 2012 due to higher allo$ated #ariable in$enti#e $o%pensation expenses. Fuel $osts in$reased 21L in 2012 due to in$reases in the a#erage pri$e per gallon of fuel. Fuel usage in 2012 !as do!n slightly.

FedEx Express #eg ent 9utlook

We expe$t re#enues and earnings to in$rease at FedEx Express during 2014 due to slight gro!th in our international pa$*age and interna1 tional do%esti$ ser#i$es. In addition !e expe$t operating in$o%e to i%pro#e through ongoing exe$ution of our profit i%pro#e%ent progra%s in$luding i%pro#ing yields ad)usting net!or* $apa$ity and redu$ing stru$tural $osts. @o!e#er the de%and shift fro% our priority international ser#i$es to our e$ono%y international ser#i$es !ill $ontinue to $onstrain earnings gro!th in 2014. 5ase yields on priority international ser#i$es at FedEx Express $ontinue to !ea*en based on our $usto%ers" a$$elerating preferen$e for our lo!er1yielding ser#i$es. 2i#en the persisten$e of this trend !e !ill $ontinue e#aluating further a$tions to ad)ust our FedEx Express net!or* $apa$ity and shift lo!er yielding ser#i$es into lo!er $ost deli#ery net!or*s. ;apital expenditures at FedEx Express are expe$ted to in$rease in 2014 dri#en by an in$rease in air$raft in#est%ent. We !ill $ontinue to %oderni6e our air$raft fleet at FedEx Express during 2014 by adding ne!er air$raft that are %ore reliable fuel1effi$ient and te$hnologi1 $ally ad#an$ed and retiring older less1effi$ient air$raft. Due to the a$$elerated retire%ent of $ertain air$raft and related engines to aid in %oderni6ing our fleet and i%pro#ing our global net!or* !e expe$t an additional >C4 %illion in year1o#er1year depre$iation expense in 2014. In .pril 2013 FedEx Express !as sele$ted as the sole a!ardee of the re$ent 9.S. 7ostal Ser#i$e air $argo soli$itation representing the %a)ority of the 9nited States 7ostal Ser#i$e"s G<9S7S=H air linehaul traffi$. /his ne! se#en year agree%ent begins on 0$tober 1 2013. /he agree%ent pro#ides redu$ed rates for the 9S7S #ersus the prior FedEx Express agree%ent and offers the opportunity for in$re%ental re#enue.

FedEx 2round Seg%ent

FedEx 2round ser#i$e offerings in$lude day1$ertain ser#i$e deli#ery to businesses in the 9.S. and ;anada and to nearly 100L of 9.S. residen$es. FedEx S%art7ost $onsolidates high1#olu%e lo!1!eight less ti%e1sensiti#e business1to1$onsu%er pa$*ages and utili6es the 9S7S for final deli#ery.

/he follo!ing tables $o%pare re#enues operating expenses operating expenses as a per$ent of re#enue operating in$o%e and operating %argin Gdollars in %illionsH and sele$ted pa$*age statisti$s Gin thousands ex$ept yield a%ountsH for the years ended 8ay 31(

FedEx %round #eg ent 3evenues

FedEx 2round seg%ent re#enues in$reased 10L during 2013 due to #olu%e in$reases at both FedEx 2round and FedEx S%art7ost as !ell as yield gro!th at FedEx 2round. FedEx 2round a#erage daily pa$*age #olu%e in$reased IL during 2013 due to %ar*et share gains fro% $ontinued gro!th in our FedEx @o%e Deli#ery ser#i$e and in$reases in our $o%%er$ial business. FedEx 2round yield in$reased 2L in 2013 pri%arily due to in$reased rates and higher residential sur$harge re#enue partially offset by lo!er fuel sur$harges and pa$*age !eights. FedEx S%art7ost a#erage daily #olu%e gre! 22L during 2013 pri%ar1 ily as a result of gro!th in e1$o%%er$e. &ields at FedEx S%art7ost de$reased 2L during 2013 pri%arily due to higher postage $osts partially offset by in$reased rates. FedEx S%art7ost yield represents the a%ount $harged to $usto%ers net of postage paid to the 9S7S. During 2012 FedEx 2round seg%ent re#enues in$reased 13L due to yield and #olu%e gro!th at both FedEx 2round and FedEx S%art7ost. FedEx 2round yields in$reased CL during 2012 pri%arily due to rate in$reases higher fuel sur$harges and higher extra ser#i$e re#enue. .#erage daily pa$*age #olu%e in$reased 4L at FedEx 2round in 2012 due to %ar*et share gains fro% $ontinued gro!th in our FedEx @o%e Deli#ery ser#i$e and an in$rease in our $o%%er$ial business. .t FedEx S%art7ost yields in$reased 3L in 2012 pri%arily due to higher fuel sur$harges and in$reased rates partially offset by an unfa#orable ser#i$e %ix. .#erage daily #olu%e in$reased 1IL at FedEx S%art7ost in 2012 as a result of gro!th in e1$o%%er$e. /he FedEx 2round fuel sur$harge is based on a rounded a#erage of the national 9.S. on1high!ay a#erage pri$e for a gallon of diesel fuel as published by the Depart%ent of Energy. 0ur fuel sur$harge ranged as follo!s for the years ended 8ay 31(

2013 2012 'e#enues( FedEx 2round > A ?32 > I CA1 > C I33 10 12 FedEx S%art7ost A2? CI2 ?30 1I 24 /otal re#enues 10 3CI A 3C3 I 4I3 10 13 0perating expenses( Salaries and e%ployee benefits 1 3I? 1 431 1 2I2 A 13 7ur$hased transportation 4 1A1 3 C?2 3 431 11 10 'entals 331 2I4 2?3 1C I Depre$iation and a%orti6ation 434 3IA 33C 12 13 Fuel 1C 14 12 21 1C 8aintenan$e and repairs 1A0 1C? 1?A I 4 G1H Inter$o%pany $harges 1 14I ACI IAC 1C A 0ther IA3 C33 C?A 1I G2H /otal operating expenses I CA0 C I0A C 1?0 13 A 0perating in$o%e > 1 CII > 1 C?4 > 1 323 1 33 0perating %arginG1H 1?.AL 1I.4L 13.?L G130Hbp 2I0bp .#erage daily pa$*age #olu%e( FedEx 2round 4 222 3 A0C 3 C4? I 4 FedEx S%art7ost 2 03I 1 ?A2 1 432 22 1I 'e#enue per pa$*age GyieldH( FedEx 2round > I.A4 > I.CC > I.1C 2 C FedEx S%art7ost > 1.CC > 1.I1 > 1.C2 G2H 3 7er$ent of 'e#enue 2013 2012 2011 0perating expenses( Salaries and e%ployee benefits 7ur$hased transportation 'entals Depre$iation and a%orti6ation Fuel 8aintenan$e and repairs Inter$o%pany $hargesG1H 0ther /otal operating expenses 0perating %arginG1H 13.?L 13.0L 13.2L 13.1L 3A.? 3A.3 40. 43.1 3.1 3.0 4.1 4.1 4.0 0.2 0.1 0.1 1.I 1.I 2.0 10.A 10.2 10. ?A.1 I.4 C.A I4. I3.1 I1.? 4 1?.AL 1I.4L

7er$ent ;hange 2013- 20122011 2012 2011

:o! @igh Weighted1a#erage

2013 ?.30L I.30 C.?0

2012 C.30L A.30 I.4?

2011 3.30L I.30 ?.20

In Banuary 2013 and 2012 FedEx 2round and FedEx @o%e Deli#ery i%ple%ented a 4.AL a#erage list pri$e in$rease. /he full a#erage rate in$rease of 3.AL !as partially offset by ad)usting the fuel pri$e threshold at !hi$h the fuel sur$harge begins redu$ing the fuel sur$harge by one per$entage point. FedEx S%art7ost rates also in$reased.

FedEx %round #eg ent 9perating $nco e

FedEx 2round seg%ent operating in$o%e in$reased 1L during 2013 pri%arily due to #olu%e gro!th and higher yields. @o!e#er operat1 ing %argin de$reased as the benefit of higher #olu%e and re#enue per pa$*age !as %ore than offset by inter$o%pany $harges of >103 %illion asso$iated !ith the business realign%ent progra% and a fa#orable self1insuran$e true1up in the prior year. 7ur$hased transportation $osts

(1) 4ncludes allocations o $105 million in &013 or (usiness realignment costs /hich reduced operating margin (# 100 (asis points!

in$reased 11L in 2013 pri%arily as a result of #olu%e gro!th and higher rates paid to our independent $ontra$tors. 0ther operating expenses in$reased 1IL pri%arily due to a fa#orable self1 insuran$e true1up in the prior year and higher legal expenses in the $urrent year. Salaries and e%ployee benefits expense in$reased AL in 2013 pri%arily due to in$reased staffing to support #olu%e gro!th. FedEx 2round seg%ent operating in$o%e in$reased 33L and operating %argin in$reased 2I0 basis points during 2012 pri%arily due to higher yields and #olu%e gro!th. FedEx 2round has $ontinued to shorten transit ti%es throughout 2012 by a$$elerating #arious lanes through1 out the 9.S. and ;anada !hile %aintaining $onsistently high on1 ti%e ser#i$e. 7ur$hased transportation $osts in$reased 10L in 2012 pri%arily as a result of #olu%e gro!th and higher fuel sur$harges. Salaries and e%ployee benefits in$reased 13L pri%arily due to in$reased staffing to support #olu%e gro!th and higher in$enti#e $o%pensation a$$ruals. Inter$o%pany $harges in$reased AL in 2012 pri%arily due to higher allo$ated infor%ation te$hnology $osts. Depre$iation expense in$reased 13L in 2012 due to higher $apital spending a$ross the net!or* in$luding te$hnology and transportation e4uip%ent upgrades and an initiati#e to repla$e lighting fixtures throughout the net!or* in order to redu$e energy $osts.

FedEx Freight Seg%ent

FedEx Freight ser#i$e offerings in$lude priority ser#i$es !hen speed is $riti$al and e$ono%y ser#i$es !hen ti%e $an be traded for sa#ings. /he follo!ing tables $o%pare re#enues operating expenses operat1 ing expenses as a per$ent of re#enue operating in$o%e GlossH and operating %argin Gdollars in %illionsH and sele$ted statisti$s for the years ended 8ay 31(

7er$ent ;hange 2013- 20122013 2012 2012 2011 2011 > 3 401 > 3 2I2 > 4 A11 2 I

$ndependent -ontractor Model

.lthough FedEx 2round is in#ol#ed in nu%erous la!suits and other pro$eedings Gsu$h as state tax or other ad%inistrati#e $hallengesH !here the $lassifi$ation of its independent $ontra$tors is at issue a nu%ber of re$ent )udi$ial de$isions support our $lassifi$ation and !e belie#e our relationship !ith the $ontra$tors is generally ex$ellent. For a des$ription of these pro$eedings see <'is* Fa$tors= and Note 1I of the a$$o%panying $onsolidated finan$ial state%ents.

FedEx %round #eg ent 9utlook

FedEx 2round seg%ent re#enues and operating in$o%e are expe$ted to $ontinue to gro! in 2014 led by #olu%e gro!th a$ross all our %a)or ser#i$es due to %ar*et share gains. We also anti$ipate yield gro!th in 2014 through yield %anage%ent progra%s. We !ill $ontinue to %a*e in#est%ents to gro! our highly profitable FedEx 2round net!or* through hub expansion and #ehi$le and e4uip%ent pur$hases. Earnings gro!th %ay be da%pened slightly during periods of in$reased net!or* expansion. We !ill $ontinue to #igorously defend #arious atta$*s against our independent $ontra$tor %odel and in$ur ongoing legal $osts as a part of properly $lassified as independent $ontra$tors it is reasonably possible that !e $ould in$ur a %aterial loss in $onne$tion !ith one or %ore of these %atters or be re4uired to %a*e %aterial $hanges to our $ontra$tor %odel. @o!e#er !e do not belie#e that any su$h $hanges !ill i%pair our ability to operate and profitably gro! our FedEx 2round business.

'e#enues 0perating expenses( Salaries and e%ployee benefits 2 342 2 31? 2 303 1 1 7ur$hased transportation I?3 I31 CCA 2 A 'entals 11I 114 122 4 GCH Depre$iation and a%orti6ation 21C 1I3 203 1C G10H Fuel 3AI ?3? 3I3 G?H A 8aintenan$e and repairs 1A1 1A2 1I2 G1H 3 5usiness realign%ent i%pair%ent and other $hargesG1H 3 O IA N8 N8 G2H Inter$o%pany $harges 4I4 433 42C 12 1 0ther 3C3 3A3 3A4 G3H O /otal operating expenses 3 1A3 3 120 3 0I? 1 1 0perating in$o%e GlossH > 20I > 1?2 > G1C3H 2I 1A3 0perating %arginG3H 3.AL 3.1L G3.?HL I0bp ?C0bp .#erage daily :/: ship%ents Gin thousandsHG4H 7riority 3A.3 ?0.4 G2H E$ono%y 2?.4 /otal a#erage daily :/: ship%ents I3.C G4H Weight per :/: ship%ent GlbsH 7riority 1 23C E$ono%y AA0 ;o%posite !eight per :/: yield Gre#enue per hundred!eightH
G4H

24.3 I4.A 1 202 1 043 I?.0

I 1 3 G3H G1H

7riority E$ono%y ;o%posite :/: yield

> 1C.I0 > 1I.02 23.A0 23.A? > 1A.A4 > 1A.3C > 1I.24

G1H I 2

7er$ent of 'e#enue 2013 2012 2011 0perating expenses( Salaries and e%ployee benefits 7ur$hased transportation 'entals Depre$iation and a%orti6ation Fuel 8aintenan$e and repairs 5usiness realign%ent i%pair%ent and other $hargesG1H Inter$o%pany $hargesG2H 0ther /otal operating expenses 0perating %arginG3H 3.AL 43.4L 1?.0 2.2 4.0 11.1 3.3 O A.0 ?.A A?.1 3.1L 43.AL 1?.1 2.2 3.3 12.0 3.? O I.2 C.4 A?.A 4?.AL 13.A 2.3 4.2 11.A 3.C 1.I I.C I.0 103.? G3.?HL

/he indexed :/: fuel sur$harge is based on the a#erage of the national 9.S. on1high!ay a#erage pri$e for a gallon of diesel fuel as published by the Depart%ent of Energy. /he indexed :/: fuel sur$harge ranged as follo!s for the years ended 8ay 31(

2013 :o! @igh Weighted1a#erage 21.I0L 24.40 23.3I

2012

2011

1A.I0L 13.10L 24.30 20.C0 22.A0 1C.00

enhan$ed ser#i$e le#els strong $usto%er satisfa$tion fro% our ser#i$e offerings and the i%pa$t of se#ere !eather in the prior year.

(1) &013 includes severance costs associated /ith our voluntar# (u#out program! &011 includes severance, impairment and other charges associated /ith the com(ination o our "ed)x "reight and "ed)x ,ational -.- operations, e ective 1anuar# 30, &011! (&) 4ncludes allocations o $*< million in &013 or (usiness realignment costs! (3) .he direct and indirect charges disclosed in notes (1) and (&) a(ove reduced &013 operating margin (# +0 (asis points! (*) "ed)x "reight introduced 7riorit# and )conom# services during the ourth 6uarter o &011= there ore, ull5#ear detail has not (een presented or &011!

FedEx Freight #eg ent 3evenues

FedEx Freight seg%ent re#enues in$reased 2L in 2013 due to higher :/: yield and a#erage daily :/: ship%ents. :/: yield in$reased 2L in 2013 due to i%pro#e%ents in FedEx Freight E$ono%y yield result1 ing fro% higher rates and lo!er !eight per :/: ship%ent. .#erage daily :/: ship%ents in$reased 1L in 2013 dri#en by our FedEx Freight E$ono%y ser#i$es offering partially offset by transitional $hallenges en$ountered by so%e $usto%ers in the se$ond half of 2013 !hile %igrating FedEx Freight fun$tionality to the FedEx enterprise auto1 %ated platfor%. 'e#enue per hundred!eight is a $o%%only1used indi$ator of pri$ing trends but this %etri$ $an be influen$ed by %any other fa$tors su$h as $hanges in fuel sur$harges !eight per ship%ent length of haul and the %ix of freight. 2enerally :/: freight is rated using a standard $lass syste% for the :/: industry and $lasses are assigned based on trans1 portation $hara$teristi$s in$luding density ris* and handling. 9nder the $lass syste% lo!1#alue freight that is easy to handle unli*ely to da%age and dense !ill re$ei#e lo!er $lass ratings Gand lo!er yieldsH than expensi#e light bul*y freight !hi$h is highly sus$eptible to da%1 age Gand produ$es higher yieldsH. .s a result $hanges in re#enue per hundred!eight do not ne$essarily indi$ate a$tual $hanges in underly1 ing base rates. During 2012 FedEx Freight re#enues in$reased IL due to in$reased :/: yield and !eight per :/: ship%ent partially offset by lo!er a#er1 age daily :/: ship%ents. :/: yield in$reased CL during 2012 due to higher fuel sur$harges and base yield i%pro#e%ent. .#erage daily :/: ship%ents de$reased 1L in 2012E ho!e#er during the se$ond half of 2012 :/: ship%ent year1o#er1year $o%parisons i%pro#ed se4uentially G2L in the third 4uarter and 4L in the fourth 4uarterH due to

0n Bune 10 2013 FedEx Freight announ$ed it !ill in$rease 9.S. and $ertain other shipping rates by an a#erage of 4.3L effe$ti#e on Buly 1 2013. In Buly 2012 FedEx Freight i%ple%ented a rate in$rease of ?.AL for :/: ship%ents. In Bune 2011 FedEx Freight in$reased the fuel sur$harge rate to a %axi%u% of 3.? per$entage points abo#e pre#ious le#els.

FedEx Freight #eg ent 9perating $nco e

/he FedEx Freight seg%ent operating results for 2013 i%pro#ed as a result of :/: yield gro!th and in$reased a#erage daily :/: ship%ents along !ith ongoing i%pro#e%ent in operational effi$ien$ies in our inte1 grated net!or*. @o!e#er operating results for 2013 !ere negati#ely i%pa$ted by >30 %illion of $osts asso$iated !ith our business realign1 %ent progra% both dire$tly and through inter$o%pany allo$ations. Depre$iation and a%orti6ation expense in$reased 1CL due to $ontinued in#est%ent in repla$e%ent transportation e4uip%ent. Salaries and e%ployee benefits in$reased 1L in 2013 pri%arily due to in$reases in #olu%e and higher health$are !or*ers" $o%pensation and pension $osts partially offset by operational effi$ien$ies and lo!er in$enti#e $o%pensation. 7ur$hased transportation $osts in$reased 2L in 2013 due to in$reased utili6ation of rail and higher rates partially offset by a lo!er $ost per %ile due to our ability to opti%i6e %ode of transportation. Fuel $osts de$reased ?L in 2013 due to in$reased utili6ation of rail and fuel effi$ien$y i%pro#e%ents. 5ased on a stati$ analysis of the net i%pa$t of year1o#er1year $hanges in fuel pri$es $o%pared to year1 o#er1year $hanges in fuel sur$harges fuel had a %ini%al i%pa$t on operating in$o%e in 2013. In 2012 the FedEx Freight seg%ent operating in$o%e in$reased signifi1 $antly as a result of higher fuel sur$harges yield gro!th and ongoing i%pro#e%ents in operational effi$ien$ies due to the $o%bination of our FedEx Freight and FedEx National :/: operations in 2011. .dditionally the FedEx Freight seg%ent"s 2012 results benefited fro% %ilder !inter !eather !hile our 2011 results !ere negati#ely i%pa$ted by unusu1 ally se#ere !inter !eather. 7ur$hased transportation $osts in$reased AL in 2012 due to higher rates and the in$reased utili6ation of rail partially offset by a lo!er $ost per %ile due to our ability to opti%i6e %ode of transportation !hile %eeting ser#i$e standards. Fuel $osts in$reased AL in 2012 due to a higher a#erage pri$e per gallon of diesel fuel partially offset by the in$reased utili6ation of rail. 5ased on a stati$ analysis of the net i%pa$t of year1o#er1year $hanges in fuel pri$es $o%pared to year1o#er1year $hanges in fuel sur$harges fuel had a positi#e i%pa$t to operating in$o%e in 2012. Depre$iation and a%orti6ation expense

de$reased 10L in 2012 pri%arily due to a$$elerated depre$iation in 2011 asso$iated !ith the $o%bination of our :/: operations.

FedEx Freight #eg ent 9utlook

We expe$t %odest re#enue gro!th at the FedEx Freight seg%ent in 2014 dri#en by yield and #olu%e initiati#es fro% our differentiated :/: ser#i$es. FedEx Freight operating in$o%e and operating %argin are expe$ted to in$rease in 2014 dri#en by i%pro#e%ents in yields and #olu%e as !ell as $ontinued i%pro#e%ent in produ$ti#ity and effi$ien$y a$ross our integrated net!or*. We !ill $ontinue to use in#est%ents in te$hnology fo$used on net!or* and e4uip%ent planning and $usto%er auto%ation to further enhan$e $usto%er ser#i$e le#els throughout 2014. ;apital expenditures in 2014 are expe$ted to be $o%parable to 2013 !ith the %a)ority of our spending for repla$e%ent of #ehi$les and freight handling e4uip%ent.

Effe$t of ex$hange rate $hanges on $ash 3 41 Net in$rease in $ash and $ash e4ui#alents > 2 0C4 > 3C?

G2CH 313 >

FIN.N;I.: ;0NDI/I0N
:i4uidity
;ash and $ash e4ui#alents totaled >4.A billion at 8ay 31 2013 $o%1 pared to >2.I billion at 8ay 31 2012. /he follo!ing table pro#ides a su%%ary of our $ash flo!s for the periods ended 8ay 31 Gin %illionsH(

2013 2012 2011 0perating a$ti#ities( Net in$o%e > 1 3?1 > 2 032 > 1 432 5usiness realign%ent i%pair%ent and other $harges 4CA 134 2A 3 1I3 3 304 2 IA2 0ther non$ash $harges and $redits G333H GI33H G332H ;hanges in assets and 4 041 4 ?II 4 I33 liabilities ;ash pro#ided by operating a$ti#ities In#esting a$ti#ities( ;apital expenditures G3 3C3H G4 00CH G3 434H 5usiness a$4uisitions net of $ash a$4uired G4I3H G11?H GA?H 7ro$eeds fro% asset and other 33 C4 111 dispositions ;ash used in in#esting a$ti#ities G3 I03H G4 04AH G3 41AH Finan$ing a$ti#ities( 7ur$hase of treasury sto$* 7rin$ipal pay%ents on debt 7ro$eeds fro% debt issuan$e Di#idends paid 0ther ;ash pro#ided by Gused inH finan$ing a$ti#ities

G24?H G41CH 1 C3A G1CCH 2I3 1 1I4

G1ACH G2AH O G1?4H 14? G244H

O G2?2H O G131H 12? G2ICH

;.S@ 7'0PIDED 5& 07E'./IN2 .;/IPI/IES. ;ash flo!s fro% operating a$ti#ities de$reased >14C %illion in 2013 pri%arily due to de$reased earnings and higher tax #ariable $o%pensation and #oluntary buyout pay%ents partially offset by a de$rease in pension $ontributions. ;ash flo!s fro% operating a$ti#ities in$reased >CA4 %illion in 2012 pri%arily due to in$reased earnings partially offset by higher pension $ontributions. We %ade $ontributions of >3?0 %illion to our tax14ualified 9.S. do%esti$ pension plans G<9.S. 7ension 7lans=H during 2013 and $ontributions of >C22 %illion to our 9.S. 7ension 7lans during 2012. We %ade $ontributions of >4I0 %illion to our 9.S. 7ension 7lans during 2011. ;.S@ 9SED IN INPES/IN2 .;/IPI/IES. ;apital expenditures !ere 1?L lo!er in 2013 largely due to de$reased spending at FedEx Express and 1CL higher in 2012 pri%arily due to in$reased spending at FedEx Express and FedEx Freight. See <;apital 'esour$es= for a dis$ussion of $apital expenditures during 2013 and 2012. FIN.N;IN2 .;/IPI/IES. In .pril 2013 !e issued >C30 %illion of senior unse$ured debt under our $urrent shelf registration state%ent $o%prised of >230 %illion of 2.C0L fixed1rate notes due in .pril 2023 and >300 %illion of 4.10L fixed1rate notes due in .pril 2043. Interest on these notes is payable se%i1annually. We utili6ed the net pro$eeds for !or*ing $apital and general $orporate purposes. In Buly 2012 !e issued >1 billion of senior unse$ured debt under a then $urrent shelf registration state%ent $o%prised of >300 %illion of 2.?23L fixed1rate notes due in .ugust 2022 and >300 %illion of 3.IC3L fixed1rate notes due in .ugust 2042. Interest on these notes is payable se%i1annually. We utili6ed the net pro$eeds for !or*ing $apital and general $orporate purposes. During 2013 !e %ade prin$ipal pay%ents of >11? %illion related to $apital lease obligations and repaid our >300 %illion A.?3L unse$ured notes that %atured in Bune 2012 using $ash fro% operations. During 2013 !e repur$hased 2.C %illion shares of FedEx $o%%on sto$* at an a#erage pri$e of >A1 per share for a total of >24? %illion. In 8ar$h 2013 our 5oard of Dire$tors authori6ed the repur$hase of up to 10 %illion shares of $o%%on sto$*. It is expe$ted that the additional share authori6ation !ill pri%arily be utili6ed to offset the effe$ts of e4uity $o%pensation dilution o#er the next se#eral years. .s of 8ay 31 2013 10 1II 000 shares re%ained under existing share repur$hase authori6ations. During 2012 !e repur$hased 2.I %illion FedEx $o%%on shares at an a#erage pri$e of >C0 per share for a total of >1AC %illion.

;apital 'esour$es
0ur operations are $apital intensi#e $hara$teri6ed by signifi$ant in#est%ents in air$raft #ehi$les te$hnology fa$ilities and pa$*age1 handling and sort e4uip%ent. /he a%ount and ti%ing of $apital additions depend on #arious fa$tors in$luding pre1existing $ontra$tual $o%%it%ents anti$ipated #olu%e gro!th do%esti$ and international e$ono%i$ $onditions ne! or enhan$ed ser#i$es geographi$al expansion of ser#i$es and a$tions of regulatory authorities.

8anage8ent"s dis$ussion and analysis

/he follo!ing table $o%pares $apital expenditures by asset $ategory and reportable seg%ent for the years ended 8ay 31 Gin %illionsH(

7er$ent 2013 2012 2011 .ir$raft and related e4uip%ent > 1 1A0 > 1 IC3 > 1 AII G3CH Fa$ilities and sort e4uip%ent C2C ?3I 333 14 Pehi$les C34 C23 2I2 2
Infor%ation and te$hnology in#est%ents 0ther e4uip%ent /otal $apital expenditures

and landing feesH to $apital Gad)usted debt plus total $o%%on sto$*1 holders" in#est%entH that does not ex$eed C0L. 0ur le#erage ratio of ad)usted debt to $apital !as 31L at 8ay 31 2013. We belie#e the

2013- 2012- in our re#ol#ing $redit agree%ent. 0ur re#ol#ing $redit agree%ent 2012 2011 $ontains other $usto%ary $o#enants that do not indi#idually or in the G?H 13 13? 1A 4A
issuan$e of $o%%er$ial paper. In 8ar$h 2013 !e entered into an a%end%ent to our $redit agree%ent to a%ong other things extend its %aturity date fro% .pril 2? 201? to 8ar$h 1 201I. /he agree1 %ent $ontains a finan$ial $o#enant !hi$h re4uires us to %aintain a le#erage ratio of ad)usted debt Glong1ter% debt in$luding the $urrent portion of su$h debt plus six ti%es our last four fis$al 4uarters" rentals

432 341 433 G1?H 2C2 230 134 1I > 3 3C3 > 4 00C > 3 434 G1?H

1C > 2 0?C > 2 ?IA > 2 4?C G23H 333 33? 42? 4 FedEx Freight seg%ent 32? 340 133 G4H FedEx Ser#i$es seg%ent 424 43C 3IC G3H 0ther 3 3 1 N8 /otal $apital expenditures > 3 3C3 > 4 00C > 3 434 G1?H 1C
FedEx Express seg%ent FedEx 2round seg%ent ;apital expenditures during 2013 !ere lo!er than the prior year pri%arily due to de$reased spending for air$raft and related e4uip1 pur$hases at FedEx Express during 2013 in$luded the deli#ery of 1? 5oeing C3Cs G<5C3C=H to be %odified for $argo transport and four 5CCCFs. ;apital expenditures during 2012 !ere higher than the prior year pri%arily due to in$reased spending for #ehi$les at FedEx Express FedEx Freight and FedEx 2round although spending for air$raft and related e4uip%ent at FedEx Express de$reased. .ir$raft and air$raft1related e4uip%ent pur$hases at FedEx Express during 2012 in$luded deli#ery of se#en 5CCCFs and 13 5C3Cs.

A 2? 122 13 N8

:i4uidity 0utloo*
We belie#e that our $ash and $ash e4ui#alents !hi$h totaled >4.A billion in 2013 $ash flo! fro% operations and a#ailable finan$1 ing sour$es !ill be ade4uate to %eet our li4uidity needs in$luding !or*ing $apital $apital expenditure re4uire%ents and debt pay%ent obligations. 0ur $ash and $ash e4ui#alents balan$e at 8ay 31 2013 in$ludes >420 %illion of $ash in offshore )urisdi$tions asso$iated !ith our per%anent rein#est%ent strategy. We do not belie#e that the indefinite rein#est%ent of these funds offshore i%pairs our ability to %eet our do%esti$ debt or !or*ing $apital obligations. We ha#e a shelf registration state%ent filed !ith the Se$urities and Ex$hange ;o%%ission G<SE;=H that allo!s us to sell in one or %ore future offerings any $o%bination of our unse$ured debt se$urities and $o%%on sto$*. . >1 billion re#ol#ing $redit fa$ility is a#ailable to finan$e our operations and other $ash flo! needs and to pro#ide support for the

aggregate %aterially restri$t the $ondu$t of our business. We are in $o%plian$e !ith the le#erage ratio $o#enant and all other $o#enants of our re#ol#ing $redit agree%ent and do not expe$t the $o#enants to affe$t our operations in$luding our li4uidity or expe$ted funding needs. .s of 8ay 31 2013 no $o%%er$ial paper !as outstanding and the entire >1 billion under the re#ol#ing $redit fa$ility !as a#ailable for future borro!ings. Standard N 7oor"s has assigned us a senior unse$ured debt $redit rat1 ing of 555 and a $o%%er$ial paper rating of .12 and a ratings outloo* of <stable.= 8oody"s In#estors Ser#i$e has assigned us a senior unse$ured debt $redit rating of 5aa1 and a $o%%er$ial paper rating of 712 and a ratings outloo* of <stable.= If our $redit ratings drop our interest expense %ay in$rease. If our $o%%er$ial paper ratings drop belo! $urrent le#els !e %ay ha#e diffi$ulty utili6ing the $o%%er$ial paper %ar*et. If our senior unse$ured debt $redit ratings drop belo! in#est%ent grade our a$$ess to finan$ing %ay be$o%e li%ited. 0ur $apital expenditures are expe$ted to be >4.0 billion in 2014. We our in$reased $apital expenditures in 2014 !hi$h !ill in$lude spend1 ing for air$raft and air$raft1related e4uip%ent at FedEx Express sort fa$ility expansion pri%arily at FedEx 2round and #ehi$le repla$e%ent at all our transportation seg%ents. We expe$t approxi%ately 30L of $apital expenditures in 2014 !ill be designated for gro!th initiati#es predo%inantly at FedEx 2round and 30L dedi$ated to %aintaining our existing operations. 0ur expe$ted $apital expenditures for 2014 in$lude >1.4 billion in in#est%ents for deli#ery of air$raft as !ell as progress pay%ents to!ard future air$raft deli#eries at FedEx Express. For 2014 !e anti$ipate %a*ing re4uired $ontributions totaling approx1 i%ately >?30 %illion to our 9.S. 7ension 7lans. 0ur 9.S. 7ension 7lans ha#e a%ple funds to %eet expe$ted benefit pay%ents. We ha#e se#eral air$raft %oderni6ation progra%s under!ay !hi$h are supported by the pur$hase of 5CCCF 5oeing C?C1300 Freighter G<5C?CF=H and 5C3C air$raft. /hese air$raft are signifi$antly %ore fuel1effi$ient per unit than the air$raft types pre#iously utili6ed and these expenditures are ne$essary to a$hie#e signifi$ant long1ter% operating sa#ings and to repla$e older air$raft. 0ur ability to delay the ti%ing of these air$raft1 related expenditures is li%ited !ithout in$urring signifi$ant $osts to %odify existing pur$hase agree%ents. During 2013 FedEx Express entered into an agree%ent to pur$hase 14 additional 5C3C air$raft the deli#ery of !hi$h began in 2013 and !ill $ontinue through 2014. /he agree%ent pro#ides the option to pur1 $hase up to 1? additional 5C3C air$raft sub)e$t to the satisfa$tion of $ertain $onditions. In addition FedEx Express entered into agree%ents to pur$hase an additional 23 5C?CF air$raft the deli#ery of !hi$h !ill o$$ur bet!een 2014 and 201A. /he deli#ery of t!o fir% 5CCCF air$raft orders !ere also deferred fro% 2013 to 201?. Effe$ti#e as of Bune 14 2013 FedEx Express entered into a supple1 %ental agree%ent to pur$hase 13 of the 1? 5C3C option air$raft noted abo#e. Deli#ery of the air$raft !ill o$$ur during 2014 and 2013.

8.N.2E8EN/"S DIS;9SSI0N .ND .N.:ySIS

;ontra$tual ;ash 0bligations and 0ff15alan$e Sheet .rrange%ents

/he follo!ing table sets forth a su%%ary of our $ontra$tual $ash obligations as of 8ay 31 2013. ;ertain of these $ontra$tual obligations are refle$ted in our balan$e sheet !hile others are dis$losed as future obligations under a$$ounting prin$iples generally a$$epted in the 9nited States. Ex$ept for the $urrent portion of long1ter% debt this table does not in$lude a%ounts already re$orded in our balan$e sheet as $urrent liabilities at 8ay 31 2013. We ha#e $ertain $ontingent liabilities that are not a$$rued in our balan$e sheet in a$$ordan$e !ith a$$ounting prin$iples generally a$$epted in the 9nited States. /hese $ontingent liabilities are not in$luded in the table belo!. We ha#e other long1ter% liabilities refle$ted in our balan$e sheet in$luding deferred in$o%e taxes 4ualified and non4ualified pension and postretire%ent health$are plan liabilities and other self1insuran$e a$$ruals. /he pay%ent obligations asso$iated !ith these liabilities are not refle$ted in the table belo! due to the absen$e of s$heduled %aturities. .$$ordingly this table is not %eant to represent a fore$ast of our total $ash expenditures for any of the periods presented.

(in millions) 0perating a$ti#ities( 0perating leases Non1$apital pur$hase obligations and other Interest on long1ter% debt ;ontributions to our 9.S. 7ension 7lans In#esting a$ti#ities( .ir$raft and air$raft1related $apital $o%%it%ents 0ther $apital pur$hase obligations Finan$ing a$ti#ities( Debt /otal 32 AA?

2014 > 1 A3? 2I3 13C ?30 A?I 24A 230 > 4 4A3

7ay%ents Due by Fis$al &ear G9ndis$ountedH 2013 201? 201C 201I /hereafter > 1 I34 1I3 13I O 1 034 1 O > 3 210 > 1 ?3? 123 13I O 1 140 O O > 3 03C > 1 ?IA 101 13I O A3A O O > 2 IIC > 1 230 44 13I O 1 3I2 O O > 2 CA4 > ? ?30 10A 2 3I2 O 4 4A2 O

/otal > 14 AC3 I43 3 2A1 ?30 A AA3 230

2 C40 2 AA0 > 1? 3C3 >

0pen pur$hase orders that are $an$elable are not $onsidered un$on1 ditional pur$hase obligations for finan$ial reporting purposes and are not in$luded in the table abo#e. Su$h pur$hase orders often represent authori6ations to pur$hase rather than binding agree%ents. See Note 1C of the a$$o%panying $onsolidated finan$ial state%ents for %ore infor%ation.

/he a%ounts refle$ted for pur$hase obligations represent non$an1 $elable agree%ents to pur$hase goods or ser#i$es that are not $apital1related. Su$h $ontra$ts in$lude those for printing and ad#ertis1 ing and pro%otions $ontra$ts. In$luded in the table abo#e !ithin the $aption entitled <Non1$apital pur$hase obligations and other= is our esti%ate of the $urrent portion of the liability G>1 %illionH for un$ertain tax positions. We $annot rea1 sonably esti%ate the ti%ing of the long1ter% pay%ents or the a%ount by !hi$h the liability !ill in$rease or de$rease o#er ti%eE therefore the long1ter% portion of the liability G>4? %illionH is ex$luded fro% the table. See Note 12 of the a$$o%panying $onsolidated finan$ial state1 %ents for further infor%ation. /he a%ounts refle$ted in the table abo#e for interest on long1ter% debt represent future interest pay%ents due on our long1ter% debt all of !hi$h are fixed rate.

9perating 4ctivities
In a$$ordan$e !ith a$$ounting prin$iples generally a$$epted in the 9nited States future $ontra$tual pay%ents under our operating leases Gtotaling >13 billion on an undis$ounted basisH are not re$orded in our balan$e sheet. ;redit rating agen$ies routinely use infor%ation $on1 $erning %ini%u% lease pay%ents re4uired for our operating leases to $al$ulate our debt $apa$ity. /he a%ounts refle$ted in the table abo#e for operating leases represent future %ini%u% lease pay%ents under non$an$elable operating leases Gprin$ipally air$raft and fa$ilitiesH !ith an initial or re%aining ter% in ex$ess of one year at 8ay 31 2013. 9nder the proposed ne! lease a$$ounting rules the %a)ority of these leases !ill be re4uired to be re$ogni6ed on the balan$e sheet as a liability !ith an offsetting right1to1use asset. In the past !e finan$ed a signifi$ant portion of our air$raft needs Gand $ertain other e4uip%ent needsH using operating leases Ga type of <off1balan$e sheet finan$1 ing=H. .t the ti%e that the de$ision to lease !as %ade !e deter%ined that these operating leases !ould pro#ide e$ono%i$ benefits fa#or1 able to o!nership !ith respe$t to %ar*et #alues li4uidity or after1tax $ash flo!s.

$nvesting 4ctivities
/he a%ounts refle$ted in the table abo#e for $apital pur$hase obliga1 tions represent non$an$elable agree%ents to pur$hase $apital1related e4uip%ent. Su$h $ontra$ts in$lude those for $ertain pur$hases of air$raft air$raft %odifi$ations #ehi$les fa$ilities $o%puters and other e4uip%ent. ;o%%it%ents to pur$hase air$raft in passenger $onfiguration do not in$lude the attendant $osts to %odify these air$raft for $argo transport unless !e ha#e entered into non$an$elable $o%%it%ents to %odify su$h air$raft.

8anage8ent"s dis$ussion and analysis

Financing 4ctivities
We ha#e $ertain finan$ial instru%ents representing potential $o%1 %it%ents not refle$ted in the table abo#e that !ere in$urred in the nor%al $ourse of business to support our operations in$luding standby letters of $redit and surety bonds. /hese instru%ents are re4uired under $ertain 9.S. self1insuran$e progra%s and are also used in the nor%al $ourse of international operations. /he underlying liabili1 ties insured by these instru%ents are refle$ted in our balan$e sheets !here appli$able. /herefore no additional liability is refle$ted for the letters of $redit and surety bonds the%sel#es. /he a%ounts refle$ted in the table abo#e for long1ter% debt represent future s$heduled pay%ents on our long1ter% debt. In 2014 !e ha#e s$heduled debt pay%ents of >230 %illion.

under this for%ula !ere $apped on 8ay 31 200I for %ost e%ployees.

;'I/I;.: .;;09N/IN2 ES/I8./ES

/he preparation of finan$ial state%ents in a$$ordan$e !ith a$$ount1 ing prin$iples generally a$$epted in the 9nited States re4uires %anage%ent to %a*e signifi$ant )udg%ents and esti%ates to de#elop a%ounts refle$ted and dis$losed in the finan$ial state%ents. In %any $ases there are alternati#e poli$ies or esti%ation te$hni4ues that $ould be used. We %aintain a thorough pro$ess to re#ie! the appli$ation of our a$$ounting poli$ies and to e#aluate the appropriate1 ness of the %any esti%ates that are re4uired to prepare the finan$ial state%ents of a $o%plex global $orporation. @o!e#er e#en under opti%al $ir$u%stan$es esti%ates routinely re4uire ad)ust%ent based on $hanging $ir$u%stan$es and ne! or better infor%ation. /he esti%ates dis$ussed belo! in$lude the finan$ial state%ent ele1 %ents that are either the %ost )udg%ental or in#ol#e the sele$tion or appli$ation of alternati#e a$$ounting poli$ies and are %aterial to our finan$ial state%ents. 8anage%ent has dis$ussed the de#elop1 %ent and sele$tion of these $riti$al a$$ounting esti%ates !ith the .udit ;o%%ittee of our 5oard of Dire$tors and !ith our independent registered publi$ a$$ounting fir%.

'etire%ent 7lans
0PE'PIEW. We sponsor progra%s that pro#ide retire%ent benefits to %ost of our e%ployees. /hese progra%s in$lude defined benefit pension plans defined $ontribution plans and postretire%ent health$are plans. 7ension benefits for %ost e%ployees are a$$rued under a $ash balan$e for%ula !e $all the 7ortable 7ension .$$ount. 9nder the 7ortable 7ension .$$ount the retire%ent benefit is expressed as a dollar a%ount in a notional a$$ount that gro!s !ith annual $redits based on pay age and years of $redited ser#i$e and interest on the notional a$$ount balan$e. /he 7ortable 7ension .$$ount benefit is payable as a lu%p su% or an annuity at retire%ent at the ele$tion of the e%ployee. /he plan interest $redit rate #aries fro% year to year based on a 9.S. /reasury index and $orporate bond rates. 7rior to 200A $ertain e%ployees earned benefits using a traditional pension for%ula Gbased on a#erage earnings and years of ser#i$eH. 5enefits

8anage8ent"s dis$ussion and analysis

/he $urrent rules for pension a$$ounting are $o%plex and $an produ$e tre%endous #olatility in our results finan$ial $ondition and li4uidity. 0ur pension expense is pri%arily a fun$tion of the #alue of our plan assets and the dis$ount rate used to %easure our pension liabilities at a single point in ti%e at the end of our fis$al year Gthe %easure%ent dateH. 5oth of these fa$tors are signifi$antly influen$ed by the sto$* and bond %ar*ets !hi$h in re$ent years ha#e experien$ed substantial #olatility. In addition to expense #olatility !e are re4uired to re$ord year1 end ad)ust%ents to our balan$e sheet on an annual basis for the net funded status of our pension and postretire%ent health$are plans. /hese ad)ust%ents ha#e flu$tuated signifi$antly o#er the past se#eral years and li*e our pension expense are a result of the dis$ount rate and #alue of our plan assets at the %easure%ent date. /he funded status of our plans also i%pa$ts our li4uidity as $urrent funding la!s re4uire in$reasingly aggressi#e funding le#els for our pension plans. @o!e#er the $ash funding rules operate under a $o%pletely differ1 ent set of assu%ptions and standards than those used for finan$ial reporting purposes so our a$tual $ash funding re4uire%ents $an differ %aterially fro% our reported funded status. /e%porary funding relief !as passed in Buly 2012 that !ill i%pro#e our funded status for those purposes o#er the next se#eral years. 0ur retire%ent plans $ost is in$luded in the <Salaries and E%ployee 5enefits= $aption in our $onsolidated in$o%e state%ents. . su%%ary of our retire%ent plans $osts o#er the past three years is as follo!s Gin %illionsH(

a%orti6ed and re$ogni6ed in future periods. 0ur pension expense in$ludes a%orti6ation of these a$tuarial losses of >30? %illion in 2013 >302 %illion in 2012 and >2C? %illion in 2011.

2013 9.S. do%esti$ and international pension plans 343 9.S. do%esti$ and international defined $ontribution plans 23C 9.S. do%esti$ and international postretire%ent health$are plans ?0 > ?CA 334 CI > 1 111

2012 > 324 33I C0 > A32

2011 >

> I?0

/otal retire%ent plans $ost in$reased >1CA %illion in 2013 dri#en by lo!er dis$ount rates used to %easure our benefit obligations at our 8ay 31 2012 %easure%ent date. /otal retire%ent plans $ost in$reased >C2 %illion in 2012 pri%arily due to higher expenses for our 401G*H plans due to the full restoration of $o%pany %at$hing $ontributions on Banuary 1 2011. .%ounts re$ogni6ed in our balan$e sheet refle$t a snapshot of the state of our long1ter% pension liabilities at the plan %easure%ent date and the effe$t of year1end a$$ounting on plan assets. ;u%ulati#e unre$ogni6ed a$tuarial losses !ere >C.0 billion through 8ay 31 2013 $o%pared to >I.A billion through 8ay 31 2012. /hese unre$ogni6ed losses refle$t $hanges in the dis$ount rates and differen$es bet!een expe$ted and a$tual asset returns !hi$h are being a%orti6ed o#er future periods. /hese unre$ogni6ed losses %ay be re$o#ered in future periods through a$tuarial gains. @o!e#er unless they are belo! a $orridor a%ount these unre$ogni6ed a$tuarial losses are re4uired to be

7ENSI0N ;0S/. /he a$$ounting for pension and postretire%ent health$are plans in$ludes nu%erous assu%ptions in$luding the dis1 $ount rate and expe$ted long1ter% in#est%ent returns on plan assets. /hese assu%ptions %ost signifi$antly i%pa$t our 9.S. 7ension 7lans. Follo!ing is a dis$ussion of the *ey esti%ates !e $onsider in deter1 %ining our pension $ost( DIS;09N/ './E. /his is the interest rate used to dis$ount the esti1 %ated future benefit pay%ents that ha#e been a$$rued to date Gthe pro)e$ted benefit obligation or <750=H to their net present #alue and to deter%ine the su$$eeding year"s pension expense. /he dis$ount rate is deter%ined ea$h year at the plan %easure%ent date. . de$rease in the dis$ount rate in$reases pension expense. /he dis$ount rate affe$ts the 750 and pension expense based on the %easure%ent dates as des$ribed belo!.

part of our strategy to %anage pension $osts and funded status #ola1 tility !e ha#e transitioned to a liability1dri#en in#est%ent strategy to better align plan assets !ith liabilities. Establishing the expe$ted future rate of in#est%ent return on our pension assets is a )udg%ental %atter !hi$h !e re#ie! on an annual basis and re#ise as appropriate. 8anage%ent $onsiders the follo!ing fa$tors in deter%ining this assu%ption( @ the duration of our pension plan liabilities !hi$h dri#es the in#est1 %ent strategy !e $an e%ploy !ith our pension plan assetsE @ the types of in#est%ent $lasses in !hi$h !e in#est our pension plan assets and the expe$ted $o%pound geo%etri$ return !e $an reason1 ably expe$t those in#est%ent $lasses to earn o#er ti%eE and @ the in#est%ent returns !e $an reasonably expe$t our in#est%ent %anage%ent progra% to a$hie#e in ex$ess of the returns !e $ould expe$t if in#est%ents !ere %ade stri$tly in indexed funds. We ha#e assu%ed an I.0L expe$ted long1ter% rate of return on our 9.S. 7ension 7lan assets for 2013 2012 and 2011. /he a$tual returns during ea$h of the last three fis$al years ha#e ex$eeded that long1 ter% assu%ption. /he a$tual histori$al return on our 9.S. 7ension 7lan assets $al$ulated on a $o%pound geo%etri$ basis !as ?.AL net of in#est%ent %anager fees for the 131year period ended 8ay 31 2013 and C.4L net of in#est%ent %anager fees for the 131year period ended 8ay 31 2012. For 2014 !e plan to lo!er our expe$ted return on plan assets assu%ption for long1ter% returns on plan assets to C.C3L as !e $ontinue to refine our asset and liability %anage%ent strategy. In lo!ering this assu%ption !e $onsidered our histori$al returns our in#est%ent strategy for our plan assets in$luding the i%pa$ts of the long duration of our plan liability and the relati#ely lo! annual dra! on plan assets on that in#est%ent strategy. . one1basis1point $hange in our expe$ted return on plan assets i%pa$ts our pension expense by >1.A %illion. 7ension expense is also affe$ted by the a$$ounting poli$y used to deter%ine the #alue of plan assets at the %easure%ent date. We use a $al$ulated1#alue %ethod to deter%ine the #alue of plan assets !hi$h helps %itigate short1ter% #olatility in %ar*et perfor%an$e Gboth in$reases and de$reasesH by a%orti6ing $ertain a$tuarial gains or losses o#er a period no longer than four years. .nother %ethod used in pra$ti$e applies the %ar*et #alue of plan assets at the %easure1 rate of earnings on plan assets. 0ur pension plan assets are in#ested pri%arily in publi$ly tradeable se$urities and our pension plans hold only a %ini%al in#est%ent in FedEx $o%%on sto$* that is entirely at the dis$retion of third1party pension fund in#est%ent %anagers. .s

.%ounts Deter%ined by 8easure%ent Date 3-31-2013 3-31-2012 3-31-2011 3-31-2010

Dis$ount 'ate 4.CAL 4.44 3.C? ?.3C

8easure%ent Date and Dis$ount 'ate 2013 750 and 2014 expense 2012 750 and 2013 expense 2011 750 and 2012 expense 2010 750 and 2011 expense

We deter%ine the dis$ount rate !ith the assistan$e of a$tuaries !ho $al$ulate the yield on a theoreti$al portfolio of high1grade $orporate bonds Grated .a or betterH. In de#eloping this theoreti$al portfolio !e sele$t bonds that %at$h $ash flo!s to benefit pay%ents li%it our $on$entration by industry and issuer and apply s$reening $riteria to ensure bonds !ith a $all feature ha#e a lo! probability of being $alled. /o the extent s$heduled bond pro$eeds ex$eed the esti%ated benefit pay%ents in a gi#en period the $al$ulation assu%es those ex$ess pro$eeds are rein#ested at one1year for!ard rates. /he dis$ount rate assu%ption is highly sensiti#e as the follo!ing table illustrates for our largest pension plan(

0ne1basis1point $hange in dis$ount rate 2.3

Sensiti#ity Gin %illionsH Effe$t on Effe$t on 2014 2013 7ension Expense 7ension Expense > 2.1 >

.t our 8ay 31 2013 %easure%ent date a 301basis1point in$rease in the dis$ount rate !ould ha#e de$reased our 2013 750 by approxi1 %ately >1.4 billion and a 301basis1point de$rease in the dis$ount rate !ould ha#e in$reased our 2013 750 by approxi%ately >1.3 billion. Fro% 2010 to 2013 the dis$ount rate used to #alue our liabilities has de$lined by o#er 130 basis points !hi$h in$reased the #aluation of our liabilities by o#er >3.I billion. 7:.N .SSE/S. /he esti%ated a#erage rate of return on plan assets is a long1ter% for!ard1loo*ing assu%ption that also %aterially affe$ts our pension $ost. It is re4uired to be the expe$ted future long1ter%

%ent date. For purposes of #aluing plan assets for deter%ining 2014 pension expense the $al$ulated #alue %ethod resulted in the sa%e #alue as the %ar*et #alue. F9NDED S/./9S. Follo!ing is infor%ation $on$erning the funded status of our pension plans as of 8ay 31 Gin %illionsH(

2013 "unded :tatus o 7lans> 7ro)e$ted benefit obligation G750H Fair #alue of plan assets Funded status of the plans ;ash 2mounts> ;ash $ontributions during the year 5enefit pay%ents during the year

2012

> 22 ?00 > 22 1IC 1A 433 1C 334 > G3 1?CH > G4 I33H > > ?13 > 3IA > CI0 302

0ur retire%ent plans $osts are expe$ted to de$rease approxi%ately >1A0 %illion in 2014 due to signifi$ant in$reases in the #alue of our plan assets in 2013 and an in$rease in our dis$ount rates at our 8ay 31 2013 %easure%ent date. F9NDIN2. /he funding re4uire%ents for our 9.S. 7ension 7lans are go#erned by the 7ension 7rote$tion .$t of 200? !hi$h has aggressi#e funding re4uire%ents in order to a#oid benefit pay%ent restri$tions that be$o%e effe$ti#e if the funded status deter%ined under I'S rules falls belo! I0L at the beginning of a plan year. .ll of our 9.S. 7ension 7lans ha#e funded status le#els in ex$ess of I0L and our plans re%ain ade4uately funded to pro#ide benefits to our e%ployees as they $o%e due. .dditionally $urrent benefit pay%ents are no%inal $o%pared to our total plan assets Gbenefit pay%ents for our 9.S. 7ension 7lans for 2013 !ere approxi%ately >3C2 %illion or 3L of plan assetsH. During 2013 !e %ade >3?0 %illion in re4uired $ontributions to our 9.S. 7ension 7lans. 0#er the past se#eral years !e ha#e %ade #olun1 tary $ontributions to our 9.S. 7ension 7lans in ex$ess of the %ini%u% re4uired $ontributions. .%ounts $ontributed in ex$ess of the %ini%u% re4uired $an result in a $redit balan$e for funding purposes that $an be used to redu$e %ini%u% $ontribution re4uire%ents in future years. 0ur $urrent $redit balan$e ex$eeds >2 billion at 8ay 31 2013. For 2014 !e anti$ipate %a*ing re4uired $ontributions to our 9.S. 7ension 7lans totaling approxi%ately >?30 %illion. See Note 13 of the a$$o%panying $onsolidated finan$ial state%ents for further infor%ation about our retire%ent plans.

%easured on a $onser#ati#e basis. Ne#ertheless $hanges in health$are $osts a$$ident fre4uen$y and se#erity insuran$e retention le#els and other fa$tors $an %aterially affe$t the esti%ates for these liabilities.

Self1Insuran$e .$$ruals
We are self1insured up to $ertain li%its for $osts asso$iated !ith !or*ers" $o%pensation $lai%s #ehi$le a$$idents and general business liabilities and benefits paid under e%ployee health$are and long1 ter% disability progra%s. 0ur reser#es are established for esti%ates of loss on reported $lai%s in$luding in$urred1but1not1reported $lai%s. Self1 insuran$e a$$ruals refle$ted in our balan$e sheet !ere >1.C billion at 8ay 31 2013 and >1.? billion at 8ay 31 2012. .pproxi%ately 41L of these a$$ruals !ere $lassified as $urrent liabilities. 0ur self1insuran$e a$$ruals are pri%arily based on the a$tuarially esti%ated undis$ounted $ost of $lai%s in$urred as of the balan$e sheet date. /hese esti%ates in$lude $onsideration of fa$tors su$h as se#erity of $lai%s fre4uen$y of $lai%s and future health$are $osts. ;ost trends on %aterial a$$ruals are updated ea$h 4uarter. We self1 insure up to $ertain li%its that #ary by operating $o%pany and type of ris*. 7eriodi$ally !e e#aluate the le#el of insuran$e $o#erage and ad)ust insuran$e le#els based on ris* toleran$e and pre%iu% expense. @istori$ally it has been infre4uent that in$urred $lai%s ex$eeded our self1insured li%its. We belie#e the use of a$tuarial %ethods to a$$ount for these liabili1 ties pro#ides a $onsistent and effe$ti#e !ay to %easure these highly )udg%ental a$$ruals. @o!e#er the use of any esti%ation te$hni4ue in this area is inherently sensiti#e gi#en the %agnitude of $lai%s in#ol#ed and the length of ti%e until the ulti%ate $ost is *no!n. We belie#e our re$orded obligations for these expenses are $onsistently

:ong1:i#ed .ssets
7'07E'/& .ND EQ9I78EN/. 0ur *ey businesses are $apital intensi#e !ith approxi%ately 33L of our total assets in#ested in our transportation and infor%ation syste%s infrastru$tures. We $apital1 i6e only those $osts that %eet the definition of $apital assets under a$$ounting standards. .$$ordingly repair and %aintenan$e $osts that do not extend the useful life of an asset or are not part of the $ost of a$4uiring the asset are expensed as in$urred. /he depre$iation or a%orti6ation of our $apital assets o#er their esti%ated useful li#es and the deter%ination of any sal#age #alues re4uires %anage%ent to %a*e )udg%ents about future e#ents. 5e$ause !e utili6e %any of our $apital assets o#er relati#ely long periods Gthe %a)ority of air$raft $osts are depre$iated o#er 13 to 30 yearsH !e periodi$ally e#aluate !hether ad)ust%ents to our esti%ated ser#i$e li#es or sal#age #alues are ne$essary to ensure these esti1 %ates properly %at$h the e$ono%i$ use of the asset. /his e#aluation %ay result in $hanges in the esti%ated li#es and residual #alues used to depre$iate our air$raft and other e4uip%ent. For our air$raft !e typi$ally assign no residual #alue due to the utili6ation of these assets in $argo $onfiguration !hi$h results in little to no #alue at the end of their useful life. /hese esti%ates affe$t the a%ount of depre$iation expense re$ogni6ed in a period and ulti%ately the gain or loss on the disposal of the asset. ;hanges in the esti%ated li#es of assets !ill result in an in$rease or de$rease in the a%ount of depre$iation re$ogni6ed in future periods and $ould ha#e a %aterial i%pa$t on our results of operations. @istori$ally gains and losses on disposals of operating e4uip%ent ha#e not been %aterial. @o!e#er su$h a%ounts %ay differ %aterially in the future due to $hanges in business le#els te$hnologi$al obsoles$en$e a$$ident fre4uen$y regulatory $hanges and other fa$tors beyond our $ontrol. In 8ay 2013 FedEx Express %ade the de$ision to a$$elerate the retire%ent of C? air$raft and related engines to aid in our fleet %oderni6ation and i%pro#e our global net!or*. In 8ay 2012 !e shortened the depre$iable li#es for 34 air$raft and related engines to a$$elerate the retire%ent of these air$raft resulting in a depre$ia1 tion expense in$rease of >?A %illion in 2013. .s a result of these a$$elerated retire%ents !e expe$t an additional >C4 %illion in year1o#er1year a$$elerated depre$iation expense in 2014. 5e$ause of the lengthy lead ti%es for air$raft %anufa$ture and %odifi$ations !e %ust anti$ipate #olu%e le#els and plan our fleet re4uire%ents years in ad#an$e and %a*e $o%%it%ents for air$raft based on those pro)e$tions. Further%ore the ti%ing and a#ailability of $ertain used air$raft types Gparti$ularly those !ith better fuel effi$ien$yH %ay $reate li%ited opportunities to a$4uire these air$raft at fa#orable pri$es in ad#an$e of our $apa$ity needs. /hese a$ti#ities $reate ris*s that asset $apa$ity %ay ex$eed de%and and that an i%pair%ent of our assets %ay o$$ur. .ir$raft pur$hases Gpri%ar1 ily air$raft in passenger $onfigurationH that ha#e not been pla$ed in ser#i$e totaled >12A %illion at 8ay 31 2013 and >12C %illion at 8ay 31 2012. We plan to %odify these assets in the future and pla$e the% into operations.

/he a$$ounting test for !hether an asset held for use is i%paired in#ol#es first $o%paring the $arrying #alue of the asset !ith its esti1 %ated future undis$ounted $ash flo!s. If the $ash flo!s do not ex$eed

the $arrying #alue the asset %ust be ad)usted to its $urrent fair #alue. We operate integrated transportation net!or*s and a$$ordingly $ash flo!s for %ost of our operating assets are assessed at a net!or* le#el not at an indi#idual asset le#el for our analysis of i%pair%ent. Further de$isions about $apital in#est%ents are e#aluated based on the i%pa$t to the o#erall net!or* rather than the return on an indi#idual asset. We %a*e de$isions to re%o#e $ertain long1li#ed assets fro% ser#i$e based on pro)e$tions of redu$ed $apa$ity needs or lo!er operating $osts of ne!er air$raft types and those de$isions %ay result in an i%pair%ent $harge. .ssets held for disposal %ust be ad)usted to their esti%ated fair #alues less $osts to sell !hen the de$ision is %ade to dispose of the asset and $ertain other $riteria are %et. /he fair #alue deter%inations for su$h air$raft %ay re4uire %anage%ent esti%ates as there %ay not be a$ti#e %ar*ets for so%e of these air$raft. Su$h esti%ates are sub)e$t to re#ision fro% period to period. In the nor%al %anage%ent of our air$raft fleet !e routinely idle air$raft and engines te%porarily due to %aintenan$e $y$les and ad)ust%ents of our net!or* $apa$ity to %at$h seasonality and o#erall $usto%er de%and le#els. /e%porarily idled assets are $lassified as a#ailable1for1use and !e $ontinue to re$ord depre$iation expense asso$iated !ith these assets. /hese te%porarily idled assets are assessed for i%pair%ent on a 4uarterly basis. Fa$tors !hi$h $ould $ause i%pair%ent in$lude but are not li%ited to ad#erse $hanges in our global e$ono%i$ outloo* and the i%pa$t of our outloo* on our $urrent and pro)e$ted #olu%e le#els in$luding lo!er $apa$ity needs during our pea* shipping seasonsE the introdu$tion of ne! fleet types or de$isions to per%anently retire an air$raft fleet fro% operationsE or $hanges to planned ser#i$e expansion a$ti#ities. We $urrently ha#e one air$raft te%porarily idled. /his air$raft has been idled for 13 %onths and is expe$ted to return to re#enue ser#i$e. In 8ay 2013 !e %ade the de$ision to retire fro% ser#i$e t!o .irbus .3101200 air$raft and four related engines three .irbus .3101300 air$raft and t!o related engines and fi#e 5oeing 8D101 10 air$raft and 13 related engines to align !ith the plans of FedEx Express to %oderni6e its air$raft fleet and i%pro#e its global net!or*. .s a $onse4uen$e of this de$ision a non$ash i%pair%ent $harge of >100 %illion G>?3 %illion net of tax or >0.20 per diluted shareH !as re$orded in the fourth 4uarter. .ll of these air$raft !ere te%porarily idled and not in re#enue ser#i$e. In 2012 !e in$urred a non$ash i%pair%ent $harge of >134 %illion G>I4 %illion net of tax or >0.2? per diluted shareH. /his $harge related to our 8ay 2012 de$ision to per%anently retire 24 air$raft and 43 related engines to better align the 9.S. do%esti$ air net!or* $apa$ity of FedEx Express to %at$h $urrent and anti$ipated ship%ent #olu%es. /he %a)ority of these air$raft !ere te%porarily idled and not in re#enue ser#i$e. :E.SES. We utili6e operating leases to finan$e $ertain of our air$raft fa$ilities and e4uip%ent. Su$h arrange%ents typi$ally shift the ris* of loss on the residual #alue of the assets at the end of the lease

period to the lessor. .s dis$losed in <;ontra$tual ;ash 0bligations= and Note C of the a$$o%panying $onsolidated finan$ial state%ents at 8ay 31 2013 !e had approxi%ately >13 billion Gon an undis$ounted basisH of future $o%%it%ents for pay%ents under operating leases.

/he !eighted1a#erage re%aining lease ter% of all operating leases outstanding at 8ay 31 2013 !as approxi%ately six years. /he future $o%%it%ents for operating leases are not refle$ted as a liability in our balan$e sheet under $urrent 9.S. a$$ounting rules. /he deter%ination of !hether a lease is a$$ounted for as a $apital lease or an operating lease re4uires %anage%ent to %a*e esti%ates pri%arily about the fair #alue of the asset and its esti%ated e$ono%i$ useful life. In addition our e#aluation in$ludes ensuring !e properly a$$ount for build1to1suit lease arrange%ents and %a*ing )udg%ents about !hether #arious for%s of lessee in#ol#e%ent during the $onstru$tion period %a*e the lessee an agent for the o!ner1lessor or in substan$e the o!ner of the asset during the $onstru$tion period. We belie#e !e ha#e !ell1 defined and $ontrolled pro$esses for %a*ing these e#aluations in$luding obtaining third1party appraisals for %aterial transa$tions to assist us in %a*ing these e#aluations. 9nder a proposed re#ision to the a$$ounting standards for leases !e !ould be re4uired to re$ord an asset and a liability for our outstanding operating leases si%ilar to the $urrent a$$ounting for $apital leases. Notably the a%ount !e re$ord in the future !ould be the net present #alue of our future lease $o%%it%ents at the date of adoption. /his proposed guidan$e has not been issued and has been sub)e$ted to nu%erous re#isions sin$e the proposal !as issued %ost re$ently in 8ay 2013. While !e are not re4uired to 4uantify the effe$ts of the proposed rule $hanges until these rules are finali6ed !e belie#e that a %a)ority of the operating lease obligations refle$ted in the $ontra$tual $ash obligations table !ould be re4uired to be refle$ted in our balan$e sheet !ere the proposed rules to be adopted. Further%ore our existing finan$ing agree%ents and the rating agen$ies that e#aluate our $redit!orthiness already ta*e our operating leases into a$$ount. 200DWI::. .s of 8ay 31 2013 !e had >2.I billion of re$orded good1 !ill fro% our a$4uisitions representing the ex$ess of the pur$hase pri$e o#er the fair #alue of the net assets !e ha#e a$4uired. Se#eral fa$tors gi#e rise to good!ill in our a$4uisitions su$h as the expe$ted benefit fro% synergies of the $o%bination and the existing !or*for$e of the a$4uired entity. In our e#aluation of good!ill i%pair%ent !e perfor% a 4ualitati#e assess%ent !hi$h re4uires %anage%ent )udg%ent and the use of esti%ates to deter%ine if it is %ore li*ely than not that the fair #alue of a reporting unit is less than its $arrying a%ount. If the 4ualitati#e assess%ent is not $on$lusi#e !e pro$eed to a t!o1step pro$ess to test good!ill for i%pair%ent in$luding $o%paring the fair #alue of ea$h reporting unit !ith its $arrying #alue Gin$luding attributable good!illH. Fair #alue is esti%ated using standard #aluation %ethodologies Gprin$ipally the in$o%e or %ar*et approa$hH in$orporating %ar*et parti$ipant $onsiderations and %anage%ent"s assu%ptions on re#enue gro!th rates operating %argins dis$ount rates and expe$ted $apital expenditures. Esti%ates used by %anage%ent $an signifi$antly affe$t the out$o%e of the i%pair%ent test. ;hanges in fore$asted operating results and other assu%ptions $ould %aterially affe$t these esti%ates. We perfor% our annual i%pair%ent tests in the fourth 4uarter unless $ir$u%stan$es indi$ate the need to a$$elerate the ti%ing of the tests.

0ur reporting units !ith signifi$ant re$orded good!ill in$lude our FedEx Express FedEx Freight and FedEx 0ffi$e Greported in the FedEx Ser#i$es seg%entH reporting units. We e#aluated these reporting units during the fourth 4uarters of 2013 and 2012. /he esti%ated fair #alue of ea$h of these reporting units ex$eeded their $arrying #alues in 2013 and 2012 and !e do not belie#e that any of these reporting units !ere at ris* as of 8ay 31 2013.

;ontingen$ies
We are sub)e$t to #arious loss $ontingen$ies in$luding tax pro$eed1 ings and litigation in $onne$tion !ith our operations. ;ontingent liabilities are diffi$ult to %easure as their %easure%ent is sub)e$t to %ultiple fa$tors that are not easily predi$ted or pro)e$ted. Further additional $o%plexity in %easuring these liabilities arises due to the #arious )urisdi$tions in !hi$h these %atters o$$ur !hi$h %a*es our ability to predi$t their out$o%e highly un$ertain. 8oreo#er different a$$ounting rules %ust be e%ployed to a$$ount for these ite%s based on the nature of the $ontingen$y. .$$ordingly signifi$ant %anage%ent )udg%ent is re4uired to assess these %atters and to %a*e deter%ina1 tions about the %easure%ent of a liability if any. 0ur %aterial pending loss $ontingen$ies are des$ribed in Note 1I of the a$$o%panying $onsolidated finan$ial state%ents. In the opinion of %anage%ent the aggregate liability if any of indi#idual %atters or groups of %atters not spe$ifi$ally des$ribed in Note 1I is not expe$ted to be %aterial to our finan$ial position results of operations or $ash flo!s. /he follo!1 ing des$ribes our %ethods and asso$iated pro$esses for e#aluating these %atters. /.T ;0N/IN2EN;IES. We are sub)e$t to in$o%e and operating tax rules of the 9.S. its states and %uni$ipalities and of the foreign )urisdi$tions in !hi$h !e operate. Signifi$ant )udg%ent is re4uired in deter%ining in$o%e tax pro#isions as !ell as deferred tax asset and liability balan$es and related deferred tax #aluation allo!an$es if ne$essary due to the $o%plexity of these rules and their intera$tion !ith one another. We a$$ount for in$o%e taxes by re$ording both $urrent taxes payable and deferred tax assets and liabilities. 0ur pro#ision for in$o%e taxes is based on do%esti$ and international statutory in$o%e tax rates in the )urisdi$tions in !hi$h !e operate applied to taxable in$o%e redu$ed by appli$able tax $redits. /ax $ontingen$ies arise fro% un$ertainty in the appli$ation of tax rules throughout the %any )urisdi$tions in !hi$h !e operate and are i%pa$ted by se#eral fa$tors in$luding tax audits appeals litigation $hanges in tax la!s and other rules and their interpretations and $hanges in our business. We regularly assess the potential i%pa$t of these fa$tors for the $urrent and prior years to deter%ine the ade4ua$y of our tax pro#isions. We $ontinually e#aluate the li*elihood and a%ount of potential ad)ust%ents and ad)ust our tax positions in$luding the $urrent and deferred tax liabilities in the period in !hi$h the fa$ts that gi#e rise to a re#ision be$o%e *no!n. In addition %an1 age%ent $onsiders the ad#i$e of third parties in %a*ing $on$lusions regarding tax $onse4uen$es.

We re$ogni6e liabilities for un$ertain in$o%e tax positions based on a t!o1step pro$ess. /he first step is to e#aluate the tax position for re$1 ognition by deter%ining if the !eight of a#ailable e#iden$e indi$ates that it is %ore li*ely than not that the position !ill be sustained on audit in$luding resolution of related appeals or litigation pro$esses if any. /he se$ond step re4uires us to esti%ate and %easure the tax benefit as the largest a%ount that is %ore than 30L li*ely to be real1 i6ed upon ulti%ate settle%ent. It is inherently diffi$ult and sub)e$ti#e to esti%ate su$h a%ounts as !e %ust deter%ine the probability of #arious possible out$o%es. We ree#aluate these un$ertain tax posi1 tions on a 4uarterly basis or !hen ne! infor%ation be$o%es a#ailable to %anage%ent. /hese ree#aluations are based on fa$tors in$luding but not li%ited to $hanges in fa$ts or $ir$u%stan$es $hanges in tax la! su$$essfully settled issues under audit and ne! audit a$ti#ity. Su$h a $hange in re$ognition or %easure%ent $ould result in the re$ognition of a tax benefit or an in$rease to the related pro#ision. We $lassify interest related to in$o%e tax liabilities as interest expense and if appli$able penalties are re$ogni6ed as a $o%ponent of in$o%e tax expense. /he in$o%e tax liabilities and a$$rued interest and penalties that are due !ithin one year of the balan$e sheet date are presented as $urrent liabilities. /he re%aining portion of our in$o%e tax liabilities and a$$rued interest and penalties are presented as non$urrent liabilities be$ause pay%ent of $ash is not anti$ipated !ithin one year of the balan$e sheet date. /hese non$urrent in$o%e tax liabilities are re$orded in the $aption <0ther liabilities= in the a$$o%panying $onsolidated balan$e sheets. We a$$ount for operating taxes based on %ulti1state lo$al and foreign taxing )urisdi$tion rules in those areas in !hi$h !e operate. 7ro#isions for operating taxes are esti%ated based upon these rules asset a$4uisitions and disposals histori$al spend and other #ariables. /hese pro#isions are $onsistently e#aluated for reasonableness against $o%plian$e and ris* fa$tors. We %easure and re$ord operating tax $ontingen$y a$$ruals in a$$ordan$e !ith a$$ounting guidan$e for $ontingen$ies. .s dis$ussed belo! this guidan$e re4uires an a$$rual of esti%ated loss fro% a $ontingen$y su$h as a tax or other legal pro$eeding or $lai% !hen it is probable that a loss !ill be in$urred and the a%ount of the loss $an be reasonably esti%ated. 0/@E' ;0N/IN2EN;IES. 5e$ause of the $o%plex en#iron%ent in !hi$h !e operate !e are sub)e$t to other legal pro$eedings and $lai%s in$luding those relating to general $o%%er$ial %atters e%ploy%ent1related $lai%s and FedEx 2round"s o!ner1operators. .$$ounting guidan$e for $ontingen$ies re4uires an a$$rual of esti1 %ated loss fro% a $ontingen$y su$h as a tax or other legal pro$eeding or $lai% !hen it is probable Gi.e. the future e#ent or e#ents are li*ely to o$$urH that a loss has been in$urred and the a%ount of the loss $an be reasonably esti%ated. /his guidan$e also re4uires dis$losure of a loss $ontingen$y %atter !hen in %anage%ent"s )udg%ent a %aterial loss is reasonably possible or probable.

During the preparation of our finan$ial state%ents !e e#aluate our $ontingen$ies to deter%ine !hether it is probable reasonably pos1 sible or re%ote that a liability has been in$urred. . loss is re$ogni6ed for all $ontingen$ies dee%ed probable and esti%able regardless of a%ount. For unresol#ed $ontingen$ies !ith potentially %aterial exposure that are dee%ed reasonably possible !e e#aluate !hether a potential loss or range of loss $an be reasonably esti%ated. 0ur e#aluation of these %atters is the result of a $o%prehensi#e pro$ess designed to ensure that a$$ounting re$ognition of a loss or dis$losure of these $ontingen$ies is %ade in a ti%ely %anner and in#ol#es our legal and a$$ounting personnel as !ell as external $ounsel !here appli$able. /he pro$ess in$ludes regular $o%%uni$a1 tions during ea$h 4uarter and s$heduled %eetings shortly before the $o%pletion of our finan$ial state%ents to e#aluate any ne! legal pro$eedings and the status of any existing %atters. In deter%ining !hether a loss should be a$$rued or a loss $ontingen$y dis$losed !e e#aluate a%ong other fa$tors( @ the $urrent status of ea$h %atter !ithin the s$ope and $ontext of the entire la!suit Gi.e. the lengthy and $o%plex nature of $lass1 a$tion %attersHE @ the pro$edural status of ea$h la!suitE @ any opportunities to dispose of the la!suit on its %erits before trial Gi.e. %otion to dis%iss or for su%%ary )udg%entHE @ the a%ount of ti%e re%aining before the trial dateE @ the status of dis$o#eryE @ the status of settle%ent arbitration or %ediation pro$eedings andE @ our )udg%ent regarding the li*elihood of su$$ess prior to or at trial. In rea$hing our $on$lusions !ith respe$t to a$$rual of a loss or loss $ontingen$y dis$losure !e ta*e a holisti$ #ie! of ea$h %atter based on these fa$tors and the infor%ation a#ailable prior to the issuan$e of our finan$ial state%ents. 9n$ertainty !ith respe$t to an indi#idual fa$tor or $o%bination of these fa$tors %ay i%pa$t our de$isions related to a$$rual or dis$losure of a loss $ontingen$y in$luding a $on$lusion that !e are unable to establish an esti%ate of possible loss or a %eaningful range of possible loss. We update our dis$lo1 sures to refle$t our %ost $urrent understanding of the $ontingen$ies at the ti%e !e issue our finan$ial state%ents. @o!e#er e#ents %ay arise that !ere not anti$ipated and the out$o%e of a $ontingen$y %ay result in a loss to us that differs %aterially fro% our pre#iously esti%ated liability or range of possible loss. Despite the inherent $o%plexity in the a$$ounting and dis$losure of $ontingen$ies !e belie#e that our pro$esses are robust and thorough and pro#ide a $onsistent fra%e!or* for %anage%ent in e#aluating the potential out$o%e of $ontingen$ies for proper a$$ounting re$ognition and dis$losure.

Q9.N/I/./IPE .ND Q9.:I/./IPE DIS;:0S9'ES .509/ 8.'JE/ 'ISJ

IN/E'ES/ './ES. While !e $urrently ha#e %ar*et ris* sensiti#e instru%ents related to interest rates !e ha#e no signifi$ant exposure to $hanging interest rates on our long1ter% debt be$ause the interest rates are fixed on all of our long1ter% debt. .s dis$losed in Note ? to the a$$o%panying $onsolidated finan$ial state%ents !e had outstanding fixed1rate long1ter% debt Gex$lusi#e of $apital leasesH !ith esti%ated fair #alues of >3.2 billion at 8ay 31 2013 and >2.0 billion at 8ay 31 2012. 8ar*et ris* for fixed1rate long1ter% debt is esti%ated as the potential de$rease in fair #alue resulting fro% a hypotheti$al 10L in$rease in interest rates and a%ounts to >CC %illion as of 8ay 31 2013 and >30 %illion as of 8ay 31 2012. /he underlying fair #alues of our long1ter% debt !ere esti%ated based on 4uoted %ar*et pri$es or on the $urrent rates offered for debt !ith si%ilar ter%s and %aturities. We ha#e interest rate ris* !ith respe$t to our pension and postre1 tire%ent benefit obligations. ;hanges in interest rates i%pa$t our liabilities asso$iated !ith these benefit plans as !ell as the a%ount of pension and postretire%ent benefit expense re$ogni6ed. De$lines in the #alue of plan assets $ould di%inish the funded status of our pension plans and potentially in$rease our re4uire%ent to %a*e $on1 tributions to the plans. Substantial in#est%ent losses on plan assets !ill also in$rease pension and postretire%ent benefit expense in the years follo!ing the losses. F0'EI2N ;9''EN;&. While !e are a global pro#ider of transporta1 tion e1$o%%er$e and business ser#i$es the substantial %a)ority of our transa$tions are deno%inated in 9.S. dollars. /he prin$ipal foreign $urren$y ex$hange rate ris*s to !hi$h !e are exposed are in the ;hinese yuan euro 5ra6ilian real ;anadian dollar and the 5ritish pound. @istori$ally our exposure to foreign $urren$y flu$tuations is %ore signifi$ant !ith respe$t to our re#enues than our expenses as a signifi$ant portion of our expenses are deno%inated in 9.S. dollars su$h as air$raft and fuel expenses. During 2013 and 2012 foreign $ur1 ren$y flu$tuations had a slightly positi#e i%pa$t on operating in$o%e. @o!e#er fa#orable foreign $urren$y flu$tuations also %ay ha#e had an offsetting i%pa$t on the pri$e !e obtained or the de%and for our ser#i$es !hi$h is not 4uantifiable. .t 8ay 31 2013 the result of a unifor% 10L strengthening in the #alue of the dollar relati#e to the $urren$ies in !hi$h our transa$tions are deno%inated !ould result in a de$rease in operating in$o%e of >132 %illion for 2014. /his theoreti1 $al $al$ulation re4uired under SE; guidelines assu%es that ea$h ex$hange rate !ould $hange in the sa%e dire$tion relati#e to the 9.S. dollar !hi$h is not $onsistent !ith our a$tual experien$e in foreign $urren$y transa$tions. In addition to the dire$t effe$ts of $hanges in ex$hange rates flu$tuations in ex$hange rates also affe$t the #olu%e of sales or the foreign $urren$y sales pri$e as $o%petitors" ser#i$es be$o%e %ore or less attra$ti#e. /he sensiti#ity analysis of the effe$ts of $hanges in foreign $urren$y ex$hange rates does not fa$tor in a potential $hange in sales le#els or lo$al $urren$y pri$es.

;0880DI/&. While !e ha#e %ar*et ris* for $hanges in the pri$e of )et and #ehi$le fuel this ris* is largely %itigated by our fuel sur$harges be$ause our fuel sur$harges are $losely lin*ed to %ar*et pri$es for fuel. /herefore a hypotheti$al 10L $hange in the pri$e of fuel !ould not be expe$ted to %aterially affe$t our earnings o#er the long ter%. @o!e#er our fuel sur$harges ha#e a ti%ing lag Gapproxi%ately six to eight !ee*s for FedEx Express and FedEx 2roundH before they are ad)usted for $hanges in fuel pri$es. 0ur fuel sur$harge index also allo!s fuel pri$es to flu$tuate approxi%ately 2L for FedEx Express and approxi%ately 4L for FedEx 2round before an ad)ust%ent to the fuel sur$harge o$$urs. .$$ordingly our operating in$o%e in a spe$ifi$ period %ay be signifi$antly affe$ted should the spot pri$e of fuel sud1 denly $hange by a substantial a%ount or $hange by a%ounts that do not result in an ad)ust%ent in our fuel sur$harges. 0/@E'. We do not pur$hase or hold any deri#ati#e finan$ial instru1 %ents for trading purposes.

G!hether or not )ustifiedH relating to a$ti#ities by our e%ployees $ontra$tors or agents su$h as $usto%er ser#i$e %ishaps or non$o%1 plian$e !ith anti1$orruption la!s $ould tarnish our reputation and redu$e the #alue of our brand. With the in$rease in the use of so$ial %edia outlets su$h as &ou/ube and /!itter ad#erse publi$ity $an be disse%inated 4ui$*ly and broadly %a*ing it in$reasingly diffi$ult for us to defend against. Da%age to our reputation and loss of brand e4uity $ould redu$e de%and for our ser#i$es and thus ha#e an ad#erse effe$t on our finan$ial $ondition li4uidity and results of operations as !ell as re4uire additional resour$es to rebuild our reputation and restore the #alue of our brand. We rely hea#ily on infor%ation and te$hnology to operate our transportation and business net!or*s and any disruption to our te$hnology infrastru$ture or the Internet $ould har% our opera1 tions and our reputation a%ong $usto%ers. 0ur ability to attra$t and retain $usto%ers and to $o%pete effe$ti#ely depends in part upon the sophisti$ation and reliability of our te$hnology net!or* in$lud1 ing our ability to pro#ide features of ser#i$e that are i%portant to our $usto%ers. External and internal ris*s su$h as %al!are $ode ano%a1 lies <.$ts of 2od = atte%pts to penetrate our net!or*s transitional $hallenges in %igrating operating $o%pany fun$tionality to our FedEx enterprise auto%ation platfor% data lea*age and hu%an error pose a dire$t threat to our produ$ts ser#i$es and data. .ny disruption to the Internet or our $o%plex global te$hnology infrastru$ture in$luding those i%pa$ting our $o%puter syste%s and $usto%er !ebsites $ould ad#ersely i%pa$t our $usto%er ser#i$e #olu%es and re#enues and result in in$reased $osts. /hese types of ad#erse i%pa$ts $ould also o$$ur in the e#ent the $onfidentiality integrity or a#ailability of $o%1 pany and $usto%er infor%ation !as $o%pro%ised due to a data loss by FedEx or a trusted third party. While !e ha#e in#ested and $ontinue to in#est in te$hnology se$urity initiati#es infor%ation te$hnology ris* %anage%ent and disaster re$o#ery plans these %easures $annot fully insulate us fro% te$hnology disruptions or data loss and the resulting ad#erse effe$t on our operations and finan$ial results. 0ur transportation businesses are i%pa$ted by the pri$e and a#ailability of fuel. We %ust pur$hase large 4uantities of fuel to operate our air$raft and #ehi$les and the pri$e and a#ailability of fuel $an be unpredi$table and beyond our $ontrol. /o date !e ha#e been %ostly su$$essful in %itigating o#er ti%e the expense i%pa$t of higher fuel $osts through our indexed fuel sur$harges as the a%ount of the sur$harges is $losely lin*ed to the %ar*et pri$es for fuel. If !e are unable to %aintain or in$rease our fuel sur$harges be$ause of $o%petiti#e pri$ing pressures or so%e other reason fuel $osts $ould ad#ersely i%pa$t our operating results. E#en if !e are able to offset the $ost of fuel !ith our sur$harges high fuel sur$harges $ould %o#e our $usto%ers a!ay fro% our higher1yielding express ser#i$es to our lo!er1yielding deferred or ground ser#i$es or e#en redu$e $usto%er de%and for our ser#i$es altogether. In addition disruptions in the sup1 ply of fuel $ould ha#e a negati#e i%pa$t on our ability to operate our transportation net!or*s.

'ISJ F.;/0'S
0ur finan$ial and operating results are sub)e$t to %any ris*s and un$ertainties as des$ribed belo!. We are dire$tly affe$ted by the state of the e$ono%y. While %a$ro1e$ono%i$ ris*s apply to %ost $o%panies !e are parti$ularly #ulnerable. /he transportation industry is highly $y$li$al and espe1 $ially sus$eptible to trends in e$ono%i$ a$ti#ity. 0ur pri%ary business is to transport goods so our business le#els are dire$tly tied to the pur$hase and produ$tion of goods + *ey %a$ro1e$ono%i$ %easure1 %ents. When indi#iduals and $o%panies pur$hase and produ$e fe!er goods !e transport fe!er goods and as $o%panies expand the nu%ber of distribution $enters and %o#e %anufa$turing $loser to $on1 su%er %ar*ets !e transport goods shorter distan$es. In addition !e ha#e a relati#ely high fixed1$ost stru$ture !hi$h is diffi$ult to 4ui$*ly ad)ust to %at$h shifting #olu%e le#els. 8oreo#er as !e $ontinue to gro! our international business !e are in$reasingly affe$ted by the health of the global e$ono%y and the typi$ally %ore #olatile e$ono1 %ies of e%erging %ar*ets. In 2013 slo!er than expe$ted e$ono%i$ gro!th resulted in a $ontinued $usto%er preferen$e for slo!er less $ostly shipping ser#i$es !hi$h had a negati#e i%pa$t on our profitability. 0ur businesses depend on our strong reputation and the #alue of the FedEx brand. /he FedEx brand na%e sy%boli6es high14uality ser#i$e reliability and speed. FedEx is one of the %ost !idely re$og1 ni6ed trusted and respe$ted brands in the !orld and the FedEx brand is one of our %ost i%portant and #aluable assets. In addition !e ha#e a strong reputation a%ong $usto%ers and the general publi$ for high standards of so$ial and en#iron%ental responsibility and $orporate go#ernan$e and ethi$s. /he FedEx brand na%e and our $orporate reputation are po!erful sales and %ar*eting tools and !e de#ote sig1 nifi$ant resour$es to pro%oting and prote$ting the%. .d#erse publi$ity

0ur businesses are $apital intensi#e and !e %ust %a*e $apital de$isions based upon pro)e$ted #olu%e le#els. We %a*e signifi1 $ant in#est%ents in air$raft #ehi$les te$hnology pa$*age handling fa$ilities sort e4uip%ent $opy e4uip%ent and other assets to support our transportation and business net!or*s. We also %a*e signifi$ant in#est%ents to rebrand integrate and gro! the $o%panies that !e a$4uire. /he a%ount and ti%ing of $apital in#est%ents depend on #arious fa$tors in$luding our anti$ipated #olu%e gro!th. We %ust %a*e $o%%it%ents to pur$hase or %odify air$raft years before the air$raft are a$tually needed. We %ust predi$t #olu%e le#els and fleet re4uire%ents and %a*e $o%%it%ents for air$raft based on those pro1 )e$tions. 8issing our pro)e$tions $ould result in too %u$h or too little $apa$ity relati#e to our shipping #olu%es. 0#er$apa$ity $ould lead to asset dispositions or !rite1do!ns and under$apa$ity $ould negati#ely i%pa$t ser#i$e le#els. For exa%ple in the fourth 4uarter of 2013 !e %ade a de$ision to retire fro% ser#i$e $ertain air$raft and ex$ess air$raft engines and thus re$orded a non$ash i%pair%ent $harge of >100 %illion. We fa$e intense $o%petition. /he transportation and business ser1 #i$es %ar*ets are both highly $o%petiti#e and sensiti#e to pri$e and ser#i$e espe$ially in periods of little or no %a$ro1e$ono%i$ gro!th. So%e of our $o%petitors ha#e %ore finan$ial resour$es than !e do or they are $ontrolled or subsidi6ed by foreign go#ern%ents !hi$h enables the% to raise $apital %ore easily. We belie#e !e $o%pete effe$ti#ely !ith these $o%panies + for exa%ple by pro#iding %ore reliable ser#i$e at $o%pensatory pri$es. @o!e#er an irrational pri$ing en#iron%ent $an li%it our ability not only to %aintain or in$rease our pri$es Gin$luding our fuel sur$harges in response to rising fuel $ostsH but also to %aintain or gro! our %ar*et share. In addition high #olu%e pa$*age shippers $ould de#elop in1house ground deli#ery $apabilities !hi$h !ould in turn redu$e our re#enues and %ar*et share. While !e belie#e !e $o%pete effe$ti#ely through our $urrent ser#i$e offerings if our $urrent $o%petitors or potential future $o%1 petitors offer a broader range of ser#i$es or %ore effe$ti#ely bundle their ser#i$es or our $urrent $usto%ers be$o%e $o%petitors it $ould i%pede our ability to %aintain or gro! our %ar*et share. If !e do not effe$ti#ely operate integrate le#erage and gro! a$4uired businesses our finan$ial results and reputation %ay suffer. 0ur strategy for long1ter% gro!th produ$ti#ity and profitability depends in part on our ability to %a*e prudent strategi$ a$4uisitions and to reali6e the benefits !e expe$t !hen !e %a*e those a$4uisi1 tions. In furtheran$e of this strategy in 2013 !e %ade strategi$ a$4uisitions in 7oland Fran$e and 5ra6il. While !e expe$t our past and future a$4uisitions to enhan$e our #alue proposition to $usto%ers and i%pro#e our long1ter% profitability there $an be no assuran$e that !e !ill reali6e our expe$tations !ithin the ti%e fra%e !e ha#e established if at all or that !e $an $ontinue to support the #alue !e allo$ate to these a$4uired businesses in$luding their good!ill or other intangible assets.

:abor organi6ations atte%pt to organi6e groups of our e%ploy1 ees fro% ti%e to ti%e and potential $hanges in labor la!s $ould %a*e it easier for the% to do so. If !e are unable to $ontinue to %aintain good relationships !ith our e%ployees and pre#ent labor organi6ations fro% organi6ing groups of our e%ployees our operating $osts $ould signifi$antly in$rease and our operational flexibility $ould be signifi$antly redu$ed. Despite $ontinual organi6ing atte%pts by labor unions other than the pilots of FedEx Express all of our 9.S. e%ployees ha#e thus far $hosen not to unioni6e. /he 9.S. ;ongress has in the past $onsidered adopting $hanges in labor la!s ho!1 e#er that !ould %a*e it easier for unions to organi6e units of our e%ployees. For exa%ple there is al!ays a possibility that ;ongress $ould re%o#e %ost FedEx Express e%ployees fro% the pur#ie! of the 'ail!ay :abor .$t of 1A2? as a%ended Gthe <':.=H. Su$h legislation $ould expose our $usto%ers to the type of ser#i$e disruptions that the ':. !as designed to pre#ent + lo$al !or* stoppages in *ey areas that interrupt the ti%ely flo! of ship%ents of ti%e1sensiti#e high1 #alue goods throughout our global net!or*. Su$h disruptions $ould threaten our ability to pro#ide $o%petiti#ely pri$ed shipping options and ready a$$ess to global %ar*ets. /here is also the possibility that ;ongress $ould pass other labor legislation that $ould ad#ersely affe$t our $o%panies su$h as FedEx 2round and FedEx Freight !hose e%ployees are go#erned by the National :abor 'elations .$t of 1A33 as a%ended Gthe <N:'.=H. In addition federal and state go#ern%ental agen$ies su$h as the National :abor 'elations 5oard ha#e and %ay $ontinue to ta*e a$tions that $ould %a*e it easier for our e%ployees to organi6e under the ':. or N:'.. Finally $hanges to federal or state la!s go#erning e%ployee $lassifi$ation $ould i%pa$t the status of FedEx 2round"s o!ner1operators as independent $ontra$tors. FedEx 2round relies on o!ner1operators to $ondu$t its linehaul and pi$*up1and1deli#ery operations and the status of these o!ner1operators as independent $ontra$tors rather than e%ployees is being $hallenged. FedEx 2round"s use of independent $ontra$tors is !ell suited to the needs of the ground deli#ery business and its $usto%ers as e#iden$ed by the strong gro!th of this business seg%ent. We are in#ol#ed in nu%erous la!suits and state tax and other ad%inistrati#e pro$eedings that $lai% that the $o%pany"s o!ner1operators or their dri#ers should be treated as our e%ployees rather than independent $ontra$tors. We in$ur $ertain $osts in$luding legal fees in defending the status of FedEx 2round"s o!ner1operators as independent $ontra$tors. We belie#e that FedEx 2round"s o!ner1 operators are properly $lassified as independent $ontra$tors and that FedEx 2round is not an e%ployer of the dri#ers of the $o%pany"s independent $ontra$tors. @o!e#er ad#erse deter%inations in these %atters $ould a%ong other things entitle $ertain of our o!ner1 operators and their dri#ers to the rei%burse%ent of $ertain expenses and to the benefit of !age1and1 hour la!s and result in e%ploy%ent and !ithholding tax and benefit liability for FedEx 2round and $ould result in $hanges to the independent $ontra$tor status of FedEx 2round"s o!ner1operators. ;hanges to state la!s go#erning the definition of independent $ontra$tors $ould i%pa$t the status of FedEx 2round"s o!ner1operators. If FedEx 2round is $o%pelled to $on#ert its independent $ontra$tors to e%ployees labor organi6ations $ould %ore easily organi6e these indi#iduals our operating $osts $ould in$rease %aterially and !e $ould in$ur signifi$ant $apital outlays.

Failure to exe$ute on our business realign%ent progra% !ill $ause our future finan$ial results to suffer. In 2013 !e announ$ed profit i%pro#e%ent progra%s pri%arily through initiati#es at FedEx Express and FedEx Ser#i$es that in$lude $ost redu$tions %odern1 i6ation of our air$raft fleet transfor%ation of the 9.S. do%esti$ operations and international profit i%pro#e%ents at FedEx Express and i%pro#ed effi$ien$ies and lo!er $osts of infor%ation te$hnology at FedEx Ser#i$es. /o this end during 2013 !e $ondu$ted a progra% to offer #oluntary $ash buyouts to eligible 9.S.1based e%ployees in $ertain staff fun$tions. .dditionally !e announ$ed in 8ay 2013 our de$ision to retire fro% ser#i$e 10 air$raft and related engines as !ell as to shorten the depre$iable li#es of an additional C? air$raft and related engines in an effort to %oderni6e our air$raft fleet and i%pro#e our global net!or*. We !ill $ontinue to !or* to!ards the plan of annual profitability i%pro#e%ent of >1.? billion by the end of 201? but if !e are not able to rea$h this goal in the fa$e of $halleng1 ing e$ono%i$ $onditions our future finan$ial results %ay suffer. /he transportation infrastru$ture $ontinues to be a target of terrorist a$ti#ities. 5e$ause transportation assets $ontinue to be a target of terrorist a$ti#ities go#ern%ents around the !orld are adopting or are $onsidering adopting stri$ter se$urity re4uire%ents that !ill in$rease operating $osts and potentially slo! ser#i$e for businesses in$luding those in the transportation industry. For exa%ple the 9.S. /ransportation Se$urity .d%inistration $ontinues to re4uire FedEx Express to $o%ply !ith a Full .ll1;argo .ir$raft 0perator Standard Se$urity 7lan !hi$h $ontains e#ol#ing and stri$t se$urity re4uire%ents. /hese re4uire%ents are not stati$ but $hange periodi$ally as the result of regulatory and legislati#e re4uire%ents i%posing additional se$urity $osts and $reating a le#el of un$ertainty for our operations. /hus it is reasonably possible that these rules or other future se$urity re4uire%ents $ould i%pose %aterial $osts on us. 8oreo#er a terrorist atta$* dire$ted at FedEx or other aspe$ts of the transportation infrastru$ture $ould disrupt our operations and ad#ersely i%pa$t de%and for our ser#i$es. /he regulatory en#iron%ent for global a#iation or other transpor1 tation rights %ay i%pa$t our operations. 0ur extensi#e air net!or* is $riti$al to our su$$ess. 0ur right to ser#e foreign points is sub)e$t to the appro#al of the Depart%ent of /ransportation and generally re4uires a bilateral agree%ent bet!een the 9nited States and foreign go#ern%ents. In addition !e %ust obtain the per%ission of foreign go#ern%ents to pro#ide spe$ifi$ flights and ser#i$es. 0ur opera1 tions outside of the 9nited States su$h as FedEx Express"s gro!ing international do%esti$ operations are also sub)e$t to $urrent and potential regulations in$luding $ertain postal regulations and li$ens1 ing re4uire%ents that restri$t %a*e diffi$ult and so%eti%es prohibit the ability of foreign1o!ned $o%panies su$h as FedEx Express to $o%pete effe$ti#ely in parts of the international do%esti$ transporta1 tion and logisti$s %ar*et. 'egulatory a$tions affe$ting global a#iation or transportation rights or a failure to obtain or %aintain a#iation or other transportation rights in i%portant international

%ar*ets $ould i%pair our ability to operate our net!or*s.

We %ay be affe$ted by global $li%ate $hange or by legal regulatory or %ar*et responses to su$h $hange. ;on$ern o#er $li%ate $hange in$luding the i%pa$t of global !ar%ing has led to signifi$ant 9.S. and international legislati#e and regulatory efforts to li%it greenhouse gas G<2@2=H e%issions in$luding our air$raft and diesel engine e%issions. For exa%ple during 200A the European ;o%%ission appro#ed the extension of the European 9nion E%issions /rading S$he%e G<E/S=H for 2@2 e%issions to the airline industry. 9nder this de$ision all FedEx Express flights to and fro% any airport in any %e%ber state of the European 9nion are no! $o#ered by the E/S re4uire%ents and ea$h year !e are re4uired to sub%it e%ission allo!an$es in an a%ount e4ual to the $arbon dioxide e%issions fro% su$h flights. 5e$ause the European 9nion E/S is being $ontested by %any $ountries on a nu%ber of fronts and the effe$ti#e date for parts of the E/S has been delayed until next year the future i%pa$t on us is un$lear. In addition the 9.S. ;ongress has in the past $onsidered bills that !ould regulate 2@2 e%issions and so%e for% of federal $li%ate $hange legislation is possible in the future. In$reased regula1 tion regarding 2@2 e%issions espe$ially air$raft or diesel engine e%issions $ould i%pose substantial $osts on us espe$ially at FedEx Express. /hese $osts in$lude an in$rease in the $ost of the fuel and other energy !e pur$hase and $apital $osts asso$iated !ith updat1 ing or repla$ing our air$raft or #ehi$les pre%aturely. 9ntil the ti%ing s$ope and extent of su$h regulation be$o%es *no!n !e $annot predi$t its effe$t on our $ost stru$ture or our operating results. It is reasonably possible ho!e#er that it $ould i%pose %aterial $osts on us. 8oreo#er e#en !ithout su$h regulation in$reased a!areness and any ad#erse publi$ity in the global %ar*etpla$e about the 2@2s e%it1 ted by $o%panies in the airline and transportation industries $ould har% our reputation and redu$e $usto%er de%and for our ser#i$es espe$ially our air express ser#i$es. Finally gi#en the broad and global s$ope of our operations and our sus$eptibility to global %a$ro1 e$ono%i$ trends !e are parti$ularly #ulnerable to the physi$al ris*s of $li%ate $hange that $ould affe$t all of hu%an*ind su$h as shifts in !eather patterns and !orld e$osyste%s. . lo$ali6ed disaster in a *ey geography $ould ad#ersely i%pa$t our business. While !e operate se#eral integrated net!or*s !ith assets distributed throughout the !orld there are $on$entrations of *ey assets !ithin our net!or*s that are exposed to lo$ali6ed ris*s fro% natural or %an%ade disasters su$h as tornados floods earth4ua*es or terrorist atta$*s. /he loss of a *ey lo$ation su$h as our 8e%phis super hub or one of our infor%ation te$hnology $enters $ould $ause a signifi$ant disruption to our operations and $ause us to in$ur signifi$ant $osts to reestablish or relo$ate these fun$tions. 8oreo#er resulting e$ono%i$ dislo$ations in$luding supply $hain and fuel disruptions $ould ad#ersely i%pa$t de%and for our ser#i$es.

0ur business %ay be ad#ersely i%pa$ted by disruptions or %odi1 fi$ations in ser#i$e by the 9S7S. /he 9S7S is a signifi$ant $usto%er and #endor of FedEx and thus disruptions or %odifi$ations in ser#i$es by the 9S7S as a $onse4uen$e of the 9S7S"s $urrent finan$ial diffi$ul1 ties or any resulting stru$tural $hanges to its operations net!or* ser#i$e offerings or pri$ing $ould ha#e an ad#erse effe$t on our opera1 tions and finan$ial results. We are also sub)e$t to other ris*s and un$ertainties that affe$t %any other businesses in$luding( @ in$reasing $osts the #olatility of $osts and funding re4uire%ents and other legal %andates for e%ployee benefits espe$ially pension and health$are benefitsE @ the in$reasing $osts of $o%plian$e !ith federal and state go#ern1 %ental agen$y %andates and defending against inappropriate or un)ustified enfor$e%ent or other a$tions by su$h agen$iesE @ the i%pa$t of any international $onfli$ts on the 9nited States and global e$ono%ies in general the transportation industry or us in parti$ular and !hat effe$ts these e#ents !ill ha#e on our $osts or the de%and for our ser#i$esE @ any i%pa$ts on our businesses resulting fro% ne! do%esti$ or inter1 national go#ern%ent la!s and regulationE @ $hanges in foreign $urren$y ex$hange rates espe$ially in the ;hinese yuan euro 5ra6ilian real ;anadian dollar and the 5ritish pound !hi$h $an affe$t our sales le#els and foreign $urren$y sales pri$esE @ %ar*et a$$eptan$e of our ne! ser#i$e and gro!th initiati#esE @ any liability resulting fro% and the $osts of defending against $lass1 a$tion litigation su$h as !age1and1hour and dis$ri%ination and retaliation $lai%s and any other legal or go#ern%ental pro$eedingsE @ the out$o%e of future negotiations to rea$h ne! $olle$ti#e bargain1 ing agree%ents + in$luding !ith the union that represents the pilots of FedEx Express Gthe $urrent pilot $ontra$t be$a%e a%endable in 8ar$h 2013 and the parties are $urrently in negotiationsHE @ the i%pa$t of te$hnology de#elop%ents on our operations and on de%and for our ser#i$es and our ability to $ontinue to identify and eli%inate unne$essary infor%ation te$hnology redundan$y and $o%plexity throughout the organi6ationE @ !idespread outbrea* of an illness or any other $o%%uni$able dis1 ease or any other publi$ health $risisE and @ a#ailability of finan$ing on ter%s a$$eptable to us and our ability to %aintain our $urrent $redit ratings espe$ially gi#en the $apital intensity of our operations.

F0'W.'D1:00JIN2 S/./E8EN/S
;ertain state%ents in this report in$luding Gbut not li%ited toH those $ontained in <0utloo*= Gin$luding seg%ent outloo*sH <:i4uidity = <;apital 'esour$es = <:i4uidity 0utloo* = <;ontra$tual ;ash 0bligations= and <;riti$al .$$ounting Esti%ates = and the <'etire%ent 7lans= and <;ontingen$ies= notes to the $onsolidated finan$ial state1 %ents are <for!ard1loo*ing= state%ents !ithin the %eaning of the 7ri#ate Se$urities :itigation 'efor% .$t of 1AA3 !ith respe$t to our finan$ial $ondition results of operations $ash flo!s plans ob)e$1 ti#es future perfor%an$e and business. For!ard1loo*ing state%ents in$lude those pre$eded by follo!ed by or that in$lude the !ords <%ay = <$ould = <!ould = <should = <belie#es = <expe$ts = <anti$i1 pates = <plans = <esti%ates = <targets = <pro)e$ts = <intends= or si%ilar expressions. /hese for!ard1loo*ing state%ents in#ol#e ris*s and un$ertainties. .$tual results %ay differ %aterially fro% those $on1 te%plated Gexpressed or i%pliedH by su$h for!ard1loo*ing state%ents be$ause of a%ong other things the ris* fa$tors identified abo#e and the other ris*s and un$ertainties you $an find in our press releases and other SE; filings. .s a result of these and other fa$tors no assuran$e $an be gi#en as to our future results and a$hie#e%ents. .$$ordingly a for!ard1loo*ing state%ent is neither a predi$tion nor a guarantee of future e#ents or $ir$u%stan$es and those future e#ents or $ir$u%stan$es %ay not o$$ur. &ou should not pla$e undue relian$e on the for!ard1loo*ing state%ents !hi$h spea* only as of the date of this report. We are under no obligation and !e expressly dis$lai% any obligation to update or alter any for!ard1loo*ing state%ents !hether as a result of ne! infor%ation future e#ents or other!ise.

fedex $orporation

8.N.2E8EN/"S 'E70'/ 0N IN/E'N.: ;0N/'0: 0PE' FIN.N;I.: 'E70'/IN2

0ur %anage%ent is responsible for establishing and %aintaining ade4uate internal $ontrol o#er finan$ial reporting Gas defined in 'ules 13a113GfH and 13d113GfH under the Se$urities Ex$hange .$t of 1A34 as a%endedH. 0ur internal $ontrol o#er finan$ial reporting in$ludes a%ong other things defined poli$ies and pro$edures for $ondu$ting and go#erning our business sophisti$ated infor%ation syste%s for pro$essing transa$1 tions and a properly staffed professional internal audit depart%ent. 8e$hanis%s are in pla$e to %onitor the effe$ti#eness of our internal $ontrol o#er finan$ial reporting and a$tions are ta*en to $orre$t all identified defi$ien$ies. 0ur pro$edures for finan$ial reporting in$lude the a$ti#e in#ol#e%ent of senior %anage%ent our .udit ;o%%ittee and our staff of highly 4ualified finan$ial and legal professionals. 8anage%ent !ith the parti$ipation of our prin$ipal exe$uti#e and finan$ial offi$ers assessed our internal $ontrol o#er finan$ial reporting as of 8ay 31 2013 the end of our fis$al year. 8anage%ent based its assess%ent on $riteria established in Internal ;ontrol O Integrated Fra%e!or* issued by the ;o%%ittee of Sponsoring 0rgani6ations of the /read!ay ;o%%ission Gthe ;0S0 $riteriaH. 5ased on this assess%ent %anage%ent has $on$luded that our internal $ontrol o#er finan$ial reporting !as effe$ti#e as of 8ay 31 2013. /he effe$ti#eness of our internal $ontrol o#er finan$ial reporting as of 8ay 31 2013 has been audited by Ernst N &oung ::7 the independent registered publi$ a$$ounting fir% !ho also audited the ;o%pany"s $onsolidated finan$ial state%ents in$luded in this .nnual 'eport. Ernst N &oung ::7"s report on the ;o%pany"s internal $ontrol o#er finan$ial reporting is in$luded in this .nnual 'eport.

'E70'/ 0F INDE7ENDEN/ 'E2IS/E'ED 795:I; .;;09N/IN2 FI'8

/he 5oard of Dire$tors and Sto$*holders FedEx ;orporation We ha#e audited FedEx ;orporation"s internal $ontrol o#er finan$ial reporting as of 8ay 31 2013 based on $riteria established in Internal ;ontrol O Integrated Fra%e!or* issued by the ;o%%ittee of Sponsoring 0rgani6ations of the /read!ay ;o%%ission Gthe ;0S0 $riteriaH. FedEx ;orporation"s %anage%ent is responsible for %aintaining effe$ti#e internal $ontrol o#er finan$ial reporting and for its assess%ent of the effe$ti#eness of internal $ontrol o#er finan$ial reporting in$luded in the a$$o%panying 8anage%ent"s 'eport on Internal ;ontrol o#er Finan$ial 'eporting. 0ur responsibility is to express an opinion on the $o%pany"s internal $ontrol o#er finan$ial reporting based on our audit. We $ondu$ted our audit in a$$ordan$e !ith the standards of the 7ubli$ ;o%pany .$$ounting 0#ersight 5oard G9nited StatesH. /hose standards re4uire that !e plan and perfor% the audit to obtain reasonable assuran$e about !hether effe$ti#e internal $ontrol o#er finan$ial reporting !as %aintained in all %aterial respe$ts. 0ur audit in$luded obtaining an understanding of internal $ontrol o#er finan$ial reporting assessing the ris* that a %aterial !ea*ness exists testing and e#aluating the design and operating effe$ti#eness of internal $ontrol based on the assessed ris* and perfor%ing su$h other pro$edures as !e $onsidered ne$essary in the $ir$u%stan$es. We belie#e that our audit pro#ides a reasonable basis for our opinion. . $o%pany"s internal $ontrol o#er finan$ial reporting is a pro$ess designed to pro#ide reasonable assuran$e regarding the reliability of finan$ial reporting and the preparation of finan$ial state%ents for external purposes in a$$ordan$e !ith generally a$$epted a$$ounting prin$iples. . $o%pany"s internal $ontrol o#er finan$ial reporting in$ludes those poli$ies and pro$edures that G1H pertain to the %aintenan$e of re$ords that in reasonable detail a$$urately and fairly refle$t the transa$tions and dispositions of the assets of the $o%panyE G2H pro#ide reasonable assuran$e that transa$tions are re$orded as ne$essary to per%it preparation of finan$ial state%ents in a$$ordan$e !ith generally a$$epted a$$ounting prin$iples and that re$eipts and expenditures of the $o%pany are being %ade only in a$$ordan$e !ith authori6ations of %anage%ent and dire$tors of the $o%panyE and G3H pro#ide reasonable assuran$e regarding pre#ention or ti%ely dete$tion of unauthori6ed a$4uisition use or disposition of the $o%pany"s assets that $ould ha#e a %aterial effe$t on the finan$ial state%ents. 5e$ause of its inherent li%itations internal $ontrol o#er finan$ial reporting %ay not pre#ent or dete$t %isstate%ents. .lso pro)e$tions of any e#aluation of effe$ti#eness to future periods are sub)e$t to the ris* that $ontrols %ay be$o%e inade4uate be$ause of $hanges in $onditions or that the degree of $o%plian$e !ith the poli$ies or pro$edures %ay deteriorate. In our opinion FedEx ;orporation %aintained in all %aterial respe$ts effe$ti#e internal $ontrol o#er finan$ial reporting as of 8ay 31 2013 based on the ;0S0 $riteria. We also ha#e audited in a$$ordan$e !ith the standards of the 7ubli$ ;o%pany .$$ounting 0#ersight 5oard G9nited StatesH the $onsolidated balan$e sheets of FedEx ;orporation as of 8ay 31 2013 and 2012 and the related $onsolidated state%ents of in$o%e $o%prehensi#e in$o%e GlossH $hanges in sto$*holders" in#est%ent and $ash flo!s for ea$h of the three years in the period ended 8ay 31 2013 of FedEx ;orporation and our report dated Buly 13 2013 expressed an un4ualified opinion thereon.

8e%phis /ennessee Buly 13 2013

fedex $orporation

;0NS0:ID./ED S/./E8EN/S 0F IN;08E

(in millions, except per share amounts)

'e#enues 0perating Expenses(

Salaries and e%ployee benefits 7ur$hased transportation 'entals and landing fees Depre$iation and a%orti6ation Fuel 8aintenan$e and repairs 5usiness realign%ent i%pair%ent and other $harges 0ther

2013 > 44 2IC 1? 3C0 C 2C2 2 321 2 3I? 4 C4? 1 A0A ??0 3 ?C2 41 C3? 2 331 GI2H 21 G33H GA?H 2 433 IA4 > 1 3?1 > 4.A3 > 4.A1

&ears ended 8ay 31 2011 2012 > 3A 304 > 42 ?I0 1? 0AA ? 333 2 4IC 2 113 4 A3? 1 AI0 134 3 3A0 3A 4A4 3 1I? G32H 13 G?H G43H 3 141 1 10A > 2 032 > > ?.44 ?.41 13 2C? 3 ?C4 2 4?2 1 AC3 4 131 1 ACA IA 3 322 3? A2? 2 3CI GI?H A G3?H G113H 2 2?3 I13 > 1 432 > > 4.?1 4.3C

0perating In$o%e 0ther In$o%e GExpenseH(

Interest expense Interest in$o%e 0ther net

In$o%e 5efore In$o%e /axes 7ro#ision For In$o%e /axes Net In$o%e 5asi$ Earnings 7er ;o%%on Share Diluted Earnings 7er ;o%%on Share
.he accompan#ing notes are an integral part o these consolidated inancial statements!

2=

fedeT $orporation

;0NS0:ID./ED S/./E8EN/S 0F ;087'EhENSIPE IN;08E G:0SSH

(in millions)

Net In$o%e 0ther ;o%prehensi#e In$o%e G:ossH(

Foreign $urren$y translation ad)ust%ents net of tax benefit of >12 and >2? in 2013 and 2012 and tax expense of >2C in 2011 .%orti6ation of unreali6ed pension a$tuarial gains-losses and other net of tax expense of >?CC in 2013 and tax benefit of >1 3?A and >141 in 2012 and 2011

2013 > 1 3?1

&ears ended 8ay 31 2012 > 2 032

2011 > 1 432

41 1 0A2 1 133 > 2 ?A4

GA3H G2 30IH G2 403H > G3C1H

123 G233H G110H > 1 342

;o%prehensi#e In$o%e G:ossH

.he accompan#ing notes are an integral part o these consolidated inancial statements!

+*

fedex $orporation

;0NS0:ID./ED 5.:.N;E ShEE/S

8ay 31
(in millions, except share data)

2013

2012

.ssets
;urrent 2ssets
;ash and $ash e4ui#alents 'e$ei#ables less allo!an$es of >1C? and >1CI Spare parts supplies and fuel less allo!an$es of >203 and >1I4 Deferred in$o%e taxes 7repaid expenses and other /otal $urrent assets

> 4 A1C 3 044 43C 333 323 11 2C4 14 C1? ? 432 4 A3I 4 0I0 C A03 3I 10A 1A ?23 1I 4I4 2 C33 1 034 3 I0A > 33 3?C

> 2 I43 4 C04 440 333 33? A 03? 14 3?0 3 A12 4 ?4? 3 ?34 C 3A2 3? 1?4 1I A1? 1C 24I 2 3IC 1 212 3 3AA > 2A A03

7ropert# and )6uipment, at ;ost

.ir$raft and related e4uip%ent 7a$*age handling and ground support e4uip%ent ;o%puter and ele$troni$ e4uip%ent Pehi$les Fa$ilities and other :ess a$$u%ulated depre$iation and a%orti6ation Net property and e4uip%ent

0ther -ong5.erm 2ssets

2ood!ill 0ther assets /otal other long1ter% assets

:iabilities and Sto$*holders" In#est%ent

;urrent -ia(ilities
;urrent portion of long1ter% debt .$$rued salaries and e%ployee benefits .$$ounts payable .$$rued expenses /otal $urrent liabilities

>

-ong5.erm ?e(t, -ess ;urrent 7ortion 0ther -ong5.erm -ia(ilities

Deferred in$o%e taxes 7ension postretire%ent health$are and other benefit obligations Self1insuran$e a$$ruals Deferred lease obligations Deferred gains prin$ipally related to air$raft transa$tions 0ther liabilities /otal other long1ter% liabilities

231 1 ?II 1 ICA 1 A32 3 C30 2 C3A 1 ?32 3 A1? AIC CCI 22C 120 C ?I0

>

41C 1 ?33 1 ?13 1 C0A 3 3C4 1 230 I3? 3 3I2 A?3 CI4 231 13? I 332

;ommitments and ;ontingencies ;ommon :tockholders@ 4nvestment

;o%%on sto$* >0.10 par #alueE I00 %illion shares authori6edE 31I %illion shares issued as of 8ay 31 2013 and 31C %illion shares issued as of 8ay 31 2012 .dditional paid1in $apital 'etained earnings .$$u%ulated other $o%prehensi#e loss /reasury sto$* at $ost /otal $o%%on sto$*holders" in#est%ent
.he accompan#ing notes are an integral part o these consolidated inancial statements! +1

32 2 ??I 1I 31A G3 I20H G1H 1C 3AI > 33 3?C

32 2 3A3 1C 134 G4 A33H GI1H 14 C2C > 2A A03

fedeT $orporation

;0NS0:ID./ED S/./E8EN/S 0F ;.Sh F:0WS

(in millions) 2013 > 1 3?1 2 3I? 1?C 321 4CA 10A &ears ended 8ay 31 2012 > 2 032 2 113 1?0 1 12? 134 103 2011 > 1 432 1 AC3 132 ??A 2A AI

0perating .$ti#ities
Net In$o%e .d)ust%ents to re$on$ile net in$o%e to $ash pro#ided by operating a$ti#ities( Depre$iation and a%orti6ation 7ro#ision for un$olle$tible a$$ounts Deferred in$o%e taxes and other non$ash ite%s 5usiness realign%ent i%pair%ent and other $harges Sto$*1based $o%pensation ;hanges in assets and liabilities( 'e$ei#ables 0ther $urrent assets 7ension assets and liabilities net G1?AH .$$ounts payable and other liabilities 3C0 0ther net ;ash pro#ided by operating a$ti#ities

G431H 23C

G234H G231H G333H 10 G41H 4 I33

G400H G114H G433H 144 G1AH 4 041

G1?H 4 ?II

In#esting .$ti#ities
;apital expenditures 5usiness a$4uisitions net of $ash a$4uired 7ro$eeds fro% asset dispositions and other ;ash used in in#esting a$ti#ities G3 3C3H G4I3H 33 G3 I03H G4 00CH G11?H C4 G4 04AH G3 434H GA?H 111 G3 41AH

Finan$ing .$ti#ities
7rin$ipal pay%ents on debt 7ro$eeds fro% debt issuan$es 7ro$eeds fro% sto$* issuan$es Ex$ess tax benefit on the exer$ise of sto$* options Di#idends paid 7ur$hase of treasury sto$* 0ther net ;ash pro#ided by Gused inH finan$ing a$ti#ities Effe$t of ex$hange rate $hanges on $ash Net in$rease in $ash and $ash e4ui#alents ;ash and $ash e4ui#alents at beginning of period ;ash and $ash e4ui#alents at end of period 2 32I
.he accompan#ing notes are an integral part o these consolidated inancial statements!

G41CH 1 C3A 2I0 23 G1CCH G24?H G1IH 1 1I4 3 2 0C4 2 I43 > 4 A1C

G2AH O 12I 1I G1?4H G1ACH O G244H G2CH 313 2 32I > 2 I43

G2?2H O 10I 23 G131H O G3H G2ICH 41 3C? 1 A32 >

+)

fedex $orporation

;0NS0:ID./ED S/./E8EN/S 0F ;h.N2ES IN S/0;Jh0:DE'S" INPES/8EN/

;o%%on Sto$* > 31 O O O O 1 32 O O O O O 32 O O O O O > 32 .dditional 7aid1in ;apital > 2 2?1 O O O O 223 2 4I4 O O O O 111 2 3A3 O O O O C3 > 2 ??I 'etained Earnings > 13 A?? 1 432 O O G132H O 13 2?? 2 032 O O G1?4H O 1C 134 1 3?1 O O G1C?H O > 1I 31A .$$u%ulated 0ther ;o%prehensi#e In$o%e G:ossH > G2 440H O G110H O O O G2 330H O G2 403H O O O G4 A33H O 1 133 O O O > G3 I20H /reasury Sto$* > GCH O O G3H O O G12H O O G1ACH O 12I GI1H O O G24?H O 32? > G1H

(in millions, except share data)

5alan$e at 8ay 31 2010

Net in$o%e 0ther $o%prehensi#e loss net of tax of >114 7ur$hase of treasury sto$* ;ash di#idends de$lared G>0.4I per shareH E%ployee in$enti#e plans and other G2 22A 031 shares issuedH

/otal > 13 I11 1 432 G110H G3H G132H 224 13 220 2 032 G2 403H G1ACH G1?4H 23A 14 C2C 1 3?1 1 133 G24?H G1C?H 3AA > 1C 3AI

5alan$e at 8ay 31 2011

Net in$o%e 0ther $o%prehensi#e loss net of tax of >1 3A3 of treasury sto$* 7ur$hase ;ash di#idends de$lared G>0.32 per shareH E%ployee in$enti#e plans and other G2 33A ?3A shares issuedH

5alan$e at 8ay 31 2012

Net in$o%e 0ther $o%prehensi#e gain net of tax of >??3 7ur$hase of treasury sto$* ;ash di#idends de$lared G>0.3? per shareH E%ployee in$enti#e plans and other G4 1C2 AC? shares issuedH

5alan$e at 8ay 31 2013

.he accompan#ing notes are an integral part o these consolidated inancial statements!

+2

notes to $onsolidated finan$ial state%ents

N0/E 1( DES;'I7/I0N 0F 59SINESS .ND S988.'y 0F SI2NIFI;.N/ .;;09N/IN2 70:I;IES

DES;'I7/I0N 0F 59SINESS. FedEx ;orporation G<FedEx=H pro#ides a broad portfolio of transportation e1$o%%er$e and business ser#i$es through $o%panies $o%peting $olle$ti#ely operating independently and %anaged $ollaborati#ely under the respe$ted FedEx brand. 0ur pri%ary operating $o%panies are Federal Express ;orporation G<FedEx Express=H the !orld"s largest express transportation $o%panyE FedEx 2round 7a$*age Syste% In$. G<FedEx 2round=H a leading North .%eri$an pro#ider of s%all1pa$*age ground deli#ery ser#i$esE and FedEx Freight In$. G<FedEx Freight=H a leading North .%eri$an pro1 #ider of less1than1tru$*load G<:/:=H freight ser#i$es. /hese $o%panies represent our %a)or ser#i$e lines and along !ith FedEx ;orporate Ser#i$es In$. G<FedEx Ser#i$es=H for% the $ore of our reportable seg%ents. 0ur FedEx Ser#i$es seg%ent pro#ides sales %ar*eting infor%ation te$hnology $o%%uni$ations and ba$*1offi$e support to our transportation seg%ents. In addition the FedEx Ser#i$es seg%ent pro#ides $usto%ers !ith retail a$$ess to FedEx Express and FedEx 2round shipping ser#i$es through FedEx 0ffi$e and 7rint Ser#i$es In$. G<FedEx 0ffi$e=H and pro#ides $usto%er ser#i$e te$hni$al support and billing and $olle$tion ser#i$es through FedEx /e$h;onne$t In$. G<FedEx /e$h;onne$t=H. FIS;.: &E.'S. Ex$ept as other!ise spe$ified referen$es to years indi$ate our fis$al year ended 8ay 31 2013 or ended 8ay 31 of the year referen$ed. 7'IN;I7:ES 0F ;0NS0:ID./I0N. /he $onsolidated finan$ial state1 %ents in$lude the a$$ounts of FedEx and its subsidiaries substantially all of !hi$h are !holly o!ned. .ll signifi$ant inter$o%pany a$$ounts and transa$tions ha#e been eli%inated in $onsolidation. We are not the pri%ary benefi$iary of nor do !e ha#e a $ontrolling finan$ial interest in any #ariable interest entity. .$$ordingly !e ha#e not $onsolidated any #ariable interest entity. 'EPEN9E 'E;02NI/I0N. We re$ogni6e re#enue upon deli#ery of ship%ents for our transportation businesses and upon $o%pletion of ser#i$es for our business ser#i$es logisti$s and trade ser#i$es businesses. /ransportation ser#i$es are pro#ided !ith the use of e%ployees and independent $ontra$tors. FedEx is the prin$ipal to the transa$tion for %ost of these ser#i$es and re#enue fro% these transa$tions is re$ogni6ed on a gross basis. ;osts asso$iated !ith independent $ontra$tor settle%ents are re$ogni6ed as in$urred and in$luded in the $aption <7ur$hased transportation= in the a$$o%pa1 nying $onsolidated state%ents of in$o%e. For ship%ents in transit re#enue is re$orded based on the per$entage of ser#i$e $o%pleted at the balan$e sheet date. Esti%ates for future billing ad)ust%ents to re#enue and a$$ounts re$ei#able are re$ogni6ed at the ti%e of ship%ent for %oney1ba$* ser#i$e guarantees and billing $orre$tions. Deli#ery $osts are a$$rued as in$urred.

0ur $ontra$t logisti$s global trade ser#i$es and $ertain transportation businesses su$h as FedEx S%art7ost engage in so%e transa$tions !herein they a$t as agents. 'e#enue fro% these transa$tions is re$orded on a net basis. Net re#enue in$ludes billings to $usto%ers less third1party $harges in$luding transportation or handling $osts fees $o%%issions and taxes and duties. ;ertain of our re#enue1produ$ing transa$tions are sub)e$t to taxes su$h as sales tax assessed by go#ern%ental authorities. We present these re#enues net of tax. ;'EDI/ 'ISJ. We routinely grant $redit to %any of our $usto%ers for transportation and business ser#i$es !ithout $ollateral. /he ris* of $redit loss in our trade re$ei#ables is substantially %itigated by our $redit e#aluation pro$ess short $olle$tion ter%s and sales to a large nu%ber of $usto%ers as !ell as the lo! re#enue per transa$1 tion for %ost of our ser#i$es. .llo!an$es for potential $redit losses are deter%ined based on histori$al experien$e and the i%pa$t of $urrent e$ono%i$ fa$tors on the $o%position of a$$ounts re$ei#1 able. @istori$ally $redit losses ha#e been !ithin %anage%ent"s expe$tations. .DPE'/ISIN2. .d#ertising and pro%otion $osts are expensed as in$urred and are $lassified in other operating expenses. .d#ertising and pro%otion expenses !ere >424 %illion in 2013 >421 %illion in 2012 and >3C3 %illion in 2011. ;.S@ EQ9IP.:EN/S. ;ash in ex$ess of $urrent operating re4uire1 %ents is in#ested in short1ter% interest1bearing instru%ents !ith %aturities of three %onths or less at the date of pur$hase and is stated at $ost !hi$h approxi%ates %ar*et #alue. S7.'E 7.'/S S977:IES .ND F9E:. Spare parts Gprin$ipally air$raft1 relatedH are reported at !eighted1a#erage $ost. .llo!an$es for obsoles$en$e are pro#ided for spare parts expe$ted to be on hand at the date the air$raft are retired fro% ser#i$e. /hese allo!an$es are pro#ided o#er the esti%ated useful life of the related air$raft and engines. .dditionally allo!an$es for obsoles$en$e are pro#ided for spare parts $urrently identified as ex$ess or obsolete. /hese allo!1 an$es are based on %anage%ent esti%ates !hi$h are sub)e$t to $hange. /he %a)ority of our supplies and our fuel are reported at !eighted a#erage $ost. 7'07E'/& .ND EQ9I78EN/. Expenditures for %a)or additions i%pro#e%ents and flight e4uip%ent %odifi$ations are $apitali6ed !hen su$h $osts are deter%ined to extend the useful life of the asset or are part of the $ost of a$4uiring the asset. Expenditures for e4uip1 %ent o#erhaul $osts of engines or airfra%es prior to their operational use are $apitali6ed as part of the $ost of su$h assets as they are $osts re4uired to ready the asset for its intended use. 8aintenan$e and repairs are $harged to expense as in$urred. We $apitali6e $ertain dire$t internal and external $osts asso$iated !ith the de#elop%ent of internal1use soft!are. 2ains and losses on sales of property used in operations are $lassified !ithin operating expenses.

++

For finan$ial reporting purposes !e re$ord depre$iation and a%or1 ti6ation of property and e4uip%ent on a straight1line basis o#er the asset"s ser#i$e life or related lease ter% if shorter. For in$o%e tax purposes depre$iation is $o%puted using a$$elerated %ethods !hen appli$able. /he depre$iable li#es and net boo* #alue of our property and e4uip%ent are as follo!s Gdollars in %illionsH(

dis$ounted $ash

Net 5oo* Palue at 8ay 31 'ange 2013 2012 Wide1body air$raft and related e4uip%ent 13 to 30 years Narro!1body and feeder air$raft and related e4uip%ent 3 to 1I years 7a$*age handling and ground support e4uip%ent 3 to 30 years Pehi$les 3 to 13 years ;o%puter and ele$troni$ e4uip%ent 2 to 10 years Fa$ilities and other 2 to 40 years 3 C?4 > C 1A1 2 2I4 2 311 1 C4I AA3 3 A3C > C 1?1 1 II1 2 101 1 411 A30

Substantially all property and e4uip%ent ha#e no %aterial residual #alues. /he %a)ority of air$raft $osts are depre$iated on a straight1line basis o#er 13 to 30 years. We periodi$ally e#aluate the esti%ated ser#i$e li#es and residual #alues used to depre$iate our property and e4uip%ent. /his e#aluation %ay result in $hanges in the esti%ated li#es and residual #alues as it did in 2013 and 2012 !ith $ertain air$raft. In 8ay 2013 FedEx Express %ade the de$ision to a$$elerate the retire%ent of C? air$raft and related engines to aid in our fleet %oderni6ation and i%pro#e our global net!or*. In 8ay 2012 !e shortened the depre$iable li#es for 34 air$raft and related engines to a$$elerate the retire%ent of these air$raft resulting in a depre$ia1 tion expense in$rease of >?A %illion in 2013. .s a result of these a$$elerated retire%ents !e expe$t an additional >C4 %illion in year1 o#er1year depre$iation expense in 2014. Depre$iation expense ex$luding gains and losses on sales of property and e4uip%ent used in operations !as >2.3 billion in 2013 >2.1 billion in 2012 and >1.A billion in 2011. Depre$iation and a%orti6ation expense in$ludes a%orti6ation of assets under $apital lease. ;.7I/.:IFED IN/E'ES/. Interest on funds used to finan$e the a$4uisition and %odifi$ation of air$raft in$luding pur$hase deposits $onstru$tion of $ertain fa$ilities and de#elop%ent of $ertain soft!are up to the date the asset is ready for its intended use is $apitali6ed and in$luded in the $ost of the asset if the asset is a$ti#ely under $onstru$1 tion. ;apitali6ed interest !as >43 %illion in 2013 >I3 %illion in 2012 and >C1 %illion in 2011. I87.I'8EN/ 0F :0N21:IPED .SSE/S. :ong1li#ed assets are re#ie!ed for i%pair%ent !hen $ir$u%stan$es indi$ate the $arry1 ing #alue of an asset %ay not be re$o#erable. For assets that are to be held and used an i%pair%ent is re$ogni6ed !hen the esti%ated undis$ounted $ash flo!s asso$iated !ith the asset or group of assets is less than their $arrying #alue. If i%pair%ent exists an ad)ust%ent is %ade to !rite the asset do!n to its fair #alue and a loss is re$orded as the differen$e bet!een the $arrying #alue and fair #alue. Fair #al1 ues are deter%ined based on 4uoted %ar*et #alues

flo!s or internal and external appraisals as appli$able. .ssets to be disposed of are $arried at the lo!er of $arrying #alue or esti%ated net reali6able #alue. We operate integrated transportation net!or*s and a$$ordingly $ash flo!s for %ost of our operating assets are assessed at a net!or* le#el not at an indi#idual asset le#el for our analysis of i%pair%ent. In the nor%al %anage%ent of our air$raft fleet !e routinely idle air$raft and engines te%porarily due to %aintenan$e $y$les and ad)ust%ents of our net!or* $apa$ity to %at$h seasonality and o#erall $usto%er de%and le#els. /e%porarily idled assets are $lassified as a#ailable1for1use and !e $ontinue to re$ord depre$iation expense asso$iated !ith these assets. /hese te%porarily idled assets are assessed for i%pair%ent on a 4uarterly basis. Fa$tors !hi$h $ould $ause i%pair%ent in$lude but are not li%ited to ad#erse $hanges in our global e$ono%i$ outloo* and the i%pa$t of our outloo* on our $urrent and pro)e$ted #olu%e le#els in$luding lo!er $apa$ity needs during our pea* shipping seasonsE the introdu$tion of ne! fleet types or de$isions to per%anently retire an air$raft fleet fro% operationsE or $hanges to planned ser#i$e expansion a$ti#ities. We $urrently ha#e one air$raft te%porarily idled. /his air$raft has been idled for 13 %onths and is expe$ted to return to re#enue ser#i$e. In 8ay 2013 !e %ade the de$ision to retire fro% ser#i$e t!o .irbus .3101200 air$raft and four related engines three .irbus .3101300 air$raft and t!o related engines and fi#e 5oeing 8D10110 air$raft and 13 related engines to align !ith the plans of FedEx Express to %oderni6e its air$raft fleet and i%pro#e its global net!or*. .s a $onse4uen$e of this de$ision a non$ash i%pair%ent $harge of >100 %illion G>?3 %illion net of tax or >0.20 per diluted shareH !as re$orded in the FedEx Express seg%ent in the fourth 4uarter. .ll of these air$raft !ere te%porarily idled and not in re#enue ser#i$e. In 8ay 2012 !e %ade the de$ision to retire fro% ser#i$e 1I .irbus .3101200 air$raft and 2? related engines as !ell as six 5oeing 8D10110 air$raft and 1C related engines. .s a $onse4uen$e of this de$ision a non$ash i%pair%ent $harge of >134 %illion G>I4 %illion net of tax or >0.2? per diluted shareH !as re$orded in the FedEx Express seg%ent in the fourth 4uarter. /he de$ision to retire these air1 $raft the %a)ority of !hi$h !ere te%porarily idled and not in re#enue ser#i$e better aligns the 9.S. do%esti$ air net!or* $apa$ity of FedEx Express to %at$h $urrent and anti$ipated ship%ent #olu%es. /he $o%bination of our FedEx Freight and FedEx National :/: opera1 tions !as $o%pleted on Banuary 30 2011. /hese a$tions resulted in total progra% $osts of >133 %illion re$orded during 2011 !hi$h in$ludes >IA %illion of i%pair%ent and other $harges Gre$orded in the <5usiness realign%ent i%pair%ent and other $harges= $aption on the $onsolidated in$o%e state%entsH and >44 %illion of other progra% $osts Gpri%arily re$orded in the <Depre$iation and a%orti6ation= $aption on the $onsolidated in$o%e state%entsH.

200DWI::. 2ood!ill is re$ogni6ed for the ex$ess of the pur$hase pri$e o#er the fair #alue of tangible and identifiable intangible net assets of businesses a$4uired. Se#eral fa$tors gi#e rise to good!ill in our a$4uisitions su$h as the expe$ted benefit fro% synergies of the $o%bination and the existing !or*for$e of the a$4uired entity. 2ood!ill is re#ie!ed at least annually for i%pair%ent. In our e#alua1 tion of good!ill i%pair%ent !e perfor% a 4ualitati#e assess%ent to

deter%ine if it is %ore li*ely than not that the fair #alue of a reporting unit is less than its $arrying a%ount. If the 4ualitati#e assess%ent is not $on$lusi#e !e !ould pro$eed to a t!o1step pro$ess to test good!ill for i%pair%ent in$luding $o%paring the fair #alue of ea$h reporting unit !ith its $arrying #alue Gin$luding attributable good!illH. Fair #alue for our reporting units is deter%ined using an in$o%e or %ar*et approa$h in$orporating %ar*et parti$ipant $onsiderations and %anage%ent"s assu%ptions on re#enue gro!th rates operating %argins dis$ount rates and expe$ted $apital expenditures. Fair #alue deter%inations %ay in$lude both internal and third1party #aluations. 9nless $ir$u%stan$es other!ise di$tate !e perfor% our annual i%pair%ent testing in the fourth 4uarter. 7ENSI0N .ND 70S/'E/I'E8EN/ @E.:/@;.'E 7:.NS. 0ur defined benefit plans are %easured using a$tuarial te$hni4ues that refle$t %anage%ent"s assu%ptions for dis$ount rate expe$ted long1ter% in#est%ent returns on plan assets salary in$reases expe$ted retire1 %ent %ortality e%ployee turno#er and future in$reases in health$are $osts. We deter%ine the dis$ount rate G!hi$h is re4uired to be the rate at !hi$h the pro)e$ted benefit obligation $ould be effe$ti#ely settled as of the %easure%ent dateH !ith the assistan$e of a$tuar1 ies !ho $al$ulate the yield on a theoreti$al portfolio of high1grade $orporate bonds Grated .a or betterH !ith $ash flo!s that are designed to %at$h our expe$ted benefit pay%ents in future years. . $al$ulated1 #alue %ethod is e%ployed for purposes of deter%ining the asset #alues for our tax14ualified 9.S. do%esti$ pension plans G<9.S. 7ension 7lans=H. 0ur expe$ted rate of return is a )udg%ental %atter !hi$h is re#ie!ed on an annual basis and re#ised as appropriate. /he a$$ounting guidan$e related to e%ployers" a$$ounting for defined benefit pension and other postretire%ent plans re4uires re$ognition in the balan$e sheet of the funded status of defined benefit pension and other postretire%ent benefit plans and the re$ognition in other $o%prehensi#e in$o%e G<0;I=H of unre$ogni6ed gains or losses and prior ser#i$e $osts or $redits. .dditionally the guidan$e re4uires the %easure%ent date for plan assets and liabilities to $oin$ide !ith the plan sponsor"s year end. .t 8ay 31 2013 !e re$orded an in$rease to e4uity through 0;I of >I?1 %illion Gnet of taxH based pri%arily on year1end ad)ust%ents related to an in$rease in the #alue of our plan assets and an in$rease in the dis$ount rate used to %easure the liabilities at 8ay 31 2013. .t 8ay 31 2012 !e re$orded a de$rease to e4uity through 0;I of >2.4 billion Gnet of taxH based pri%arily on year1end ad)ust%ents related to in$reases in our pro)e$ted benefit obligation due to a de$rease in the dis$ount rate used to %easure the liabilities at 8ay 31 2012. IN;08E /.TES. Deferred in$o%e taxes are pro#ided for the tax effe$t of te%porary differen$es bet!een the tax basis of assets and liabilities and their reported a%ounts in the finan$ial state%ents. /he liability %ethod is used to a$$ount for in$o%e taxes !hi$h re4uires deferred taxes to be re$orded at the statutory rate expe$ted to be in effe$t !hen the taxes are paid.

We re$ogni6e liabilities for un$ertain in$o%e tax positions based on a t!o1step pro$ess. /he first step is to e#aluate the tax position for re$1 ognition by deter%ining if the !eight of a#ailable e#iden$e indi$ates that it is %ore li*ely than not that the position !ill be sustained on audit in$luding resolution of related appeals or litigation pro$esses

if any. /he se$ond step re4uires us to esti%ate and %easure the tax benefit as the largest a%ount that is %ore than 30L li*ely to be real1 i6ed upon ulti%ate settle%ent. It is inherently diffi$ult and sub)e$ti#e to esti%ate su$h a%ounts as !e %ust deter%ine the probability of #arious possible out$o%es. We ree#aluate these un$ertain tax posi1 tions on a 4uarterly basis or !hen ne! infor%ation be$o%es a#ailable to %anage%ent. /hese ree#aluations are based on fa$tors in$luding but not li%ited to $hanges in fa$ts or $ir$u%stan$es $hanges in tax la! su$$essfully settled issues under audit and ne! audit a$ti#ity. Su$h a $hange in re$ognition or %easure%ent $ould result in the re$ognition of a tax benefit or an in$rease to the related pro#ision. We $lassify interest related to in$o%e tax liabilities as interest expense and if appli$able penalties are re$ogni6ed as a $o%ponent of in$o%e tax expense. /he in$o%e tax liabilities and a$$rued interest and penalties that are due !ithin one year of the balan$e sheet date are presented as $urrent liabilities. /he re%aining portion of our in$o%e tax liabilities and a$$rued interest and penalties are presented as non$urrent liabilities be$ause pay%ent of $ash is not anti$ipated !ithin one year of the balan$e sheet date. /hese non$urrent in$o%e tax liabilities are re$orded in the $aption <0ther liabilities= in the a$$o%panying $onsolidated balan$e sheets. SE:F1INS9'.N;E .;;'9.:S. We are self1insured for $osts asso$i1 ated !ith !or*ers" $o%pensation $lai%s #ehi$le a$$idents and general business liabilities and benefits paid under e%ployee health$are and long1ter% disability progra%s. .$$ruals are pri%arily based on the a$tuarially esti%ated undis$ounted $ost of $lai%s !hi$h in$ludes in$urred1but1not1 reported $lai%s. ;urrent !or*ers" $o%pensation $lai%s #ehi$le and general liability e%ployee health$are $lai%s and long1ter% disability are in$luded in a$$rued expenses. We self1insure up to $ertain li%its that #ary by operating $o%pany and type of ris*. 7eriodi$ally !e e#aluate the le#el of insuran$e $o#erage and ad)ust insuran$e le#els based on ris* toleran$e and pre%iu% expense. :E.SES. We lease $ertain air$raft fa$ilities e4uip%ent and #ehi$les under $apital and operating leases. /he $o%%en$e%ent date of all leases is the earlier of the date !e be$o%e legally obligated to %a*e rent pay%ents or the date !e %ay exer$ise $ontrol o#er the use of the property. In addition to %ini%u% rental pay%ents $ertain leases pro#ide for $ontingent rentals based on e4uip%ent usage prin$ipally related to air$raft leases at FedEx Express and $opier usage at FedEx 0ffi$e. 'ent expense asso$iated !ith $ontingent rentals is re$orded as in$urred. ;ertain of our leases $ontain flu$tuating or es$alating pay1 %ents and rent holiday periods. /he related rent expense is re$orded on a straight1line basis o#er the lease ter%. /he $u%ulati#e ex$ess of rent pay%ents o#er rent expense is a$$ounted for as a deferred lease asset and re$orded in <0ther assets= in the a$$o%panying $onsolidated balan$e sheets. /he $u%ulati#e ex$ess of rent expense o#er rent pay%ents is a$$ounted for as a deferred lease obligation. :easehold i%pro#e%ents asso$iated !ith assets utili6ed under $apital or operating leases are a%orti6ed o#er the shorter of the asset"s use1 ful life or the lease ter%. DEFE''ED 2.INS. 2ains on the sale and leaseba$* of air$raft and other property and e4uip%ent are deferred and a%orti6ed ratably o#er the life of the lease as a redu$tion of rent expense. Substantially all of these deferred gains are related to air$raft transa$tions.

F0'EI2N ;9''EN;& /'.NS:./I0N. /ranslation gains and losses of foreign operations that use lo$al $urren$ies as the fun$tional $urren$y are a$$u%ulated and reported net of appli$able deferred in$o%e taxes as a $o%ponent of a$$u%ulated other $o%prehensi#e in$o%e !ithin $o%%on sto$*holders" in#est%ent. /ransa$tion gains and losses that arise fro% ex$hange rate flu$tuations on transa$tions deno%inated in a $urren$y other than the lo$al $urren$y are in$luded in the $aption <0ther net= in the a$$o%panying $onsolidated state1 %ents of in$o%e and !ere i%%aterial for ea$h period presented. E87:0&EES 9NDE' ;0::E;/IPE 5.'2.ININ2 .''.N2E8EN/S. /he pilots of FedEx Express !hi$h represent a s%all nu%ber of FedEx Express"s total e%ployees are e%ployed under a $olle$ti#e bargaining agree%ent. /he $ontra$t be$a%e a%endable in 8ar$h 2013 and the parties are $urrently in negotiations. In addition to our pilots at FedEx Express $ertain FedEx non19.S. e%ployees are unioni6ed. S/0;J15.SED ;087ENS./I0N. We re$ogni6e $o%pensation expense for sto$*1based a!ards under the pro#isions of the a$$ounting guidan$e related to share1based pay%ents. /his guidan$e re4uires re$ognition of $o%pensation expense for sto$*1based a!ards using a fair #alue %ethod. We issue ne! shares or repur$hase shares on the open %ar*et to $o#er e%ployee share option exer$ises and restri$ted sto$* grants. .$$ordingly !e plan to repur$hase approxi%ately 3.C %illion shares in 2014. /'E.S9'& S@.'ES. During 2013 !e repur$hased 2.C %illion shares of FedEx $o%%on sto$* at an a#erage pri$e of >A1 per share for a total of >24? %illion. In 8ar$h 2013 our 5oard of Dire$tors authori6ed the repur$hase of up to 10 %illion shares of $o%%on sto$*. It is expe$ted that the additional share authori6ation !ill pri%arily be utili6ed to off1 set the effe$ts of e4uity $o%pensation dilution o#er the next se#eral years. .s of 8ay 31 2013 10 1II 000 shares re%ained under existing share repur$hase authori6ations. DIPIDENDS DE;:.'ED 7E' ;0880N S@.'E. 0n Bune 3 2013 our 5oard of Dire$tors de$lared a 4uarterly di#idend of >0.13 per share of $o%%on sto$*. /he di#idend !as paid on Buly 1 2013 to sto$*holders of re$ord as of the $lose of business on Bune 1C 2013. Ea$h 4uarterly di#idend pay%ent is sub)e$t to re#ie! and appro#al by our 5oard of Dire$tors and !e e#aluate our di#idend pay%ent a%ount on an annual basis at the end of ea$h fis$al year. 59SINESS 'E.:I2N8EN/ ;0S/S. During 2013 !e announ$ed profit i%pro#e%ent progra%s in$luding redu$ing our selling general and ad%inistrati#e $ost fun$tions through a #oluntary e%ployee separation progra%. During 2013 !e $ondu$ted a progra% to offer #oluntary $ash buyouts to eligible 9.S.1based e%ployees in $ertain staff fun$tions. /he #oluntary buyout progra% in$ludes #oluntary se#eran$e pay%ents and funding to health$are rei%burse%ent a$$ounts !ith the #oluntary se#eran$e $al$ulated based on four !ee*s of gross base salary for e#ery year of FedEx ser#i$e up to a %axi%u% pay%ent of t!o years of pay. /his progra% !as $o%pleted in the fourth 4uarter and approxi1 %ately 3 ?00 e%ployees ha#e left or !ill be #oluntarily lea#ing the

$o%pany by the end of 2014. Eligible e%ployees are s$heduled to #a$ate positions in phases to ensure a s%ooth transition in the

i%pa$ted fun$tions so that !e %aintain ser#i$e le#els to our $usto%1 ers. 0f the total population lea#ing the $o%pany approxi%ately 40L of the e%ployees #a$ated positions on 8ay 31 2013. .n additional 33L !ill depart throughout 2014 and approxi%ately 23L of this population !ill re%ain until 8ay 31 2014. ;osts of the benefits pro#ided under the #oluntary progra% !ere re$ogni6ed as spe$ial ter%ination benefits in the period that eligible e%ployees a$$epted their offers. We in$urred $osts of >3?0 %illion G>333 %illion net of tax or >1.11 per diluted shareH during 2013 asso$iated !ith our business realign1 %ent a$ti#ities. /hese $osts related pri%arily to se#eran$e for e%ployees !ho a$$epted #oluntary buyouts in the third and fourth 4uarters of 2013. 7ay%ents !ill be %ade at the ti%e of departure. .pproxi%ately >1I0 %illion !as paid under this progra% during 2013. /he $ost of the buyout progra% is in$luded in the $aption <5usiness realign%ent i%pair%ent and other $harges= in our $onsolidated state%ents of in$o%e. .lso in$luded in that $aption are other external $osts dire$tly attributable to our business realign%ent a$ti#ities su$h as professional fees. 9SE 0F ES/I8./ES. /he preparation of our $onsolidated finan$ial state%ents re4uires the use of esti%ates and assu%ptions that affe$t the reported a%ounts of assets and liabilities the reported a%ounts of re#enues and expenses and the dis$losure of $ontingent liabilities. 8anage%ent %a*es its best esti%ate of the ulti%ate out$o%e for these ite%s based on histori$al trends and other infor%ation a#ailable !hen the finan$ial state%ents are prepared. ;hanges in esti%ates are re$ogni6ed in a$$ordan$e !ith the a$$ounting rules for the esti%ate !hi$h is typi$ally in the period !hen ne! infor%ation be$o%es a#ail1 able to %anage%ent. .reas !here the nature of the esti%ate %a*es it reasonably possible that a$tual results $ould %aterially differ fro% a%ounts esti%ated in$lude( self1insuran$e a$$rualsE retire%ent plan obligationsE long1ter% in$enti#e a$$rualsE tax liabilitiesE a$$ounts re$ei#able allo!an$esE obsoles$en$e of spare partsE $ontingent liabilitiesE loss $ontingen$ies su$h as litigation and other $lai%sE and i%pair%ent assess%ents on long1li#ed assets Gin$luding good!illH.

state%ents. In addition on Bune 1 2012 !e adopted the F.S5"s a%end%ents to the fair #alue

N0/E 2( 'E;EN/ .;;09N/IN2 29ID.N;E

Ne! a$$ounting rules and dis$losure re4uire%ents $an signifi$antly i%pa$t our reported results and the $o%parability of our finan$ial state%ents. 0n Bune 1 2012 !e adopted the authoritati#e guidan$e issued by the Finan$ial .$$ounting Standards 5oard G<F.S5=H on the presentation of $o%prehensi#e in$o%e. /he ne! guidan$e re4uires $o%panies to report $o%ponents of $o%prehensi#e in$o%e by in$luding $o%pre1 hensi#e in$o%e on the fa$e of the in$o%e state%ent or in a separate state%ent of $o%prehensi#e in$o%e. We ha#e adopted this guidan$e by in$luding a separate state%ent of $o%prehensi#e in$o%e GlossH for the three years ending 8ay 31 2013 and by in$luding expanded a$$u%ulated other $o%prehensi#e in$o%e dis$losure re4uire%ents in the notes to our $onsolidated finan$ial

%easure%ents and dis$losure re4uire%ents !hi$h expanded existing dis$losure re4uire%ents regarding the fair #alue of our long1ter% debt. In February 2013 the F.S5 issued ne! guidan$e re4uiring additional infor%ation about re$lassifi$ation ad)ust%ents out of $o%prehensi#e in$o%e in$luding $hanges in $o%prehensi#e in$o%e balan$es by $o%ponent and signifi$ant ite%s re$lassified out of $o%prehensi#e in$o%e. /his ne! standard is effe$ti#e for our fis$al year ending 8ay 31 2014 and !ill ha#e no i%pa$t on our finan$ial $ondition or results of operations. In 8ay 2013 the F.S5 issued a re#ised exposure draft outlining proposed $hanges to the a$$ounting for leases. 9nder the re#ised exposure draft the re$ognition %easure%ent and presentation of expenses and $ash flo!s arising fro% a lease !ould depend pri%arily on !hether the lessee is expe$ted to $onsu%e %ore than an insig1 nifi$ant portion of the e$ono%i$ benefits e%bedded in the underlying asset. . right1of1use asset and a liability to %a*e lease pay%ents !ill be re$ogni6ed on the balan$e sheet for all leases Gex$ept short1 ter% leasesH. /he ena$t%ent of this proposal !ill ha#e a signifi$ant i%pa$t on our a$$ounting and finan$ial reporting. /he F.S5 has not yet proposed an effe$ti#e date of this proposal. We belie#e that no other ne! a$$ounting guidan$e !as adopted or issued during 2013 that is rele#ant to the readers of our finan$ial state%ents. @o!e#er there are nu%erous ne! proposals under de#el1 op%ent !hi$h if and !hen ena$ted %ay ha#e a signifi$ant i%pa$t on our finan$ial reporting.

/he esti%ated fair #alues of the assets and liabilities related to these a$4uisitions ha#e been re$orded in the FedEx Express seg%ent and are in$luded in the a$$o%panying $onsolidated balan$e sheet based on an allo$ation of the pur$hase pri$es Gsu%%ari6ed in the table belo! in %illionsH.

;urrent assets 7roperty and e4uip%ent 2ood!ill Intangible assets 0ther non1$urrent assets ;urrent liabilities :ong1ter% liabilities /otal pur$hase pri$e

> 143 A1 331 ?0 C0 G1C4H G3?H > 30C

/he good!ill of >331 %illion is pri%arily attributable to expe$ted benefits fro% synergies of the $o%binations !ith the existing FedEx Express business and other a$4uired entities. /he portion of the pur$hase pri$e allo$ated to good!ill is not dedu$tible for 9.S. in$o%e tax purposes. /he intangible assets a$4uired $onsist pri%arily of $usto%er1related intangible assets !hi$h !ill be a%orti6ed on an a$$elerated basis o#er their a#erage esti%ated useful li#es of nine years !ith the %a)ority of the a%orti6ation re$ogni6ed during the first fi#e years. 0n Bune 20 2013 !e signed agree%ents to a$4uire the businesses operated by our $urrent ser#i$e pro#ider Supas!ift G7tyH :td. in fi#e $oun1 tries in Southern .fri$a. /he a$4uisition !ill be funded !ith $ash fro% operations and is expe$ted to be $o%pleted in the se$ond half of 2014 sub)e$t to $usto%ary $losing $onditions. /he finan$ial results of the a$4uired businesses !ill be in$luded in the FedEx Express seg%ent fro% the date of a$4uisition and !ill be i%%aterial to our 2014 results. In 2012 !e $o%pleted our a$4uisition of Ser#i$ios Na$ionales 8upa S... de ;.P. G8ulti7a$*H a 8exi$an do%esti$ express pa$*age deli#ery $o%pany for >12I %illion in $ash fro% operations on Buly 23 2011. In 2011 FedEx Express $o%pleted the a$4uisition of the Indian logisti$s distribution and express businesses of .F: 7#t. :td. and its affiliate 9nifreight India 7#t. :td. for >A? %illion in $ash fro% operations on February 22 2011. /he finan$ial results of these a$4uired businesses are in$luded in the FedEx Express seg%ent fro% the date of a$4uisition and !ere not %aterial indi#idually or in the aggregate to our results of operations or finan$ial $ondition and therefore pro for%a finan$ial infor%ation has not been presented. Substantially all of the pur$hase pri$e !as allo$ated to good!ill !hi$h !as entirely attributed to our FedEx Express reporting unit.

N0/E 3( 59SINESS ;085IN./I0NS

During 2013 !e expanded the international ser#i$e offerings of FedEx Express by $o%pleting the follo!ing business a$4uisitions( @ 'apidRo ;o%eta :ogSsti$a e /ransporte S... a 5ra6ilian transporta1 tion and logisti$s $o%pany for >3AI %illion in $ash fro% operations on Buly 4 2012 @ /./ET a Fren$h express transportation $o%pany for >33 %illion in $ash fro% operations on Buly 3 2012 @ 0pe* Sp. 6 o.o. a 7olish do%esti$ express pa$*age deli#ery $o%1 pany for >34 %illion in $ash fro% operations on Bune 13 2012 /hese a$4uisitions gi#e us %ore robust transportation net!or*s !ithin these $ountries and added $apabilities in these i%portant interna1 tional %ar*ets. /he finan$ial results of these a$4uired businesses are in$luded in the FedEx Express seg%ent fro% the date of a$4uisition and !ere not %aterial indi#idually or in the aggregate to our results of operations and therefore pro for%a finan$ial infor%ation has not been presented.

N0/E 4( 200DWI:: .ND 0/hE' IN/.N2I5:E .SSE/S

200DWI::. /he $arrying a%ount of good!ill attributable to ea$h reportable operating seg%ent and $hanges therein are as follo!s Gin %illionsH(

2ood!ill at 8ay 31 2011 .$$u%ulated i%pair%ent $harges 5alan$e as of 8ay 31 2011 2ood!ill a$4uiredG1H 7ur$hase ad)ust%ents and otherG2H 5alan$e as of 8ay 31 2012 2ood!ill a$4uiredG3H 7ur$hase ad)ust%ents and otherG2H 5alan$e as of 8ay 31 2013 .$$u%ulated good!ill i%pair%ent $harges as of 8ay 31 2013

FedEx Express Seg%ent > 1 2C2 O 1 2C2 104 G32H 1 344 331 20 > 1 C13 > O

FedEx 2round FedEx Freight FedEx Ser#i$es Seg%ent Seg%ent Seg%ent > A0 > C33 > 1 33A O G133H G1 1CCH A0 ?02 3?2 O O O O O G11H A0 ?02 331 O O O O O G3H > 34I > A0 > ?02 > O > G133H > G1 1CCH

/otal > 3 ?3? G1 310H 2 32? 104 G43H 2 3IC 331 1C > 2 C33 > G1 310H

(1) 3ood/ill ac6uired in &01& relates to the ac6uisition o the $exican domestic express package deliver# compan#, $ulti7ack! :ee ,ote 3 or related disclosures! (&) 7rimaril# currenc# translation adAustments! (3) 3ood/ill ac6uired in &013 relates to the ac6uisitions o transportation companies in 7oland, "rance and 8ra9il! :ee ,ote 3 or related disclosures!

0ur reporting units !ith signifi$ant re$orded good!ill in$lude our FedEx Express FedEx Freight and FedEx 0ffi$e Greported in the FedEx Ser#i$es seg%entH reporting units. We e#aluated these reporting units during the fourth 4uarter of 2013. /he esti%ated fair #alue of ea$h of these reporting units ex$eeded their $arrying #alues in 2013 and 2012 and !e do not belie#e that any of these reporting units !ere at ris* as of 8ay 31 2013. 0/@E' IN/.N2I5:E .SSE/S. /he net boo* #alue of our other intangible assets !as >C2 %illion at 8ay 31 2013 and >34 %illion at 8ay 31 2012. .%orti6ation expense for intangible assets !as

N0/E ?( :0N21/E'8 DE5/ .ND 0/hE' FIN.N;IN2 .''.N2E8EN/S

/he $o%ponents of long1ter% debt Gnet of dis$ountsH along !ith %aturity dates for the years subse4uent to 8ay 31 2013 are as follo!s Gin %illionsH(

8ay 31 2013 2012 Interest 'ate L 8aturity A.?3 2013 C.3I 2014 I.00 201A 2.?23 2023 2.C0 2023 3.IC3 2043 4.10 2043 C.?0 20AI /otal senior unse$ured debt ;apital lease obligations

Esti%ated a%orti6ation expense is expe$ted to be i%%aterial in 2014 and beyond.

>

N0/E 3( SE:E;/ED ;9''EN/ :I.5I:I/IES

/he $o%ponents of sele$ted $urrent liability $aptions !ere as follo!s Gin %illionsH(

8ay 31 2013 2012 .$$rued Salaries and E%ployee 5enefits Salaries E%ployee benefits in$luding #ariable $o%pensation ;o%pensated absen$es 1 ?33 .$$rued Expenses Self1insuran$e a$$ruals

> 4IA ?13 3I4 > 1 ?II

> 2I0 I03 332 > :ess $urrent portion /axes other than in$o%e taxes 1 230 0ther

O 230 C30 4AA 24A 4A3 4AA 23A 2 ACA 11 2 AA0

> 300 230 C30 O O O O 23A 1 33A 12I 1 ??C

231 > 2 41C C3A 3?I C?I > 1 A32

> 3I? ?43 > 1 C0A

> CA?

> ?CI

Interest on our fixed1rate notes is paid se%i1annually. :ong1ter% debt ex$lusi#e of $apital leases had esti%ated fair #alues of >3.2 billion at 8ay 31 2013 and >2.0 billion at 8ay 31 2012. /he esti%ated fair #alues !ere deter%ined based on 4uoted %ar*et pri$es and the $urrent rates offered for debt !ith si%ilar ter%s and %aturities. /he fair #alue of our long1ter% debt is $lassified as :e#el 2 !ithin the fair

#alue hierar$hy. /his $lassifi$ation is defined as a fair #alue deter1 %ined using %ar*et1based inputs other than 4uoted pri$es that are obser#able for the liability either dire$tly or indire$tly. We ha#e a shelf registration state%ent filed !ith the Se$urities and Ex$hange ;o%%ission that allo!s us to sell in one or %ore future offerings any $o%bination of our unse$ured debt se$urities and $o%%on sto$*. In .pril 2013 !e issued >C30 %illion of senior unse$ured debt under our $urrent shelf registration state%ent $o%prised of >230 %illion of 2.C0L fixed1rate notes due in .pril 2023 and >300 %illion of 4.10L fixed1rate notes due in .pril 2043. We utili6ed the net pro$eeds for !or*ing $apital and general $orporate purposes. In Buly 2012 !e issued >1 billion of senior unse$ured debt under a then $urrent shelf registration state%ent $o%prised of >300 %illion of 2.?23L fixed1rate notes due in .ugust 2022 and >300 %illion of 3.IC3L fixed1rate notes due in .ugust 2042. We utili6ed the net pro$eeds for !or*ing $apital and general $orporate purposes. During 2013 !e %ade prin$ipal pay%ents of >11? %illion related to $apital lease obligations and repaid our >300 %illion A.?3L unse$ured notes that %atured in Bune 2012 using $ash fro% operations. . >1 billion re#ol#ing $redit fa$ility is a#ailable to finan$e our operations and other $ash flo! needs and to pro#ide support for the issuan$e of $o%%er$ial paper. 0n 8ar$h 1 2013 !e entered into an a%end%ent to our $redit agree%ent to a%ong other things extend its %aturity date fro% .pril 2? 201? to 8ar$h 1 201I. /he agree1 %ent $ontains a finan$ial $o#enant !hi$h re4uires us to %aintain a le#erage ratio of ad)usted debt Glong1ter% debt in$luding the $urrent portion of su$h debt plus six ti%es our last four fis$al 4uarters" rentals and landing feesH to $apital Gad)usted debt plus total $o%%on sto$*1 holders" in#est%entH that does not ex$eed C0L. 0ur le#erage ratio of ad)usted debt to $apital !as 31L at 8ay 31 2013. We belie#e the le#erage ratio $o#enant is our only signifi$ant restri$ti#e $o#enant in our re#ol#ing $redit agree%ent. 0ur re#ol#ing $redit agree%ent $ontains other $usto%ary $o#enants that do not indi#idually or in the aggregate %aterially restri$t the $ondu$t of our business. We are in $o%plian$e !ith the le#erage ratio $o#enant and all other $o#enants of our re#ol#ing $redit agree%ent and do not expe$t the $o#enants to affe$t our operations in$luding our li4uidity or expe$ted funding needs. .s of 8ay 31 2013 no $o%%er$ial paper !as outstanding and the entire >1 billion under the re#ol#ing $redit fa$ility !as a#ail1 able for future borro!ings. We issue other finan$ial instru%ents in the nor%al $ourse of business to support our operations in$luding standby letters of $redit and surety bonds. We had a total of >33I %illion in letters of $redit out1 standing at 8ay 31 2013 !ith >12I %illion unused under our pri%ary >300 %illion letter of $redit fa$ility and >33A %illion in outstanding surety bonds pla$ed by third1party insuran$e pro#iders. /hese instru1 %ents are re4uired under $ertain 9.S. self1insuran$e progra%s and are also used in the nor%al $ourse of international operations. /he underlying liabilities insured by these instru%ents are refle$ted in our balan$e sheets !here appli$able. /herefore no additional liability is refle$ted for the letters of $redit and surety bonds the%sel#es.

N0/E C( :E.SES
We utili6e $ertain air$raft land fa$ilities retail lo$ations and e4uip1 %ent under $apital and operating leases that expire at #arious dates through 204?. We leased 10L of our total air$raft fleet under operat1 ing leases as of 8ay 31 2013 and 10L of our total air$raft fleet under $apital and operating leases as of 8ay 31 2012. . portion of our supple%ental air$raft are leased by us under agree%ents that pro#ide for $an$ellation upon 30 days" noti$e. 0ur leased fa$ilities in$lude national regional and %etropolitan sorting fa$ilities retail fa$ilities and ad%inistrati#e buildings. 'ent expense under operating leases for the years ended 8ay 31 !as as follo!s Gin %illionsH(

8ini%u% rentals ;ontingent rentalsG1H

2013 > 2 0?1 1A2 > 2 233

2012 > 2 01I 210 > 2 22I

2011 > 2 023 1A3 > 2 21I

(1) ;ontingent rentals are (ased on e6uipment usage!

. su%%ary of future %ini%u% lease pay%ents under non$an$elable operating leases !ith an initial or re%aining ter% in ex$ess of one year at 8ay 31 2013 is as follo!s Gin %illionsH(

0perating :eases .ir$raft and 'elated E4uip%ent 2014 2013 201? 201C 201I /hereafter /otal > 4?2 44I 433 3A1 32? I24 > 2 A04 Fa$ilities and 0ther > 1 4C4 1 3I? 1 1I3 1 2AI A04 3 I2? > 12 0C1 /otal 0perating :eases > 1 A3? 1 I34 1 ?3? 1 ?IA 1 230 ? ?30 > 14 AC3

7roperty and e4uip%ent re$orded under $apital leases and future %ini%u% lease pay%ents under $apital leases !ere i%%aterial at 8ay 31 2013. /he !eighted1a#erage re%aining lease ter% of all operating leases outstanding at 8ay 31 2013 !as approxi%ately six years. While $ertain of our lease agree%ents $ontain $o#enants go#erning the use of the leased assets or re4uire us to %aintain $ertain le#els of insuran$e none of our lease agree%ents in$lude %aterial finan$ial $o#enants or li%itations. FedEx Express %a*es pay%ents under $ertain le#eraged operating leases that are suffi$ient to pay prin$ipal and interest on $ertain pass1through $ertifi$ates. /he pass1through $ertifi$ates are not dire$t obligations of or guaranteed by FedEx or FedEx Express. We are the lessee in a series of operating leases $o#ering a portion of our leased air$raft. /he lessors are trusts established spe$ifi$ally to pur$hase finan$e and lease air$raft to us. /hese leasing entities

%eet the $riteria for #ariable interest entities. We are not the pri%ary benefi$iary of the leasing entities as the lease ter%s are $onsistent !ith %ar*et ter%s at the in$eption of the lease and do not in$lude

a residual #alue guarantee fixed1pri$e pur$hase option or si%ilar feature that obligates us to absorb de$reases in #alue or entitles us to parti$ipate in in$reases in the #alue of the air$raft. .s su$h !e are not re4uired to $onsolidate the entity as the pri%ary benefi$iary. 0ur %axi%u% exposure under these leases is in$luded in the su%%ary of future %ini%u% lease pay%ents sho!n abo#e.

N0/E I( 7'EFE''ED S/0;J

0ur ;ertifi$ate of In$orporation authori6es the 5oard of Dire$tors at its dis$retion to issue up to 4 000 000 shares of preferred sto$*. /he sto$* is issuable in series !hi$h %ay #ary as to $ertain rights and preferen$es and has no par #alue. .s of 8ay 31 2013 none of these shares had been issued.

N0/E A( .;;989:./ED 0/hE' ;087'EhENSIPE IN;08E G:0SSH

/he follo!ing table pro#ides $hanges in a$$u%ulated other $o%prehensi#e in$o%e GlossH net of tax reported in our finan$ial state%ents Gin %illionsH(

5alan$e at 8ay 31 2010 0ther $o%prehensi#e gain GlossH 5alan$e at 8ay 31 2011 0ther $o%prehensi#e gain GlossH 5alan$e at 8ay 31 2012 0ther $o%prehensi#e gain GlossH 5alan$e at 8ay 31 2013

Foreign $urren$y translation ad)ust%ent > 31 123 13? GA3H ?1 41 > 102

'etire%ent plans ad)ust%ents > G2 4C1H G233H G2 C0?H G2 30IH G3 014H 1 0A2 > G3 A22H

.$$u%ulated other $o%prehensi#e in$o%e GlossH > G2 440H G110H G2 330H G2 403H G4 A33H 1 133 > G3 I20H

N0/E 10( S/0;J1 5.SED ;087ENS./I0N

0ur total sto$*1based $o%pensation expense for the years ended 8ay 31 !as as follo!s Gin %illionsH(

P.:9./I0N .ND .SS987/I0NS. We use the 5la$*1S$holes option pri$ing %odel to $al$ulate the fair #alue of sto$* options. /he #alue of restri$ted sto$* a!ards is based on the sto$* pri$e of the a!ard on the grant date. We re$ord sto$*1based $o%pensation expense in the <Salaries and e%ployee benefits= $aption in the a$$o%panying $onsolidated state%ents of in$o%e. /he *ey assu%ptions for the 5la$*1S$holes #aluation %ethod in$lude the expe$ted life of the option sto$* pri$e #olatility a ris*1free interest rate and di#idend yield. Follo!ing is a table of the !eighted1a#erage 5la$*1 S$holes #alue of our sto$* option grants the intrinsi$ #alue of options exer$ised Gin %illionsH and the *ey !eighted1a#erage assu%ptions used in the #aluation $al$ulations for the options granted during the years ended 8ay 31 and then a dis$ussion of our %ethodology for de#eloping ea$h of the assu%ptions used in the #aluation %odel(

Sto$*1based $o%pensation expense

2013 2011 > 10A

2012 > 103 > AI

We ha#e t!o types of e4uity1based $o%pensation( sto$* options and restri$ted sto$*. S/0;J 07/I0NS. 9nder the pro#isions of our in$enti#e sto$* plans *ey e%ployees and non1e%ployee dire$tors %ay be granted options to pur$hase shares of our $o%%on sto$* at a pri$e not less than its fair %ar*et #alue on the date of grant. Pesting re4uire%ents are deter1 %ined at the dis$retion of the ;o%pensation ;o%%ittee of our 5oard of Dire$tors. 0ption1#esting periods range fro% one to four years !ith expense asso$iated !ith these a!ards is re$ogni6ed on a straight1line basis o#er the re4uisite ser#i$e period of the a!ard. 'ES/'I;/ED S/0;J. 9nder the ter%s of our in$enti#e sto$* plans restri$ted shares of our $o%%on sto$* are a!arded to *ey e%ployees. .ll restri$tions on the shares expire ratably o#er a four1year period. Shares are #alued at the %ar*et pri$e on the date of a!ard. /he ter%s of our restri$ted sto$* pro#ide for $ontinued #esting subse4uent to the e%ployee"s retire%ent. ;o%pensation expense asso$iated !ith these a!ards is re$ogni6ed on a straight1line basis o#er the shorter of the re%aining ser#i$e or #esting period.

2013

2012

2011

Weighted1a#erage > 2A.20 > 2A.A2 > 2I.12 5la$*1S$holes #alue Intrinsi$ #alue of options exer$ised > 10C > ?C > I0 5la$*1S$holes .ssu%ptions( Expe$ted li#es ?.1 years ?.0 years 3.A years Expe$ted #olatility 33L 34L 34L 'is*1free interest rate 0.A4L 1.CAL 2.3?L Di#idend yield 0.?0AL 0.3?3L 0.33IL

/he expe$ted life represents an esti%ate of the period of ti%e options are expe$ted to re%ain outstanding and !e exa%ine a$tual sto$* option exer$ises to deter%ine the expe$ted life of the options. 0ptions granted ha#e a %axi%u% ter% of 10 years. Expe$ted #olatilities are based on the a$tual $hanges in the %ar*et #alue of our sto$* and are $al$ulated using daily %ar*et #alue $hanges fro% the date of

grant o#er a past period e4ual to the expe$ted life of the options. /he ris*1free interest rate is the 9.S. /reasury Strip rate posted at the date of grant ha#ing a ter% e4ual to the expe$ted life of the option. /he expe$ted di#idend yield is the annual rate of di#idends per share o#er the exer$ise pri$e of the option.

/he follo!ing table su%%ari6es infor%ation about sto$* option a$ti#ity for the year ended 8ay 31 2013(

0utstanding at Bune 1 2012 2ranted Exer$ised Forfeited 0utstanding at 8ay 31 2013 Exer$isable Expe$ted to #est .#ailable for future grants

Shares 21 031 33I 2 34C 2A0 G3 ACA 33AH G4?4 033H 1A 133 434 12 44C 31C ? 2II ?42 ? 4I2 410

Sto$* 0ptions Weighted1.#erage Weighted1.#erage 'e%aining Exer$ise 7ri$e ;ontra$tual /er% > I4.3A II.0I C0.41 A1.44 > IC.?2 3.3 years > A0.23 4.2 years > I2.CC I.1 years

.ggregate Intrinsi$ Palue Gin %illionsHG1H

> 22A > 13C > IC

(1) 0nl# presented or options /ith market value at $a# 31, &013 in excess o the exercise price o the option!

/he options granted during the year ended 8ay 31 2013 are pri%arily related to our prin$ipal annual sto$* option grant in Bune 2012. /he follo!ing table su%%ari6es infor%ation about #ested and un#ested restri$ted sto$* for the year ended 8ay 31 2013(

/he follo!ing table su%%ari6es infor%ation about sto$* option #esting during the years ended 8ay 31(

'estri$ted Sto$* Shares 3IA IC2 220 3A1 G233 423H G2C 30?H 32A 334 Weighted1.#erage 2rant Date Fair Palue > C?.CA I3.43 C3.4? I0.13 > 2013 2012 2011

9n#ested at Bune 1 2012 2ranted Pested Forfeited 9n#ested at 8ay 31 2013 I0.I?

Sto$* 0ptions Pested Fair #alue during Gin %illionsH the year 2 I24 C3C > I1 2 I0C I0A C0 2 C21 ?02 ?C

.s of 8ay 31 2013 there !as >133 %illion of total unre$ogni6ed $o%pensation $ost net of esti%ated forfeitures related to un#ested share1based $o%pensation arrange%ents. /his $o%pensation expense is expe$ted to be re$ogni6ed on a straight1line basis o#er the re%aining !eighted1a#erage #esting period of approxi%ately t!o years. /otal shares outstanding or a#ailable for grant related to e4uity $o%pensation at 8ay 31 2013 represented IL of the total outstanding $o%%on and e4uity $o%pensation shares and e4uity $o%pensation shares a#ailable for grant.

During the year ended 8ay 31 2012 there !ere 214 433 shares of restri$ted sto$* granted !ith a !eighted1a#erage fair #alue of >II.A3. During the year ended 8ay 31 2011 there !ere 233 AAI shares of restri$ted sto$* granted !ith a !eighted1 a#erage fair #alue of >CI.C4.

N0/E 11( ;0879/./I0N 0F E.'NIN2S 7E' Sh.'E

/he $al$ulation of basi$ and diluted earnings per $o%%on share for the years ended 8ay 31 !as as follo!s Gin %illions ex$ept per share a%ountsH(

!ere ti%ing benefits only in that depre$iation a$$elerated into an earlier year is foregone in later years. 0ur 2013 $urrent pro#ision for federal in$o%e taxes !as therefore higher than in 2012 and 2011. 7re1tax GlossH earnings of foreign operations for 2013 2012 and 2011 !ere >G33H %illion >33I %illion and >4C2 %illion respe$ti#ely. /hese a%ounts represent only a portion of total results asso$iated !ith international ship%ents and a$$ordingly do not represent our interna1 tional or do%esti$ results of operations. . re$on$iliation of the statutory federal in$o%e tax rate to the effe$ti#e in$o%e tax rate for the years ended 8ay 31 !as as follo!s(

2013 2012 2011 8asic earnings per common share> Net earnings allo$able to $o%%on sharesG1H > 1 33I > 2 02A > 1 44A Weighted1a#erage $o%%on shares 313 313 313 8asic earnings per common share > 4.A3 > ?.44 > 4.?1 ?iluted earnings per common share> Net earnings allo$able to $o%%on sharesG1H 1 44A Weighted1a#erage $o%%on shares Diluti#e effe$t of share1based a!ards Weighted1a#erage diluted shares 31C ?iluted earnings per common share 4.3C .nti1diluti#e options ex$luded fro% diluted earnings per $o%%on share A.3

> 1 33I > 2 02A > 313 2 31C 313 2 31C 313 2

Statutory 9.S. in$o%e tax rate In$rease Gde$reaseH resulting fro%( State and lo$al in$o%e taxes net of federal benefit 0ther net Effe$ti#e tax rate

2013 33.0L

2012 33.0L

2011 33.0L

2.1 G0.CH 3?.4L

2.1 G1.IH 33.3L

1.C G0.IH 33.AL

> 4.A1 > ?.41 >

0ur 2012 rate !as fa#orably i%pa$ted by the $on$lusion of the I'S audit of our 200C1200A $onsolidated in$o%e tax returns. /he signifi$ant $o%ponents of deferred tax assets and liabilities as of 8ay 31 !ere as follo!s Gin %illionsH(

11.1

12.?

(1) ,et earnings availa(le to participating securities /ere immaterial in all periods presented!

2013

2012

N0/E 12( IN;08E /.TES

/he $o%ponents of the pro#ision for in$o%e taxes for the years ended 8ay 31 !ere as follo!s Gin %illionsH(

Deferred Deferred Deferred Deferred /ax /ax /ax /ax .ssets :iabilities .ssets :iabilities 7roperty e4uip%ent leases and intangibles > 13C E%ployee benefits 1 CC1 Self1insuran$e a$$ruals 333 0ther 231 Net operating loss-$redit $arryfor!ards 2AI Paluation allo!an$es G204H > 2 I0? > 3 ?C? 11 O 23I O O > 3 A23 > 24I 2 300 4A3 33I 1CA G143H > 3 413 > 3 43? 11 O

;urrent pro#ision GbenefitH Do%esti$( Federal State and lo$al Foreign Deferred pro#ision GbenefitH Do%esti$( Federal State and lo$al Foreign

2013 2011 > 312 I? 1C0 C?I

2012

> G120H I0 1I1 141

> CA 4I 1AI 323

O O > 3 C1I

1C3 GCH G42H 12? > IA4

A4C 21 O A?I > 1 10A

4I3 the balan$e sheets as follo!s Gin %illionsH( 12 2013 GAH ;urrent deferred tax asset > 333 4II Non$urrent deferred tax liability G1 ?32H > I13 > G1 11AH

/he net deferred tax liabilities as of 8ay 31 ha#e been $lassified in

2012 > 333 GI3?H > G303H

0ur $urrent federal in$o%e tax expenses in 2013 2012 and 2011 !ere signifi$antly redu$ed by a$$elerated depre$iation dedu$tions !e $lai%ed under pro#isions of the .%eri$an /axpayer 'elief .$t of 2013 and the /ax 'elief and the S%all 5usiness Bobs .$ts of 2010. /hose

.$ts designed to sti%ulate ne! business in#est%ent in the 9.S. a$$elerated our depre$iation dedu$tions for ne! 4ualifying in#est1 %ents su$h as our 5oeing CCC Freighter G<5CCCF=H air$raft. /hese

We ha#e >A40 %illion of net operating loss $arryo#ers in #arious foreign )urisdi$tions and >300 %illion of state operating loss $arry1 o#ers. /he #aluation allo!an$es pri%arily represent a%ounts reser#ed for operating loss and tax $redit $arryfor!ards !hi$h expire o#er #arying periods starting in 2014. .s a result of this and other fa$tors !e belie#e that a substantial portion of these deferred tax assets %ay not be reali6ed.

7er%anently rein#ested earnings of our foreign subsidiaries a%ounted to >1.3 billion at the end of 2013 and >1 billion at the end of 2012. We ha#e not re$ogni6ed deferred taxes for 9.S. federal in$o%e tax purposes on those earnings. In 2013 our per%anent rein#est%ent strategy !ith respe$t to unre%itted earnings of our foreign subsidiaries pro#ided a 1.2L benefit to our effe$ti#e tax rate. Were the earnings to be distributed in the for% of di#idends or other!ise these earnings $ould be sub)e$t to 9.S. federal in$o%e tax and non19.S. !ithholding taxes. 9nre$ogni6ed foreign tax $redits potentially $ould be a#ailable to redu$e a portion of any 9.S. tax liability. Deter%ination of the a%ount of unre$ogni6ed deferred 9.S. in$o%e tax liability is not pra$ti$able due to un$ertainties related to the ti%ing and sour$e of any potential distribution of su$h funds along !ith other i%portant fa$tors su$h as the a%ount of asso$iated foreign tax $redits. ;ash in offshore )urisdi$1 tions asso$iated !ith our per%anent rein#est%ent strategy totaled >420 %illion at the end of 2013 and >410 %illion at the end of 2012. In 2013 %ore than I3L of our total enterprise1!ide in$o%e !as earned in 9.S. $o%panies of FedEx that are taxable in the 9nited States. .s a 9.S. airline our FedEx Express unit is re4uired by Federal .#iation .d%inistration and other rules to $ondu$t its air operations do%esti$ and international through a 9.S. $o%pany. @o!e#er !e ser#e %ore than 220 $ountries and territories around the !orld and are re4uired to establish legal entities in %any of the%. 8ost of our entities in those $ountries are operating entities engaged in pi$*ing up and deli#ering pa$*ages and perfor%ing other transportation ser#i$es. In the %eanti%e !e are $ontinually expanding our global net!or* to %eet our $usto%ers" needs !hi$h re4uires in$reasing in#est%ent outside the 9.S. We typi$ally use $ash generated o#erseas to fund these in#est%ents and ha#e a foreign holding $o%pany !hi$h %anages our in#est%ents in se#eral foreign operating $o%panies in$luding ne! a$4uisitions %ade in 2013 in 7oland Fran$e and 5ra6il. We are sub)e$t to taxation in the 9.S. and #arious 9.S. state lo$al and foreign )urisdi$tions. We are $urrently under exa%ination by the I'S for the 2010 and 2011 tax years. It is reasonably possible that $ertain in$o%e tax return pro$eedings !ill be $o%pleted during the next 12 %onths and $ould result in a $hange in our balan$e of unre$1 ogni6ed tax benefits. /he expe$ted i%pa$t of any $hanges !ould not be %aterial to our $onsolidated finan$ial state%ents. . re$on$iliation of the beginning and ending a%ount of unre$ogni6ed tax benefits is as follo!s Gin %illionsH(

0ur liabilities re$orded for un$ertain tax positions in$lude >42 %illion at 8ay 31 2013 and >4C %illion at 8ay 31 2012 asso$iated !ith positions that if fa#orably resol#ed !ould pro#ide a benefit to our effe$ti#e tax rate. We $lassify interest related to in$o%e tax liabilities as interest expense and if appli$able penalties are re$ogni6ed as a $o%ponent of in$o%e tax expense. /he balan$e of a$$rued interest and penalties !as >2A %illion on both 8ay 31 2013 and 8ay 31 2012. /otal interest and penalties in$luded in our $onsolidated state1 %ents of in$o%e are i%%aterial. It is diffi$ult to predi$t the ulti%ate out$o%e or the ti%ing of resolution for tax positions. ;hanges %ay result fro% the $on$lusion of ongoing audits appeals or litigation in state lo$al federal and foreign tax )urisdi$tions or fro% the resolution of #arious pro$eedings bet!een the 9.S. and foreign tax authorities. 0ur liability for un$ertain tax positions in$ludes no %atters that are indi#idually or $olle$ti#ely %aterial to us. It is reasonably possible that the a%ount of the benefit !ith respe$t to $ertain of our unre$ogni6ed tax positions !ill in$rease or de$rease !ithin the next 12 %onths but an esti%ate of the range of the reasonably possible $hanges $annot be %ade. @o!e#er !e do not expe$t that the resolution of any of our un$ertain tax positions !ill be %aterial.

N0/E 13( 'E/I'E8EN/ 7:.NS

We sponsor progra%s that pro#ide retire%ent benefits to %ost of our e%ployees. /hese progra%s in$lude defined benefit pension plans defined $ontribution plans and postretire%ent health$are plans. /he a$$ounting for pension and postretire%ent health$are plans in$ludes nu%erous assu%ptions su$h as( dis$ount ratesE expe$ted long1ter% in#est%ent returns on plan assetsE future salary in$reasesE e%ployee turno#erE %ortalityE and retire%ent ages. /hese assu%ptions %ost signifi$antly i%pa$t our 9.S. 7ension 7lans. /he a$$ounting guidan$e related to postretire%ent benefits re4uires re$ognition in the balan$e sheet of the funded status of defined bene1 fit pension and other postretire%ent benefit plans and the re$ognition in a$$u%ulated other $o%prehensi#e in$o%e G<.0;I=H of unre$ogni6ed gains or losses and prior ser#i$e $osts or $redits. /he funded status is %easured as the differen$e bet!een the fair #alue of the plan"s assets and the pro)e$ted benefit obligation G<750=H of the plan. We re$orded an in$rease to e4uity of >I?1 %illion Gnet of taxH at 8ay 31 2013 and a de$rease to e4uity of >2.4 billion Gnet of taxH at 8ay 31 2012 attributable to our plans. . su%%ary of our retire%ent plans $osts o#er the past three years is as follo!s Gin %illionsH(

5alan$e at beginning of year In$reases for tax positions ta*en in the $urrent year In$reases for tax positions ta*en in prior years De$reases for tax positions ta*en in prior years Settle%ents In$reases due to a$4uisitions De$rease fro% lapse of statute of li%itations ;hanges due to $urren$y translation

2013 > 31 1 3 G3H GAH 4 G2H 2

2012 > ?A 2 4 G33H G3H 13 O G1H

2011 > I2 2 ? G10H G11H O O O

2013 9.S. do%esti$ and international pension plans 9.S. do%esti$ and international defined $ontribution plans 9.S. do%esti$ and international postretire%ent health$are plans > ?CA 334 CI

2012 > 324 33I C0

2011 > 343 23C ?0

> 1 111 5alan$e at end of year > 4C > 31 > ?A

> A32

> I?0

/otal retire%ent plans $osts in 2013 !ere higher than 2012 due to the negati#e i%pa$t of a signifi$antly lo!er dis$ount rate at our 8ay 31 2012 %easure%ent date. /otal retire%ent plans $ost in$reased in 2012 pri%arily due to higher expenses for our 401G*H plans due to the full restoration of $o%pany %at$hing $ontributions on Banuary 1 2011. 7ENSI0N 7:.NS. 0ur largest pension plan $o#ers $ertain 9.S. e%ployees age 21 and o#er !ith at least one year of ser#i$e. 7ension benefits for %ost e%ployees are a$$rued under a $ash balan$e for%ula !e $all the 7ortable 7ension .$$ount. 9nder the 7ortable 7ension .$$ount the retire%ent benefit is expressed as a dollar a%ount in a notional a$$ount that gro!s !ith annual $redits based on pay age and years of $redited ser#i$e and interest on the notional a$$ount balan$e. /he 7ortable 7ension .$$ount benefit is payable as a lu%p su% or an annuity at retire%ent at the ele$tion of the e%ployee. /he plan interest $redit rate #aries fro% year to year based on a 9.S. /reasury index and $orporate bond rates. 7rior to 200A $ertain e%ployees earned benefits using a traditional pension for%ula Gbased on a#erage earnings and years of ser#i$eH. 5enefits under this for%ula !ere $apped on 8ay 31 200I for %ost e%ployees. We also sponsor or parti$ipate in non4ualified benefit plans $o#ering $ertain of our 9.S. e%ployee groups and other pension plans $o#ering $ertain of our international e%ployees. /he international defined benefit pension plans pro#ide benefits pri%arily based on final earnings and years of ser#i$e and are funded in $o%plian$e !ith lo$al la!s and pra$ti$es. 70S/'E/I'E8EN/ @E.:/@;.'E 7:.NS. ;ertain of our subsidiaries offer %edi$al dental and #ision $o#erage to eligible 9.S. retirees and

their eligible dependents. 9.S. e%ployees $o#ered by the prin$ipal plan be$o%e eligible for these benefits at age 33 and older if they ha#e per%anent $ontinuous ser#i$e of at least 10 years after attain%ent of age 43 if hired prior to Banuary 1 1AII or at least 20 years after attain%ent of age 33 if hired on or after Banuary 1 1AII. 7ostretire%ent health$are benefits are $apped at 130L of the 1AA3 per $apita pro)e$ted e%ployer $ost !hi$h has been rea$hed and therefore these benefits are not sub)e$t to additional future inflation. 7ENSI0N 7:.N .SS987/I0NS. 0ur pension $ost is %aterially affe$ted by the dis$ount rate used to %easure pension obligations the le#el of plan assets a#ailable to fund those obligations and the expe$ted long1ter% rate of return on plan assets. We use a %easure%ent date of 8ay 31 for our pension and postre1 tire%ent health$are plans. 8anage%ent re#ie!s the assu%ptions used to %easure pension $osts on an annual basis. E$ono%i$ and %ar*et $onditions at the %easure%ent date i%pa$t these assu%ptions fro% year to year. .$tuarial gains or losses are generated for $hanges in assu%ptions and to the extent that a$tual results differ fro% those assu%ed. /hese a$tuarial gains and losses are a%orti6ed o#er the re%aining a#erage ser#i$e li#es of our a$ti#e e%ployees if they ex$eed a $orridor a%ount in the aggregate. .dditional infor%ation about our pension plans $an be found in the ;riti$al .$$ounting Esti%ates se$tion of 8anage%ent"s Dis$ussion and .nalysis of 'esults of 0perations and Finan$ial ;ondition G<8DN.=H in this .nnual 'eport.

Weighted1a#erage a$tuarial assu%ptions for our pri%ary 9.S. retire%ent plans !hi$h represent substantially all of our 750 and a$$u%ulated postretire%ent benefit obligation G<.750=H are as follo!s(

2013 Dis$ount rate used to deter%ine benefit obligation Dis$ount rate used to deter%ine net periodi$ benefit $ost 'ate of in$rease in future $o%pensation le#els used to deter%ine benefit obligation 'ate of in$rease in future $o%pensation le#els used to deter%ine net periodi$ benefit $ost Expe$ted long1ter% rate of return on assets 4.CAL 4.44 4.34 4.?2 I.00

7ension 7lans 2012 4.44L 3.C? 4.?2 4.3I I.00

2011 3.C?L ?.3C 4.3I 4.?3 I.00

7ostretire%ent @ealth$are 7lans 2011 2013 2012 4.A1L 4.33 O O O 4.33L 3.?C O O O 3.?CL ?.11 O O O

/he esti%ated a#erage rate of return on plan assets is the expe$ted future long1ter% rate of earnings on plan assets and is a for!ard1 loo*ing assu%ption that %aterially affe$ts our pension $ost. Establishing the expe$ted future rate of in#est%ent return on our pension assets is a )udg%ental %atter. We re#ie! the expe$ted long1ter% rate of return on an annual basis and re#ise it as appropri1 ate. 8anage%ent $onsiders the follo!ing fa$tors in deter%ining this assu%ption( @ the duration of our pension plan liabilities !hi$h dri#es the in#est1 %ent strategy !e $an e%ploy !ith our pension plan assetsE @ the types of in#est%ent $lasses in !hi$h !e in#est our pension plan assets and the expe$ted $o%pound geo%etri$ return !e $an reason1 ably expe$t those in#est%ent $lasses to earn o#er ti%eE and @ the in#est%ent returns !e $an reasonably expe$t our in#est%ent %anage%ent progra% to a$hie#e in ex$ess of the returns !e $ould expe$t if in#est%ents !ere %ade stri$tly in indexed funds. 0ur expe$ted long1ter% rate of return on plan assets !as IL for 2013 2012 and 2011. 0ur a$tual return in ea$h of the past three years ex$eeded that a%ount for our prin$ipal 9.S. do%esti$ pension plan. For the 131year period ended 8ay 31 2013 our a$tual returns !ere ?.AL. For 2014 !e plan to lo!er our expe$ted return on plan assets assu%ption for long1ter% returns on plan assets to C.C3L as !e $ontinue to refine our asset and liability %anage%ent strategy. In lo!ering this assu%ption !e $onsidered our histori$al returns our in#est%ent strategy for our plan assets in$luding the i%pa$ts of the long duration of our plan liability and the relati#ely lo! annual dra! on plan assets on that in#est%ent strategy. 7ension expense is also affe$ted by the a$$ounting poli$y used to deter%ine the #alue of plan assets at the %easure%ent date. We use a $al$ulated1#alue %ethod to deter%ine the #alue of plan assets !hi$h helps %itigate short1ter% #olatility in %ar*et perfor%an$e Gboth in$reases and de$reasesH by a%orti6ing $ertain a$tuarial gains or losses o#er a period no longer than four years. .nother %ethod used in pra$ti$e applies the %ar*et #alue of plan assets at the %easure1 %ent date. For purposes of #aluing plan assets for deter%ining 2014 pension expense the $al$ulated #alue %ethod resulted in the sa%e #alue as the %ar*et #alue as it did in 2013. For deter%ining 2012 pen1 sion expense !e used the $al$ulated #alue %ethod !hi$h resulted in a portion of the asset gain in 2011 being deferred to future years be$ause our a$tual returns on plan assets signifi$antly ex$eeded our assu%ptions.

/he in#est%ent strategy for pension plan assets is to utili6e a di#ersi1 fied %ix of global publi$ and pri#ate e4uity portfolios together !ith fixed1in$o%e portfolios to earn a long1ter% in#est%ent return that %eets our pension plan obligations. 0ur pension plan assets are in#ested pri%arily in publi$ly tradeable se$urities and our pension plans hold only a %ini%al in#est%ent in FedEx $o%%on sto$* that is entirely at the dis$retion of third1party pension fund in#est%ent %an1 agers. 0ur largest holding $lasses are 9.S. :arge ;ap E4uities !hi$h is indexed to the SN7 300 Index ;orporate Fixed In$o%e Se$urities and 2o#ern%ent Fixed In$o%e Se$urities. .$$ordingly !e do not ha#e any signifi$ant $on$entrations of ris*. .$ti#e %anage%ent strategies are utili6ed !ithin the plan in an effort to reali6e in#est%ent returns in ex$ess of %ar*et indi$es. .s part of our strategy to %anage pension $osts and funded status #olatility !e ha#e transitioned to a liability1 dri#en in#est%ent strategy to better align plan assets !ith liabilities. 0ur in#est%ent strategy also in$ludes the li%ited use of deri#ati#e finan$ial instru%ents on a dis$retionary basis to i%pro#e in#est%ent returns and %anage exposure to %ar*et ris*. In all $ases our in#est1 %ent %anagers are prohibited fro% using deri#ati#es for spe$ulati#e purposes and are not per%itted to use deri#ati#es to le#erage a portfolio. Follo!ing is a des$ription of the #aluation %ethodologies used for in#est%ents %easured at fair #alue( @ ;ash and $ash e4ui#alents. /hese :e#el 1 in#est%ents in$lude $ash $ash e4ui#alents and foreign $urren$y #alued using ex$hange rates. /he :e#el 2 in#est%ents in$lude $o%%ingled funds #alued using the net asset #alue. @ Do%esti$ and international e4uities. /hese :e#el 1 in#est%ents are #alued at the $losing pri$e or last trade reported on the %a)or %ar*et on !hi$h the indi#idual se$urities are traded. /he :e#el 2 in#est%ents are $o%%ingled funds #alued using the net asset #alue. @ 7ri#ate e4uity. /he #aluation of these :e#el 3 in#est%ents re4uires signifi$ant )udg%ent due to the absen$e of 4uoted %ar*et pri$es the inherent la$* of li4uidity and the long1ter% nature of su$h assets. In#est%ents are #alued based upon re$o%%endations of our in#est%ent %anagers in$orporating fa$tors su$h as $ontributions and distributions %ar*et transa$tions %ar*et $o%parables and perfor%an$e %ultiples. @ Fixed in$o%e. We deter%ine the fair #alue of these :e#el 2 $orpo1 rate bonds 9.S. and non19.S. go#ern%ent se$urities and other fixed in$o%e se$urities by using bid e#aluation pri$ing %odels or 4uoted pri$es of se$urities !ith si%ilar $hara$teristi$s.

/he fair #alues of in#est%ents by le#el and asset $ategory and the !eighted1a#erage asset allo$ations for our do%esti$ pension plans at the %easure%ent date are presented in the follo!ing table Gin %illionsH(

.sset ;lass ;ash and $ash e4ui#alents E4uities 9.S. large $ap e4uity 9.S. S8ID $ap e4uity International e4uities 7ri#ate e4uities Fixed in$o%e se$urities ;orporate 2o#ern%ent 8ortgage ba$*ed and other 0ther

Fair Palue > 43? 3 2?4 1 C41 2 2C1 332 4 AC2 3 III 200 GCCH > 1A 04C

7lan .ssets at 8easure%ent Date 2013 Quoted 7ri$es in 0ther 0bser#able 9nobser#able /arget .$ti#e 8ar*ets Inputs Inputs :e#el 1 :e#el 2 :e#el 3 .$tualL 'angeL 013L > 13 > 441 2L 33133 2I 3C 3 22C A 1 C41 12 1 A04 3?C 2 > 332 431?3 2? 4 AC2 20 3 III 1 200 O GI3H ? 100L > 3 ?14 > 13 101 > 332

.sset ;lass ;ash and $ash e4ui#alents E4uities 9.S. large $ap e4uity 9.S. S8ID $ap e4uity International e4uities 7ri#ate e4uities Fixed in$o%e se$urities ;orporate 2o#ern%ent 8ortgage ba$*ed and other 0ther

Fair Palue > ?1I 4 24I 1 3?I 1 ?3C 402 4 3?3 4 1C3 3A GCAH > 1C 013

.$tualL 4L 23 I 10 2 2C 24 O O 100L

2012 Quoted 7ri$es in 0ther 0bser#able 9nobser#able .$ti#e 8ar*ets Inputs Inputs /arget :e#el 1 :e#el 2 :e#el 3 'angeL 013L > I > ?10 43133 A 4 23A 1 3?I 1 3A3 2?2 > 402 43133 4 3?3 4 1C3 3A GI3H ? > 2 ?A3 > 13 A1? > 402

/he $hange in fair #alue of :e#el 3 assets that use signifi$ant unobser#able inputs is sho!n in the table belo! Gin %illionsH(

5alan$e at beginning of year .$tual return on plan assets( .ssets held during $urrent .ssets year sold during the year 7ur$hases sales and settle%ents 5alan$e at end of year

2013 > 402 G2AH 33 GA?H > 332

2012 > 403 3 3I G42H > 402

/he follo!ing table pro#ides a re$on$iliation of the $hanges in the pension and postretire%ent health$are plans" benefit obligations and fair #alue of assets o#er the t!o1year period ended 8ay 31 2013 and a state%ent of the funded status as of 8ay 31 2013 and 2012 Gin %illionsH(

2ccumulated 8ene it 0(ligation (B280B) ;hanges in 7roAected 8ene it 0(ligation (C780D) and 2ccumulated 7ostretirement 8ene it 0(ligation (C2780D) 750-.750 at the beginning of year Ser#i$e $ost Interest $ost .$tuarial loss GgainH 5enefits paid 0ther
750-.750 at the end of year

7ension 7lans 2013 2012 > 21 A3I > 21 33?

7ostretire%ent @ealth$are 7lans 2013 2012

> 22 1IC ?A2 A?I G?32H G3IAH G?H > 22 ?00

> 1C 3C2 3A3 AC? 3 CIA G302H G41H > 22 1IC

> CA0 42 3? G1CH G34H 31 > I2I

> ?4I 33 3? AI G31H 24 >

CA0 ;hange in 7lan 2ssets Fair #alue of plan assets at the beginning of year O .$tual return on plan assets O ;o%pany $ontributions 2C 5enefits paid 0ther Fair #alue of plan assets at the end of year O "unded :tatus o the 7lans GCA0H 2mount %ecogni9ed in the 8alance :heet at $a# 31> ;urrent pension postretire%ent health$are and other benefit obligations Non$urrent pension postretire%ent health$are and other benefit obligations Net a%ount re$ogni6ed 2mounts %ecogni9ed in 20;4 and not #et re lected in ,et 7eriodic 8ene it ;ost> Net a$tuarial loss GgainH 7rior ser#i$e G$reditH $ost and other /otal 2mounts %ecogni9ed in 20;4 and not #et re lected in ,et 7eriodic 8ene it ;ost expected to (e amorti9ed in next #ear@s ,et 7eriodic 8ene it ;ost> Net a$tuarial loss GgainH 7rior ser#i$e $redit and other /otal

> 1C 334 2 0I1 ?13 G3IAH GIH > 1A 433 > G3 1?CH

> 13 I41 1 233 CI0 G302H G20H > 1C 334 > G4 I33H

>

> O 2C G31H 24 > >

G34H 2C > O > GI2IH

>

G4IH G3 11AH

>

G33H G4 I1IH

> G3AH GCIAH > GI2IH

> G33H GC3CH > GCA0H

> G3 1?CH

> G4 I33H

> ? AA3 GCI1H > ? 212

> I I?? GIACH > C A?A

> >

G4H 2 G2H

> 13 2 > 13

> >

3CI G114H 2?4

> >

31? G114H 402

> >

O O O

> >

O O O

0ur pension plans in$luded the follo!ing $o%ponents at 8ay 31 2013 and 2012 Gin %illionsH(

750 2013 Qualified Non4ualified International 7lans /otal 2012 Qualified Non4ualified International 7lans /otal > 21 332 322 C4? > 22 ?00 > 21 1A2 333 ?40 > 22 1IC

Fair Palue of 7lan .ssets > 1A 04C O 3I? > 1A 433 > 1C 013 O 321 > 1C 334

Funded Status > G2 4I3H G322H G3?0H > G3 1?CH > G4 1CAH G333H G31AH > G4 I33H

/he table abo#e pro#ides the 750 fair #alue of plan assets and funded status of our pension plans on an aggregated basis. /he follo!ing table presents our plans on a disaggregated basis to sho! those plans Gas a groupH !hose assets did not ex$eed their liabilities. /hese plans are $o%prised of our unfunded non4ualified plans $ertain international plans and our 9.S. 7ension 7lans. .t 8ay 31 2013 and 2012 the fair #alue of plan assets for pension plans !ith a 750 or .50 in ex$ess of plan assets !ere as follo!s Gin %illionsH(

750 Ex$eeds the Fair Palue of 7lan .ssets 7ension 5enefits Fair #alue of plan assets 750 Net funded status

2013 2012
> 1A 433 G22 ?00H > G3 1?CH > 1C 334 G22 1ICH > G4 I33H

.50 Ex$eeds the Fair Palue of 7lan .ssets 2013 2012 7ension 5enefits .50G1H Fair #alue of plan assets 750 Net funded status G4280 I32 H used in determination o (1) not > G21 A30H 1A 404 G22 3C0H > G3 1??H
unded status!

> G21 333H 1C 333 G22 1I3H >

;ontributions to our 9.S. 7ension 7lans for the years ended 8ay 31 !ere as follo!s Gin %illionsH(

'e4uired Poluntary

2013 > 3?0 O > 3?0

2012 > 4A? 22? > C22

For 2014 !e anti$ipate %a*ing re4uired $ontributions to our 9.S. 7ension 7lans totaling approxi%ately >?30 %illion.

Net periodi$ benefit $ost for the three years ended 8ay 31 !ere as follo!s Gin %illionsH(

2013 Ser#i$e $ost > ?A2 Interest $ost A?I Expe$ted return on plan assets G1 3I3H 'e$ogni6ed a$tuarial losses GgainsH and other 402 Net periodi$ benefit $ost > ?CA

7ension 7lans 2012 > 3A3 AC? G1 240H 1A3 > 324

7ostretire%ent @ealth$are 7lans 2011 321 A00 G1 0?2H 1I4 > 343 2013 > 42 3? O O > CI 2012 > 33 3? O G1H > C0 2011 > 31 34 O G3H > ?0

>

7ension $osts in 2013 !ere higher than 2012 due to the negati#e i%pa$t of a signifi$antly lo!er dis$ount rate at our 8ay 31 2012 %easure%ent date. .%ounts re$ogni6ed in 0;I for all plans !ere as follo!s Gin %illionsH(

2013 7ension 7lans 2ross Net of /ax .%ount .%ount Net GgainH loss and other arising during period .%orti6ations( 7rior ser#i$es $redit .$tuarial GlossesH gains and other /otal re$ogni6ed in 0;I > G1 330H 114 G31?H > G1 C32H > GI40H ?? G2ACH > G1 0C1H 7ostretire%ent @ealth$are 7lans 2ross Net of /ax .%ount .%ount > G1CH O O > G1CH > G21H O O > G21H

2012 7ension 7lans 2ross Net of /ax .%ount .%ount > 3 CCC 113 G311H > 3 3CA > 2 3C1 C1 G1A3H > 2 24C 7ostretire%ent @ealth$are 7lans 2ross Net of /ax .%ount .%ount > AC O 1 > AI > ?1 O O > ?1

5enefit pay%ents !hi$h refle$t expe$ted future ser#i$e are expe$ted to be paid as follo!s for the years ending 8ay 31 Gin %illionsH(

/hese esti%ates are based on assu%ptions about future e#ents. .$tual benefit pay%ents %ay #ary signifi$antly fro% these esti%ates. Future %edi$al benefit $lai%s $osts are esti%ated to in$rease at an annual rate of C.CL during 2014 de$reasing to an annual gro!th rate of 4.3L in 202A and thereafter. Future dental benefit $osts are esti1 %ated to in$rease at an annual rate of ?.AL during 2014 de$reasing to an annual gro!th rate of 4.3L in 202A and thereafter. . 1L $hange in these annual trend rates !ould not ha#e a signifi$ant i%pa$t on the .750 at 8ay 31 2013 or 2013 benefit expense be$ause the le#el of these benefits is $apped.

2014 2013 201? 201C 201I 201AO2023

7ension 7lans > I21 A3? IA? A?1 1 04A ? AC4

7ostretire%ent @ealth$are 7lans > 3A 42 44 43 4C 2C4

N0/E 14( 59SINESS SE28EN/ INF0'8./I0N

FedEx Express FedEx 2round and FedEx Freight represent our %a)or ser#i$e lines and along !ith FedEx Ser#i$es for% the $ore of our reportable seg%ents. 0ur reportable seg%ents in$lude the follo!ing businesses(
FedEx Express Seg%ent

FedEx 2round Seg%ent

@ FedEx Express Gexpress transportationH @ FedEx /rade Net!or*s Gair and o$ean freight for!arding and $usto%s bro*erageH @ FedEx Supply;hain Syste%s Glogisti$s ser#i$esH @ FedEx 2round Gs%all1pa$*age ground deli#eryH @ FedEx S%art7ost Gs%all1par$el $onsolidatorH

/he FedEx Ser#i$es seg%ent pro#ides dire$t and indire$t support to our transportation businesses and !e allo$ate all of the net operat1 ing $osts of the FedEx Ser#i$es seg%ent Gin$luding the net operating results of FedEx 0ffi$eH to refle$t the full $ost of operating our transportation businesses in the results of those seg%ents. Within the FedEx Ser#i$es seg%ent allo$ation the net operating results of FedEx 0ffi$e !hi$h are an i%%aterial $o%ponent of our allo$ations are allo$ated to FedEx Express and FedEx 2round. /he allo$ations of net operating $osts are based on %etri$s su$h as relati#e re#1 enues or esti%ated ser#i$es pro#ided. We belie#e these allo$ations approxi%ate the net $ost of pro#iding these fun$tions. We re#ie! and e#aluate the perfor%an$e of our transportation seg%ents based on operating in$o%e Gin$lusi#e of FedEx Ser#i$es seg%ent allo$ationsH. For the FedEx Ser#i$es seg%ent perfor%an$e is e#aluated based on the i%pa$t of its total allo$ated net operating $osts on our transporta1 tion seg%ents. /he operating expenses line ite% <Inter$o%pany $harges= on the a$$o%panying unaudited finan$ial su%%aries of our transporta1 tion seg%ents in 8DN. refle$ts the allo$ations fro% the FedEx Ser#i$es seg%ent to the respe$ti#e transportation seg%ents. /he <Inter$o%pany $harges= $aption also in$ludes $harges and $redits for ad%inistrati#e ser#i$es pro#ided bet!een operating $o%panies and $ertain other $osts su$h as $orporate %anage%ent fees related to ser#i$es re$ei#ed for general $orporate o#ersight in$luding exe$uti#e offi$ers and $ertain legal and finan$e fun$tions. We belie#e these allo$ations approxi%ate the net $ost of pro#iding these fun$tions.

@ FedEx Freight G:/: freight transportationH @ FedEx ;usto% ;riti$al Gti%e1$riti$al transportationH FedEx Ser#i$es Seg%ent @ FedEx Ser#i$es Gsales %ar*eting infor%ation te$hnology $o%%uni$ations and ba$*1offi$e fun$tionsH @ FedEx /e$h;onne$t G$usto%er ser#i$e te$hni$al support billings and $olle$tionsH @ FedEx 0ffi$e Gdo$u%ent and business ser#i$es and pa$*age a$$eptan$eH
FedEx Freight Seg%ent

0ther Interseg%ent /ransa$tions

;ertain FedEx operating $o%panies pro#ide transportation and related ser#i$es for other FedEx $o%panies outside their reportable seg%ent. 5illings for su$h ser#i$es are based on negotiated rates !hi$h !e belie#e approxi%ate fair #alue and are refle$ted as re#enues of the billing seg%ent. /hese rates are ad)usted fro% ti%e to ti%e based on %ar*et $onditions. Su$h interseg%ent re#enues and expenses are eli%inated in our $onsolidated results and are not separately identi1 fied in the follo!ing seg%ent infor%ation be$ause the a%ounts are not %aterial.

FedEx Ser#i$es Seg%ent

/he FedEx Ser#i$es seg%ent operates $o%bined sales %ar*eting ad%inistrati#e and infor%ation te$hnology fun$tions in shared ser1 #i$es operations that support our transportation businesses and allo! us to obtain synergies fro% the $o%bination of these fun$tions. For the international regions of FedEx Express so%e of these fun$tions are perfor%ed on a regional basis by FedEx Express and reported in the FedEx Express seg%ent in their natural expense line ite%s. /he FedEx Ser#i$es seg%ent in$ludes( FedEx Ser#i$es !hi$h pro#ides sales %ar*eting infor%ation te$hnology $o%%uni$ations and ba$*1 offi$e support to our other $o%paniesE FedEx /e$h;onne$t !hi$h is responsible for $usto%er ser#i$e te$hni$al support billings and $olle$tions for 9.S. $usto%ers of our %a)or business unitsE and FedEx 0ffi$e !hi$h pro#ides an array of do$u%ent and business ser#i$es and retail a$$ess to our $usto%ers for our pa$*age transportation businesses.

/he follo!ing table pro#ides a re$on$iliation of reportable seg%ent re#enues depre$iation and a%orti6ation operating in$o%e GlossH and seg1 %ent assets to $onsolidated finan$ial state%ent totals for the years ended or as of 8ay 31 Gin %illionsH(

FedEx Express Seg%entG1H 'e#enues 2013 2012 2011 Depre$iation and a%orti6ation 2013 2012 2011 0perating in$o%e GlossH 2013 2012 2011 Seg%ent assetsG4H 2013 2012 2011 > 2C 1C1 2? 313 24 3I1 > 1 330 1 1?A 1 03A > 333 1 2?0 1 22I

FedEx 2round Seg%entG2H > 10 3CI A 3C3 I 4I3 > 434 3IA 33C

FedEx Freight FedEx Ser#i$es Seg%entG3H Seg%ent > 3 401 3 2I2 4 A11 > 21C 1I3 203 > 20I 1?2 G1C3H > 2 A33 2 I0C 2 ??4 > 1 3I0 1 ?C1 1 ?I4 > 3I4 3?A 3C1 > O O O

0ther and Eli%inations > G443H G3?1H G33CH > 1 1 1 O O O

;onsolidated /otal > 44 2IC 42 ?I0 3A 304 > 2 3I? 2 113 1 AC3 > 2 331 3 1I? 2 3CI > 33 3?C 2A A03 2C 3I3

> 1 CII 1 C?4 1 323 > C 333 ? 134 3 04I

>

> 1I A33 1C AI1 1? 4?3

> 4 ICA 4 34? 4 2CI

> G333H G1 3I3H G1 0?IH

(1) "ed)x )xpress segment &013 operating expenses include $*05 million o direct and allocated (usiness realignment costs and an impairment charge o $100 million resulting rom the decision to retire 10 aircra t and related engines! "ed)x )xpress segment &01& operating expenses include an impairment charge o $13* million resulting rom the decision to retire &* aircra t and related engines and a reversal o a $'' million legal reserve /hich /as initiall# recorded in &011! (&) "ed)x 3round segment &013 operating expenses include $105 million o allocated (usiness realignment costs! (3) "ed)x "reight segment &013 operating expenses include $50 million in direct and allocated (usiness realignment costs! "ed)x "reight segment &011 operating expenses include $133 million in costs associated /ith the com(ination o our "ed)x "reight and "ed)x ,ational -.- operations, e ective 1anuar# 30, &011! (*) :egment assets include intercompan# receiva(les!

/he follo!ing table pro#ides a re$on$iliation of reportable seg%ent $apital expenditures to $onsolidated totals for the years ended 8ay 31 Gin %illionsH(

2013 2012 2011

FedEx Express Seg%ent > 2 0?C 2 ?IA 2 4?C

FedEx 2round Seg%ent > 333 33? 42?

FedEx Freight Seg%ent > 32? 340 133

FedEx Ser#i$es Seg%ent > 424 43C 3IC

0ther >3 3 1

;onsolidated /otal > 3 3C3 4 00C 3 434

/he follo!ing table presents re#enue by ser#i$e type and geographi$ infor%ation for the years ended or as of 8ay 31 Gin %illionsH(

2013 2011 %evenue (# :ervice .#pe FedEx Express seg%ent( 7a$*age( 9.S. o#ernight box 9.S. o#ernight en#elope 9.S. deferred /otal 9.S. do%esti$ pa$*age re#enue priority International International e$ono%y /otal international export pa$*age re#enue do%esti$G1H International /otal pa$*age re#enue Freight( 9.S. International priority International airfreight /otal freight re#enue 0ther G2H /otal FedEx Express seg%ent FedEx 2round seg%ent( FedEx 2round FedEx S%art7ost /otal FedEx 2round seg%ent FedEx Freight seg%ent FedEx Ser#i$es seg%ent 0ther and eli%inations 3A 304 3eographical 4n ormation(3) 'e#enues( 9.S. International( FedEx Express seg%ent FedEx 2round seg%ent FedEx Freight seg%ent FedEx Ser#i$es seg%ent /otal international re#enue Non$urrent assets( 9.S. International

2012

N0/E 13( S977:E8EN/.: ;.Sh F:0W INF0'8./I0N

;ash paid for interest expense and in$o%e taxes for the years ended 8ay 31 !as as follo!s Gin %illionsH(

2013 > ? 313 > ? 34? > ? 12I 1 C03 1 C4C 1 C3? 3 020 3 001 2 I03 11 23I 11 2A4 10 ??A ? 3I? ? I4A ? C?0 2 04? 1 I3A 1 4?I I ?32 1 3AI 21 2?I 2 3?2 1 ?CI 2C? 4 31? 1 3IC 2C 1C1 I C0I I33 20 I33 2 4AI 1 I2C 30C 4 ?32 1 02I 2? 313 I 22I ?33 1A 330 ;ash pay%ents for( Interest Gnet of $apitali6ed interestH In$o%e taxes In$o%e tax refunds re$ei#ed ;ash tax pay%ents net

2012

2011

> I0 > ?IC G21AH > 4?I

> 32 > 403 G14?H > 23C

> A3 > 4A3 G10?H > 3IC

N0/E 1?( 29.'.N/EES .ND INDE8NIFI;./I0NS

A ?32 I CA1 A2? CI2 10 3CI A 3C3 I 4I3 3 401 3 2I2 4 A11 1 3I0 1 ?C1 1 ?I4 G443H G3?1H G33CH > 44 2IC > 42 ?I0 >

In $on)un$tion !ith $ertain transa$tions pri%arily the lease sale or 2 1II pur$hase of operating assets or ser#i$es in the ordinary $ourse of business !e %ay pro#ide routine guarantees or inde%nifi$ations 1 C22 Ge.g. en#iron%ental fuel tax and soft!are infringe%entH the ter%s 2I3 of !hi$h range in duration and often they are not li%ited and ha#e 4 1A3 no spe$ified %axi%u% obligation. .s a result the o#erall %axi%u% I3I potential a%ount of the obligation under su$h guarantees and inde%1 24 3I1 nifi$ations $annot be reasonably esti%ated. @istori$ally !e ha#e not been re4uired to %a*e signifi$ant pay%ents under our guarantee or inde%nifi$ation obligations and no a%ounts ha#e been re$ogni6ed C I33 in our finan$ial state%ents for the underlying fair #alue of these ?30 obligations. Spe$ial fa$ility re#enue bonds ha#e been issued by $ertain %uni$ipali1 ties pri%arily to finan$e the a$4uisition and $onstru$tion of #arious airport fa$ilities and e4uip%ent. /hese fa$ilities !ere leased to us and are a$$ounted for as operating leases. FedEx Express has un$ondition1 ally guaranteed >331 %illion in prin$ipal of these bonds G!ith total future prin$ipal and interest pay%ents of approxi%ately >C0I %illion

as of May 31, 2013) through these leases.

> 31 330 > 2A I3C > 2C 4?1 12 33C 12 3C0 11 43C 234 21? 1CC 112 101 I4 34 13? 143 12 C3C 12 I43 11 I43 > 44 2IC > 42 ?I0 > 3A 304 > 1A ?3C > 1I IC4 > 1C 233 2 ?3? 1 AC3 1 I?3 > 22 2A3 > 20 I4C > 1A 100

(1) 4nternational domestic revenues include our international intra5countr# domestic express operations, including ac6uisitions in 4ndia ("e(ruar# &011), $exico (1ul# &011), 7oland (1une &01&), "rance (1ul# &01&) and 8ra9il (1ul# &01&)! (&) 4ncludes "ed)x .rade ,et/orks and "ed)x :uppl#;hain :#stems! (3) 4nternational revenue includes shipments that either originate in or are destined to

locations outside the Enited :tates! ,oncurrent assets include propert# and e6uipment, good/ill and other long5term assets! 0ur light e6uipment registered in the E!:! is included as E!:! assets= ho/ever, man# o our aircra t operate internationall#!

N0/E 1C( ;088I/8EN/S

.nnual pur$hase $o%%it%ents under #arious $ontra$ts as of 8ay 31 2013 !ere as follo!s Gin %illionsH(

and air$raft1related $ontra$ts are sub)e$t to pri$e es$alations. /he follo!ing table is a su%%ary of the *ey air$raft !e are $o%%itted to pur$hase as of 8ay 31 2013 !ith the year of expe$ted deli#ery(

2014 2013 201? 201C 201I /hereafter /otal

.ir$raft and .ir$raft 'elated > A?I 1 034 1 140 A3A 1 3I2 4 4A2 > A AA3

Fa$ilities and 0therG1H > 1 1I3 1I4 123 101 44 10A > 1 C44

/otal > 2 131 1 23I 1 2?3 1 0?0 1 42? 4 ?01 > 11 C3A Effe$ti#e as of Bune 14 2013 !e entered into a supple%ental

2014 2013 201? 201C 201I /hereafter /otal

5C3C 13 O O O O O 13

5C?CF 4 12 10 10 10 4 30

5CCCF 2 O 2 O 2 14 20

/otal 1A 12 12 10 12 1I I3

(1) 7rimaril# vehicles, acilities, advertising contracts and in &01*, approximatel# $'50 million o 6uarterl# contri(utions to our E!:! 7ension 7lans!

/he a%ounts refle$ted in the table abo#e for pur$hase $o%%it%ents represent non$an$elable agree%ents to pur$hase goods or ser#i$es. .s of 8ay 31 2013 our obligation to pur$hase four 5oeing C?C1 300 Freighter G<5C?CF=H air$raft and nine 5CCCF air$raft is $onditioned upon there being no e#ent that $auses FedEx Express or its e%ployees not to be $o#ered by the 'ail!ay :abor .$t of 1A2? as a%ended. ;o%%it%ents to pur$hase air$raft in passenger $onfiguration do not in$lude the attendant $osts to %odify these air$raft for $argo transport unless !e ha#e entered into non$an$elable $o%%it%ents to %odify su$h air$raft. 0pen pur$hase orders that are $an$elable are not $onsidered un$onditional pur$hase obligations for finan$ial reporting purposes and are not in$luded in the table abo#e. We ha#e se#eral air$raft %oderni6ation progra%s under!ay !hi$h are supported by the pur$hase of 5CCCF 5C?CF and 5oeing C3C G<5C3C=H air$raft. /hese air$raft are signifi$antly %ore fuel1effi$ient per unit than the air$raft types pre#iously utili6ed and these expenditures are ne$essary to a$hie#e signifi$ant long1ter% operating sa#ings and to repla$e older air$raft. 0ur ability to delay the ti%ing of these air$raft1 related expenditures is li%ited !ithout in$urring signifi$ant $osts to %odify existing pur$hase agree%ents. During 2013 FedEx Express entered into an agree%ent to pur$hase 14 additional 5C3C air$raft the deli#ery of !hi$h began in 2013 and !ill $ontinue through 2014. /he agree%ent pro#ides the option to pur$hase up to 1? additional 5C3C air$raft sub)e$t to the satisfa$tion of $ertain $onditions. In addition FedEx Express entered into agree%ents to pur$hase an additional 23 5C?CF air$raft the deli#ery of !hi$h !ill o$$ur bet!een 2014 and 201A. /he deli#ery of t!o fir% 5CCCF air$raft orders !ere also deferred fro% 2013 to 201?. We had >414 %illion in deposits and progress pay%ents as of 8ay 31 2013 on air$raft pur$hases and other planned air$raft1related transa$1 tions. /hese deposits are $lassified in the <0ther assets= $aption of our $onsolidated balan$e sheets. In addition to our $o%%it%ent to pur$hase 5CCCFs and 5C?CFs our air$raft pur$hase $o%%it1 %ents in$lude the 5C3C air$raft in passenger $onfiguration !hi$h !ill re4uire additional $osts to %odify for $argo transport. .ir$raft

agree%ent to pur$hase 13 of the 1? 5C3C option air$raft noted abo#e. Deli#ery of the air$raft !ill o$$ur during 2014 and 2013. /his air$raft transa$tion is not in$luded in the table abo#e as it o$$urred subse1 4uent to 8ay 31 2013.

N0/E 1I( ;0N/IN2EN;IES

W.2E1.ND1@09'. We are a defendant in a nu%ber of la!suits $ontaining #arious $lass1a$tion allegations of !age1and1hour #iolations. /he plaintiffs in these la!suits allege a%ong other things that they !ere for$ed to !or* <off the $lo$* = !ere not paid o#erti%e or !ere not pro#ided !or* brea*s or other benefits. /he $o%plaints generally see* unspe$ified %onetary da%ages in)un$ti#e relief or both. We do not belie#e that a %aterial loss is reasonably possible !ith respe$t to any of these %atters. INDE7ENDEN/ ;0N/'.;/0' + :.WS9I/S .ND S/./E .D8INIS/'./IPE 7'0;EEDIN2S. FedEx 2round is in#ol#ed in nu%erous $lass1a$tion la!suits Gin$luding 31 that ha#e been $ertified as $lass a$tionsH indi#idual la!suits and state tax and other ad%inis1 trati#e pro$eedings that $lai% that the $o%pany"s o!ner1operators should be treated as e%ployees rather than independent $ontra$tors. 8ost of the $lass1a$tion la!suits !ere $onsolidated for ad%inistration of the pre1trial pro$eedings by a single federal $ourt the 9.S. Distri$t ;ourt for the Northern Distri$t of Indiana. /he %ultidistri$t litigation $ourt granted $lass $ertifi$ation in 2I $ases and denied it in 14 $ases. 0n De$e%ber 13 2010 the $ourt entered an opinion and order addressing all outstanding %otions for su%%ary )udg%ent on the status of the o!ner1operators Gi!e. independent $ontra$tor #s. e%ployeeH. In su% the $ourt has no! ruled on our su%%ary )udg%ent %otions and entered )udg%ent in fa#or of FedEx 2round on all $lai%s in 20 of the 2I %ultidistri$t litigation $ases that had been $ertified as $lass a$tions finding that the o!ner1operators in those $ases !ere $ontra$tors as a %atter of the la! of 20 states. /he plaintiffs filed noti$es of appeal in all of these 20 $ases. /he Se#enth ;ir$uit heard the appeal in the Jansas $ase in Banuary 2012 and in Buly 2012 issued an opinion that did not %a*e a deter%ination !ith respe$t to

the $orre$tness of the distri$t $ourt"s de$ision and instead $ertified t!o 4uestions to the Jansas Supre%e ;ourt related to the $lassifi$a1 tion of the plaintiffs as independent $ontra$tors under the Jansas Wage 7ay%ent .$t. /he other 1A $ases that are before the Se#enth ;ir$uit re%ain stayed pending a de$ision of the Jansas Supre%e ;ourt. /he %ultidistri$t litigation $ourt re%anded the other eight $ertified $lass a$tions ba$* to the distri$t $ourts !here they !ere originally filed be$ause its su%%ary )udg%ent ruling did not $o%pletely dispose of all of the $lai%s in those la!suits. /hree of those $ases are no! on appeal !ith the ;ourt of .ppeals for the Ninth ;ir$uit. /he other fi#e re%ain pending in their respe$ti#e distri$t $ourts. While the granting of su%%ary )udg%ent in fa#or of FedEx 2round by the %ultidistri$t litigation $ourt in 20 of the 2I $ases that had been $ertified as $lass a$tions re%ains sub)e$t to appeal !e belie#e that it signifi$antly i%pro#es the li*elihood that our independent $ontra$tor %odel !ill be upheld. .d#erse deter%inations in %atters related to FedEx 2round"s independent $ontra$tors ho!e#er $ould a%ong other things entitle $ertain of our o!ner1operators and their dri#ers to the rei%burse%ent of $ertain expenses and to the benefit of !age1and1 hour la!s and result in e%ploy%ent and !ithholding tax and benefit liability for FedEx 2round and $ould result in $hanges to the indepen1 dent $ontra$tor status of FedEx 2round"s o!ner1operators in $ertain )urisdi$tions. We belie#e that FedEx 2round"s o!ner1operators are properly $lassified as independent $ontra$tors and that FedEx 2round is not an e%ployer of the dri#ers of the $o%pany"s independent $on1 tra$tors. While it is reasonably possible that potential loss in so%e of these la!suits or su$h $hanges to the independent $ontra$tor status of FedEx 2round"s o!ner1operators $ould be %aterial !e $annot yet deter%ine the a%ount or reasonable range of potential loss. . nu%ber of fa$tors $ontribute to this. /he nu%ber of plaintiffs in these la!suits $ontinues to $hange !ith so%e being dis%issed and others being added and as to ne! plaintiffs dis$o#ery is still ongoing. In addition the parties ha#e $ondu$ted only #ery li%ited dis$o#ery into da%ages !hi$h $ould #ary $onsiderably fro% plaintiff to plaintiff. Further the range of potential loss $ould be i%pa$ted $onsiderably by future rulings on the %erits of $ertain $lai%s and FedEx 2round"s #arious defenses and on e#identiary issues. In any e#ent !e do not belie#e that a %aterial loss is probable in these %atters. In addition !e are defending $ontra$tor1%odel $ases that are not or are no longer part of the %ultidistri$t litigation three of !hi$h ha#e been $ertified as $lass a$tions. /hese $ases are in #arying stages of litigation and !e do not expe$t to in$ur a %aterial loss in any of these %atters. 0/@E' 8.//E'S. In .ugust 2010 a third1party $onsultant !ho !or*s !ith shipping $usto%ers to negotiate lo!er rates filed a la!suit in federal distri$t $ourt in ;alifornia against FedEx and 9nited 7ar$el Ser#i$e In$. G<97S=H alleging #iolations of 9.S. antitrust la!. /his %atter !as dis%issed in 8ay 2011 but the $ourt granted the plaintiff per%ission to file an a%ended $o%plaint !hi$h FedEx re$ei#ed in Bune 2011. In No#e%ber 2011 the $ourt granted our %otion to dis%iss this $o%plaint but again allo!ed the plaintiff to file an

a%ended $o%plaint. /he plaintiff filed a ne! $o%plaint in De$e%ber 2011 and the %atter re%ains pending before the $ourt. In February 2011 shortly after the initial la!suit !as filed !e re$ei#ed a de%and for the produ$tion of infor%ation and do$u%ents in $onne$tion !ith a $i#il in#estigation by the 9.S. Depart%ent of Busti$e G<D0B=H into the poli$ies and pra$ti$es of FedEx and 97S for dealing !ith third1 party $onsultants !ho !or* !ith shipping $usto%ers to negotiate lo!er rates. In No#e%ber 2012 the D0B ser#ed a $i#il in#estigati#e de%and on the third1party $onsultant see*ing all pleadings deposi1 tions and do$u%ents produ$ed in the la!suit. We are $ooperating !ith the in#estigation do not belie#e that !e ha#e engaged in any anti1$o%petiti#e a$ti#ities and !ill #igorously defend oursel#es in any a$tion that %ay result fro% the in#estigation. While the litigation pro$eedings and the D0B in#estigation %o#e for!ard and the a%ount of loss if any is dependent on a nu%ber of fa$tors that are not yet fully de#eloped or resol#ed !e do not belie#e that a %aterial loss is reasonably possible. We ha#e re$ei#ed re4uests for infor%ation fro% the D0B in the Northern Distri$t of ;alifornia in $onne$tion !ith a $ri%inal in#estiga1 tion relating to the transportation of pa$*ages for online phar%a$ies that %ay ha#e shipped phar%a$euti$als in #iolation of federal la!. We responded to grand )ury subpoenas issued in Bune 200I and .ugust 200A and to additional re4uests for infor%ation pursuant to those subpoenas and !e $ontinue to respond and $ooperate !ith the in#estigation. We belie#e that our e%ployees ha#e a$ted in good faith at all ti%es. We do not belie#e that !e ha#e engaged in any illegal a$ti#ities and !ill #igorously defend oursel#es in any a$tion that %ay result fro% the in#estigation. /he D0B %ay pursue a $ri%inal indi$t1 %ent and if !e are $on#i$ted re%edies $ould in$lude fines penalties finan$ial forfeiture and $o%plian$e $onditions. We $annot esti%ate the a%ount or range of loss if any as su$h analysis !ould depend on fa$ts and la! that are not yet fully de#eloped or resol#ed. FedEx and its subsidiaries are sub)e$t to other legal pro$eedings that arise in the ordinary $ourse of their business. In the opinion of %anage%ent the aggregate liability if any !ith respe$t to these other a$tions !ill not ha#e a %aterial ad#erse effe$t on our finan$ial position results of operations or $ash flo!s.

N0/E 1A( 'E:./ED 7.'/y /'.NS.;/I0NS

0ur ;hair%an 7resident and ;hief Exe$uti#e 0ffi$er Frederi$* W. S%ith $urrently holds an approxi%ate 10L o!nership interest in the National Football :eague Washington 'eds*ins professional football tea% G<'eds*ins=H and is a %e%ber of its board of dire$tors. FedEx has a %ulti1year na%ing rights agree%ent !ith the 'eds*ins granting us $ertain %ar*eting rights in$luding the right to na%e the 'eds*ins" stadiu% <FedExField.=

N0/E 20( S988.'y 0F Q9.'/E':y 07E'./IN2 'ES9:/S G9N.9DI/EDH

(in millions, except per share amounts) 2013G1H 'e#enues 0perating in$o%e Net in$o%e 5asi$ earnings per $o%%on shareG2H Diluted earnings per $o%%on shareG2H 2012G3H 'e#enues 0perating in$o%e Net in$o%e 5asi$ earnings per $o%%on shareG2H Diluted earnings per $o%%on shareG2H First Quarter > 10 CA2 C42 43A 1.4? 1.43 > 10 321 C3C 4?4 1.4? 1.4? Se$ond Quarter > 11 10C C1I 43I 1.3A 1.3A > 10 3IC CI0 4AC 1.3C 1.3C /hird Quarter > 10 A33 3IA 3?1 1.14 1.13 > 10 3?4 I13 321 1.?? 1.?3 Fourth Quarter > 11 433 302 303 0.A? 0.A3 > 11 00I I3? 330 1.C4 1.C3

(1) .he ourth 6uarter o &013 includes $*+' million o (usiness realignment costs and an impairment charge o $100 million resulting rom the decision to retire 10 aircra t and related engines at "ed)x )xpress! .he third 6uarter o &013 includes $*< million o (usiness realignment costs! .he second 6uarter o &013 includes $13 million o (usiness realignment costs! (&) .he sum o the 6uarterl# earnings per share ma# not e6ual annual amounts due to di erences in the /eighted5average num(er o shares outstanding during the respective period! (3) .he ourth 6uarter o &01& includes an impairment charge o $13* million resulting rom the decision to retire &* aircra t and related engines at "ed)x )xpress! .he third 6uarter o &01& includes the reversal o a $'' million legal reserve!

N0/E 21( ;0NDENSED ;0NS0:ID./IN2 FIN.N;I.: S/./E8EN/S

We are re4uired to present $ondensed $onsolidating finan$ial infor%ation in order for the subsidiary guarantors Gother than FedEx ExpressH of our publi$ debt to $ontinue to be exe%pt fro% reporting under the Se$urities Ex$hange .$t of 1A34 as a%ended. /he guarantor subsidiaries !hi$h are !holly o!ned by FedEx guarantee >2.C3 billion of our debt. /he guarantees are full and un$onditional and )oint and se#eral. 0ur guarantor subsidiaries !ere not deter%ined using geographi$ ser#i$e line or other si%ilar $riteria and as a result the <2uarantor Subsidiaries= and <Non1guarantor Subsidiaries= $olu%ns ea$h in$lude portions of our do%esti$ and international operations. .$$ordingly this basis of presentation is not intended to present our finan$ial $ondition results of operations or $ash flo!s for any purpose other than to $o%ply !ith the spe$ifi$ re4uire%ents for subsidiary guarantor reporting. ;ondensed $onsolidating finan$ial state%ents for our guarantor subsidiaries and non1guarantor subsidiaries are presented in the follo!ing tables Gin %illionsH(

;ondensed ;onsolidating 5alan$e Sheets

8ay 31 2013 2uarantor Non1guarantor Subsidiaries Subsidiaries

7arent

.ssets
;urrent 2ssets ;ash and $ash e4ui#alents 'e$ei#ables less allo!an$es Spare parts supplies fuel prepaid expenses and other less allo!an$es Deferred in$o%e taxes /otal $urrent assets 7ropert# and )6uipment, at ;ost :ess a$$u%ulated depre$iation and a%orti6ation Net property and e4uip%ent 4ntercompan# %eceiva(le 3ood/ill 4nvestment in :u(sidiaries 0ther 2ssets > 3 IA2 O 43 O 3 A3C 2C 21 ? O O 1I C3A 2 1IC > 24 I?A > 403 3 AIA

"o!solidated
> C1C 1 0I4 34 13 1 IC0 2 1?C 1 133 1 032 1 203 1 203 O 1A1 > 3 4AA

Eli i!atio!s

>

GACH G2AH

> 4 A1C 3 044 CI0 333 11 2C4 3I 10A 1A ?23 1I 4I4 O 2 C33 O 1 034 > 33 3?C

?I1 31I 3 3A3 33 A13 1I 4?A 1C 44? 43A 1 332 3 34C I22 > 2A 1AA

O O G12?H O O O G1 ?42H O G22 0I?H G2 14?H > G2? 000H

:iabilities and Sto$*holders" In#est%ent

;urrent -ia(ilities ;urrent portion of long1ter% debt .$$rued salaries and e%ployee benefits .$$ounts payable .$$rued expenses /otal $urrent liabilities -ong5.erm ?e(t, -ess ;urrent 7ortion 4ntercompan# 7a#a(le 0ther -ong5.erm -ia(ilities Deferred in$o%e taxes 0ther liabilities /otal other long1ter% liabilities :tockholders@ 4nvestment > 230 I2 4 333 ?A1 2 4IA 1 ?42 > 1 1 402 1 3A2 1 3?? 4 1?1 230 O > O 204 ?0A 211 1 024 O O > O O G12?H O G12?H O G1 ?42H > 231 1 ?II 1 ICA 1 A32 3 C30 2 C3A O

O 2 ?4A 2 ?4A 1C 3AI > 24 I?A

3 CAI 3 133 ? A31 1C I3C > 2A 1AA

O 24? 24? 4 22A > 3 4AA

G2 14?H O G2 14?H G22 0I?H > G2? 000H

1 ?32 ? 02I C ?I0 1C 3AI > 33 3?C

;ondensed ;onsolidating 5alan$e Sheets

7arent 8ay 31 2012 2uarantor Non1guarantor Subsidiaries Subsidiaries

.ssets
;urrent 2ssets ;ash and $ash e4ui#alents 'e$ei#ables less allo!an$es Spare parts supplies fuel prepaid expenses and other less allo!an$es Deferred in$o%e taxes /otal $urrent assets 7ropert# and )6uipment, at ;ost :ess a$$u%ulated depre$iation and a%orti6ation Net property and e4uip%ent 4ntercompan# %eceiva(le 3ood/ill 4nvestment in :u(sidiaries 0ther 2ssets 2A A03 > 1 A0? 3 2?1 O 2 1C0 2A 20 A O O 1C 1?3 2 I43 > 22 1IC > 41C 3 CA3

"o!solidated
> ?3? A43 44 1A 1 ?42 1 I34 1 0C4 C?0 1 324 I34 O I? > 4 I4?

Eli i!atio!s

>

G11?H G33H

> 2 I43 4 C04 AC? 333 A 03? 3? 1?4 1I A1? 1C 24I O 2 3IC O 1 212 >

?C1 314 3 3A3 34 301 1C I22 1? 4CA 323 1 333 2 ACI 1 0AA > 2C I2C

O O G131H O O O G1 I4CH O G20 141H G2 I1IH > G24 A3CH

:iabilities and Sto$*holders" In#est%ent

;urrent -ia(ilities ;urrent portion of long1ter% debt .$$rued salaries and e%ployee benefits .$$ounts payable .$$rued expenses /otal $urrent liabilities -ong5.erm ?e(t, -ess ;urrent 7ortion 4ntercompan# 7a#a(le 0ther -ong5.erm -ia(ilities Deferred in$o%e taxes 0ther liabilities /otal other long1ter% liabilities :tockholders@ 4nvestment 2A A03 > O I3 ? 1I4 2C3 1 000 1 I4C > 41C 1 3?3 1 2C? 1 40? 4 4?4 230 O > O 1IC 4I2 11A CII O O > O O G131H O G131H O G1 I4CH > 41C 1 ?33 1 ?13 1 C0A 3 3C4 1 230 O I3? C C1? I 332 14 C2C >

O 4 340 4 340 14 C2C > 22 1IC

3 ?4A 3 1A3 ? I42 1? 2C1 > 2C I2C

3 1I3 1II 3 IC0 > 4 I4?

G2 I1IH O G2 I1IH G20 141H > G24 A3CH

;ondensed ;onsolidating State%ents of ;o%prehensi#e In$o%e

7arent > O 103 O 3 1 O 1 21 G22CH A? O O 1 3?1 G10IH 113 G3H 1 3?1 O > 1 3?1 > 2 ?22 2uarantor Subsidiaries > 3C 0C3 14 3C3 4 I3A 2 1AI 2 200 4 ?30 1 CA1 ?3A G32AH 4 3?3 34 A2I 2 143 233 42 G131H G20H 2 2IA C10 > 1 3CA > 1 ?1I &ear Ended 8ay 31 2013 Non1guarantor Eli%inations Subsidiaries > C 343 > G32A7 2 0A2 2 3C4 324 1I3 A? 11C O 33? 1 1A3 C 13C 40? O 3 1I G10H 41A 1I4 > 233 > 2?I O G141H G?H O O O O O G1I2H G32AH O G1 I14H O O O G1 I14H O > G1 I14H > G1 I14H ;onsolidated > 44 2IC 1? 3C0 C 2C2 2 321 2 3I? 4 C4? 1 A0A ??0 O 3 ?C2 41 C3? 2 331 O G?1H O G33H 2 433 IA4 > 1 3?1 > 2 ?A4

'e#enues 0perating Expenses(

Salaries and e%ployee benefits 7ur$hased transportation 'entals and landing fees Depre$iation and a%orti6ation Fuel 8aintenan$e and repairs 5usiness realign%ent i%pair%ent and other $harges Inter$o%pany $harges net 0ther

0perating In$o%e 0ther In$o%e GExpenseH(

E4uity in earnings of subsidiaries Interest net Inter$o%pany $harges net 0ther net

In$o%e 5efore In$o%e /axes

7ro#ision for in$o%e taxes

Net In$o%e ;o%prehensi#e In$o%e

;ondensed ;onsolidating State%ents of ;o%prehensi#e In$o%e G:ossH

7arent > O 114 O 3 1 O 1 O G21IH AC O O 2 032 GC3H I0 G3H 2 032 O > 2 032 > G120H 2uarantor Subsidiaries > 3? 412 14 133 4 30A 2 221 1 A?2 4 ICC 1 II2 134 G323H 4 4I2 33 IAC 2 313 3A3 31 G102H G10H 2 I2A IC3 > 1 A34 > 1 CA? &ear Ended 8ay 31 2012 Non1guarantor Eli%inations Subsidiaries > > G301H ? 3?A 1 I32 O 1 A44 G11IH 2?C G?H 130 O CA O AC O O O 341 O AII G1CCH 3 IAI G301H ?C1 O O 3 22 A C0C 234 > 4C3 > 3I0 G2 42CH O O O G2 42CH O > G2 42CH > G2 42CH ;onsolidated > 42 ?I0 1? 0AA ? 333 2 4IC 2 113 4 A3? 1 AI0 134 O 3 3A0 3A 4A4 3 1I? O G3AH O G?H 3 141 1 10A > 2 032 > G3C1H

'e#enues 0perating Expenses(

Salaries and e%ployee benefits 7ur$hased transportation 'entals and landing fees Depre$iation and a%orti6ation Fuel 8aintenan$e and repairs I%pair%ent and other $harges Inter$o%pany $harges net 0ther

0perating In$o%e 0ther In$o%e GExpenseH(

E4uity in earnings of subsidiaries Interest net Inter$o%pany $harges net 0ther net

In$o%e 5efore In$o%e /axes

7ro#ision for in$o%e taxes

Net In$o%e ;o%prehensi#e G:ossH In$o%e

;ondensed ;onsolidating State%ents of ;o%prehensi#e In$o%e

7arent > O 10A O 4 1 O 1 O G222H 10C O O 1 432 GIIH 104 G1?H 1 432 O > 1 432 > 1 240 2uarantor Subsidiaries > 33 124 13 20? 4 034 2 20A 1 CI4 4 003 1 I?2 2I G31CH 4 3A2 31 201 1 A23 200 13 G133H G14H 1 AIC ?CC > 1 310 > 1 32A &ear Ended 8ay 31 2011 Non1guarantor Eli%inations Subsidiaries > ? 4AI > G31IH 1 A?1 1 C43 233 1II 14I 11? ?1 33A 1 032 ? 043 433 O G2H 31 G?H 4CI 13? > 342 > 423 O G103H G4H O O O O O G20AH G31IH O G1 ?32H O O O G1 ?32H O > G1 ?32H > G1 ?32H ;onsolidated > 3A 304 13 2C? 3 ?C4 2 4?2 1 AC3 4 131 1 ACA IA O 3 322 3? A2? 2 3CI O GCCH O G3?H 2 2?3 I13 > 1 432 > 1 342

'e#enues 0perating Expenses(

Salaries and e%ployee benefits 7ur$hased transportation 'entals and landing fees Depre$iation and a%orti6ation Fuel 8aintenan$e and repairs I%pair%ent and other $harges Inter$o%pany $harges net 0ther

0perating In$o%e 0ther In$o%e GExpenseH(

E4uity in earnings of subsidiaries Interest net Inter$o%pany $harges net 0ther net

In$o%e 5efore In$o%e /axes

7ro#ision for in$o%e taxes

Net In$o%e ;o%prehensi#e In$o%e

;ondensed ;onsolidating State%ents of ;ash Flo!s

7arent > 24C G3H O O G3H 141 O O O 1 C3A 2I0 23 G1CCH G24?H G1IH 1 C42 O 1 AI? O O G11AH GA3IH G10H G12H &ear Ended 8ay 31 2013 2uarantor Non1guarantor Subsidiaries Subsidiaries Eli%inations ;onsolidated > 3 A3? > 4I? > 1A > 4 ?II G3 02AH O 4A G2 AI0H G3IH G3I3H 21 G41CH O O O O O 11A 400 13 I1 G343H G4I3H ? GI20H GI3H 3I3 G21H O O O O O O O O O 1A O O O O O O O O O G3 3C3H G4I3H 33 G3 I03H O O O G41CH 1 C3A O O G1CCH G24?H G1IH 1 1I4 3 2 0C4

;ash pro#ided by operating a$ti#ities In#esting a$ti#ities

;apital expenditures 5usiness a$4uisitions net of $ash a$4uired 7ro$eeds fro% asset dispositions and other

;ash used in in#esting a$ti#ities Finan$ing a$ti#ities

Net transfers fro% GtoH 7arent 7ay%ent on loan bet!een subsidiaries Inter$o%pany di#idends 7rin$ipal pay%ents on debt 7ro$eeds fro% debt issuan$es 7ro$eeds fro% sto$* issuan$es 2I0 Ex$ess tax benefit on the exer$ise of sto$* options 23 Di#idends paid 7ur$hase of treasury sto$* 0ther net

;ash pro#ided by Gused inH finan$ing a$ti#ities

Effe$t of ex$hange rate $hanges on $ash Net in$rease Gde$reaseH in $ash and $ash e4ui#alents

;ash and $ash e4ui#alents at beginning of period ;ash and $ash e4ui#alents at end of period

1 A0? > 3 IA2

41C > 403

?3? > C1C

G11?H > GACH

2 I43 > 4 A1C

;ondensed ;onsolidating State%ents of ;ash Flo!s

7arent 2uarantor Subsidiaries &ear Ended 8ay 31 2012 Non1guarantor Subsidiaries Eli%inations > 3C0 G210H G11?H O G32?H GC3H GC?H O O O O O 1A G322H G3H 13I 2CA > 41C 34? > ?3? G132H G22H A0 GI?H > G11?H > G30H O O O O O O O O O O O O O O G30H 2 32I > ;onsolidated > 4 I33 G4 00CH G11?H C4 G4 04AH O O G2AH 12I 1I G1?4H G1ACH O

;ash pro#ided by Gused inH operating a$ti#ities In#esting a$ti#ities

;apital expenditures 5usiness a$4uisition net of $ash a$4uired 7ro$eeds fro% asset dispositions and other

> GIIH G3H O O G3H ?23 O O 12I 1I G1?4H G1ACH O 410

> 4 3I3 G3 CA2H O C4 G3 C1IH G330H C? G2AH O O O O G1AH O 31C

;ash used in in#esting a$ti#ities Finan$ing a$ti#ities

Net transfers fro% GtoH 7arent Inter$o%pany di#idends 7rin$ipal pay%ents on debt 7ro$eeds fro% sto$* issuan$es Ex$ess tax benefit on the exer$ise of sto$* options Di#idends paid 7ur$hase of treasury sto$* 0ther net G244H Effe$t of ex$hange rate $hanges on $ash G2CH Net in$rease Gde$reaseH in $ash and $ash e4ui#alents ;ash and $ash e4ui#alents at beginning of period ;ash and $ash e4ui#alents at end of period

;ash Gused inH pro#ided by finan$ing a$ti#ities

313 1 3IA > 1 A0? 2 I43

;ondensed ;onsolidating State%ents of ;ash Flo!s

7arent > 23 G1H O O G1H 330 O O G230H 10I 23 G131H G3H 233 O 41 Net in$rease Gde$reaseH in $ash and $ash e4ui#alents ;ash and $ash e4ui#alents at beginning of period 2CA 1 310 21 23I 103 443 G2CH G3AH 3C? 1 A32 &ear Ended 8ay 31 2011 2uarantor Non1guarantor Subsidiaries Subsidiaries Eli%inations ;onsolidated > 3 ACI > ?3 > G2CH > 4 041 G3 2?3H GA?H 110 G3 24AH GAA4H 233 ?1 G12H O O O GAH GC1AH 11 G1C0H O 1 G1?AH 4?4 G233H G?1H O O O O A 1CC 30 O O O O O O O O O O O O O O G3 434H GA?H 111 G3 41AH O O O G2?2H 10I 23 G131H G3H

;ash pro#ided by Gused inH operating a$ti#ities In#esting a$ti#ities

;apital expenditures 5usiness a$4uisition net of $ash a$4uired 7ro$eeds fro% asset dispositions and other

;ash used in in#esting a$ti#ities Finan$ing a$ti#ities

Net transfers fro% GtoH 7arent 7ay%ent on loan bet!een subsidiaries Inter$o%pany di#idends 7rin$ipal pay%ents on debt 7ro$eeds fro% sto$* issuan$es Ex$ess tax benefit on the exer$ise of sto$* options Di#idends paid 0ther net G2ICH Effe$t of ex$hange rate $hanges on $ash

;ash Gused inH pro#ided by finan$ing a$ti#ities

;ash and $ash e4ui#alents at end of period

> 1 3IA 2 32I

> 2CA

> 34?

> GI?H

>

'E70'/ 0F INDE7ENDEN/ 'E2IS/E'ED 795:I; .;;09N/IN2 FI'8

/he 5oard of Dire$tors and Sto$*holders FedEx ;orporation We ha#e audited the a$$o%panying $onsolidated balan$e sheets of FedEx ;orporation as of 8ay 31 2013 and 2012 and the related $onsolidated state%ents of in$o%e $o%prehensi#e in$o%e GlossH $hanges in sto$*holders" in#est%ent and $ash flo!s for ea$h of the three years in the period ended 8ay 31 2013. /hese finan$ial state%ents are the responsibility of the ;o%pany"s %anage%ent. 0ur responsibility is to express an opinion on these finan$ial state%ents based on our audits. We $ondu$ted our audits in a$$ordan$e !ith the standards of the 7ubli$ ;o%pany .$$ounting 0#ersight 5oard G9nited StatesH. /hose standards re4uire that !e plan and perfor% the audit to obtain reasonable assuran$e about !hether the finan$ial state%ents are free of %aterial %isstate%ent. .n audit in$ludes exa%ining on a test basis e#iden$e supporting the a%ounts and dis$losures in the finan$ial state%ents. .n audit also in$ludes assessing the a$$ounting prin$iples used and signifi$ant esti%ates %ade by %anage%ent as !ell as e#aluating the o#erall finan$ial state%ent presentation. We belie#e that our audits pro#ide a reasonable basis for our opinion. In our opinion the finan$ial state%ents referred to abo#e present fairly in all %aterial respe$ts the $onsolidated finan$ial position of FedEx ;orporation at 8ay 31 2013 and 2012 and the $onsolidated results of its operations and its $ash flo!s for ea$h of the three years in the period ended 8ay 31 2013 in $onfor%ity !ith 9.S. generally a$$epted a$$ounting prin$iples. We also ha#e audited in a$$ordan$e !ith the standards of the 7ubli$ ;o%pany .$$ounting 0#ersight 5oard G9nited StatesH FedEx ;orporation"s internal $ontrol o#er finan$ial reporting as of 8ay 31 2013 based on $riteria established in Internal ;ontrol O Integrated Fra%e!or* issued by the ;o%%ittee of Sponsoring 0rgani6ations of the /read!ay ;o%%ission and our report dated Buly 13 2013 expressed an un4ualified opinion thereon.

8e%phis /ennessee Buly 13 2013

0)

fedex $orporation

SE:E;/ED FIN.N;I.: D./.

/he follo!ing table sets forth Gin %illions ex$ept per share a%ounts and other operating dataH $ertain sele$ted $onsolidated finan$ial and operating data for FedEx as of and for the fi#e years ended 8ay 31 2013. /his infor%ation should be read in $on)un$tion !ith the ;onsolidated Finan$ial State%ents 8DN. and other finan$ial data appearing else!here in this .nnual 'eport.

2013G1H

2012G2H > 42 ?I0 3 1I? 3 141 2 032

2011G3H > 3A 304 2 3CI 2 2?3 1 432

2010G4H > 34 C34 1 AAI 1 IA4 1 1I4

200AG3H > 33 4AC C4C ?CC AI

0perating 'esults
'e#enues 0perating in$o%e In$o%e before in$o%e taxes Net in$o%e > 44 2IC 2 331 2 433 1 3?1

7er Share Data

Earnings per share( 5asi$ > 4.A3 Diluted > 4.A1 .#erage shares of $o%%on sto$* outstanding 313 .#erage $o%%on and $o%%on e4ui#alent shares utstanding 31C o ;ash di#idends de$lared > 0.3? > ?.44 > ?.41 313 31C > 0.32 > 1C 24I 2A A03 1 230 14 C2C ??0 > 4.?1 > 4.3C 313 31C > 0.4I > 13 343 2C 3I3 1 ??C 13 220 ?II > 3.CI > 3.C? 312 314 > 0.44 > 14 3I3 24 A02 1 ??I 13 I11 ??C > 0.31 > 0.31 311 312 > 0.44 > 13 41C 24 244 1 A30 13 ?2? ?34

Finan$ial 7osition
7roperty and e4uip%ent net /otal assets :ong1ter% debt less $urrent portion ;o%%on sto$*holders" in#est%ent > 1I 4I4 33 3?C 2 C3A 1C 3AI ?4C

0ther 0perating Data

FedEx Express air$raft fleet
(1) %esults or &013 include $5'0 million ($353 million, net o tax, or $1!11 per diluted share) o (usiness realignment costs and a $100 million ($'3 million, net o tax, or $0!&0 per diluted share) impairment charge resulting rom the decision to retire 10 aircra t and related engines at "ed)x )xpress! :ee ,ote 1 to the accompan#ing consolidated inancial statements! 2dditionall#, common stockholders@ investment includes an other comprehensive income increase o $8'1 million, net o tax, or the unded status o our retirement plans at $a# 31, &013! (&) %esults or &01& include a $13* million ($8* million, net o tax or $0!&' per diluted share) impairment charge resulting rom the decision to retire &* aircra t and related engines at "ed)x )xpress and the reversal o a $'' million legal reserve initiall# recorded in &011! :ee ,ote 1 to the accompan#ing consolidated inancial statements! 2dditionall#, common stockholders@ investment includes an other comprehensive income charge o $&!* (illion, net o tax, or the unded status o our retirement plans at $a# 31, &01&! (3) %esults or &011 include charges o approximatel# $1++ million ($10* million, net o tax and applica(le varia(le incentive compensation impacts, or $0!33 per diluted share) or the com(ination o our "ed)x "reight and "ed)x ,ational -.- operations and a $'' million reserve associated /ith a legal matter at "ed)x )xpress! :ee ,ote 1 to the accompan#ing consolidated inancial statements! 2dditionall#, common stockholders@ investment includes an other comprehensive income charge o $350 million, net o tax, or the unded status o our retirement plans at $a# 31, &011! (*) ;ommon stockholders@ investment includes an other comprehensive income charge o $1!0 (illion, net o tax, or the unded status o our retirement plans at $a# 31, &010! (5) %esults or &00+ include a charge o $1!& (illion ($1!1 (illion, net o tax, or $3!*5 per diluted share) primaril# or impairment charges associated /ith good/ill and aircra t! 2dditionall#, common stockholders@ investment includes an other comprehensive income charge o $1!& (illion, net o tax, or the unded status o our retirement plans at $a# 31, &00+!

02

fedeT $orporation

50.'D 0F DI'E;/0'S
Ba%es :. 5ar*sdale
G3UH G4H

;hair%an and 7resident 5ar*sdale 8anage%ent ;orporation 4nvestment management compan#

Boshua ;ooper 'a%oG3H

Pi$e ;hair%an Jissinger .sso$iates In$. :trategic advisor# irm

Bohn .. Ed!ardsonG1UH
For%er ;hair%an and ;hief Exe$uti#e 0ffi$er ;DW ;orporation .echnolog# products and services compan#

Susan ;. S$h!ab

G2H

Shirley .nn Ba$*sonG2H G4UH G3H

7resident 'ensselaer 7olyte$hni$ Institute .echnological research universit#

7rofessor 9ni#ersity of 8aryland S$hool of 7ubli$ 7oli$y For%er 9.S. /rade 'epresentati#e

Frederi$* W. S%ith
;hair%an 7resident and ;hief Exe$uti#e 0ffi$er FedEx ;orporation

Ste#en '. :orangerG2UH G4H

;hair%an E%eritus Tyle% In$. Fater technolog# compan#

Boshua I. S%ith

G1H

2ary W. :o#e%anG1H G3H

;hair%an 7resident and ;hief Exe$uti#e 0ffi$er ;aesars Entertain%ent ;orporation 8randed gaming entertainment compan#

;hair%an and 8anaging 7artner ;oa$hing 2roup ::; $anagement consulting irm

Da#id 7. Steiner ;hief

Exe$uti#e 0ffi$er Waste 8anage%ent In$. 4ntegrated /aste management services compan#

G1H

'. 5rad 8artin

G4H

;hair%an '58 Penture ;o%pany 7rivate investment compan#

7aul S. Walsh

G2H

Exe$uti#e .d#isor Diageo pl$ 8everage compan#

(1) 2udit ;ommittee (&) ;ompensation ;ommittee (3) 4n ormation .echnolog# 0versight ;ommittee (*) ,ominating G 3overnance ;ommittee (5) -ead 4ndependent ?irector * ;ommittee ;hair

0+

ETE;9/IPE 0FFI;E'S .ND SENI0' 8.N.2E8EN/

FedEx -orporation

Frederi$* W. S%ith
;hair%an 7resident and ;hief Exe$uti#e 0ffi$er

;hristine 7. 'i$hards
Exe$uti#e Pi$e 7resident 2eneral ;ounsel and Se$retary

.lan 5. 2raf Br.

Exe$uti#e Pi$e 7resident and ;hief Finan$ial 0ffi$er

/. 8i$hael 2lenn
Exe$uti#e Pi$e 7resident 8ar*et De#elop%ent and ;orporate ;o%%uni$ations

'obert 5. ;arter
Exe$uti#e Pi$e 7resident FedEx Infor%ation Ser#i$es and ;hief Infor%ation 0ffi$er

Bohn :. 8erino
;orporate Pi$e 7resident and 7rin$ipal .$$ounting 0ffi$er

FedEx Express #eg ent

Da#id B. 5ron$6e*
7resident and ;hief Exe$uti#e 0ffi$er FedEx Express

FedEx %round #eg ent

@enry B. 8aier
7resident and ;hief Exe$uti#e 0ffi$er FedEx 2round

8i$hael :. Du$*er
Exe$uti#e Pi$e 7resident and ;hief 0perating 0ffi$er FedEx Express

Ward 5. Strang
Exe$uti#e Pi$e 7resident and ;hief 0perating 0ffi$er FedEx 2round

Ba%es '. 7ar*er

Exe$uti#e Pi$e 7resident .ir 0perations FedEx Express

5arbara 5. Wallander
7resident and ;hief Exe$uti#e 0ffi$er FedEx S%art7ost

;athy D. 'oss
Exe$uti#e Pi$e 7resident and ;hief Finan$ial 0ffi$er FedEx Express

8anfred S$hardt
7resident and ;hief Exe$uti#e 0ffi$er FedEx /rade Net!or*s

;raig 8. Si%on
7resident and ;hief Exe$uti#e 0ffi$er FedEx Supply;hain Syste%s

FedEx Freight #eg ent

FedEx #ervices #eg ent

Willia% B. :ogue
7resident and ;hief Exe$uti#e 0ffi$er FedEx Freight

Donald F. ;olleran
Exe$uti#e Pi$e 7resident 2lobal Sales FedEx Ser#i$es

Donald ;. 5ro!n
Exe$uti#e Pi$e 7resident Finan$e and .d%inistration and ;hief Finan$ial 0ffi$er FedEx Freight

'a)esh Subra%ania%
Exe$uti#e Pi$e 7resident 2lobal 8ar*eting FedEx Ser#i$es

5rian D. 7hilips 7atri$* :. 'eed

Exe$uti#e Pi$e 7resident and ;hief 0perating 0ffi$er FedEx Freight 7resident and ;hief Exe$uti#e 0ffi$er FedEx 0ffi$e

;ary ;. 7appas Pirginia ;. .lbanese

7resident and ;hief Exe$uti#e 0ffi$er FedEx ;usto% ;riti$al 7resident and ;hief Exe$uti#e 0ffi$er FedEx /e$h;onne$t

;0'70'./E INF0'8./I0N
FEDET ;0'70'./I0N( A42 South Shady 2ro#e 'oad 8e%phis /ennessee 3I120 GA01H I1I1C300 fedex.$o% .NN9.: 8EE/IN2 0F S@.'E0WNE'S( 8onday Septe%ber 23 2013 I(00 a.%. lo$al ti%e FedEx Express World @ead4uarters 3?C0 @a$*s ;ross 'oad 5uilding 2 8e%phis /ennessee 3I123. S/0;J :IS/IN2( FedEx ;orporation"s $o%%on sto$* is listed on the Ne! &or* Sto$* Ex$hange under the ti$*er sy%bol FDT. S@.'E0WNE'S( .s of Buly 12 2013 there !ere 13 131 shareo!ners of re$ord.
8.'JE/ INF0'8./I0N( Follo!ing are high and lo! sale pri$es and $ash di#idends paid by 4uarter for FedEx ;orporation"s $o%%on sto$* in 2013 and 2012(

;9S/08E' SE'PI;E( ;all 11I0012o1FedEx or #isit fedex.$o%. 8EDI. INQ9I'IES( Bess 5unn 8anager In#estor 'elations FedEx ;orporation A42 South Shady 2ro#e 'oad 8e%phis /ennessee 3I120 GA01H I1I1C4?3 e1%ail( %ediarelationsVfedex.$o% S@.'E0WNE' .;;09N/ SE'PI;ES( ;o%putershare In#estor Ser#i$es 7.0. 5ox 430?A 7ro#iden$e 'hode Island 02A40130?A GI00H 44?12?1C !!!.$o%putershare.$o% DI'E;/ S/0;J 79';@.SE .ND DIPIDEND 'EINPES/8EN/( For infor%ation on the dire$t sto$* pur$hase and di#idend rein#est%ent plan for FedEx ;orporation $o%%on sto$* $all ;o%putershare at GI00H 44?12?1C or #isit their dire$t sto$* pur$hase plan !ebsite at !!!.$o%putershare.$o%. /his plan pro#ides an alternati#e to traditional retail bro*erage %ethods of pur$hasing holding and selling FedEx $o%%on sto$*. /his plan also per%its shareo!ners to auto%ati$ally rein#est their di#idends to pur$hase additional shares of FedEx $o%%on sto$*. INPES/0' 'E:./I0NS( 8i$*ey Foster Pi$e 7resident In#estor 'elations FedEx ;orporation A42 South Shady 2ro#e 'oad 8e%phis /ennessee 3I120 GA01H I1I1C200 e1%ail( irVfedex.$o% EQ9.: E87:0&8EN/ 0770'/9NI/&( 0ur greatest asset is our people. We are $o%%itted to pro#iding a !or*pla$e !here our e%ployees and $ontra$tors feel respe$ted satisfied and appre$iated. 0ur poli$ies are designed to pro%ote fairness and respe$t for e#eryone. We hire e#aluate and pro%ote e%ployees and engage $ontra$tors based on their s*ills and perfor%an$e. With this in %ind !e !ill not tolerate $ertain beha#iors. /hese in$lude harass%ent retaliation #iolen$e inti%idation and dis$ri%ination of any *ind in#ol#ing ra$e $olor religion national origin gender sexual orientation gender identity gender expression age disability #eteran status or any other $hara$teristi$ prote$ted by federal state or lo$al la!. For %ore detail on the infor%ation in this report #isit http(--in#estors.fedex.$o%. 0ur latest 2lobal ;iti6enship 'eport is a#ailable at http(--$sr.fedex.$o%.

First Quarter

Se$ond Quarter

/hird Quarter

Fourth Quarter >

F&2013 @igh 10A.?? :o! A0.?1 Di#idend F&2012 @igh :o! Di#idend

> A3.1C I3.I0 0.14 > AI.?? C2.1? 0.13

> A4.2? I3.A2 0.14 > I3.C3 ?4.0C 0.13

> 10C.30 IC.AA 0.14 > AC.1A C?.A3 0.13

0.14 > A?.IA I4.I? 0.13

INDE7ENDEN/ 'E2IS/E'ED 795:I; .;;09N/IN2 FI'8( Ernst N &oung ::7 8e%phis /ennessee

residual %aterials as !ell as the use of lo! P0; in*s and $oatings. In addition $arbon and P0; redu$tion strategies !ere e%ployed to destroy residual P0;s #ia bio1oxidation. ;arbon offsets !ere pur$hased !here $arbon $ould not be eli%inated rendering this report $arbon1 balan$ed.

In line !ith FedEx"s $o%%it%ent to sustainability our .nnual 'eport !as produ$ed using en#iron%entally and so$ially responsible pro$ure%ent and %anufa$turing pra$ti$es to ensure a %ini%i6ed en#iron%ental i%pa$t. /his report !as printed at Earth;olor on FS;M $ertified paper $ontaining 10L re$y$led 7;W fiber. 7rinting plant utili6ed 100L rene!able !ind po!er G'E;sH and lean %anufa$turing prin$iples in$luding green $he%istry prin$iples the re$y$ling of

Strategy !riting and design by @anley Wood ::; 8inneapolis 8N. 7rinting by Earth;olor In$.

FIN.N;I.: INF0'8./I0N( ;opies of FedEx ;orporation"s .nnual 'eport on For% 101J other do$u%ents filed !ith the Se$urities and Ex$hange ;o%%ission GSE;H and other finan$ial and statisti$al infor%ation are a#ailable through our In#estor 'elations !ebsite at in#estors.fedex.$o%. ;o%pany do$u%ents filed ele$troni$ally !ith the SE; $an also be found at the SE;"s !ebsite at !!!.se$.go#. &ou !ill be %ailed a $opy of the For% 101J upon re4uest to( FedEx ;orporation In#estor 'elations A42 South Shady 2ro#e 'oad 8e%phis /ennessee 3I120 GA01H I1I1C200 e1%ail( irVfedex.$o%.

@ 13C trees preser#ed for the future @ ?1 %illion 5/9s of energy $onser#ed @ 3 I30 *Wh of ele$tri$ity offset @ 11 C?2 pounds of greenhouse gas redu$ed @ ?3 CA1 gallons of !ater !aste eli%inated @ 4 2C0 pounds of solid !aste eli%inated
Sour$es( En#iron%ental i%pa$t esti%ates !ere %ade using the En#iron%ental 7aper Net!or* 7aper ;al$ulator and the 9.S. E7. Ws po!er profiler.

powering possibilities
When people $onne$t !ith ea$h other anything is possible. Fair and open trade unleashes inno#ation + the po!er of te$hnology transportation infor%ation and ideas to $o%pound and %ultiply. 5y %a*ing it easier to bring ne! ideas to ne! %ar*ets e#eryone benefits.

Fedex ;orporation A42 South Shady 2ro#e road 8e%phis tennessee 3I120 fedex.co