Item 2. Properties

We currently control more than 34,000 leased or owned facilities in the United States, its possessions, and territories. We also contract with approximately 3,000 locations to distribute our products. The size of our facilities ranges from fifty square feet to as large as 35.3 acres under one roof. The types of real estate include, but are not limited to, Post Offices, carrier facilities, mail processing plants, retail outlets, business office space, warehouse space, vehicle maintenance facilities, and other permanent or temporary space. The vast majority of these facilities are Post Offices, stations, branches, and carrier annexes. We have 675 processing and distribution facilities (Processing and Distribution Facilities, Air Mail Facilities and Bulk Mail Facilities), and over 1,000 other types of facilities including administrative, support and vehicle maintenance facilities.

We have one of the largest vehicle fleets in the country, including an extensive fleet of alternative fuel vehicles.

Item 3. Legal Proceedings

We are subject to various claims and liabilities that arise in the ordinary and normal course of postal operations. These claims generally cover labor, tort, and contract disputes and are regularly reviewed by management and, where significant, by the Audit and Finance Committee of the Board of Governors, or the full Board of Governors. In our evaluation, no single claim is material to our financial statements taken as a whole. We have accrued in our financial statements of September 30, 2005, the estimated impact of those claims we think it is probable we will pay. Further details on these claims are identified in Note 10 of the Notes to the Financial Statements.

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

Not applicable to this report.