Notice of Annual Meeting

and

Proxy Statement

Annual Meeting of Shareholders

APRIL 18, 2006

CNF INC.

________________________________________________________________________________

 

CNF INC.

2855 CAMPUS DRIVE, SUITE 300

TELEPHONE: 650/378-5200

SAN MATEO, CALIFORNIA 94403

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

Tuesday, April 18, 2006

9:00 A.M., local time

Knowles Room, Hotel du Pont, 11th and Market Streets, Wilmington, Delaware

FELLOW SHAREHOLDER:

      The Annual Meeting of Shareholders of CNF Inc. will be held at 9:00 A.M., local time, on Tuesday, April 18, 2006, to:

      Shareholders of record at the close of business on March 1, 2006, are entitled to notice of and to vote at the meeting.

      Your vote is important. Whether or not you plan to attend, I urge you to SIGN, DATE AND RETURN THE ENCLOSED WHITE PROXY CARD IN THE ENVELOPE PROVIDED, in order that as many shares as possible will be represented at the meeting. If you attend the meeting and prefer to vote in person, you will be able to do so and your vote at the meeting will revoke any proxy you may submit.

March  l , 2006

TABLE OF CONTENTS

CNF INC.

2855 CAMPUS DRIVE, SUITE 300

SAN MATEO, CALIFORNIA 94403

TELEPHONE: 650/378-5200

PROXY STATEMENT

March  l , 2006

      The Annual Meeting of Shareholders of CNF Inc. (the “Company”) will be held on Tuesday, April 18, 2006. Shareholders of record at the close of business on March 1, 2006 will be entitled to vote at the meeting. This proxy statement and accompanying proxy are first being sent to shareholders on or about March  l , 2006.

Board of Directors’ Recommendations

      The Board of Directors of the Company is soliciting your proxy for use at the meeting and any adjournment or postponement of the meeting. The Board recommends a vote for the election of the nominees for directors described below, for approval of the proposed amendment to the Company’s Certificate of Incorporation, for approval of the Company’s 2006 Equity and Incentive Plan, and for ratification of the appointment of KPMG LLP as independent auditors.

Proxy Voting Procedures

      To be effective, properly signed proxies must be returned to the Company prior to the meeting. The shares represented by your proxy will be voted in accordance with your instructions. However, if no instructions are given, your shares will be voted in accordance with the recommendations of the Board.

Voting Requirements

      A majority of the votes attributable to all voting shares must be represented in person or by proxy at the meeting to establish a quorum for action at the meeting. Directors are elected by a plurality of the votes cast, and the five nominees who receive the greatest number of votes cast for election of directors at the meeting will be elected directors for a three-year term. Approval of the proposed amendment to the Company’s Certificate of Incorporation requires a favorable vote of the holders of a majority of the voting power entitled to vote thereon. Approval of all other matters expected to come before the meeting requires a favorable vote of the holders of a majority of the voting power represented at the meeting.

      In the election of directors, broker non-votes, if any, will be disregarded and have no effect on the outcome of the vote. With respect to the proposed amendment to the Certificate of Incorporation, abstentions and broker non-voters will have the same effect as voting against the proposal. With respect to all other matters, abstentions from voting will have the same effect as voting against such matter and broker non-votes, if any, will be disregarded and have no effect on the outcome of such vote.

Voting Shares Outstanding

      At the close of business on March 1, 2006, the record date for the Annual Meeting, there were outstanding and entitled to vote        l        shares of Common Stock and        l        shares of Series B Cumulative Convertible Preferred Stock (“Series B Preferred Stock”). Each share of Common

Proxy Voting Convenience

      You are encouraged to exercise your right to vote by returning to the Company a properly executed WHITE proxy in the enclosed envelope, whether or not you plan to attend the meeting. This will ensure that your votes are cast.

      You may revoke or change your proxy at any time prior to its use at the meeting. There are three ways you may do so: (1) give the Company a written direction to revoke your proxy; (2) submit a later dated proxy; or (3) attend the meeting and vote in person.

Attendance at the Meeting

      All shareholders are invited to attend the meeting. Persons who are not shareholders may attend only if invited by the Board of Directors. If you are a shareholder but do not own shares in your name, you must bring proof of ownership (e.g., a current broker’s statement) in order to be admitted to the meeting.

ELECTION OF DIRECTORS

The Board of Directors Recommends a Vote “For” All Nominees.

      The Board of Directors of the Company, pursuant to the Bylaws, has determined that the number of directors of the Company shall be fourteen. Unless you withhold authority to vote, your proxy will be voted for election of the nominees named below.

      The following persons are the nominees of the Board of Directors for election as Class III directors to serve for a three-year term until the 2009 Annual Meeting of Shareholders and until their successors are duly elected and qualified:

      If a nominee becomes unable or unwilling to serve, proxy holders are authorized to vote for election of such person or persons as shall be designated by the Board of Directors; however, the management knows of no reason why any nominee should be unable or unwilling to serve.

      The Company has three classes of directors, each of which is elected for a three-year term. Class I directors will be elected in 2007 and Class II directors will be elected in 2008. All directors have previously been elected by the shareholders, except John J. Anton, who was appointed as a Class I director in March 2005, William R. Corbin, who was appointed as a Class III director in March 2005, Admiral Henry H. Mauz, Jr., who was appointed as a Class III director in March 2005, and Douglas W. Stotlar, who was appointed as a Class I director in April 2005. Mr. Anton, Mr. Corbin, and Admiral Mauz were recommended to the Company’s Director Affairs Committee by non-management directors of the Company.

CLASS III DIRECTORS

CLASS I DIRECTORS

CLASS II DIRECTORS

STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS

      The following table sets forth information regarding beneficial ownership of the Company’s Common Stock and Series B Preferred Stock, as of February 1, 2006, by the directors, the executive officers identified in the Summary Compensation Table below and by the directors and executive officers as a group.

INFORMATION ABOUT THE BOARD OF DIRECTORS AND CERTAIN BOARD COMMITTEES

Director Independence

      The Board of Directors has determined that each incumbent director, other than Douglas W. Stotlar, is an independent director under the New York Stock Exchange listing standards. In making such determination as to Robert P. Wayman, the Board considered all of the relevant facts and circumstances relating to the services provided by the Company and its subsidiaries to Hewlett-Packard Company, of which Mr. Wayman is Chief Financial Officer and was Interim Chief Executive Officer from February 2005 through March 2005, and concluded that such services do not constitute a material relationship between Mr. Wayman and the Company.

Board Meetings; Executive Sessions of Non-Management Directors

      During 2005, the Board of Directors held eleven meetings. Each incumbent director attended at least 75% of all meetings of the Board and the committees of the Board on which he or she served.

      Non-management members of the Board of Directors meet in executive session on a regularly scheduled basis. Neither the Chief Executive Officer nor any other member of management attends such meetings of non-management directors. The Chairman of the Board of Directors of the Company, W. Keith Kennedy, Jr., has been chosen as the “Lead Non-Management Director” to preside at such executive sessions. For information regarding how to communicate with the Lead Non-Management Director and other members of the Company’s Board of Directors, see “Communications with Directors” on page        l       .

Standing Committees

      The Board of Directors currently has the following standing committees: Audit Committee, Compensation Committee, Director Affairs Committee and Finance Committee, the members of which are shown in the table below. Each of the Audit, Compensation and Directors Affairs Committees is governed by a charter, current copies of which are available on the Company’s corporate website at www.cnf.com under the headings “Investor Relations/ Corporate Governance.” Copies of the charters are also available in print to shareholders upon request, addressed to the Corporate Secretary at 2855 Campus Drive, Suite 300, San Mateo, California 94403. In addition, a copy of the Audit Committee charter is attached as Appendix A to the Company’s 2004 Proxy Statement.

      Descriptions of the Audit, Compensation and Director Affairs Committees follow:

      Audit Committee: The Audit Committee assists the Board in its oversight of matters involving the accounting, auditing, financial reporting, and internal control functions of the Company. The Committee receives reports on the work of the Company’s outside auditors and internal auditors, and reviews with them the adequacy and effectiveness of the Company’s accounting and internal control policies and procedures. Pursuant to Board policy, the Company’s Chief Executive Officer, Chief Financial Officer, Controller and General Counsel are required to promptly notify the Chair of the Audit Committee upon receiving complaints regarding accounting, internal control and auditing matters involving the Company.

      Each Committee member has been determined to be an independent director under the New York Stock Exchange listing standards. The Board has determined that each of Mr. Wayman and Mr. Pope qualifies as an “audit committee financial expert” as such term is defined in rules adopted by the Securities and Exchange Commission. The Board has determined that Mr. Pope’s service on the audit committees of more than three public companies does not impair his ability to effectively serve on the Company’s Audit Committee. The Committee met thirteen times during 2005.

      Compensation Committee: The Compensation Committee approves the salary and other compensation of the Chief Executive Officer of the Company and of certain other executive officers. The Committee also oversees the administration of the Company’s short-term and long-term incentive compensation plans, oversees grants of stock options and other awards under the Company’s Equity and Incentive Plans, and reviews the retirement and benefit plans of the Company and its domestic subsidiaries for non-contractual employees. Each Committee member has been determined to be an independent director under the New York Stock Exchange listing standards. The Committee met six times during 2005.

      Director Affairs Committee: The functions of the Director Affairs Committee include the following:

      Each Committee member has been determined to be an independent director under the New York Stock Exchange listing standards. The Director Affairs Committee met four times during 2005.

      The shareholder recommendation and information described above must be sent to the Corporate Secretary at 2855 Campus Drive, Suite 300, San Mateo, California 94403. The Director Affairs Committee will accept recommendations of director candidates throughout the year; however, in order for a recommended director candidate to be considered for nomination to stand for election at an upcoming annual meeting of shareholders, the recommendation must be received by the Corporate Secretary not less than 120 days prior to the anniversary date of the Company’s most recent annual meeting of shareholders.

      The Director Affairs Committee believes that the minimum qualifications for serving as a director of the Company are that a nominee demonstrate, by significant accomplishment in his or her field, an ability to make a meaningful contribution to the Board’s oversight of the business and affairs of the Company and have a reputation for honest and ethical conduct in both his or her professional and personal activities. In addition, the Director Affairs Committee examines a candidate’s specific experiences and skills, time availability in light of other commitments, potential conflicts of interest and independence from management and the Company. The Director Affairs Committee also seeks to have the Board represent a diversity of backgrounds and experience.

      The Director Affairs Committee identifies potential nominees by asking current directors and executive officers to notify the Committee if they become aware of persons, meeting the criteria described above, who would be good candidates for service on the Board. The Director Affairs Committee also, from time to time, may engage firms that specialize in identifying director candidates. As described above, the Committee will also consider candidates recommended by shareholders.

      Once a person has been identified by the Director Affairs Committee as a potential candidate, the Committee may collect and review publicly available information regarding the person to assess whether the person should be considered further. If the Director Affairs Committee determines that the candidate warrants further consideration, the Chairman or another member of the Committee contacts the person. Generally, if the person expresses a willingness to be considered and to serve on the Board, the Director Affairs Committee requests information from the candidate, reviews the person’s accomplishments and qualifications, including in light of any other candidates that the Committee might be considering, and conducts one or more interviews with the candidate. In certain instances, Committee members may contact one or more references provided by the candidate or may contact other members of the business community or other persons that may have greater first-hand knowledge of the candidate’s accomplishments. The Committee’s evaluation process does not vary based on whether or not a candidate is recommended by a shareholder.

Communications with Directors

      Any shareholder or other interested party desiring to communicate with any director (including the Lead Non-Management Director and the other non-management directors) regarding the Company may directly contact any director or group of directors by submitting such

      All communications received as set forth in the preceding paragraph will be opened by the Corporate Secretary for the sole purpose of determining whether the contents represent a message to the Company’s directors. Any contents that are not in the nature of advertising, promotions of a product or service, or patently offensive material will be forwarded promptly to the addressee. In the case of communications to the Board or any group of directors, the Corporate Secretary will make sufficient copies of the contents to send to each director who is a member of the group to which the envelope is addressed.

Policy Regarding Director Attendance at Annual Meetings of Shareholders

      The Company’s policy regarding director attendance at the Annual Meeting of Shareholders is for the Chairman of the Board of Directors and the Chief Executive Officer (if different from the Chairman) to attend in person, and for other directors to attend in person or electronically. The Chairman of the Board, who at the time was also serving as the Company’s interim Chief Executive Officer, attended the Company’s 2005 Annual Meeting of Shareholders in person and eleven of twelve other Directors attended telephonically.

Authority to Retain Advisors

      The Board of Directors and each Committee of the Board is authorized, as it determines necessary to carry out its duties, to engage independent counsel and other advisors. The Company compensates, or provides adequate funding to the Board or the applicable Committee for the payment of compensation to, any such independent counsel or other advisor.

Code of Ethics; Corporate Governance Guidelines

      The Board of Directors has adopted a Code of Ethics for Chief Executive and Senior Financial Officers, including the Chief Financial Officer and Controller. The Board of Directors has also adopted a Directors’ Code of Business Conduct and Ethics applicable to all directors, a Code of Business Conduct applicable to all officers and employees, and Corporate Governance Guidelines. Current copies of each of these documents are available on the Company’s corporate website at www.cnf.com under the headings “Investor Relations/ Corporate Governance.” Copies are also available in print to shareholders upon request, addressed to the Corporate Secretary at 2855 Campus Drive, Suite 300, San Mateo, California 94403. The Company intends to satisfy any disclosure requirements regarding an amendment to, or waiver from, the Code of Ethics by posting such information on the Company’s website at www.cnf.com.

COMPENSATION OF DIRECTORS

      Dr. Kennedy, who served as Chairman of the Company’s Board of Directors in 2005 and who continues to serve in that capacity, also served as interim Chief Executive Officer during the period from July 1, 2004 until April 25, 2005, at which time Mr. Stotlar was appointed President and Chief Executive Officer of the Company. During the period from January 1, 2005 until April 25, 2005, Dr. Kennedy did not receive any compensation in his capacity as Chairman of the Board. However, as discussed under “CEO Compensation” in the Compensation Committee Report on Executive Compensation commencing on page        l       , during this period Dr. Kennedy received $233,669 in salary (based on an annualized salary of $750,000) for serving as interim Chief Executive Officer. In 2005 he also received two $1,000,000 cash bonuses, one in recognition of his contributions as Interim Chief Executive Officer during 2004 and the other in recognition of his contributions as Interim Chief Executive Officer during 2005.

      During the period from April 26, 2005 through the end of 2005, Dr. Kennedy received $516,355 as a retainer (based on an annualized retainer of $750,000) for serving as Chairman of the Board, in recognition of his increased responsibilities and time commitment as Chair in ensuring a smooth transition as the Board’s strategic direction was communicated to and embraced by the new Chief Executive Officer, Mr. Stotlar, during the first few months following his assumption of such executive responsibilities. Dr. Kennedy did not receive any other compensation in his capacity as Chairman during that period. In January 2006, the Board of Directors established an annualized retainer of $270,000 as compensation for Dr. Kennedy’s service as Chairman in 2006. In April 2006, as a transition grant described below, Dr. Kennedy will also receive a grant of restricted stock having a value at the time of grant of $65,000.

      In January 2005, the Board of Directors, based upon advice from an outside compensation consultant and the recommendation of the Director Affairs Committee, revised the compensation payable to non-employee directors (other than Dr. Kennedy). Commencing in 2005, each such director began receiving an annual cash retainer of $70,000. The chair of the Company’s Audit Committee also receives an annual chair cash retainer of $15,000, and the chairs of the Compensation, Director Affairs and Finance Committees each receive an annual chair cash retainer of $8,000. Each member of the Audit Committee, other than the chair, also receives an additional committee retainer of $5,000. Each of the retainers described above are payable quarterly in advance. Directors no longer receive any fees for attending Board or Committee meetings.

      Directors may elect to defer payment of their fees. Payment of any deferred amount and interest equivalents accrued thereon will be paid in a lump sum or in installments beginning no later than the year following the director’s final year on the Board. Interest is credited quarterly to amounts deferred at the prime rate and, as a result, in 2005 Dr. Kennedy and Mr. Rogers earned $661 and $3,747, respectively, in interest on their deferred account balances above 120% of the applicable federal rate. Dr. Kennedy’s compensation as Interim Chief Executive Officer is discussed in the Summary Compensation Table on page        l       .

      Each director also receives grants of restricted stock having a notional value of $65,000 per year for each year of the director’s three-year term. Except during a transition period, each director receives a grant of restricted stock having a value at the time of grant of $195,000 (3 years at $65,000 per year) in the year that the director is elected or re-elected to the Board, and does not receive a restricted stock grant under this program in the subsequent two years. Each such grant of restricted stock is granted in April (following election or re-election to the Board) and vests one-third per year, commencing on the anniversary date of the grant, or earlier upon the occurrence of certain events such as death, disability, retirement or a Change in Control.

      Directors are also provided with certain insurance coverages and, in addition, are reimbursed for travel expenses incurred for attending Board and Committee meetings. The Company has a policy pursuant to which it will match, on a dollar-for-dollar basis up to $5,000 for all contributions during a calendar year, qualifying charitable contributions made by employees and members of the Company’s Board of Directors. During 2005, the Company made matching contributions of $5,000 on behalf of Admiral Mauz and Messrs. Jaunich and Kennedy.

COMPENSATION OF EXECUTIVE OFFICERS

I.     SUMMARY COMPENSATION TABLE

      The following table sets forth the compensation received by the Company’s Chief Executive Officer, Chief Financial Officer and the other current or former executive officers for whom disclosure is required, for the three fiscal years ended December 31, 2005. As used in this Proxy Statement, “Named Executives” means the officers identified in this Summary Compensation Table.

II. OPTION/ SAR GRANTS TABLE

Option/ SAR Grants in Last Fiscal Year

III.     OPTION/ SAR EXERCISES AND YEAR-END VALUE TABLE

Aggregated Option/ SAR Exercises in Last Fiscal Year and

Fiscal-Year End Option/ SAR Values

      The following table provides information on option/ SAR exercises in 2005 by the Named Executives and the value of such officers’ unexercised options/ SARs at December 31, 2005.

IV.     LONG-TERM INCENTIVE PLAN AWARDS TABLE

      The following table sets forth information regarding awards made to the Named Executives in 2005 under the Company’s Value Management Plan. Except for such awards, no long-term incentive plan awards were made to the Named Executives in 2005.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

To the Board of Directors:

      The Compensation Committee of the Board of Directors administers the Company’s executive compensation program, the purpose of which is to: (a) align the Company’s rewards strategy with its business objectives; (b) support a culture of strong performance; and (c) attract, retain and motivate highly talented executives.

      Executive compensation consists of three components: base salary, short-term incentive compensation, and long-term incentive compensation. The Company has put a significant portion of total compensation for all executives “at risk” through short-term and long-term incentive compensation. It is the Company’s policy to tie a greater portion of an executive’s total compensation to performance of the Company and its subsidiaries than is the case for Company employees generally. In keeping with the general policy of pay for performance, of the executives named in the Summary Compensation Table on page  l (“Named Executives”), an even greater portion of the total compensation for the Named Executives (other than Dr. Kennedy) is tied to performance than is the case for Company executives generally.

      Each year the Committee reviews a report by an independent executive compensation consultant engaged by and reporting directly to the Committee. The consultant compares the Company’s executive compensation to the compensation of similar executives at companies considered to be the Company’s most direct competitors for executive talent. The comparison covers all aspects of compensation: base salaries, annual incentive bonuses and long-term incentive awards. In 2004 (for purposes of determining 2005 compensation), the executive compensation paid to Messrs. Stotlar, Schick and Williford was compared to compensation paid to top executives by the companies that comprise the Dow Jones Transportation Average (“DJTA”), while the executive compensation paid to the Company’s other executives (including the Named Executives other than Messrs. Kennedy, Stotlar, Schick and Williford) was reviewed against surveys of executive compensation paid to similar executives in general industry, taking into account the Company’s size compared to those companies. With respect to executives other than the Chief Executive Officer, Chief Financial Officer and the most senior officers at the Company’s primary operating company subsidiaries, the Compensation Committee believes that this general industry peer group, rather than the DJTA companies that comprise the peer group index in the Comparison of Five Year Cumulative Total Return graph included in this Proxy Statement, better reflects the Company’s most direct competitors for executive talent.

      As part of the 2004 engagement (for 2005 compensation), the independent consultant concluded that, taken together, the elements of the Company’s executive compensation package deliver pay opportunities that are within the competitive norm and consistent with the Company’s pay-for-performance philosophy.

Base Salary

      The Company’s policy is to pay base salaries that are at the 50th percentile of salaries paid by companies in the compensation peer group. For 2005, the Committee determined that base salaries of executive officers, while generally in line with those of comparable officers at other companies, should be increased. As a result, at the beginning of 2005, Messrs. McClimon, Miller, Schick, and Williford and Ms. Pileggi received salary increases of 3.9%, 3.9%, 4.1%, and 5.5%, and 19.2%, respectively. In addition, Messrs. Stotlar, Labrie, McClimon, Miller, and Schick and Ms. Pileggi received salary increases upon promotion.

Short-Term Incentive Compensation

      The Company’s policy is to pay short-term incentive compensation at target performance levels that is at the 60th percentile of short-term incentive compensation paid by companies in the compensation peer group. The Company’s short-term incentive compensation plans are reviewed and approved annually by the Committee. The plans are then incorporated into the Company’s business plan for the ensuing year and presented to the Board of Directors for approval and adoption. These plans provide for annual awards to regular, full-time, non-contractual employees. The Committee has delegated to the Chief Executive Officer and other executive officers the responsibility and authority to administer the Company’s short-term incentive plans, with the Committee making the final determination as to whether the performance goals applicable to awards in a particular plan year have been achieved.

      At the end of the year, each major operating subsidiary develops goals which reflect its business objectives for the following year. These goals represent measurable performance objectives such as profits, revenue, returns on equity, assets or capital, expenses and service. The parent Company goals generally represent a compilation of the profit goals of the subsidiaries.

      As a result of promotions during 2005, the performance objectives for a number of executives were based on the performance of more than one company. The performance objective for Messrs. Stotlar and Schick was based on the pre-incentive operating income of Con-Way Transportation Services, Inc. (“CTS”) until their promotions to Chief Executive Officer and Chief Financial Officer, respectively, of the parent Company, and on the pre-tax, pre-incentive income of the parent Company thereafter; the performance objective for Mr. McClimon was based on the pre-incentive operating income of Con-Way Central Express (a division of CTS) until his promotion to President of CTS, and on the pre-incentive operating income of CTS thereafter; the performance objective for Mr. Miller was based on the pre-incentive operating income of Con-Way Southern Express (a division of CTS) until his promotion to President of Con-Way Central Express, and on the pre-incentive operating income of Con-Way Central Express thereafter; and the performance objective for Mr. Williford was based on the pre-incentive operating income of Menlo Worldwide, LLC until he transferred to the parent Company, at which time, his performance objective was based on the pre-tax, pre-incentive income of the parent Company. In addition, the performance objective for Ms. Pileggi was based on the pre-tax, pre-incentive income of the parent Company; and the performance objective for Mr. Labrie was based on the pre-incentive operating income of CTS. Dr. Kennedy did not participate in the short-term incentive plan in 2005 although, as discussed below under “CEO Compensation,” in February and April of 2005 Dr. Kennedy received discretionary cash bonuses of $1,000,000 each.

      Upon attainment of the established performance goals, each plan participant (including the Named Executives, other than Dr. Kennedy) earns incentive compensation determined as a percentage of base salary, with the actual incentive varying depending upon the level of attainment of the established performance goals, against a “target incentive” tied to the participant’s level of responsibility. For 2005, target levels of incentive compensation for Named Executives ranged from 60% to 100% of base salary. In addition, each participant’s incentive compensation is capped at an amount equal to twice the target incentive.

      Based on actual 2005 performance results, which ranged from 37.2% to 93.8% of the target performance objectives, the Named Executives earned the following incentive compensation:

Long-Term Incentive Compensation

      The Committee believes that executives should have a large stake in the risks and rewards of long-term ownership of the Company. The CNF Inc. 1997 Equity and Incentive Plan, which was approved at the Company’s 1997 Annual Meeting of Shareholders and re-approved at the Company’s 2000 and 2003 Annual Meetings of Shareholders, provides for the granting of restricted stock awards, options to purchase shares of the Company’s Common Stock, and other types of long-term awards to key employees of the Company and its subsidiaries. The Company’s goal is to provide long-term incentive compensation that is at the 50th percentile of long-term incentive compensation paid by companies in the compensation peer group.

      In general, long-term incentive awards are based on a combination of market data provided by the Committee’s outside consultant and an executive’s grade level. The consultant provides a “market multiple” (expressed as a percentage of annual base salary) for executives in the executive grade levels, reflecting the market for long-term incentives at the Committee’s target of market median pay for such awards. The target award level for executives is derived from those market multiples, then divided between equity awards (e.g., stock options) and awards under the Company’s Value Management Plan. With respect to stock options, the number of options is determined by dividing the estimated value of one option (determined using the net present value method) into the equity portion of the target long-term incentive award. A similar approach is used to determine the target award value of the Value Management Plan portion of the target long-term incentive award, which is then expressed as a percentage of the executive’s base annual salary as of the beginning of each three-year award cycle. While the formulaic approach described above is used to arrive at target award levels, individual awards of long-term incentives are subject to variation, taking into account factors such as individual performance and experience of the executive at the current grade level.

      As reported in the Company’s 2005 Proxy Statement, in 2004 the Committee decided to change the date of annual stock option grants and other awards to executive officers from December to January. This change, as well as the annual awards that were made in January 2005, were disclosed in the Company’s 2005 Proxy Statement, even though that Proxy Statement covered 2004 compensation. Going forward, it is the Company’s intention that long-term incentive awards be reflected in the Proxy Statement covering compensation for the year in which the award is granted. As a result, this Report includes a description of the annual awards that were made in January 2005, even though these awards were also reported in the Company’s 2005 Proxy Statement for those Named Executives whose compensation was reported in that Proxy Statement. Awards granted in January 2006 will first be reflected in the Proxy Statement for the 2007 Meeting of Shareholders.

      After reviewing information and recommendations provided by the above-mentioned compensation consultant and adjusting for individual factors, the Committee granted non-qualified and incentive stock options for a total of 278,200 shares to executives of the Company and its subsidiaries, effective January 24, 2005. In addition to the annual grants made in January 2005, non-qualified and incentive stock options for 138,173 shares were granted to various executive officers during 2005 upon hire or promotion, including the following grants to Named Executives; non-qualified and incentive stock options for 77,397 and 2,276 shares, respectively, to Mr. Stotlar; non-qualified and incentive stock options for 12,773 and 2,227 shares, respectively, to Mr. McClimon; and non-qualified and incentive stock options for 9,363 and 2,137 shares, respectively, to Mr. Schick.

      In order to maintain the Company’s overall long-term incentive compensation at competitive levels, in 2005, the Committee made awards to senior executives under a long-term incentive plan called the Value Management Plan. Under the Value Management Plan, which has rolling three-year cycles with a new cycle beginning each year, long-term incentive awards for the three-year cycle commencing in 2003 are paid based on a criterion called “Total Business Return” (“TBR”) which is, in turn based on cash generation and capital efficiency. For senior executives other than Mr. Williford, TBR is measured based on the performance of the company that employs that executive. For Mr. Williford, TBR is measured based in part on the performance of Menlo Worldwide, LLC and in part on the performance of the Company. The amount of a Value Management Plan award measured based upon TBR is subject to a 15% increase or decrease based upon a criterion called “Total Shareholder Return,” which measures the performance of the Company’s stock in comparison to its peers.

      For cycles commencing in 2004 and thereafter, value management awards will be paid based upon a matrix comprising “EBITDA” (earnings before interest, taxes, depreciation and amortization) and “ROCE” (return on capital employed) and upon relative total shareholder return (relative “TSR”). For executives employed by the Company, the Value Management Plan award is based on EBITDA and ROCE of the Company. For executives employed by subsidiaries of the Company, the Value Management Award may be based in part on EBITDA and ROCE of the subsidiaries and in part on EBITDA and ROCE of the Company. For all executives, the relative TSR portion of the award is based upon the relative TSR of the Company as compared to its peers. Executives who transfer from one business unit to another business unit (including transfers to and from the Company) during an award cycle will receive a Value Management Award payout that is prorated based on the performance of each business unit and the amount of time the executive worked for each business unit during the award cycle, except that any “covered employee” within the meaning of Section 162(m) of the Internal Revenue Code may not receive a larger payout than he or she would have received in the absence of a transfer between business units.

      Upon attainment of the established performance goals, each executive receives a payment equal to his or her target Value Management Plan award. No payment is paid if performance falls below a specified threshold level, and each executive’s award is capped at an amount equal to twice the target amount.

      The fourth cycle under the Value Management Plan ended on December 31, 2005 with bonus payments of $323,336, $243,048, $318,084, $106,517, and $174,993 being made to Messrs. Stotlar, Labrie, McClimon, Miller, and Schick respectively, based on performance of 200.0% of target during the three-year cycle. No payments were made to any of the other Named Executives since performance criteria applicable to those Named Executives were not met for the three-year cycle.

      Long-term incentive compensation awards made to Mr. Stotlar during 2005 are discussed in more detail below under “CEO Compensation.” Dr. Kennedy did not receive any long-term incentive compensation awards in his capacity as interim Chief Executive Officer in 2005.

CEO Compensation

      In January 2005 the Compensation Committee, together with the other independent members of the Company’s Board of Directors, approved a 2005 annualized salary of $750,000 for Dr. Kennedy. The directors also approved two cash bonuses of $1,000,000 each for Dr. Kennedy in 2005. The first bonus was approved in January 2005 and was based on Dr. Kennedy’s

      Dr. Kennedy, who was appointed interim Chief Executive Officer effective July 1, 2004, served as interim Chief Executive Officer until Mr. Stotlar was appointed President and Chief Executive Officer on April 25, 2005. After ceasing to serve as interim Chief Executive Officer, Dr. Kennedy continued to serve as Chairman of the Board of Directors and received compensation solely in his capacity as Chairman during the remainder of 2005.

      Upon his promotion to President and Chief Executive Officer in April 2005, the Committee recommended, and the Board approved, a 2005 annualized base salary for Mr. Stotlar of $650,000. This amount was based on the comparative salaries paid to chief executive officers of companies within the compensation peer group and on information provided by the Company’s independent executive compensation consultant, and took into account (among other things) that Mr. Stotlar had no prior experience as a chief executive officer of a public company.

      As discussed above under “Short-Term Incentive Compensation,” in 2005, Mr. Stotlar earned short-term incentive compensation of $481,483 based on the Company’s performance at 80.3% of the target incentive for pre-tax, pre-incentive income and on Con-Way Transportation Services, Inc.’s performance at 93.8% of the target incentive for pre-incentive operating income and prorated based on the time during 2005 that he worked for each company.

      Mr. Stotlar, who was then serving as President and Chief Executive Officer of Con-Way Transportation Services, Inc., a subsidiary of the Company, did not receive an annual grant of stock options in January 2005, although he did receive a grant of options to acquire 40,000 shares and a grant of 30,000 shares of restricted stock in December 2004 in connection with his promotion to that position. He also received an award under the Value Management Plan in January 2005. In addition, as discussed under “Long-Term Incentive Compensation” beginning on page l, upon his promotion to President and Chief Executive Officer of the Company in April 2005, Mr. Stotlar received grants of long-term incentive awards having an estimated value of approximately four times his annual salary, consisting of a grant of non-qualified and incentive stock options to acquire 79,673 shares, and an award of 23,690 shares of restricted stock that will vest in equal annual installments over three years.

Policy on Deductibility of Compensation

      The federal income tax law limits the deductibility of certain compensation paid to the Chief Executive Officer and the four other most highly compensated executives (the “covered employees”) in excess of the statutory maximum of $1 million per covered employee. The Committee’s general policy is, where feasible, to structure compensation paid to the covered employees so as to maximize the deductibility of such compensation for federal income tax purposes; however, there may be circumstances where portions of such compensation will not be deductible. In 2005, an aggregate of less than $1,000 paid to three covered employees was not deductible; all other compensation paid to covered employees in 2005 was deductible.

      Under the federal income tax law, certain compensation, including “performance-based compensation,” is excluded from the $1 million deductibility limit. The Company’s 1997 Equity and Incentive Plan, which was approved at the Company’s 1997 Annual Meeting of Shareholders and

THE COMPENSATION COMMITTEE *

* Messrs. Corbin, Mauz and Stott were appointed as members of the Committee in April 2005, at which time Messrs. Schroeder and Wayman left the Committee. Each of Messrs. Corbin, Mauz, Schroeder, Stott and Wayman reviewed this report and, as to portions of the report relating to Committee actions taken during his tenure on the Committee, approved the report.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

      Members of the Compensation Committee are all independent directors of the Company and have no other relationships with the Company and its subsidiaries.

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN*

CNF Inc., S&P Midcap 400 Index, Dow Jones Transportation Average

PENSION PLAN TABLE

ESTIMATED ANNUAL RETIREMENT BENEFITS

      The following table illustrates the approximate annual pension that may become payable to an employee in the higher salary classifications under the Company’s retirement plans.

      Compensation covered for the Named Executives (other than Dr. Kennedy, who does not participate in the Company’s retirement plans) is the highest five-year average over the last ten years of employment of the “Salary” and “Bonus”, as such terms are used in the Summary Compensation Table on page  l , and of certain other compensation. Retirement benefits shown are payable at or after age 65 in the form of a single life annuity, using the current level of Social Security benefits to compute the adjustment for such benefits.

      Applicable law for 2005 limits the annual benefits which may be paid from a tax-qualified retirement plan to $170,000 per year currently, and prevents pension accruals for compensation in excess of $210,000 per year and for deferred compensation. The Company has adopted non-qualified plans to provide for payment out of the Company’s general funds of benefits not covered by the qualified plans. The table above represents total retirement benefits which may be paid from a combination of qualified and non-qualified plans.

      As of December 31, 2005, Messrs. Stotlar, Labrie, McClimon, Miller, Schick and Williford and Ms. Pileggi had 20, 15, 22, 21, 22, 24, and 9 years of plan participation, respectively. Based on service through December 31, 2005 and assuming a 5-year certain annuity payment at age 65, Messrs. Stotlar, Labrie, McClimon, Miller, Schick and Williford and Ms. Pileggi would be entitled to receive annual pension payments, payable at age 65, of $161,302, $70,945, $161,863, $106,644, $112,067, $286,635, and $33,390, respectively.

CHANGE IN CONTROL AND EMPLOYMENT ARRANGEMENTS

      Messrs. Stotlar and Schick and Ms. Pileggi have entered into severance agreements with the Company, and Messrs. Labrie, McClimon and Miller have entered into severance agreements with Con-Way Transportation Services, Inc. (“CTS”), the Company’s wholly-owned subsidiary.

      The severance agreements for Messrs. Stotlar and Schick and Ms. Pileggi provide that if such officer’s employment is actually or constructively terminated within two years of a change in control (as defined in the severance agreement) of the Company or prior to a change in control at the direction of a person or entity which subsequently acquires control of the Company, the officer generally will receive, among other things, (i) a lump sum cash payment equal to three times the officer’s base salary as of the date of termination of employment (or as of the change in control, if higher); (ii) a lump sum cash payment equal to three times the officer’s target annual bonus for the year in which the change in control occurred; and (iii) life, disability, health, dental, and accidental insurance benefits for three years.

      The severance agreement for Mr. McClimon provides that if his employment is actually or constructively terminated within two years of a change in control (as defined in the severance agreement) of the Company or CTS, or prior to a change in control at the direction of a person or entity which subsequently acquires control of the Company or CTS, he generally will receive, among other things, (i) a lump sum cash payment equal to three times his base salary as of the date of termination of employment (or as of the change in control, if higher); (ii) a lump sum cash payment equal to three times his target annual bonus for the year in which the change in control occurred; and (iii) life, disability, health, dental, and accidental insurance benefits for three years. If CTS fails to provide these severance payments and benefits following a change in control of the Company, the Company will provide the severance payments and benefits.

      The severance agreements for Messrs. Labrie and Miller provides that if such officer’s employment is actually or constructively terminated within two years of a change in control (as defined in the severance agreement) of the Company or CTS, or prior to a change in control at the direction of a person or entity which subsequently acquires control of the Company or CTS, such officer generally will receive, among other things, (i) a lump sum cash payment equal to two times his base salary as of the date of termination of employment (or as of the change in control, if higher); (ii) a lump sum cash payment equal to two times his target annual bonus for the year in which the change in control occurred; and (iii) life, disability, health, dental, and accidental insurance benefits for three years. If CTS fails to provide these severance payments and benefits following a change in control of the Company, the Company will provide the severance payments and benefits.

      Messrs. Stotlar, Labrie, McClimon, Miller, and Schick and Ms. Pileggi will also be entitled to receive additional payments to the extent necessary to compensate them for any excise taxes payable by them under the federal laws applicable to excess parachute payments.

      On June 6, 2005, the Company entered into an Employment Agreement with Mr. Williford, pursuant to which Mr. Williford agreed to serve as an advisor to the Company until January 6, 2006. Mr. Williford had served as President and Chief Executive Officer of Menlo Worldwide, LLC until April 25, 2005. As compensation for his services during 2005, Mr. Williford received a base salary of $523,600, incentive compensation for calendar year 2005 of $322,185, and certain other benefits as described in the Employment Agreement. The Company also agreed to pay to

PROPOSAL TO AMEND THE COMPANY’S CERTIFICATE OF INCORPORATION

TO CHANGE THE NAME OF THE COMPANY

      The Board of Directors of the Company has unanimously approved a proposed amendment to the Company’s Certificate of Incorporation which, if adopted, will change the name of the Company from “CNF Inc.” to “Con-way Inc.” The text of the proposed amendment is set forth in Appendix A to this Proxy Statement.

      In February 2006, the Company announced the proposed corporate name change to mark the launch of an integrated strategy to bring the Company’s operations under a single master brand and value identity. If shareholders approve the name change, the first stage will be a phased “re-branding” of the operations of Con-Way Transportation Services, Inc. and its subsidiaries under a single graphic identity and a new Con-Way logo. Later phases of the re-branding initiative will involve the Company’s Menlo Worldwide Logistics subsidiary. Company management and the Board of Directors believe that the corporate name change and the re-branding initiative will create a single brand for accurate market identity, clarity and customer understanding, thereby enabling the Company to compete more effectively in the markets it serves.

      The change of the Company’s name will not affect in any way the validity of currently outstanding stock certificates or the trading of the Company’s securities. Shareholders will not be required to surrender or exchange any stock certificates currently held by them. The Company will begin trading on the New York Stock Exchange [and on the Pacific Stock Exchange] under the ticker symbol “CNW” if shareholders approve the amendment to the Certificate of Incorporation changing the Company’s legal name to “Con-way Inc.”

      Approval of the proposal requires the affirmative vote of the holders of a majority of the voting power entitled to vote thereon. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION.

PROPOSAL TO APPROVE THE CNF INC.

2006 EQUITY AND INCENTIVE PLAN

      The Board of Directors has placed on the agenda of the meeting a proposal for the shareholders of the Company to approve a new CNF Inc. 2006 Equity and Incentive Plan (which, if shareholders approve the name change from “CNF Inc.” to “Con-way Inc.,” will be known as the Con-way Inc. 2006 Equity and Incentive Plan) (the “Plan”). The Plan was adopted by the Board on January 23, 2006, subject to approval by the shareholders of the Company. The Plan is being submitted for shareholder approval because the Company’s existing Amended and Restated 1997 Equity and Incentive Plan (the “Existing Plan”), which was approved by shareholders in 1997 and re-approved by shareholders in 2000 and 2003, is scheduled to expire on January 27, 2007.

      The Plan is also being submitted for shareholder approval so that, among other reasons, certain awards granted under the Plan that are intended to qualify as “performance-based compensation” under Section 162(m) (“Section 162(m)”) of the Internal Revenue Code of 1986, as amended (the “Code”), may so qualify. Section 162(m) denies a deduction by an employer for certain compensation in excess of $1 million per year paid by a publicly traded corporation to the following individuals who are employed at the end of the employer’s taxable year (“Covered

      If approved, the Plan will be substituted in part for the Existing Plan and therefore shares of Common Stock previously authorized under the Existing Plan but not granted prior to adoption of the Plan will no longer be available under the Existing Plan. Of the 9,700,000 shares approved by shareholders for issuance under the Existing Plan, as of March  l , 2006, [       l       ] shares remained available for grant. Any awards previously granted under the Existing Plan will remain outstanding pursuant to the terms of the Existing Plan. If the Plan is not approved, the Existing Plan will remain in effect in its present form until it expires in January 2007.

      The following description of the Plan is qualified in its entirety by reference to complete text of the Plan, attached hereto as Appendix B. Capitalized terms used herein will, unless otherwise defined, have the meanings assigned to them in the text of the Plan.

General

      The purposes of the Plan are to afford an incentive to selected employees of the Company and its Subsidiaries and Affiliates to continue as employees, to increase their efforts on behalf of the Company and to promote the success of the Company’s business. As discussed more fully in the “Compensation Committee Report on Executive Compensation” starting on page  l , the Compensation Committee maintains a policy of “pay for performance” for executives, and in accordance with that policy has made stock options and other performance-based awards an integral part of the total compensation payable to the Company’s executives.

      The Plan generally provides for the grant of various types of stock- and cash-based compensation. The Plan includes both long-term incentive awards and an Annual Incentive Compensation Program. The long-term incentive awards include stock options (“Options”), including incentive stock options (“ISOs”) and non-qualified stock options (“NQSOs”); stock appreciation rights (“SARs”), which may be granted in tandem with or independently of Options; restricted stock and phantom stock units (“Restricted Awards”); dividend equivalents; and other stock- and cash-based awards (“Other Awards”). As more fully described below, the Annual Incentive Compensation Program provides for the granting of short-term cash-based awards. All awards will be evidenced by an agreement (an “Award Agreement”) or by a plan setting forth the terms and conditions applicable thereto.

Plan Administration

      The Plan will be administered by a committee of the Board (the “Committee”), the composition of which will at all times satisfy the provisions of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, and Section 162(m) of the Internal Revenue Code (the “Code”). The Plan provides that no member of the Board or the Committee will be liable for any action or determination taken or made in good faith with respect to the Plan.

Shares Subject to the Plan

      The maximum number of shares of the Company’s common stock (“Common Stock”) reserved for the grant of awards under the Plan is 6,200,000, subject to adjustment as provided in the Plan. The per-share market value of the Common Stock was $ l on March  l , 2006. Each share of Restricted Stock, each Phantom Stock Unit payable in shares of Stock and each share of Stock subject to an Other Stock-Based Award that is granted shall reduce the pool of shares available for issuance under the Plan by 1.72 shares, and as a result, no more than 3,604,650 shares of Common Stock may be awarded in the aggregate in respect of Restricted Stock, Phantom Stock Units and Other Stock-Based Awards over the term of the Plan, subject to adjustment as described below. No more than 1,550,000 shares of Common Stock may be awarded in the form of Options and SARs to a single individual over the term of the Plan, and no more than 500,000 shares of Common Stock may be awarded in the form of Restricted Stock and Phantom Stock Units to a single individual over the term of the Plan, in each case subject to adjustment as described below. Shares subject to an award that is forfeited, canceled, exchanged, surrendered or terminated will again be available for issuance under the Plan, to the extent of such forfeiture, cancellation, exchange, surrender or termination, with shares becoming available for issuance under the Plan on the basis of 1.72 shares for every share of Restricted Stock, every Phantom Stock Unit and every share subject to an Other Stock-Based Award that is forfeited, canceled, exchanged, surrendered or terminated. The following shares of Stock shall not be available for future grant under the Plan: (1) unissued shares that are retained by the Company, or issued shares that are surrendered by the Grantee to the Company, in each case upon exercise of an Option in order to satisfy the exercise price for such Option or any withholding taxes due with respect to such exercise; (2) shares of Restricted Stock withheld upon vesting to cover taxes; and (3) shares of Stock that otherwise would be issued with respect to an SAR, Phantom Stock Unit or Other Stock-Based Award but are instead retained in order to satisfy withholding taxes. Unless terminated earlier by the Board, the Plan will terminate ten years after the date the Plan is first adopted by the Board.

Eligibility

      Discretionary grants of awards may be made to any employee of the Company or its Subsidiaries or Affiliates who is determined by the Committee to be eligible for participation in the Plan, consistent with the purposes of the Plan.

Long-Term Incentive Awards

Options

      Options will vest and become exercisable over the exercise period, at such times and upon such conditions as the Committee determines and as set forth in the Award Agreement. The Committee may accelerate the exercisability of any outstanding Option at such time and under such circumstances, as it deems appropriate. Options are generally exercisable during the optionee’s lifetime only by the optionee. The Award Agreements will contain provisions regarding the exercise of Options following termination of employment with or service to the Company, including terminations due to the death, disability or retirement of an award recipient, or upon a Change in Control of the Company (as defined in the Plan). In addition to the terms and conditions governing NQSOs, ISOs awarded under the Plan must comply with the requirements set forth in Section 422 of the Code.

      The purchase price per share of Common Stock subject to the exercise of an Option will be as determined by the Committee but may not be less than the Fair Market Value per share on the date of grant, subject to adjustment in accordance with the antidilution provisions described in “Shares Subject to the Plan”, above. Upon the exercise of any Option, the purchase price may be fully paid in cash, by delivery of Common Stock previously owned by the optionee equal in value to the purchase price, or by a combination of both.

Stock Appreciation Rights

      Unless the Committee determines otherwise, an SAR (1) granted in tandem with an NQSO may be granted at the time of grant of the related NQSO or at any time thereafter or (2) granted in tandem with an ISO may only be granted at the time of grant of the related ISO. An SAR will be exercisable only to the extent the underlying Option is exercisable.

      Upon exercise of an SAR, the grantee will receive, with respect to each share subject thereto, an amount equal in value to the excess of (1) the Fair Market Value of one share of Common Stock on the date of exercise over (2) the grant price of the SAR (which in the case of an SAR granted in tandem with an Option will be the purchase price of the underlying Option, and which in the case of any other SAR will be the price determined by the Committee).

Restricted Stock

      A Restricted Stock award is an award of Common Stock subject to such restrictions on transferability and other restrictions as the Committee may impose at the date of grant or thereafter. Each Restricted Stock award shall be subject to restrictions, imposed at the date of grant, relating to either or both of (1) the attainment of Performance Goals by the Company or (2) the continued employment of the grantee with the Company, a Subsidiary or an Affiliate. All performance-based Restricted Stock Awards will have a minimum vesting period of one year, with no vesting prior to the end of the performance period except in the case of specified events, including, without limitation, death, disability or a Change in Control. With respect to any shares of Restricted Stock subject to restrictions which lapse solely based on the grantee’s continuation of employment with the Company, a Subsidiary or an Affiliate, such restrictions shall lapse over a vesting schedule (so long as the grantee remains employed with the Company, a Subsidiary or an Affiliate) no shorter in duration than three years from the date of grant; provided that, such vesting schedule may provide for partial or installment vesting from time to time during such period and may be subject to acceleration in the case of specified events, including, without limitation, death, disability or a Change in Control. Unless an Award Agreement provides otherwise, a Restricted Stock recipient will have all of the rights of a shareholder during the restriction period, including the right to vote Restricted Stock and the right to receive dividends thereon.

      If the recipient of an award of Restricted Stock terminates employment with the Company during the applicable restricted period, Restricted Stock and any accrued but unpaid dividends or dividend equivalents that are at that time still subject to restrictions will be forfeited (unless the applicable Award Agreement or the Committee provide otherwise).

Phantom Stock Units

      Recipients of Phantom Stock Units will be entitled to receive cash or shares of Common Stock, as determined by the Committee, upon expiration of the restricted period specified for such Phantom Stock Units in the related Award Agreement. The Committee may place restrictions on Phantom Stock Units, which lapse, in whole or in part, on the attainment of certain Performance Goals. Phantom Stock Units credited under the Company’s Deferred Compensation Plan for Executives shall constitute awards of Phantom Stock Units under the Plan. Such awards may be settled under the Plan by the delivery of cash or shares of Stock and shall otherwise be subject to the terms and conditions of the Deferred Compensation Plan for Executives.

      Upon termination of employment with the Company during any applicable deferral period to which forfeiture conditions apply, or upon failure to satisfy any other conditions precedent to the delivery of cash or Common Stock pursuant to a Phantom Stock Unit award, all such units that are subject to deferral or restriction will be forfeited (unless the applicable Award Agreement or the Committee provides otherwise).

Dividend Equivalents

      Dividend equivalents may be granted, which relate to Options, Rights or other awards under the Plan, or may be granted as freestanding awards. The Committee may provide, at the grant date or thereafter, that dividend equivalents will be paid or distributed to a grantee when accrued with

Other Awards

      The Committee may grant such other long-term incentive stock-based or cash-based awards as it deems consistent with the purposes of the Plan. Such awards may be granted with value and payment contingent upon the attainment of specified individual or Company (or Subsidiary) Performance Goals, so long as such goals relate to periods of performance in excess of one calendar year. The maximum payment in respect of such Other Awards that a grantee may receive under the Plan with respect to any performance period is $3 million. Payments in respect of such Other Awards may be decreased (or, with respect to any grantee who is not a Covered Employee, increased) in the sole discretion of the Committee. The Committee must certify the achievement of Performance Goals prior to the payment of Other Awards.

Annual Incentive Compensation Program

      The Committee is authorized to grant awards to grantees under the Annual Incentive Bonus Program (the “Program”). Awards granted under the Program may be contingent on the attainment by the Company of one or more Performance Goals over a period of one year or less. The maximum payment that any grantee may receive under the Annual Incentive Bonus Program with respect to any performance period is $3 million. Payments may be decreased (or, with respect to any participant who is not a Covered Employee, increased) in the sole discretion of the Committee based on such factors as it deems appropriate. No payment shall be made prior to the certification by the Committee that any applicable Performance Goals have been attained.

Performance Goals

      The Committee may provide that the payment of an award (or vesting thereof) will be contingent on the attainment of Performance Goals. Performance Goals are generally defined in the Plan as goals which are based on one or more of the following criteria: (i) pre-tax income, after-tax income, or operating income or profit, in each case computed with appropriate adjustments; (ii) return on equity, assets, capital or investment; (iii) earnings or book value per share; (iv) working capital; (v) sales or revenues, in each case computed with appropriate adjustments; (vi) accounts receivable or days sales outstanding; (vii) operating or administrative expense in the absolute or as a percent of revenue; (viii) stock price appreciation or total stockholder return (stock price appreciation plus dividends); (ix) operational efficiency factors; (x) safety (accidents), and (xi) implementation or completion of critical projects or processes.

      Where applicable, Performance Goals will be expressed in terms of attaining a specified level of the particular criteria or attaining a specified increase or decrease in the particular criteria, and may be applied to one or more of the Company, Subsidiary or Affiliate, or a division or strategic business unit of the Company, or may be applied to the performance of the Company relative to a market index, a group of other companies or a combination thereof, all as determined by the Committee. Performance Goals may include a threshold level of performance below which no payment will be made (or no vesting will occur), levels of performance at which specified payments will be made (or specified vesting will occur), and maximum level of performance above which no additional payment will be made (or at which full vesting will occur). Performance Goals will be

Amendment; Termination

      The Plan will terminate ten years after its adoption by the Board, unless sooner terminated. The Board may at any time terminate or amend the Plan in whole or in part. However, termination or amendment of the Plan may not adversely affect the rights of any participant without his or her consent, under awards previously granted under the Plan, and no amendment will be effective without shareholder approval if that approval is required by law or New York Stock Exchange rules.

Miscellaneous

      The Company is authorized to withhold from any award granted, any payment relating to an award under the Plan (including from a distribution of Common Stock), or any other payment to a grantee, amounts of withholding and other taxes due in connection with the award, and to take such other action as the Committee may deem advisable to enable the Company and grantees to satisfy obligations for the payment of withholding taxes and other tax obligations relating to the award. This authority includes the right to withhold or receive Common Stock or other property and to make cash payments in respect thereof in satisfaction of a grantee’s tax obligations. If Stock is distributed to a Grantee with respect to an Award or the exercise thereof, and the withholding taxes exceed any cash being distributed at the same time, the Grantee may elect to have shares of Stock withheld sufficient to satisfy the withholding taxes that are in excess of such cash.

      Unless otherwise provided by the Committee in an Award Agreement, awards granted under the Plan are not transferable, except by will or the laws of descent and distribution or pursuant to a qualified domestic relations order.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

      Set forth below is a discussion of certain federal income tax consequences relating to awards that may be granted pursuant to the Plan. The discussion constitutes a brief overview of the principal federal income tax consequences relating to the above-described awards based upon current federal income tax laws. This summary is not intended to be exhaustive and does not describe state, local or foreign tax consequences.

Stock Options

Non-Qualified Stock Options

      In the case of an NQSO, an optionee generally will not be taxed upon the grant of an option. Rather, at the time of exercise of such NQSO (and in the case of an untimely exercise of an ISO), the optionee will generally recognize ordinary income for federal income tax purposes in an amount equal to the excess of the then fair market value of the shares purchased over the purchase price.

Incentive Stock Options

      In the case of an ISO, an optionee will generally be in receipt of taxable income upon the disposition of the shares acquired upon exercise of the ISO, rather than upon the grant of the ISO or upon its timely exercise. If certain holding period requirements have been satisfied with respect to outstanding shares so acquired, taxable income will constitute long-term capital gain and the Company will not be entitled to a tax deduction. The tax consequences of any untimely exercise of an ISO will be determined in accordance with the rules applicable to NQSOs. The amount by which the fair market value of the stock on the exercise date of an ISO exceeds the option price will generally be an item of tax preference for purposes of the “alternative minimum tax” imposed by the Code.

Exercise with Shares

      An optionee who pays the purchase price upon exercise of an option, in whole or in part, by delivering already owned shares of Common Stock will generally not recognize gain or loss on the shares surrendered at the time of such delivery, except under certain circumstances relating to ISOs. Rather, such gain or loss recognition will generally occur upon disposition or the shares acquired in substitution for the shares surrendered.

SARs

      A grant of stock appreciation rights has no federal income tax consequences at the time of grant. Upon the exercise of stock appreciation rights, the value of the shares and cash received is generally taxable to the grantee as ordinary income, and the Company generally will be entitled to a corresponding deduction.

Restricted Stock

      Generally, the grant of restricted stock has no federal income tax consequences at the time of grant. Rather, at the time the shares are no longer subject to a substantial risk of forfeiture (as defined in the Code), the grantee will recognize ordinary income in an amount equal to the fair market value of such shares. A grantee may, however, elect to be taxed at the time of the grant. The Company generally will be entitled to a deduction at the time and in the amount that the grantee recognizes ordinary income.

Phantom Stock Units

      In the case of Phantom Stock Units, a grantee generally will not be taxed upon the grant of such units but, rather, will recognize ordinary income upon the receipt of cash, shares or other property in payment of such Units. The amount recognized as ordinary income will equal the amount of cash received plus the value of shares and other property received. The Company generally will be entitled to a deduction at the time and in the amount that the grantee recognizes ordinary income.

      Because participation in the Plan and the amount and terms of awards under the Plan are at the discretion of the Committee (subject to the terms of the Plan) and because Performance Goals may vary from award to award and from grantee to grantee, benefits under the Plan are not presently determinable. Compensation paid and other benefits granted to named executive officers of the Company for the 2005 fiscal year are set forth in the Summary Compensation Table appearing on page  l of this Proxy Statement. As indicated in the Compensation Committee Report starting on page  l , in 2005 the Committee granted an aggregate of 416,373 options to the Company’s executive officers (of which 191,073 were granted to the Named Executives) and an aggregate of 23,690 shares of restricted stock (all of which were granted to Mr. Stotlar).

Shareholder Approval; Board Recommendation

      Approval of the proposal requires the affirmative vote of a majority of the voting power represented at the meeting. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE CNF INC. 2006 EQUITY AND INCENTIVE PLAN.

Equity Compensation Plan Information

      The following table gives information as of December 31, 2005 regarding Company shares that may be issued upon the exercise of options, warrants and rights under all of the Company’s existing equity compensation plans (together, the “Equity Plans”). The table does not include the 6,200,000 additional shares proposed to be authorized under the CNF Inc. 2006 Equity and Incentive Plan, for which shareholder approval is being sought in this Proxy Statement.

AUDIT COMMITTEE REPORT

      The Audit Committee of the Board of Directors provides assistance to the Board in fulfilling its obligations with respect to matters involving the accounting, auditing, financial reporting and internal control functions of the Company. Among other things, the Audit Committee reviews and discusses with management and with the Company’s outside auditors the results of the year-end audit of the Company, including the audit report and audited financial statements.

      All members of the Audit Committee are independent directors, qualified to serve on the Audit Committee pursuant to the requirements of the New York Stock Exchange. The Board of Directors has adopted a written charter of the Audit Committee, which was included as Appendix A to the Company’s 2004 Proxy Statement.

      In connection with its review of the audited financial statements of the Company for the fiscal year ended December 31, 2005, the Audit Committee reviewed and discussed the audited financial statements with management, and discussed with KPMG LLP, the Company’s independent auditors, the matters required to be discussed by SAS 61 (Codification of Statements on Auditing Standards, AU 380). In addition, the Audit Committee received the written disclosures and the letter from KPMG LLP required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and discussed with KPMG LLP their independence from the Company.

      Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2005, for filing with the Securities and Exchange Commission.

THE AUDIT COMMITTEE

RATIFICATION OF AUDITORS

      At last year’s annual meeting, shareholders approved the appointment of KPMG LLP as independent public accountants to audit the consolidated financial statements of the Company for the year ended December 31, 2005. The Board recommends that shareholders vote in favor of ratifying the reappointment of KPMG LLP as the Company’s independent auditors for the year ending December 31, 2006. A representative of the firm will be present at the Annual Meeting of Shareholders with the opportunity to make a statement if he or she desires to do so and to respond to appropriate questions from shareholders. The Company has been informed by KPMG LLP that neither the firm nor any of its members or their associates has any direct financial interest or material indirect financial interest in the Company or its affiliates.

      During the Company’s fiscal years ended December 31, 2004 and December 31, 2005, the Company was billed the following aggregate fees by KPMG LLP.

      All of the services performed by KPMG LLP during 2005 were pre-approved by the Audit Committee of the Company’s Board of Directors, which concluded that the provision of the non-audit services described above is compatible with maintaining KPMG LLP’s independence.

Pre-Approval Policies and Procedures

      Prior to retaining KPMG LLP to provide services in any fiscal year, the Audit Committee first reviews and approves KPMG’s fee proposal and engagement letter. In the fee proposal, each category of services (Audit, Audit Related, Tax and All Other) is broken down into subcategories that describe the nature of the services to be rendered, and the fees for such services. For 2005, the Audit Committee also approved nominal additional fees (beyond those included in the KPMG fee proposal) for services in a limited number of subcategories, based on the Company’s experience regarding the unanticipated need for such services during the year. The Company’s pre-approval policy provides that the Audit Committee must specifically pre-approve any engagement of KPMG for services outside the scope of the fee proposal and engagement letter.

PRINCIPAL SHAREHOLDERS

      According to information furnished to the Company as of February 14, 2006, the only persons known to the Company to own beneficially an interest in 5% or more of the shares of Common Stock are set forth below. Such information is as reported in the most recent Schedule 13G or Schedule 13F filed by each such person with the Securities and Exchange Commission.

COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT

      The Company believes that, during 2005, its executive officers and directors have complied with all filing requirements under Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except as follows: Messrs. Stotlar and Labrie were one day late filing Form 4’s reporting the acquisition of dividends on phantom stock units under the Company’s Deferred Compensation Plan and Dr. Kennedy was four months late filing a Form 4 reporting the withholding of shares for taxes due upon the vesting of restricted shares.

CONFIDENTIAL VOTING

      Under the confidential voting policy adopted by the Board of Directors, all proxies, ballots, and voting materials that identify the votes of specific shareholders will be kept confidential from the Company except as may be required by law or to assist in the pursuit or defense of claims or

      Access to proxies, ballots, and other shareholder voting records will be limited to inspectors of election who are not employees of the Company and to certain Company employees and agents engaged in the receipt, count, and tabulation of proxies.

SUBMISSION OF SHAREHOLDER PROPOSALS

      Shareholder proposals intended for inclusion in the next year’s proxy statement pursuant to Rule 14a-8 under the Exchange Act must be directed to the Corporate Secretary, CNF Inc., at 2855 Campus Drive, Suite 300, San Mateo, California 94403, and must be received by November 20, 2006. In order for proposals of shareholders made outside of Rule 14a-8 under the Exchange Act to be considered “timely” within the meaning of Rule 14a-4(c) under the Exchange Act, such proposals must be received by the Corporate Secretary at the above address by January 18, 2007. The Company’s Bylaws require that proposals of shareholders made outside of Rule 14a-8 under the Exchange Act must be submitted, in accordance with the requirements of the Bylaws, not later than January 18, 2007 and not earlier than December 19, 2006.

OTHER MATTERS

      The Company will furnish to interested shareholders, free of charge, a copy of its 2005 Annual Report on Form 10-K filed with the Securities and Exchange Commission. The report will be available for mailing after April 1, 2006. Please direct your written request to the Corporate Secretary, CNF Inc., 2855 Campus Drive, Suite 300, San Mateo, California 94403.

      Your Board knows of no other matters to be presented at the meeting. If any other matters come before the meeting, it is the intention of the proxy holders to vote on such matters in accordance with their best judgment.

      The expense of proxy solicitation will be borne by the Company. The solicitation is being made by mail and may also be made by telephone, telegraph, facsimile, or personally by directors, officers, and regular employees of the Company who will receive no extra compensation for their services. In addition, the Company has engaged the services of Innisfree M&A Incorporated, New York, New York, to assist in the solicitation of proxies for a fee of $10,000, plus expenses. The Company will reimburse banks, brokerage firms and other custodians, nominees, and fiduciaries for reasonable expenses incurred by them in sending proxy material to beneficial owners of the Company’s voting stock.

March  l , 2006

APPENDIX A

PROPOSED AMENDMENT TO

CERTIFICATE OF INCORPORATION

WITH CHANGES INDICATED

      The Certificate of Incorporation, as amended, of the Company is further amended by changing Article FIRST to read as follows:

      FIRST, The name of the corporation is CNF Inc. Con-way Inc.

APPENDIX B

CNF INC.

2006 EQUITY AND INCENTIVE PLAN

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