We live in an era of change and disruption. We also live in a world where many aspects of the human endeavor are being disrupted by innovative technologies and new ways of thinking. Old business models are being challenged by advances in mobile and cloud computing, big data, crowdsourcing and 3D printing. While these changes carry risks, they also create extraordinary opportunities for the companies that can capitalize on these trends.

For many companies, these disruptive forces require new ways of doing business – new work models, new alliances, and in many instances, new logistics solutions. UPS is well-positioned to benefit from the opportunities that arise today and in the years ahead. The strength, flexibility, and reach of our worldwide network serves as the backbone of the global economy. So while UPS has been helping connect businesses with their customers for more than 100 years, I believe we’re just getting started.

The unique network we have built means that even during periods of economic uncertainty like we experienced in 2013, UPS can still deliver positive results for its shareholders:

• Our customers trusted UPS with, on average, more than 16.9 million packages each day in 2013, or 4 percent more than the year before. While most of that increase came from the e-commerce boom, we are also benefitting from the significant investments we have made to serve customers in fast-growing segments like healthcare and high tech. The growth from these sectors, coupled with the steady rebound in global trade, gives us optimism going into 2014.

• In 2013, UPS earned $4.37 billion on $55.4 billion in revenues. While we fell short of our goals, these still represented new records for UPS.

• Our International package segment earned $1.76 billion on $12.4 billion in revenue. Adjusted operating profit¹ for the segment declined slightly from 2012 as customers traded down to less-expensive modes of transportation. International package generated 22 percent of revenue versus 17 percent a decade earlier, which reflects the growing demand for our services around the world.

• Our free cash flow* generation remained robust, at $5.2 billion, enabling us to raise the dividend by almost 9 percent per share in 2013. This means UPS has now increased or maintained its dividend annually for more than four decades. Our robust cash flow also enabled us to fund $2.1 billion in capital expenditures and repurchase more than $3.8 billion in shares. UPS has returned nearly $20 billion to shareowners since 2009.

The founders of UPS built the company’s culture around the concept of “constructive dissatisfaction,” and we live it every day. There were some areas of our U.S. performance where we came up short in 2013 — particularly our service record during the peak season between Thanksgiving and Christmas. While we are grateful that a record number of customers trusted UPS with their holiday shipments, the surge in volume over-whelmed our system and prevented us from honoring all of our commitments. We are making the necessary investments and operational changes to improve service and deliver the excellence customers expect in 2014 and beyond.

Operations Review

Global Package Operations

In last year’s annual report, I outlined the four transformative strategies that guide our vision of the future:

• Deploying technology-enabled operations

• Providing unique and industry-specific customer solutions

• Expanding our global network

• Serving the needs of end consumers around the world

UPS made measurable progress on each of these fronts. The growth in e-commerce, coupled with our leading position in fast-growing segments like healthcare, enabled us to generate a 3.9 percent increase in total volume, to 4.27 billion packages during 2013. However, higher demand for lightweight, low yielding solutions, led to a 0.6 percent dip in average revenue per package during 2013

UPS continues to invest heavily in our global network. In November, we completed the expansion of our air hub in Cologne, Germany, which increased capacity there by 70 percent. The Cologne project was part of $500 million in scheduled facility expansions across Europe, Latin America and Asia over a two-year period.

Our management team is focused on optimizing the performance of our global network. I believe these investments will enable UPS to build on our reputation for reliability and service

U.S. Domestic

Our U.S. Domestic segment recorded a 3.7 percent rise in revenue, as the online shopping boom increased demand for our omni-channel solutions. By working closely with retailers, we enable them to fulfill online orders right from their stores. That not only reduces the time and distance in transit, but also helps merchants capture sales that might be otherwise lost if their distribution centers are out of stock.

Operating profit rose 1.6 percent over 2012 adjusted results³ and operating margin dipped slightly from the prior year adjusted results³, to 13.5 percent. The decline was the result of high demand for lower-cost residential delivery products and the higher operating expenses incurred to honor our service commitments during the holiday season.

As challenging as the fourth quarter was, the e-commerce revolution shows no signs of slowing. U.S. online retail sales could top $500 billion by 2020 — nearly doubling the $260 billion in estimated sales in 2013. In addition to our omni-channel solutions, UPS continues to expand our popular UPS My Choice^® service, which gives nearly 7 million subscribers more flexibility over when and where they receive their shipments.

Every January, we conduct a thorough review of our performance during the high-volume holiday season, but this year we conducted an even more exhaustive assessment. We have already identified several areas of improvement that will strengthen our network in 2014 and beyond. These include:

• Bolstering our network capacity through facility expansions, process automation, job simplification and faster implementation of technology

• Ramping up our hub modernization efforts

• Developing more predictive volume planning models that incorporate changing consumer behavior and sales promotions

• Expediting the rollout of our proprietary On Road, Integrated, Optimization and Navigation software (ORION) with the goal of embedding the technology into 45 percent of our U.S. driver routes by the end of 2014—almost double the original plan

• Improving our collaboration with large customers so we have better visibility of every incoming package even before our customers’ trucks arrive at our facilities

International

International revenue rose 2.5 percent, bolstered by the emerging recovery in Europe. Adjusted operating profit³ declined slightly to $1.8 billion as customers continued to trade down from premium express services to lower-yielding, deferred products.

We increased our focus on growth opportunities in the emerging markets. Last March, we formed a new team dedicated to accelerating UPS’s investment in emerging markets. In August, we created a new district to focus on the potential of India, the Middle East and Africa—three areas of the world that are expected to generate above-average growth over the next few decades.

In 2013, UPS invested in key emerging markets with strategic acquisitions designed to serve the needs of both local and international customers. UPS purchased Union Pak de Costa Rica, S.A. and brokerage company SEISA Brokerage in Costa Rica, both of which had long-standing relationships with UPS as Authorized Service Contractors. Half a world away, UPS also acquired the remaining 49 percent stake in VN Post Express, making it the first wholly owned global express delivery company in Vietnam. We expect to continue investing in emerging markets during 2014.

Supply Chain and Freight

The Supply Chain and Freight segment saw revenue decline 2.3 percent, with operating profit down 7.4 percent from the prior year adjusted results³, to $674 million. Operating margin decreased to 7.5 percent in 2013, a 50 basis-point decline from the prior year adjusted results³.

Freight Forwarding experienced challenges from the over-capacity and reduced demand in the air-freight market, as shippers traded down to slower modes. However, the segment enjoyed positive profit growth in ocean and brokerage services.

Our Logistics & Distribution group enjoyed solid revenue growth in the mid-single digits, largely due to improvements made in our healthcare, retail and UPS mail services. Our operating margins expanded slightly as the group continued to absorb the cost of technology and healthcare facility expansions. UPS added 13 distribution facilities in 2013 to support the growth of our healthcare, high tech, retail, and aerospace customers.

We also enhanced our healthcare capabilities during 2013, with the introduction of UPS Temperature True^® Saver and UPS Proactive Response™. In addition, we will continue to add to our 6.4 million square feet of healthcare distribution space with several openings planned worldwide in 2014.

UPS Freight experienced shipment and tonnage growth of 3.6 and 3.7 percent, respectively during 2013. Total revenue improved 9.2 percent as this business unit experienced solid LTL pricing improvements and truckload growth during the year.

Corporate Responsibility

UPS is committed to being a good steward of the environment, and our customers are looking to us as a supply chain partner to help them meet their sustainability goals. In 2013, we ramped up our investments in alternative fuel and advanced technology vehicles. We announced the purchase of more than 900 liquefied natural gas (LNG) tractors and plans to invest $68 million in 13 new LNG fueling stations that will be operational by the end of 2014. Today, UPS operates one of the largest private alternative fuel fleets in the industry, with more than 3,100 alternative fuel and advanced technology vehicles.

2013 also marked the year when we expedited the rollout of the ORION software UPS has been testing since 2008. ORION uses customized online map data to provide drivers with optimized routing information. The initial implementation of the ORION program has enabled UPS to save more than 1.5 million gallons of fuel, and to reduce our CO₂ emissions by 14,000 metric tons. Our goal is to extend ORION to every one of our U.S. routes by 2017, and eventually deploy ORION in our largest markets worldwide.

During the year, UPS again was recognized for its global leadership in sustainability. The Carbon Disclosure Project named UPS to its “Carbon Disclosure Leadership Index.” UPS also was named to Dow Jones’s North American and World Sustainability Indices, which serve as global benchmarks for sustainability efforts.

In 2013, we reaffirmed our commitment to the communities we serve. UPS and its employees contributed $102 million to our communities and gave 1.8 million hours in volunteer service. We also provided $7.5 million in humanitarian relief funding and assisted with 250 humanitarian shipments across 46 countries.

2014 and Beyond

In summary, we remain positive in our outlook for 2014. The improving global economy and the continued growth in e-commerce, healthcare and technology provide opportunities for UPS to deliver segment-specific customer solutions while leveraging our extensive asset base. Further, we expect e-commerce growth across all major global markets, with strong growth in the United States. As a result, UPS expects earnings per share to grow within a range of $5.05 to $5.30, which would represent EPS growth of 11 percent to 16 percent over adjusted 2013 results⁴.

I am optimistic beyond 2014 as well. The rise of emerging economies such as China, Brazil and Mexico is creating new consumer classes in these markets. Roughly a billion people from the developing world are now entering the market for the goods and services they see on display in the developed world, setting the stage for a new boom in global trade. According to some forecasts, global trade in goods is expected to increase at an average annual rate of 6 percent between now and 2030.

If that prediction holds true, global trade flows could more than triple over the next generation. The implications could be significant for logistics providers like UPS that connect the global economy. We strongly support trade agreements that enable global commerce. The proposed trade pacts between the United States and Europe, and the Americas and Asia are a step in the right direction and should be enacted.

The global economy has changed dramatically since the recession in 2008, and we expect this evolution to continue. Whatever the future holds, I am confident UPS will play an even greater role in enabling global commerce in the years ahead. On behalf of the approximately 400,000 employees of UPS, I thank you for your continued support and your investment.

D.Scott Davis
Chairman and CEO

Board of Directors

F. Duane Ackerman
Former Chairman and Chief Executive Officer, BellSouth Corporation
Director since 2007

Rodney C. Adkins
Senior Vice President of Corporate Strategy, International Business Machines
Director since 2005

Michael J. Burns
Former Chairman, Chief Executive Officer and President, Dana Corporation
Director since 2005

D. Scott Davis
UPS Chairman and Chief Executive Officer
Director since 2006

Stuart E. Eizenstat
Partner, Covington & Burling LLP
Director since 2005

Michael L. Eskew
Former UPS Chairman and Chief Executive Officer
Director since 1998

William R. Johnson
Former Chairman, President and Chief Executive Officer, H.J. Heinz Company
Director since 2009

Candace T. Kendle
Co-founder and Former Chairman and Chief Executive Officer, Kendle International Inc.
Director since 2011

Ann M. Livermore
Director and Former Executive Vice President, Hewlett-Packard Company
Director since 1997

Rudy H.P. Markham
Former Financial Director, Unilever PLC and Unilever NV Director since 2007

Clark T. Randt, Jr.
President, Randt & Co. LLC and Former U.S. Ambassador to the People’s Republic of China
Director since 2010

John W. Thompson*
Chief Executive Officer, Virtual Instruments Corporation
Director since 2000

Carol B. Tomé
Chief Financial Officer and Executive Vice President-Corporate Services The Home Depot, Inc.
Director since 2003

Kevin M. Warsh
Distinguished Visiting Fellow, Hoover Institution, Stanford University and Former Member of the Board of Governors of the Federal Reserve System Director since 2012

Management Committee

David P. Abney
Senior Vice President, Global Transportation and Chief Operating Officer

David A. Barnes
Senior Vice President and Chief Information Officer

James Jay Barber, Jr.
Senior Vice President and President, UPS International

D. Scott Davis
Chairman and Chief Executive Officer

Alan Gershenhorn
Senior Vice President and Chief Sales and Marketing Officer

Myron A. Gray
Senior Vice President and President, U.S. Operations

Kurt P. Kuehn
Senior Vice President and Chief Financial Officer

Teri P. McClure
Senior Vice President, General Counsel, and Corporate Secretary

John J. McDevitt
Senior Vice President, Human Resources and Labor Relations

Daniel J. Brutto and Christine M. Owens retired from UPS in 2013 after 38 and 33 years of service, respectively.

Senior Operations Management

George W. Brooks Jr.
President, U.S. East Region

Brendan Canavan
President, Asia Pacific Region

Stanley C. Deans
President, Retail Channel and U.S. Package Operations

Stephen D. Flowers
President, Freight Forwarding

Jack A. Holmes
President, UPS Freight

Gerald R. Mattes
President, U.S. West Region

Cindy J. Miller
President, Europe Region

Brad Mitchell
President, Logistics and Distribution

Mitchell R. Nichols
President, UPS Airlines

Romaine M. Seguin
President, Americas Region

Burt Wallace
President, Corporate Transportation

Derek S. Woodward
President, Emerging Markets

Investor Information

Annual Meeting

Our annual meeting of shareowners will be held at 8 a.m. on May 8, 2014, at the Hotel DuPont, 11th and Market Street, Wilmington, DE. Shareowners of record as of March 10, 2014, are entitled to vote at the meeting.

Investor Relations

You can contact our Investor Relations Department at:

UPS
55 Glenlake Parkway, NE
Atlanta, GA 30328-3474
1-800-877-1503 or 1-404-828-6059
investors.ups.com

Exchange Listing

Our Class B common stock is listed on the New York Stock Exchange under the symbol “UPS.”

Transfer Agent and Registrar

Computershare Shareowner Services
Send notices of address changes or questions regarding account status, stock transfer, lost certificates, or dividend payments to:

United Parcel Service, Inc.
c/o Computershare Shareowner Services
P.O. Box 358415
Pittsburgh, PA 15252-8415

or:

480 Washington Boulevard
Jersey City, NJ 07310-2053

Form 10-K

Our Annual Report on Form 10-K for the year ended December 31, 2013, forms part of the UPS 2013 Annual Report. If you would like an additional copy of our Form 10-K, you can access it through the Investor Relations website at www.investors.ups.com or at the Securities and Exchange Commission website, sec.gov. The Form 10-K also is available free of charge by calling, contacting via the website, or writing to the Investor Relations Department.

UPS Shareowner Services

Convenient access 24 hours a day, seven days a week.

Class A Common Shareowners
www.cpushareownerservices.com
1-888-663-8325

Class B Common Shareowners
www.cpushareownerservices.com
1-800-758-4674

Calls from outside the United States:
1-201-680-6612

TDD for hearing impaired:
1-800-231-5469

TDD for non-U.S. shareowners:
1-201-680-6610

Direct Stock Purchase Plan

To make an initial purchase of Class B shares, go to cpushareownerservices.com and select Investment Plan Enrollment to access the “Enrollment Wizard.”

Current Class B shareowners can enroll in the plan online by accessing their accounts through cpushareownerservices.com or by calling 800-758-4674.

Dividend Reinvestment Plan

To reinvest dividends in the purchase of additional UPS shares:
Class A and B Shareowners
cpushareownerservices.com

Online Access to Shareowner Account Materials

You may receive shareowner information electronically. To enroll, follow the MLink^® enrollment instructions when you access your UPS Class A or Class B shareowner account via the website addresses in the “UPS Shareowner Services” section above.