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55 Glenlake Parkway, NE, Atlanta, GA 30328-3474 www.ups.com

© 2018 United Parcel Service of America, Inc. UPS, the UPS brandmark and the color brown are trademarks of United Parcel Service of America, Inc. All rights reserved.

2017 UPS Annual Report Transforming UPS... for Today and Tomorrow

2017 U

PS Annual Report

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2017 2017 2017 2017 2017 2017 2017 2017 2017 2017

U PS Annual Report

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U PS Annual Report Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...

U PS Annual Report

U PS Annual Report Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...

U PS Annual Report

U PS Annual Report Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...

U PS Annual Report

U PS Annual Report

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U PS Annual Report Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...Transforming UPS...

U PS Annual Report

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UPSUPS2017201720172017 UPSUPSUPSUPS2017201720172017 UPSUPS20172017 Annual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual Report

FREE CASH FLOW

2017 2016 2015

Net cash from operations $1,479 $6,473 $7,430

Capital expenditures (5,227) (2,965) (2,379)

Proceeds from disposals of PP&E

24 88 26

Net change in finance receivables

5 9 5

Other investing activities 1 (59) (30)

Free cash f low (3,718) 3,546 5,052

Discretionary Pension Contributions

(in millions of dollars)

7,291 2,461 1,030

KEY METRICS 2017 2016 2015

Return on assets (adj.)* 12.1% 12.8% 13.3%

Return on assets (GAAP) 11.4% 8.7% 13.1%

Return on invested capital (adj.)*

26.8% 32.5% 32.4%

Return on invested capital (GAAP)

30.3% 27.4% 39.2%

Dividend yield 2.6% 2.7% 3.0%

FINANCIAL HIGHLIGHTS 2017 2016 2015

Revenue $65,872 $60,906 $58,363

Operating expenses 58,343 55,439 50,695

Net income 4,910 3,431 4,844

Adjusted net income* 5,259 5,104 4,923

Diluted earnings per share

5.61 3.87 5.35

Adjusted diluted earnings per share*

6.01 5.75 5.43

Dividends declared per share

3.32 3.12 2.92

Assets 45,403 40,377 38,311

Long-term debt 20,278 12,394 11,316

Shareowners’ equity 1,030 429 2,491

Capital expenditures 5,227 2,965 2,379

Cash and marketable securities

4,069 4,567 4,726

(in millions except for per-share amounts)

YEAR FOUNDED

1907 27,850 UPS ACCESS

POINT LOCATIONS

143 MILLION DAILY ONLINE TRACKING

454,000 EMPLOYEES

2,500 WORLDWIDE

OPERATING FACILITIES

9,100 ALTERNATIVE

FUEL VEHICLES

5.1 BILLION 2017 DELIVERY VOLUME

10.5 MILLION CUSTOMERS

119,000 VEHICLES IN DELIVERY FLEET

MORE THAN 43 MILLION UPS MY CHOICE® MEMBERS

2,242 DAILY FLIGHT SEGMENTS

ANNUAL MEETING Our annual meeting of shareowners will be held at 8 a.m. on May 10, 2018, at the Hotel Du Pont, 11th and Market Street, Wilmington, DE. Shareowners of record as of March 12, 2018, 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 800.877.1503 or 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 Send notices of address changes or questions regarding account status, stock transfer, lost certificates, or dividend payments to:

Regular Mail: UPS c/o Computershare PO Box 505002 Louisville, KY 40233-5002

or:

Expedited Delivery: UPS c/o Computershare 462 South 4th Street, Suite 1600 Louisville, KY 40202

FORM 10-K Our Annual Report on Form 10-K for the year ended December 31, 2017, forms part of the UPS 2017 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.computershare.com/ups 888.663.8325

Class B Common Shareowners www.computershare.com/ups 800.758.4674

Calls from outside the United States: 201.680.6612 TDD for hearing impaired: 800.231.5469 TDD for non-U.S. shareowners: 201.680.6610

DIRECT STOCK PURCHASE PLAN To make an initial purchase of UPS Class B Common Stock online, visit www.computershare.com/Investor and go to “Buy stock direct-search and enroll in available plans”. Follow the instructions provided to search for Investment Plans and access the Enrollment Wizard.

Current Class B shareowners can enroll in the plan online by accessing their accounts through www.computershare.com/ups or by calling 800.758.4674.

DIVIDEND REINVESTMENT PLAN To reinvest dividends in the purchase of additional UPS shares:

Class A and B Shareowners www.computershare.com/ups

ONLINE ACCESS TO SHAREOWNER ACCOUNT MATERIALS Enroll in E-Communications, a self-service program that provides electronic notification and secure access to shareowner communications. To enroll, access your account at www.computershare.com/ups. After accessing your account select the “View Account” link to manage your holdings. Then click on “My Profile,” select “Update” under “Communications” and follow the enrollment instructions.

UPS WEBSITES Investor Relations - - - - - - - - - - - - - - - investors.ups.com

UPS Corporate - - - - - - - - - - - - - - - - - - - - - - - - - ups.com

Sustainability/ Corporate Responsibility - - - - - sustainability.ups.com

Services and Solutions - - - ups.com/businesssolutions

INVE STOR INFORMATION

*See reconciliation of Non-GAAP financial measures on page A1.

Adjusted free cash f low $3,573 $6,007 $6,082

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ComputershareComputershare

Class A Common ShareownersClass A Common ShareownersClass A Common ShareownersClass A Common Shareowners

Class B Common ShareownersClass B Common ShareownersClass B Common ShareownersClass B Common Shareowners

Class A and B ShareownersClass A and B ShareownersClass A and B ShareownersClass A and B Shareowners

2017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 2015

2017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 2015

2017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 20152017 2016 2015

Dear Fellow Shareowner,

From our humble roots as a bicycle messenger service, UPS has a long and proud legacy of innovation. Today, we live in an era of great technological changes that are redrawing the terms of engagement for companies across the globe. So while UPS achieved all-time highs in both earnings per share* and revenues last year, our ambitions are even greater. Our founder Jim Casey famously said that “our horizon is as distant as our mind’s eye wishes it to be,” and in that same spirit, late in 2017, we embarked on a major transformation initiative to ensure UPS thrives in the new global marketplace.

The cornerstone of that plan are the investments we’re making to implement the most sweeping transformation of our network in decades. We are taking full advantage of the advances in artificial

intelligence, machine learning, blockchain, robotics, and many other cutting-edge technologies to future-proof our network. While these investments represent a major financial commitment in the near term, the benefits to our customers and shareowners over the long run will be substantial. By implementing new technology and expanding capacity in our facilities, we are making the industry’s most-eŠcient network even more e‹ective. Our digital investments give us – and our customers – more flexibility, consistency and visibility in how packages are routed and delivered.

Combine all this with our comprehensive product portfolio and the passion of our 454,000 employees, and we’re confident that our Smart Global Logistics Network will remain the industry standard for decades to come.

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Transforming, Today… UPS launched several key initiatives to transform how we go to market. To keep pace with consumer expectations for fast, dependable and convenient deliveries, we expanded access to UPS services with Saturday Operations in the U.S. for 4,700 cities and towns last year. UPS now provides pickup and delivery services six days a week to 50% of the U.S. population. In 2018, we will expand to cover 60% of the population in more than 5,800 cities and towns across the country.

Saturday service oƒers our business customers the ability to tender shipments to UPS on Saturday for delivery the following Monday. Favorable customer response and incremental volume tendered to UPS under this service has exceeded our expectations.

Beyond a leading portfolio, we are committed to exploring and implementing the best technology solutions to keep UPS on the cutting edge of innovation. We created the Advanced Technology Group (ATG), comprised of leading technology and engineering experts to oversee research, testing, development and application of new technologies.

Our ATG leadership is also charged with collaborating with technology companies and academic institutions to bring the best solutions to UPS. We are advancing the use of the latest digital, robotic and machine technologies, to improve customer service, make operations more eŒcient and reduce the physically stressful nature of certain UPS jobs. I

am excited about the potential of this group to transform our company even further to the benefit of our customers, employees and our investors.

We executed several important transactions designed to create new capabilities and relationships that are essential to our international growth strategy. This includes our joint venture with S.F. Express, a leading integrated express logistics service provider in China. Together we are providing more competitive international delivery services, initially from China to the U.S., with plans to expand to other destinations. The exclusive partnership is leveraging our complementary networks, service portfolios, technologies and logistics expertise.

Further, we expanded the UPS portfolio of solutions and presence in other key international markets with the acquisition of Nightline Logistics, the top small-package company in Ireland. Nightline is a leader in developing and deploying innovative consumer-focused and business-to- business services. This acquisition immediately positioned UPS as one of the premier shippers in Ireland.

To expand our truckload brokerage presence in Europe, we purchased Freightex, a U.K.-based asset-light provider of truckload, less-than-truckload, specialized and refrigerated over-the-road services. The acquisition was rebranded as Coyote Logistics and establishes a growth platform across Europe.

REVENUE BY SEGMENT

U.S. Domestic Package

International Package

Supply Chain & Freight

61.9%

79% 21%

17.9%

20.2%

REVENUE BY GEOGRAPHY

U.S.

International

61.9%

79% 21%

17.9%

20.2%

– 2 –

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17.917.917.917.9%%17.917.9%% 7979797917.917.9 %%7979%% 61.961.961.961.9%%61.961.9%%61.961.9

U.S.U.S.U.S.U.S.U.S.U.S.U.S. Domestic PackageU.S. Domestic PackageU.S. Domestic PackageU.S. Domestic PackageU.S. Domestic PackageU.S. Domestic PackageU.S. Domestic PackageU.S. Domestic Package InternationalInternationalInternationalInternationalInternationalInternationalInternationalInternationalInternationalInternationalInternationalInternational

Supply Chain & FreightSupply Chain & FreightSupply Chain & FreightSupply Chain & FreightSupply Chain & FreightSupply Chain & FreightSupply Chain & FreightSupply Chain & FreightSupply Chain & FreightSupply Chain & FreightSupply Chain & FreightSupply Chain & Freight

International PackageInternational PackageInternational PackageInternational PackageInternational PackageInternational PackageInternational PackageInternational PackageInternational PackageInternational Package

In addition, UPS acquired Sandler & Travis Trade Advisory Services in 2017. This purchase builds on the leadership position UPS has in specialized global brokerage services.

UPS was also selected as the O cial Logistics Partner for World Expo 2020 Dubai. As a partner with the first World Expo in the Middle East, Africa and South Asia, UPS will gain exposure and new business opportunities in this emerging economic region with more than 3.2 billion people. This exclusive partnership will accelerate our Emerging Market Strategy in the Middle East.

These announcements bring the number of partnerships and acquisitions we’ve entered to 15 over the last three years. Going forward, we’ll continue to look for creative ways to expand our capabilities, our market presence and the reach of our network in ways that create value.

As we expand our portfolio, we are also improving our service across numerous countries in Asia and Europe, including China, France, Germany, Taiwan and the United Kingdom. We are expanding our coverage while improving time-in-transit across these important regions.

In fact, we cut a full day out of delivery times between more than 9,000 shipping lanes across Europe. UPS improved transit times for virtually the entire ground network that serves the 28 EU countries plus Switzerland and Norway.

These enhancements are clearly driving our business forward in Europe. In fact, we achieved another year of double-digit gains in European cross-border shipments — and UPS’s total export growth rate in 2017 was the highest since 2010.

A Year In Review Our 2017 results demonstrate that UPS is transforming and adapting to the many changes in the global economy, including double-digit growth in ecommerce. Here are the highlights for the year:

• Even as we invest, we continue to generate strong results that position UPS for profitable growth. For the full year, adjusted diluted earnings per share increased 4.5%, to $6.01*, which marked a record high.

• The demand for our services has never been greater. UPS delivered on average more than 20 million packages per day. This higher volume drove an 8.2% increase in consolidated revenue, to nearly $66 billion.

• In the U.S., our small package business produced nearly $41 billion in revenue, up 6.4% over 2016 and the fastest growth we’ve seen in several years.

REVENUE (In Billions of Dollars)

2017 : 65.9 2016 : 60.9 2015 : 58.4 2014 : 58.2 2013 : 55.4 2012 : 54.1

UPS now provides pickup and delivery services six days a week

to 50% of the U.S. population.}

– 3 – *See reconciliation of Non-GAAP financial measures on page A1.

180069_L01_NARR.indd 3 3/6/18 7:28 PM

65.965.965.965.965.965.9 60.960.960.960.960.960.9 58.458.458.458.458.458.4 58.258.258.258.258.258.2 55.455.455.455.455.455.4 54.154.154.154.154.154.1

UPS was voted No. 1 in the delivery industry in Fortune magazine’s 2018 rankings of the “World’s Most Admired Companies.”

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• Supply Chain and Freight and International business segments produced outstanding results throughout the year. The Supply Chain and Freight segment generated a more than 26%* increase in adjusted operating profit growth. International increased operating profit to $2.5 billion on average daily shipment growth of 9.3%.

• Strong cash flow enabled UPS to advance our strategic investment schedule, and reward shareowners. For the year, we invested $5.2 billion in capital expenditures, paid $2.9 billion in dividends, and repurchased shares for $1.8 billion.

• UPS was voted No. 1 in the delivery industry in Fortune magazine’s 2018 rankings of the “World’s Most Admired Companies.” We were also recognized by Just Capital as one of America’s 100 Most Just Companies and by Ethisphere as one of the World’s Most Ethical Companies for the 11th straight year. We were named to the Dow Jones Sustainability World Index for the fi˜h straight year, and our medical drone initiative in Rwanda won a Corporate Citizenship Award from the U.S. Chamber of Commerce Foundation. These rankings highlight both the strength of our solutions portfolio and of the UPS brand.

U.S. Domestic The strong U.S. Domestic segment revenue expansion was driven by balanced growth across all products. Revenue for Ground products was up 6.5%, Next Day Air was 5.0% higher and Deferred Air products increased 8.3%. Adjusted operating profit for U.S. Domestic was $4.9 billion*, with an adjusted operating margin of 12.1%*.

International The International business segment delivered outstanding performance again in 2017. Revenue increased 11%* on a currency-neutral basis. Export shipments jumped more than 15% — the highest level we’ve produced in nearly two decades.

Total adjusted operating profit increased to $2.5 billion*, up more than 16%* on a currency-neutral basis. Operating margin was 18.7%* and continues to lead the industry.

– 5 – *See reconciliation of Non-GAAP financial measures on page A1.

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2017 : 1.8 2016 : 2.7 2015 : 2.7 2014 : 2.7 2013 : 3.8 2012 : 1.6

2017 : 16.1 2016 : 25.4 2015 : 26.8 2014 : 26.4 2013 : 43.2 2012 : 21.8

2017 : 2016 : 2015 : 2014 : 2013 : 2012 :

4.9 5.3

3.4 5.1

4.8 4.9

3.0 4.4

4.4 4.3 0.8 4.4

Adjusted

2017 : 2016 : 2015 : 2014 : 2013 : 2012 :

11.4 12.6

9.0 13.3

13.1 13.3

8.5 12.2

12.7 12.8 2.5 13.1

Adjusted

2017 : 2016 : 2015 : 2014 : 2013 : 2012 :

3.32 6.4%

3.12 6.8%

2.92 9.0%

2.68 8.1%

2.48 8.8% 2.28 9.6%

YOY % Growth Rate

2017 : 2016 : 2015 : 2014 : 2013 : 2012 :

5.61 6.01

3.87 5.75

5.35 5.43

3.28 4.75

4.61 4.57 0.83 4.53

Adjusted

NET INCOME (In Billions of Dollars)

DILUTED EARNINGS PER SHARE (In Dollars)

OPERATING MARGIN (Percent)

DIVIDENDS DECLARED n ollars per S are

SHARE REPURCHASE EXPENDITURES (In Billions of Dollars)

NUMBER SHARES REPURCHASED (In Millions)

– 6 –

180069_L01_NARR.indd 6 3/6/18 5:03 PM

5.615.615.615.615.615.615.615.61 6.016.016.016.016.016.01

3.873.873.873.873.873.873.873.87 5.755.755.755.755.755.75

5.355.355.355.355.355.355.355.35 5.435.435.435.435.435.43

3.283.283.283.283.283.283.283.28 4.754.754.754.754.754.75

4.614.614.614.614.614.614.614.61 4.574.574.574.574.574.57 0.830.830.830.830.830.830.830.83 4.534.534.534.534.534.53

4.94.94.94.94.94.9 5.35.35.35.3

3.43.43.43.43.43.4 5.15.15.15.1

4.84.84.84.84.84.8 4.94.94.94.9

3.03.03.03.03.03.0 4.44.44.44.44.44.4

4.44.44.44.44.44.4 4.34.34.34.3 0.80.80.80.80.80.8 4.44.44.44.44.44.4

3.323.323.323.323.323.323.323.32 6.4%6.4%6.4%6.4%

3.123.123.123.123.123.12 6.8%6.8%6.8%6.8%6.8%6.8%

2.922.922.922.922.922.922.922.92 9.0%9.0%9.0%9.0%9.0%9.0%

2.682.682.682.682.682.682.682.68 8.1%8.1%8.1%8.1%

2.482.482.482.482.482.48 8.8%8.8%8.8%8.8%8.8%8.8% 2.282.282.282.282.282.282.282.28 9.6%9.6%9.6%9.6%9.6%9.6%

11.411.411.411.411.411.411.411.411.411.4 12.612.612.612.612.612.6

9.0 9.0 9.0 9.0 9.0 9.0 13.313.313.313.313.313.3

13.113.113.113.113.113.113.113.1 13.313.313.313.313.313.3

8.5 8.5 8.5 8.5 8.5 8.5 12.212.212.212.212.212.212.212.2

12.712.712.712.712.712.712.712.7 12.812.812.812.812.812.8 2.5 2.5 2.5 2.5 2.5 2.5 13.113.113.113.113.113.1

1.81.81.81.8 2.72.72.72.72.72.7 2.72.72.72.72.72.7 2.72.72.72.72.72.7 3.83.83.83.8 1.61.61.61.6

16.116.116.116.116.116.1 25.425.425.425.425.425.4 26.826.826.826.826.826.8 26.426.426.426.426.426.4 43.243.243.243.243.243.2 21.821.821.821.8

Supply Chain and Freight The Supply Chain and Freight segment generated strong top and bottom-line results in 2017. Revenue growth was strong across all major business units and was led by Forwarding and Logistics, where revenue was up nearly 18% and 10% at UPS Freight. Business strategies and improved market conditions drove tonnage increases across the Forwarding and UPS Freight units.

The Supply Chain and Freight segment has undergone a multi-year transformation that has improved profitability. Continued progress on target industry strategy has led to growth in key verticals like Healthcare and Aerospace. In 2017, all units contributed to a more than 26%* increase in operating profit and margin expansion of 70 basis points*.

A Helping Hand In 2017, many of the global communities we serve su‹ered through significant natural disasters. UPS teams reacted quickly to assist those in need with relief supplies and financial support; and we worked quickly to reestablish delivery operations to ensure critical medical and other urgent supplies could be delivered.

To assist in the recovery e‹orts, the UPS Foundation committed more than $3 million to support the relief e‹orts throughout the U.S., the Caribbean and Mexico. I am extremely proud of the UPS team and their great work in the face of natural disasters and through many other corporate citizenship programs in cities and towns across the globe.

Transforming, Tomorrow… In 2018, we are further accelerating UPS’s transformation and laying the foundation for additional progress in 2019 and beyond. With the benefits from the passage of the Tax Cut and Jobs Act, we are funding additional infrastructure investments and significantly increasing pension contributions – moves that position UPS to provide more value to shareowners.

Over the next three years, we’ll enhance our information technology platforms to better manage the business; construct and renovate our facilities; acquire additional Boeing aircra›; all while creating innovative solutions for customers. By year’s end, we will add nine new aircra› to our fleet; expand Saturday Operations to another 900 cities and towns; and open 18 new or retrofitted facilities including 3

new regional hubs. As these investments become operational, benefits will be realized in the form of new revenue and improved productivity.

Globally, UPS has nearly 200 modernization projects in the works. These investments, along with our other network optimization and digital connectivity initiatives, are part of a broader strategy to use technology to improve our operating performance and help our employees deliver the best service for UPS customers. We’re also using technology to enhance the customer experience at UPS and are excited about the recent successful launch of our new ups.com website and the streamlined marketing capabilities we’ve added.

We expect to provide our customers a more personalized experience that fosters growth in incremental revenue.

Summary While customers, markets, economies, environments and society as a whole continues to evolve, UPS is adapting and advancing our business. It’s not a new phenomenon; in fact, it’s part of our DNA. For more than 110 years, we’ve transformed our business model for the benefit of UPS customers, employees and shareowners. From a messenger company facing disruption by home telephones to a global logistics provider adapting to ecommerce, we’ve reinvented ourselves many times with great success.

As we move forward through another period of transformation, we intend to harness the power of disruptive technologies and business models to the benefit of UPS — which will serve as catalysts to accelerate growth opportunities.

Our network and organizational transformation e‹orts are aligning our unique capabilities, considerable resources and future vision to refine our business model. Our focus is on ensuring a sustainable, profitable and enduring UPS. We look forward to updating you on our substantial progress along the way.

David Abney UPS Chairman and Chief Executive Officer

David Abney

– 7 – *See reconciliation of Non-GAAP financial measures on page A1.

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MANAGEMENT COMMITTEE

RICHARD PERETZ Senior Vice President, Chief

Financial O cer and Treasurer

TERI PLUMMER MCCLURE Senior Vice President and

Chief H.R. O cer, Labor Relations

MYRON GRAY Senior Vice President and President, U.S. Operations

KATE GUTMANN Senior Vice President,

Chief Sales and Solutions O cer

ALAN GERSHENHORN Senior Vice President and Chief Commercial O cer

NORMAN BROTHERS, JR. Senior Vice President, General

Counsel and Corporate Secretary

SCOTT PRICE Senior Vice President and

Chief Transformation O cer

JUAN PEREZ Senior Vice President and Chief Information O cer

JIM BARBER Senior Vice President and

President, UPS International

DAVID ABNEY UPS Chairman and

Chief Executive O cer

– 8 –

UPS BOARD OF DIRECTORS

DAVID ABNEY UPS Chairman and Chief Executive O cer Director since 2014

RODNEY C. ADKINS Former Senior Vice-President, IBM Director since 2013

MICHAEL J. BURNS Former Chairman, Chief Executive O cer & President, Dana Corporation Director since 2005

WILLIAM R. JOHNSON Former Chairman, President & Chief Executive O cer, H.J. Heinz Company Director since 2009

DR. CANDACE KENDLE Co-founder and Former Chairman & Chief Executive O cer of Kendle International, Inc. Director since 2011

ANN M. LIVERMORE Former Executive Vice President, Hewlett-Packard Company Director since 1997

RUDY H.P. MARKHAM Former Financial Director, Unilever Director since 2007

FRANCK MOISON Vice Chairman, Colgate-Palmolive Company Director since 2017

CLARK T. RANDT, JR. Former U.S. Ambassador to the People’s Republic of China, President of Randt & Co. LLC Director since 2010

JOHN T. STANKEY Senior Executive Vice President AT&T / Time Warner Integration Director since 2014

CAROL B. TOMÉ Chief Financial O cer & Executive Vice President, The Home Depot, Inc. Director since 2003

KEVIN M. WARSH Former Member of the Federal Reserve Board of Governors, Fellow, Hoover Institution, Stanford Director since 2012

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MANAGEMENT COMMITTEEMANAGEMENT COMMITTEEMANAGEMENT COMMITTEEMANAGEMENT COMMITTEEMANAGEMENT COMMITTEEMANAGEMENT COMMITTEEMANAGEMENT COMMITTEEMANAGEMENT COMMITTEEMANAGEMENT COMMITTEEMANAGEMENT COMMITTEE

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017 or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to Commission file number 001-15451

____________________________________

United Parcel Service, Inc.

Delaware 58-2480149

(State or Other Jurisdiction of Incorporation or Organization)

(I.R.S. Employer Identification No.)

55 Glenlake Parkway, N.E. Atlanta, Georgia 30328

(Address of Principal Executive Offices) (Zip Code)

(404) 828-6000 (Registrant’s telephone number, including area code)

_______________________________ Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Name of Each Exchange on Which Registered Class B common stock, par value $.01 per share New York Stock Exchange

Floating-Rate Senior Notes due 2020 New York Stock Exchange

1.625% Senior Notes due 2025 New York Stock Exchange

1% Senior Notes due 2028 New York Stock Exchange

0.375% Senior Notes due 2023 New York Stock Exchange

1.500% Senior Notes due 2032 New York Stock Exchange

_________________________________ Securities registered pursuant to Section 12(g) of the Act:

Class A common stock, par value $.01 per share (Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes No Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months

(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted

pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge,

in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer”,

“large accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. Check one:

Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No The aggregate market value of the class B common stock held by non-affiliates of the registrant was $76,094,649,311 as of June 30, 2017. The registrant’s class A common stock is not

listed on a national securities exchange or traded in an organized over-the-counter market, but each share of the registrant’s class A common stock is convertible into one share of the registrant’s class B common stock.

As of February 8, 2018, there were 173,362,905 outstanding shares of class A common stock and 688,251,874 outstanding shares of class B common stock. DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for its annual meeting of shareowners scheduled for May 10, 2018 are incorporated by reference into Part III of this report.

UNITED PARCEL SERVICE, INC. ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

PART I Item 1. Business

Overview Strategy Reporting Segments and Products & Services Our People Competition Competitive Strengths Government Regulation Where You Can Find More Information

Item 1A. Risk Factors Item 1B. Unresolved Staff Comments Item 2. Properties

Operating Facilities Fleet

Item 3. Legal Proceedings Item 4. Mine Safety Disclosures

PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Shareowner Return Performance Graph Item 6. Selected Financial Data Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview Items Affecting Comparability U.S. Domestic Package Operations International Package Operations Supply Chain & Freight Operations Operating Expenses Investment Income and Interest Expense Income Tax Expense Liquidity and Capital Resources Collective Bargaining Agreements New Accounting Pronouncements Critical Accounting Policies and Estimates

Item 7A. Quantitative and Qualitative Disclosures about Market Risk Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 9B. Other Information

PART III Item 10. Directors, Executive Officers and Corporate Governance Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Item 13. Certain Relationships and Related Transactions, and Director Independence Item 14. Principal Accounting Fees and Services

PART IV Item 15. Exhibits and Financial Statement Schedules Item 16. Form 10-K Summary

1 1 1 2 5 5 6 6 8 9

16 16 16 17 17 17

18 19 20 21 21 22 25 30 34 38 42 43 46 52 52 53 59 61

126 126 128

129 130 130 130 130

131 131

1

PART I

Cautionary Statement About Forward-Looking Statements

This report includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements in the future tense, and all statements accompanied by terms such as “believe,” “project,” “expect,” “estimate,” “assume,” “intend,” “anticipate,” “target,” “plan” and variations thereof and similar terms, are intended to be forward-looking statements. We intend that all forward-looking statements we make will be subject to safe harbor protection of the federal securities laws pursuant to Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

Our disclosure and analysis in this report, in our Annual Report to Shareholders and in our other filings with the Securities and Exchange Commission (“SEC”) contain forward-looking statements regarding our intent, belief and current expectations about our strategic direction, prospects and future results. From time to time, we also provide forward-looking statements in other materials we release as well as oral forward-looking statements. Such statements give our current expectations or forecasts of future events; they do not relate strictly to historical or current facts. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made.

Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or anticipated results. These risks and uncertainties are described in Part I, “Item 1A. Risk Factors” and may also be described from time to time in our future reports filed with the SEC. You should consider the limitations on, and risks associated with, forward-looking statements and not unduly rely on the accuracy of predictions contained in such forward-looking statements. We do not undertake any obligation to update forward- looking statements to reflect events, circumstances, changes in expectations or the occurrence of unanticipated events after the date of those statements.

Item 1. Business

Overview

United Parcel Service, Inc. (“UPS”) was founded in 1907 as a private messenger and delivery service in Seattle, Washington. Today, we are the world’s largest package delivery company, a leader in the U.S. less-than-truckload industry and a premier provider of global supply chain management solutions. We deliver packages each business day for 1.5 million shipping customers to 9.0 million receivers ("consignees") in over 220 countries and territories. In 2017, we delivered an average of 20.0 million pieces per day, or a total of 5.1 billion packages. Total revenue in 2017 was $65.872 billion.

We serve the global market for logistics services, which includes transportation, distribution, contract logistics, ground freight, ocean freight, air freight, customs brokerage, insurance and financing. We have three segments: U.S. Domestic Package, International Package and Supply Chain & Freight, all of which are described below. For financial information concerning our segments and geographic regions, refer to note 12 of our audited consolidated financial statements.

Strategy

Our market strategy is to provide customers with advanced logistics solutions made possible by a broad portfolio of differentiated services and capabilities expertly assembled and integrated into our customers’ businesses. This approach, supported by our efficient and globally balanced multimodal network, enables us to deliver value to our customers and thereby build lasting partnerships with them.

Customers leverage our broad portfolio of logistics capabilities comprised of: our balanced global presence in North America, Europe, Middle East, Africa, Asia Pacific and Latin America; reliability; industry-leading technologies and solutions expertise for competitive advantage in markets where they choose to compete. We continue to invest to expand our integrated global network and service portfolio. In 2017, we formed and received approval for a joint venture with SF Express, China’s leading small package company, which will ultimately provide millions of potential customers in China with improved access to buyers and sellers around the world. We acquired Freightex, Ltd. ("Freightex") to extend our platform-based freight transportation capabilities into both the U.K. and European markets. The acquisition of Eirpost Group Unlimited Company ("Nightline") vaulted UPS to a leading market position in Ireland. We added shipping centers and healthcare and distribution facilities in Mexico, Colombia and India. In 2017, we also acquired STTAS Global Holdings, Inc. ("Sandler & Travis Trade Advisory Services" or "STTAS"), the world’s largest dedicated global trade compliance management company.

2

We are increasing our capital expenditures to meet increasing global demand. Within our facilities, we are expanding automated capacity, driving greater efficiencies and providing additional network flexibilities. We also continue to invest in our air network capacity through aircraft acquisitions. In 2017, we announced investments in four new regional facilities in the Indianapolis, Phoenix, Salt Lake City and Dallas areas, with the previously announced regional facility in Atlanta, Georgia continuing to move toward completion.

We have a long history of sound financial management and our consolidated balance sheet reflects financial strength. Cash generation is a significant strength of UPS, giving us ample capacity to service our obligations and allowing for distributions to shareowners, reinvestment in our business and the pursuit of growth opportunities.