KELLY SERVICES 2005 SUMMARY ANNUAL REPORT S T A F F I N G T H E W O R L D Kelly Services has grown to become a leading global provider of staffing solutions. Today, you will find Kelly in 30 countries and territories throughout the world, and we continue to expand our geographic presence. TA B L E O F CO N T E N T S Corporate Profile . . . . . . . . . . . . . . . . . . . . . . . 2 Vision, Mission, Shared Values, Quality Policy Financial Highlights . . . . . . . . . . . . . . . . . . . . . 3 Letter to Stockholders . . . . . . . . . . . . . . . . . . . 4 Global Expansion . . . . . . . . . . . . . . . . . . . . . . . 8 Building Business in the Dynamic Asia-Pacific Region Staffing the World . . . . . . . . . . . . . . . . . . . . . 10 Countries of Operation Staffing Services Directors & Officers . . . . . . . . . . . . . . . . . . . . 12 Summary Financials . . . . . . . . . . . . . . . . . . . . 15 Stockholders’ Information . . . . . . . . . . . . . . . . 28 S U M M A R Y A N N U A L R E P O R T This is a summary annual report. Complete financial statements—including Management’s Discussion and Analysis of Financial Condition and Results of Operations and Notes to Financial Statements—are contained in Kelly Services’ Annual Report on Form 10-K. That report, along with a copy of our Code of Business Conduct and Ethics, is available on our Company’s website, www.kellyservices.com, or through our Investor Relations office. Please see Page 28 for contact information. CO R P O R AT E P R O F I L E O U R V I S I O N To be the world’s best staffing services company and to be recognized as the best. O U R M I S S I O N To serve our customers, employees, shareholders, and society by providing a broad range of staffing services and products. To achieve our Mission: • We will develop innovative staffing services which meet the needs of our customers and contribute to their success. • We will foster an environment which stimulates professional excellence and encourages contribution by all employees. • We will provide our shareholders a fair return on their investment. • We will demonstrate good corporate citizenship through the ethical conduct of our business. O U R S H A R E D V A L U E S • Integrity, Honesty, and Ethical Behavior • Commitment to Quality and Customer Satisfaction • Dedication to Service and Personal Responsiveness • Professional Excellence and High Performance • Innovation, Creativity, and Open-Mindedness • Employee Participation, Contribution, and Teamwork • Diversity, Individual Dignity, and Mutual Respect • Growth, Profitability, and Industry Leadership O U R Q U A L I T Y P O L I C Y We are committed to quality and to the processes, measurement, and continuous improvement which are the foundations of quality management. Quality is a basic business principle for Kelly Services®. Quality means providing our internal and external customers innovative services and products that meet or exceed their expectations. Quality improvement is the job of every Kelly Services employee. S T A F F I N G T H E W O R L D Kelly Services, Inc. was established in 1946 by William Russell Kelly, founder of the modern temporary help industry. Today, Kelly® is a leading global provider of staffing services. Over the past 59 years, Kelly’s range of staffing solutions has grown steadily to match the needs of our global customers. Kelly temporary employees work in a wide variety of businesses and disciplines including office services, finance, engineering, law, science, healthcare, information technology, marketing, call centers, light industrial, home- care, and education. Last year, the company assigned more than 700,000 employees in 30 countries and territories. Sales in 2005 totaled $5.3 billion. Kelly is headquartered in Troy, Michigan, U.S.A. 2 Revenue From Services b i l l i o n s o f d o l l a r s $5.3 $5.0 $4.3 $4.1 $4.0 F I N A N C I A L H I G H L I G H T S Diluted Earnings Per Share $1.09 $.60 $.51 $.47 $.14 01 02 03 04 05 01 02 03 04 05 (In thousands of dollars, except per share items) 2005 2004 Change Revenue From Services Earnings Before Income Taxes Income Taxes Net Earnings Basic Earnings Per Share Diluted Earnings Per Share Dividends Per Share Working Capital Stockholders’ Equity Total Assets $ 5,289,825 $ 4,984,051 55,965 16,702 39,263 1.10 1.09 .40 427,989 672,043 33,149 11,938 21,211 .60 .60 .40 413,108 654,051 1,312,857 1,249,756 6.1% 68.8% 39.9% 85.1% 83.3% 81.7% 0.0% 3.6% 2.8% 5.0% 3 L E T T E R TO STO C K H O L D E R S F e b r u a r y 3 , 2 0 0 6 Carl T. Camden (left) and Terence E. Adderley (right) SPECIAL NOTE: Shortly after preparing the initial draft of this letter, Kelly Services Chairman and CEO, Terence E. Adderley, suffered a cardiac incident and has remained incapacitated since. The letter expresses his thoughts on the Company’s performance during 2005, his comments on strategic progress, and his outlook for the year. 2005 was a very good year for Kelly Services. We set a new record, posting sales in excess of $5 billion for the first time. Our gross profit rate improved. Careful expense control and tightened operating efficiencies yielded significant results. In a highly competitive industry, we expanded our global presence, gained market share, and outperformed our peers. As a result, Kelly’s net earnings increased by 85% over last year. These achievements are notable for several reasons. The U.S. economy traveled a challenging road in 2005. Rising fuel prices, severe 4 weather, high-profile bankruptcies, and geopolitical events threatened to disrupt progress, or halt it altogether. Early in the year, an unexpected and abrupt slowdown affected demand for temporary staffing and impacted our initial projections. Yet, the pace did pick up again, and has continued on track. Unemployment rates have improved, corporate earnings have grown, capital spending is increasing, and nearly two million jobs were created during the year—174,000 of them in temporary staffing. Taking into account these underlying economic conditions, and the positive trends we see in our own business, it appears we are now in a period of solid sustainable growth. Measuring Our Progress In 2004, we outlined our strategy for returning to pre-recession earnings and set three challenging operational goals to guide our effort. During this past year, we met two of our three goals, and continue to make considerable progress on the third. >> We grew sales faster than the industry average. Kelly’s record sales of $5.3 billion for 2005 represents a year-over-year increase of 6.1%, as measured against an industry-wide growth average in the low single digits. >> We increased earnings at a rate considerably faster than sales. Our 2005 net earnings of $39.3 million surpassed our 2004 earnings of $21.2 million by 85%. Diluted earnings per share were $1.09, a significant improvement of 82% over last year’s EPS. >> We are making good progress on controlling expenses. When demand for temporary staffing leveled off early in 2005, we quickly took action, adjusting our budget and trimming expenses where necessary. As a result, we are now closer to our goal of holding controllable expenses to roughly half the rate of sales growth. Kelly’s expenses as a percentage of sales improved from the previous year to 15.2%, a trend we expect will continue. Strategic Growth Plan on Track Responsive to both demographic and economic change, Kelly’s strategic growth plan gives us the flexibility we need to capitalize on workforce dynamics and compete in the global marketplace. With confidence the economy is now in a period of relative stability, we are actively pursuing our growth strategies. Let us share our progress this year. >> We broadened our global footprint. Temporary staffing is the ideal solution for today’s workplace— matching the needs of progressive employers with adaptable, mobile, highly skilled employees. Early in 2005, Kelly entered Japan—the fourth largest staffing market in the world. An $18 million investment in Tempstaff, Japan’s second largest staffing company, creates a promising strategic alliance in this vibrant Asian region. A joint venture with Sony, and our first Kelly Scientific Resources ® office in Japan, further enhance our opportunities in this part of the world. Early in 2006, we established an office in Istanbul, Turkey, bringing our global presence to 30 countries and territories. >> We expanded our branch network. In addition to filling in our U.S. branch network, we continued to globalize many 5 L E T T E R TO STO C K H O L D E R S of our PTSA™businesses by opening branches in high-growth markets around the world. progressive employers with adaptable, ambitious employees. >> We introduced internal programs to improve productivity and quality. During the year, we began to implement the PeopleSoft ® Payroll and Billing Project. This three-year initiative to transform the business processes and systems that make up our middle office will allow us to better serve our customers and achieve greater cost efficiencies. A Promising Future The outlook for Kelly and the staffing industry remains bright. According to the U.S. Bureau of Labor Statistics, more jobs will be created in personnel supply services than in any other industry this decade. As job cycles shorten, the workforce ages, and skilled labor shortages become more widespread, competition for talent is expected to accelerate. To manage labor costs and attract scarce skilled labor, employers will turn with greater frequency to temporary help. At the same time, today’s employees are equipped with adaptable skills and want more control over their work life. Many are becoming free agents—a movement that is especially pronounced in professional positions and those requiring technical expertise. In this new workplace, temporary staffing is the ideal solution, matching the needs of PeopleSoft is a registered trademark of PeopleSoft, Inc. Our Strengths A review of our strengths finds Kelly in a strong position to take advantage of these emerging trends. >> Our infrastructure is built to meet the needs of the world’s largest and most respected companies, making us a strong competitor for the very best employees. >> The breadth of our staffing services is widely regarded; we are innovative and responsive to changing workforce demands. >> Our recruitment, referral, training, and placement methods are unequaled. >> We set the standard for quality and maintain that leadership position. >> Kelly is a financially solid, well-managed company, with the resources and know- how to take advantage of key opportunities. >> A 60-year history in the staffing industry gives us insight and a well-rounded perspective. >> We are recognized as a company with strong business ethics, character and integrity. Ahead of the Curve Our ability to study trends, stay ahead of workforce change, and develop innovative staffing solutions in response to our customers keep Kelly at the forefront of our industry. 6 For example, a decade ago, we began our first branch of Kelly Scientific Resources in direct response to customer need. Today, as we celebrate KSR’s 10-year anniversary, the business has grown to become the world’s leading scientific and clinical research staffing operation with more than 100 locations in 16 countries. On the Commercial side, Kelly Educational Staffing®, which provides substitute teachers and paraprofessionals to schools, is meeting a growing demand for skilled school personnel. KES has partnered with 45 states, the District of Columbia, and the United Kingdom, to serve over 2,900 schools, filling more than 2 million classrooms in only six years. With baby boomers nearing retirement, the nation’s workforce is aging. This past year, Kelly was recognized as one of the AARP (formerly American Association of Retired Persons) best employers for mature workers, the only staffing company to be included in the ranking. In lauding our record, AARP noted the rapidly growing need for proven, well- educated, highly productive mature workers—a group that now comprises more than 10% of our workforce. Recognizing Leadership To better position us for the future, Kelly made several new upper management assignments during the year. George Corona, Senior Vice President, was given responsibility for the U.S. Commercial segment. Michael Webster, Senior Vice President, is now responsible for Kelly’s PTSA business segment. And Catherine King, Senior Vice President, was appointed General Manager of our United Kingdom/Ireland Region. Our ability to study trends, stay ahead of workforce change, and develop innovative staffing solutions in response to our customers keep Kelly at the forefront of our industry. T . E . A d d e r l e y Our capable management team, dedicated Kelly employees, and talented temporary workers define the character of this Company: to energize the evolving work world, meet the changing needs of employers, challenge ourselves to think in new ways and find new solutions, and create value for our stockholders. We are grateful to our Board of Directors, our customers, and employees for helping us grow and inspiring us to do our best. We believe the future holds unlimited possibilities. Terence E. Adderley Carl T. Camden 7 G L O B A L E X PA N S I O N Building Business in the Dynamic Asia-Pacific Region It has been just five years since Kelly Services entered the Asian market. But in that short time, we have emerged as a staffing leader in this growing part of the world. With our acquisition of Singapore-based Business Trends in 2000, Kelly established a presence in seven Asian countries. Our pursuits continue as we add branches, roll out new products, and introduce specialty services. 2 0 0 5 : J a p a n Kelly Teams Up to Serve the World’s Fourth Largest Staffing Market During the year, Kelly established a joint venture with Tempstaff, a leading Japanese temporary staffing company, and the Sony Corporation. The new company, called Tempstaff Kelly, Inc., provides recruitment, HR consulting, outsourcing, and general temporary employment to the Sony Group. A critical step in our Company’s Moving Up Kelly’s entry into the Asian market sparked rapid sales growth in the region. We are now the number-one staffing company in Malaysia, where we opened four new branches during the year and successfully launched KellyConnect®. In Singapore’s vibrant market, Kelly is already the second largest staffing provider. international expansion strategy, this alliance also positions Kelly to meet the needs of other global customers. To take advantage of the region’s fast-growing, high-tech market, we also opened our first Kelly Scientific Resources office in Japan. 8 mic Asia-Pacific Region Keeping Pace With the India Boom Last year, the staffing industry in India grew by more than 70% to reach $600 million—making this one of the hottest recruiting markets in the world. Expanding Our Presence Kelly has been in front of India’s remarkable growth, expanding from just one branch in 2000 to 15 today. In 2005 alone, Kelly opened 12 new branches in addition to launching Kelly IT Resources® and Kelly HRfirst®. Today, Kelly Services can be found in all prominent growth cities, including Bangalore, Chennai, Guragaon, Hyderabad, Mumbai, and New Delhi—allowing us to serve the vast majority of significant employers in this booming nation. Ready to Grow Through an unwavering focus on quality and integrity, Kelly has uniquely positioned itself for both short- and long- term success in an increasingly competitive Asian market. Delivering on the Challenge Kelly’s wide range of services and ability to deliver strategic HR solutions allow us to work with some of the most respected companies in India. Kelly HRfirst and Kelly Vendor Management Solutions™ provide timely and highly tangible options for companies grappling to meet the pace of their economy’s rapid expansion. These fresh and creative approaches to the workplace match a country that is known for embracing change and innovation. Hot Growth Industrie s Telecom & Infrastructure Management: 1 million more jobs expected by 2008. IT: 1 million IT professionals employed currently and an additional 250,000 fresh recruits expected in 2006. Retail: Expected to generate 150,000 – 200,000 new jobs. Pharmaceutical & Biotech: Approximately 50,000 jobs added in 2005. By 2008, this industry will employ 4 million people. 9 STA F F I N G T H E W O R L D s e i r o t i r r e T d n a s e i r t n u o C 0 3 K E L L Y C O V E R A G E a i l a r t s u A a d a n a C e c n a r F g n o K g n o H a i d n I d n a l e r I n a p a J a i s y a l a M m u i g l e B 10 10 k r a m n e D y n a m r e G y r a g n u H a i s e n o d n I y l a t I g r u o b m e x u L T u r k e y Kelly Services continues to implement its international growth strategy. In January 2006, we established our first office in Turkey, a promising high- growth market. J a p a n In early 2005, Kelly announced its entry into Japan through an $18 million investment in Tempstaff, that country’s 2nd largest staffing company. In July, we entered into a joint venture with Tempstaff and the Sony Corporation. The expansion into Japan—the world’s 4th largest staffing market—gives Kelly an important presence in this vibrant Asian country. U.S. Commercial Kelly Office Services Kelly Marketing Services Kelly Light Industrial Services Kelly Electronic Assembly Services Kelly Educational Staffing® KellyConnect® KellyDirect® KellySelect® Professional, Technical & Staffing Alternatives Professional & Technical Kelly Scientific Resources® Kelly Healthcare Resources® Kelly Home Care Services™ Kelly Automotive Services Group® Kelly Engineering Resources® Kelly IT Resources® Kelly Law Registry® Kelly Financial Resources® Kelly FedSecure® Staffing Alternatives Kelly Management Services® Kelly Staff Leasing® Kelly HR Consulting® Kelly HRfirst® Kelly Vendor Management Solutions™ International KellyAssess® Kelly MultiHire® s e c i v r e S g n i f f a t S s d n a l r e h t e N y a w r o N o c i R o t r e u P e r o p a g n i S n e d e w S d n a l i a h T m o d g n i K d e t i n U o c i x e M d n a l a e Z w e N s e n i p p i l i h P a i s s u R n i a p S d n a l r e z t i w S y e k r u T s e t a t S d e t i n U 11 1 1 D I R E C TO R S & O F F I C E R S B O A R D O F D I R E C T O R S B. Joseph White President University of Illinois Jane E. Dutton William Russell Kelly Professor of Business Administration University of Michigan Carl T. Camden President and Chief Executive Officer Terence E. Adderley Former Chairman and Chief Executive Officer Kelly Services Verne G. Istock Non-Executive Chairman Retired Chairman and President Bank One Corporation Maureen A. Fay, O.P., Ph.D. President Emeritus University of Detroit Mercy Donald R. Parfet Managing Director, Apjohn Group, LLC “We are fortunate to have such knowledgeable Directors. Their understanding of business principles, keen insight into market issues, and firm commitment to Kelly’s corporate ethics are invaluable to our continuing growth and success.” Terence E. Adderley 12 S E N I O R O F F I C E R S Carl T. Camden President and Chief Executive Officer Michael L. Durik Executive Vice President and Chief Administrative Officer William K. Gerber Executive Vice President and Chief Financial Officer James H. Bradley Senior Vice President, Administration Joan M. Brancheau Senior Vice President, Strategic Customer Relations George S. Corona Senior Vice President, U.S. Commercial Michael E. Debs Senior Vice President, Corporate Controller and Chief Accounting Officer Allison M. Everett Senior Vice President and Chief Information Officer Carol J. Johnson Senior Vice President, Global Sales Catherine J. King Senior Vice President and Regional General Manager, UK/Ireland Region Rolf E. Kleiner Senior Vice President, International Daniel T. Lis Senior Vice President, General Counsel and Corporate Secretary Michael S. Morrow Senior Vice President, Marketing Bernard Tommasini Senior Vice President and Regional General Manager, Western Europe Dana M. Warren Senior Vice President, Service Andrew R. Watt Senior Vice President, UK Taskforce Michael S. Webster Senior Vice President, PTSA 13 O F F I C E R S Leif Agnéus Stephen Holmes Carolyn J. Palmer Steven S. Armstrong Bonnie D. Huber D. Craig Atkinson Matthew W. Igel Brian E. Pauley Richard A. Piske Christopher Bell Venson J. Jennings Lisa D. Price Pamela M. Berklich Christopher P. Jock Peter W. Quigley Jennifer L. Bialy Donald P. Kingston Antonina M. Ramsey Kathleen M. Bienkowski Henri H. J. Koerhuis Nicholas F. Regaldi Paul A. Bordonaro Gregory J. Kohl Marc Riou Barry L. Brown Jane M. Brown Susan C. Laminack Ingrid A. Roberts Jack L. Langenberg Rodger J. Rooney Jeanine E. Burgen Stig Lauvsland Diane E. Rubin-White Eileen M. Candels Candace L. Lewandowski Lori L. Sakorafis MaryAnn Carey Teresa E. Carroll Nicole M. Lewis Virginia A. Scaduto John W. Lichtenberg Lynn G. Schwartz Thomas J. Catalano Robert J. Lyons Tammy G. Seals David A. Charlip Cheryl F. Courier John P. Drew James R. Mack Dhirendra Shantilal Thomas H. Manceor Debra S. Sheehan Timothy G. McAward Scott A. Smith Shaun M. Fracassi Barbara McCabe Karin W. French James D. McIntire Allen J. Sowers J. Leon Stanek Jacqueline B. Galan Jody M. McLeod Michelle C. Steffes Jean-Claude Gallois Jonathan D. Means Richard G. Struble Carolyn Gatesman W. Edward Meisenheimer Linda A. Stuit Sergio Gomez Daniel D. Meyer Kristin W. Supancich Ekaterina Gorokhova Lisa R. Miller Michael J. Tilley Heidi L. Hanes Terrence T. Murphy Thomas L. Totte Matthew L. Harvill Nicholas A. Ockwell Tami A. Troxell John W. Healy John J. O’Connor Richard F. Wallace Christine M. Hoebermann Michael F. Orsini Larry D. Worthen 14 S U M M A RY F I N A N C I A L CO N T E N T S Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 Management’s Report on Internal Control Over Financial Reporting . . . . . . . . . . . . . . . . .17 Eleven Year Financial Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 Summary Statements of Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 Summary Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 Summary Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 Summary Statements of Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . .25 Selected Quarterly Financial Data (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26 Common Stock Price Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 S U M M A R Y A N N U A L R E P O R T This is a summary annual report. Complete financial statements—including Management’s Discussion and Analysis of Financial Condition and Results of Operations and Notes to Financial Statements—are contained in Kelly Services’ Annual Report on Form 10-K. That report, along with a copy of our Code of Business Conduct and Ethics, is available on our Company’s website, www.kellyservices.com, or through our Investor Relations office. Please see Page 28 for contact information. 15 F O R W A R D - L O O K I N G S T A T E M E N T S Certain statements contained in this Summary Annual Report are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). Forward-looking statements include statements that are predictive in nature; depend upon or refer to future events or conditions; or include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” or variations or negatives thereof, or by similar or comparable words or phrases. In addition, any statements concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible future Company actions, that may be provided by management are also forward-looking statements as defined by the Act. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties, and assumptions about the Company; and economic and market factors in the countries in which the Company does business, among other things. These statements are not guarantees of future performance, and the Company has no specific intention to update these statements. Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors. The principal important risk factors that could cause the Company’s actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to, competitive market pressures including pricing, changing market and economic conditions, material changes in demand from large corporate customers, availability of temporary workers with appropriate skills required by customers, increases in wages paid to temporary workers, liabilities for client and employee actions, foreign currency fluctuations, changes in laws and regulations (including federal, state, and international tax laws), the Company’s ability to effectively implement and manage its information technology programs, and the ability of the Company to successfully expand into new markets and service lines. Certain risk factors are discussed more fully in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. 16 M A N A G E M E N T ’ S R E P O R T O N I N T E R N A L C O N T R O L O V E R F I N A N C I A L R E P O R T I N G The management of Kelly Services, Inc. (the “Company”), is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f ) and 15d-15(f ) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: >> Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; >> Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; >> Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may change. The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of January 1, 2006. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Based on our assessment, management determined that, as of January 1, 2006, the Company’s internal control over financial reporting was effective based on those criteria. Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of January 1, 2006, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears on Page 25. 17 E L E V E N Y E A R F I N A N C I A L S U M M A R Y Kelly Services, Inc. and Subsidiaries Compound Annual Growth Rates (1) 10 Year 5 Year 1 Year 2005 2004 (2) Operating Results (In millions of dollars) Revenue from services Cost of services Gross profit Selling, general and administrative expenses (5) Earnings from operations Interest (expense) income, net Earnings before taxes Income taxes Net earnings Dividends Summary of total taxes (3) Financial Position (In millions of dollars) Current assets Current liabilities Working capital Net property and equipment Total assets Stockholders’ equity Capital expenditures Depreciation and amortization Goodwill amortization (6) Common Stock Data (4) Earnings per share Basic Diluted Dividends per share: Classes A and B Stockholders’ equity (book value) per share Stock price per share: Class A at year end 7.4% 8.0 4.7 6.3 (6.2) N/A (6.8) (9.2) (5.5) (7.0) 6.8 5.7% 10.5 1.9 7.0 6.2 3.5 (1.7) 6.4 N/A (5.0)% (5.0) (6.5) 4.1 (0.6) 4.5% 5.1 1.6 4.1 (16.3) ((((((14.5)) (17.4) (22.1) (14.7) (16.6) 5.4 5.6% 6.2 5.0 (3.8) 3.8 1.5 (12.1) 1.4 N/A (14.7)% (14.8) (16.6) 1.5 2.1 6.1% 5.8 7.7 5.1 65.1 (78.3) 68.8 39.9 85.1 1.6 (19.2) 6.3% 8.5 3.6 (8.5) 5.0 2.8 (22.5) (5.0) N/A 83.3% 81.7 0.0 1.8 (13.1) Number of common shares outstanding at year end (thousands) Average number of shares outstanding (thousands) Basic Diluted Financial Ratios (1) Return on revenues Return on average assets Return on average stockholders’ equity Effective tax rate Current assets to current liabilities (current ratio) Price earnings ratio at year end $ 4,984.1 4,186.3 797.8 763.8 34.0 (0.9) 33.1 11.9 21.2 14.0 679.3 $ 893.0 479.9 413.1 181.1 1,249.8 654.1 36.8 44.4 0.0 $ 5,289.8 4,430.9 858.9 802.7 56.2 (0.2) 56.0 16.7 39.3 14.3 548.6 948.9 520.9 428.0 165.8 1,312.9 672.0 28.5 42.2 0.0 $ $ 1.10 1.09 .40 18.76 26.22 $ .60 .60 .40 18.42 30.18 35,824 35,504 35,667 35,949 35,115 35,461 0.7% 3.1% 5.9% 29.8% 1.8 24.1 0.4% 1.8% 3.3% 36.0% 1.9 50.3 (1) Growth rates and financial ratios calculated based on data rounded to thousands. (2) Fiscal year included 53 weeks. (3) Consists of payroll taxes and federal, state, and local taxes. (4) Shares consist of Class A and B common stock adjusted for all stock splits. There were no stock splits from 1995 - 2005. (5) For 1999, 1998 and 1997, includes Year 2000 expenses of $11 million, $8 million and $1 million, respectively. (6) Goodwill amortization amounts are also included in the depreciation and amortization line item above. Note: Certain prior year amounts have been reclassified to conform with the current presentation. For 2001 through 2004, amounts have been restated due to reclasses in the balance sheet for long-term deferred rent, long-term accrued disability and restricted stock. For 2000 through 2004, amounts have been restated to reflect changes disclosed in the Company’s Form 10-K/A issued for fiscal 2004. 18 2003 2002 2001 2000 1999 1998 (2) 1997 1996 1995 $ 4,325.2 3,628.5 696.6 688.2 8.4 (0.1) 8.3 3.4 4.9 14.1 296.8 $ $ 792.8 412.6 380.2 188.5 1,139.2 614.9 30.6 47.9 0.0 .14 .14 .40 17.68 27.52 $ 4,056.9 3,364.2 692.7 662.5 30.2 0.4 30.6 12.1 18.5 14.3 336.7 $ $ 720.3 362.5 357.8 202.5 1,073.2 620.5 33.6 45.5 0.0 .52 .51 .40 17.47 24.72 $ 4,005.9 3,308.0 697.9 669.5 28.3 (0.4) 27.9 11.2 16.8 30.4 516.3 $ $ 671.1 344.2 326.9 212.0 1,040.3 608.5 42.5 44.4 2.7 .47 .47 .85 16.97 22.06 $ 4,250.7 3,458.4 792.3 655.3 137.1 (0.4) 145.2 58.1 87.1 35.3 420.8 $ $ 721.5 386.1 335.5 201.1 1,090.0 622.7 54.2 39.5 2.0 2.44 2.43 .99 17.42 23.63 $ 4,076.3 3,310.3 766.0 622.1 143.9 (0.2) 143.7 58.6 85.1 34.0 421.1 $ $ 706.3 361.6 344.7 187.0 1,033.7 582.4 76.7 36.2 1.8 2.37 2.36 .95 16.23 25.13 $ 3,882.0 3,150.7 731.3 590.7 140.6 3.0 143.6 58.9 84.7 34.2 416.2 $ $ 690.9 344.1 346.8 146.4 964.2 537.8 59.1 28.9 1.5 2.24 2.23 .91 15.02 31.75 $ 3,625.2 2,943.8 681.3 545.5 135.8 1.2 137.0 56.2 80.8 33.2 388.2 $ 3,115.4 2,502.6 612.8 491.8 121.0 1.9 122.9 49.9 73.0 31.6 339.7 $ $ 745.8 334.8 411.0 112.7 967.2 559.8 39.7 28.3 1.5 2.12 2.12 .87 14.67 29.25 $ $ 640.4 262.0 378.4 97.7 838.9 516.9 36.5 26.1 1.1 1.92 1.91 .83 13.58 27.50 $ 2,586.7 2,045.3 541.4 435.1 106.3 7.0 113.3 43.8 69.5 29.6 283.5 $ $ 544.9 191.1 353.8 84.4 718.7 476.1 34.0 22.7 0.9 1.83 1.83 .78 12.52 27.75 34,772 35,529 35,868 35,739 35,874 35,807 38,163 38,059 38,015 35,289 35,355 35,724 35,900 35,829 35,930 35,721 35,843 35,854 36,030 37,745 37,945 38,099 38,191 38,043 38,133 37,993 38,057 0.1% 0.4% 0.8% 41.1% 1.9 196.6 0.5% 1.7% 3.0% 39.6% 2.0 48.5 0.4% 1.6% 2.7% 40.0% 1.9 46.9 2.0% 8.2% 14.5% 40.0% 1.9 9.7 2.1% 8.5% 15.2% 40.8% 2.0 10.6 2.2% 8.8% 15.4% 41.0% 2.0 14.2 2.2% 8.9% 15.0% 41.0% 2.2 13.8 2.3% 9.4% 14.7% 40.6% 2.4 14.4 2.7% 10.2% 15.3% 38.7% 2.9 15.2 19 S U M M A R Y S T A T E M E N T S O F E A R N I N G S Kelly Services, Inc. and Subsidiaries 2005 2004 (1) 2003 (In thousands of dollars except per share items) Revenue from services $ 5,289,825 $ 4,984,051 $ 4,325,155 Cost of services Gross profit Selling, general and administrative expenses 4,430,931 4,186,285 3,628,524 858,894 802,742 797,766 696,631 763,756 688,227 Earnings from operations 56,152 34,010 Interest expense, net (187) (861) 8,404 (77) 8,327 3,423 4,904 .14 .14 .40 33,149 11,938 21,211 .60 .60 .40 $ $ $ $ $ $ $ $ 35,115 35,461 35,289 35,355 Earnings before income taxes Income taxes Net earnings Basic earnings per share Diluted earnings per share Dividends per share Average shares outstanding (thousands): Basic Diluted $ $ $ $ 55,965 16,702 39,263 1.10 1.09 .40 35,667 35,949 (1) Fiscal year included 53 weeks. Notes to Financial Statements can be found in the Company’s 2005 Form 10-K. 20 S U M M A R Y S T A T E M E N T S O F C A S H F L O W S Kelly Services, Inc. and Subsidiaries Cash flows from operating activities Net earnings Noncash adjustments: Depreciation and amortization Stock-based compensation Deferred income taxes Changes in operating assets and liabilities Net cash from operating activities Cash flows from investing activities Capital expenditures Short-term investments Investment in unconsolidated affiliates Increase in other assets Net cash from investing activities Cash flows from financing activities Increase (decrease) in short-term borrowings Financing to fund long-term investment in unconsolidated affiliates Dividend payments Stock options and other stock sales Other financing activities Purchase of treasury stock Net cash from financing activities Effect of exchange rates on cash and equivalents Net change in cash and equivalents Cash and equivalents at beginning of year 2005 2004 (1) 2003 (In thousands of dollars) $ 39,263 $ 21,211 $ 4,904 42,215 3,418 (1,006) (63,126) 20,764 (28,527) 1,203 (19,681) (5,411) (52,416) 6,833 19,681 (14,269) 5,786 1,949 — 19,980 (3,977) (15,649) 79,348 44,435 1,879 (10,175) (2,584) 54,766 47,929 2,174 2,809 (27,521) 30,295 (36,801) (30,567) 105 — (736) (37,432) 142 — (2,487) (32,912) (8,188) 10,280 — (14,043) 15,199 (6,777) (3) (13,812) 1,815 5,337 74,011 — (14,143) 3,865 3,921 (26,149) (22,226) 3,563 (21,280) 95,291 Cash and equivalents at end of year $ 63,699 $ 79,348 $ 74,011 (1) Fiscal year included 53 weeks. Notes to Financial Statements can be found in the Company’s 2005 Form 10-K. 21 S U M M A R Y B A L A N C E S H E E T S Kelly Services, Inc. and Subsidiaries ASSETS Current Assets Cash and equivalents Short-term investments Trade accounts receivable, less allowances of $16,648 and $16,228, respectively Prepaid expenses and other current assets Deferred taxes 2005 2004 (In thousands of dollars) $ 63,699 $ 79,348 154 6,288 803,812 727,366 47,434 33,805 43,942 36,055 Total current assets 948,904 892,999 Property and Equipment Land and buildings 58,461 58,236 Equipment, furniture and leasehold improvements 297,980 303,213 Accumulated depreciation (190,684) (180,363) Net property and equipment 165,757 181,086 Noncurrent Deferred Taxes Goodwill, Net Other Assets Total Assets 22,088 88,217 87,891 17,960 94,652 63,059 $ 1,312,857 $ 1,249,756 Notes to Financial Statements can be found in the Company’s 2005 Form 10-K. 22 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Short-term borrowings Accounts payable Accrued payroll and related taxes Accrued insurance Income and other taxes Total current liabilities Noncurrent Liabilities Accrued insurance Accrued retirement benefits Other long-term liabilities Total noncurrent liabilities Stockholders’ Equity Capital stock, $1.00 par value Class A common stock, shares issued 36,620,146 at 2005 and 36,619,693 at 2004 Class B common stock, shares issued 3,495,720 at 2005 and 3,496,173 at 2004 Treasury stock, at cost Class A common stock, 4,269,753 shares at 2005 and 4,588,739 shares at 2004 Class B common stock, 22,575 shares at 2005 and 23,575 shares at 2004 Paid-in capital Earnings invested in the business Accumulated other comprehensive income Total stockholders’ equity 2005 2004 (In thousands of dollars) $ 56,644 $ 34,289 110,411 263,112 34,097 56,651 520,915 54,517 57,443 7,939 102,947 241,651 33,165 67,839 479,891 58,548 50,892 6,374 119,899 115,814 36,620 36,620 3,496 3,496 (90,319) (97,067) (600) (626) 27,015 688,033 7,798 672,043 24,045 663,039 24,544 654,051 Total Liabilities and Stockholders’ Equity $ 1,312,857 $ 1,249,756 23 S U M M A R Y S T A T E M E N T S O F S T O C K H O L D E R S ’ E Q U I T Y Kelly Services, Inc. and Subsidiaries 2005 2004 (1) 2003 (In thousands of dollars) Capital Stock Class A common stock Balance at beginning of year Conversions from Class B Balance at end of year Class B common stock Balance at beginning of year Conversions to Class A Balance at end of year Treasury Stock Class A common stock Balance at beginning of year Exercise of stock options, restricted stock awards and other Purchase of treasury stock Balance at end of year Class B common stock Balance at beginning of year Exercise of stock options, restricted stock awards and other Purchase of treasury stock Balance at end of year Paid-in Capital Balance at beginning of year Exercise of stock options, restricted stock awards and other Balance at end of year Earnings Invested in the Business Balance at beginning of year Net earnings Dividends Balance at end of year Accumulated Other Comprehensive Income Balance at beginning of year Foreign currency translation adjustments, net of tax Unrealized gains on investments, net of tax Balance at end of year Stockholders’ Equity at End of Year Comprehensive Income Net earnings Foreign currency translation adjustments, net of tax Unrealized gains on investments, net of tax Reclassification adjustment for gains included in net earnings Comprehensive income $ $ $ (1) Fiscal year included 53 weeks. Notes to Financial Statements can be found in the Company’s 2005 Form 10-K. 24 $ 36,620 — 36,620 $ 36,619 1 36,620 $ 36,619 — 36,619 3,497 — 3,497 3,497 (1) 3,496 3,496 — 3,496 (97,067) 6,748 — (90,319) (626) 26 — (600) 24,045 2,970 27,015 663,039 39,263 (14,269) 688,033 24,544 (16,488) (258) 7,798 672,043 39,263 (16,488) 42 (300) 22,517 (112,535) (91,648) 15,468 — (97,067) (623) — (3) (626) 21,081 2,964 24,045 655,871 21,211 (14,043) 663,039 10,976 13,433 135 24,544 654,051 21,211 13,433 135 — 34,779 $ $ $ 5,150 (26,037) (112,535) (511) — (112) (623) 20,001 1,080 21,081 665,110 4,904 (14,143) 655,871 (12,538) 23,407 107 10,976 614,886 4,904 23,407 107 — 28,418 $ $ $ R E P O R T O F I N D E P E N D E N T R E G I S T E R E D P U B L I C A C C O U N T I N G F I R M To the Stockholders and Board of Directors of Kelly Services, Inc. We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of Kelly Services, Inc. as of January 1, 2006 and January 2, 2005, and for each of the three years in the period ended January 1, 2006, management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of January 1, 2006 and the effectiveness of the Company’s internal control over financial reporting as of January 1, 2006; and in our report dated February 10, 2006, we expressed unqualified opinions thereon. The consolidated financial statements referred to above (not presented herein) appear in, Items 8 and 9A, respectively, of Kelly Services Inc.’s annual report on Form 10-K for the year ended January 1, 2006. SSuummmmaarryy ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss In our opinion, the information set forth in the accompanying Summary Balance Sheets of Kelly Services, Inc. and subsidiaries at January 1, 2006 and January 2, 2005 and the Summary Statements of Earnings, Cash Flows and Stockholders’ Equity for each of the three years in the period ended January 1, 2006 is fairly stated, in all material respects, in relation to the consolidated financial statements from which it has been derived. IInntteerrnnaall ccoonnttrrooll oovveerr ffiinnaanncciiaall rreeppoorrttiinngg Also, in our opinion, management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting appearing on Page 17 of the 2005 summary annual report, that the Company maintained effective internal control over financial reporting as of January 1, 2006 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 1, 2006, based on criteria established in Internal Control - Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. PricewaterhouseCoopers LLP Detroit, Michigan February 10, 2006 25 S E L E C T E D Q U A R T E R L Y F I N A N C I A L D A T A ( U N A U D I T E D ) Kelly Services, Inc. and Subsidiaries Revenue from services 2005 2004 2003 Cost of services 2005 2004 2003 Gross profit 2005 2004 2003 Selling, general and administrative expenses 2005 2004 2003 Net earnings 2005 2004 2003 Basic earnings per share (1) 2005 2004 2003 Diluted earnings per share (1) 2005 2004 2003 Dividends per share 2005 2004 2003 First Quarter Second Quarter Third Quarter Fourth Quarter Year (In thousands of dollars except per share items) $ 1,249,335 1,158,811 1,003,397 $ 1,311,904 1,224,464 1,059,517 $ 1,344,644 1,244,854 1,097,268 $ 1,383,942 1,355,922 1,164,973 $ 5,289,825 4,984,051 4,325,155 1,045,251 975,455 837,845 1,097,802 1,026,382 887,113 1,126,466 1,042,486 924,661 1,161,412 1,141,962 978,905 4,430,931 4,186,285 3,628,524 204,084 183,356 165,552 214,102 198,082 172,404 218,178 202,368 172,607 222,530 213,960 186,068 858,894 797,766 696,631 197,989 181,482 165,203 200,494 189,494 169,991 200,849 190,037 169,998 203,410 202,743 183,035 802,742 763,756 688,227 3,938 291 269 9,333 4,876 1,448 12,675 8,094 1,404 13,317 7,950 1,783 39,263 21,211 4,904 .11 .01 .01 .11 .01 .01 .10 .10 .10 .26 .14 .04 .26 .14 .04 .10 .10 .10 .35 .23 .04 .35 .23 .04 .10 .10 .10 .37 .23 .05 .37 .22 .05 .10 .10 .10 1.10 .60 .14 1.09 .60 .14 .40 .40 .40 (1) Earnings per share amounts for each quarter are required to be computed independently and may not equal the amounts computed for the total year. 26 C O M M O N S T O C K P R I C E I N F O R M A T I O N Kelly Services, Inc. and Subsidiaries 2005 Class A common High Low Final Class B common High Low Final 2004 Class A common High Low Final Class B common High Low Final 2003 Class A common High Low Final Class B common High Low Final First Quarter Second Quarter Third Quarter Fourth Quarter Year $ 30.76 27.61 28.58 $ 29.95 25.30 28.91 $ 30.68 27.53 30.66 $ 31.18 25.84 26.22 $ 31.18 25.30 26.22 30.85 28.00 29.00 31.57 26.60 28.53 30.75 23.50 30.75 31.95 27.59 29.50 31.95 23.50 29.50 $ 30.99 27.17 28.52 $ 32.25 27.05 28.95 $ 29.80 25.26 27.16 $ 31.27 25.86 30.18 $ 32.25 25.26 30.18 $ 31.50 27.25 29.10 25.64 19.01 22.00 26.41 19.68 22.48 $ 32.74 26.50 29.55 25.90 21.31 24.60 26.35 21.87 25.01 $ 29.42 25.53 27.29 27.26 23.30 25.27 27.49 24.04 26.31 $ 31.00 26.00 30.50 29.70 24.20 27.52 29.63 25.75 27.92 $ 32.74 25.53 30.50 29.70 19.01 27.52 29.63 19.68 27.92 27 STO C K H O L D E R S ’ I N F O R M AT I O N Kelly Services, Inc. Corporate Headquarters 999 West Big Beaver Road Troy, Michigan 48084-4782 U.S.A. (248) 362-4444 www.kellyservices.com Investor Relations Contact James M. Polehna Director, Investor Relations Kelly Services, Inc. 999 West Big Beaver Road Troy, Michigan 48084-4782 U.S.A. (248) 244-4586 Annual Meeting The Annual Meeting of Stockholders will be held on May 10, 2006, at 11:00 a.m. Eastern Daylight Time, at the Corporate Headquarters of the Company. All stockholders are invited to attend. Stock Transfer Agent & Registrar Mellon Investor Services, LLC P.O. Box 3315 South Hackensack, NJ 07606-3315 For assistance with transfers of stock to another name, lost or destroyed stock certificates, lost dividend checks, direct deposit of dividends, consolidation of accounts, or changes of address, please contact Mellon at: Toll Free (U.S. and Canada): TDD for Hearing Impaired: Foreign Stockholders: TDD Foreign Stockholders: (866) 249-2607 (800) 231-5469 (201) 680-6610 (201) 680-6528 Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP 1900 St. Antoine Street Detroit, Michigan 48226-2333 Financial Reports for Stockholders Stockholders, security analysts, and interested investors may obtain additional copies of this summary annual report, the Company’s quarterly reports, the Company’s Annual Report to the Securities and Exchange Commission on Form 10-K, and copies of the Company’s Code of Business Conduct and Ethics, without charge, by addressing requests to the director of Investor Relations. This information can also be found at the Kelly Services website. Dividend Reinvestment and Direct Stock Purchase Plan Registered stockholders can purchase additional shares of Kelly’s Class A common stock through Kelly’s Dividend Reinvestment and Direct Stock Purchase Plan. Initial purchases of Kelly’s Class A common stock can also be made through this Plan. Participation is voluntary and allows for automatic reinvestment of cash dividends, direct cash investments, and safekeeping of stock certificates. For more information about this service, visit our website: www.kellyservices.com and select Investor Relations, or contact Investor Relations at Kelly. Stock Listings Kelly Services Class A and Class B common stock trade on the Nasdaq Stock MarketSM under the symbols: KELYA and KELYB. You may also visit their website, www.melloninvestor.com/isd, or contact Kelly’s director of Investor Relations. Recycled Recyclable © 2006 Kelly Services, Inc. 28 999 West Big Beaver Road Troy, Michigan 48084-4782 (248) 362-4444 www.kellyservices.com