1996 was a year of milestones and records for Kelly Services. It was the year of our 50th anniversary. In 1946, William Russell Kelly founded the company, and the modern temporary staffing industry.

1996 was also a year in which we exceeded $3 billion in sales for the first time, reached record earnings, employed 700,000 people and served 200,000 customers. All this was a wonderful way to cap off our 50th year.

Sales and Earnings At Record Levels

Sales for the fiscal year ending December 29, 1996 were $3.3 billion, a 23 percent increase over 1995 sales of $2.7 billion.

Earnings from operations were $121 million, 14% more than 1995 operating earnings of $106 million.

Record net earnings of $73 million were 5 percent higher than the $69.5 million reported in 1995. Earnings per share in 1996 were $1.92 versus $1.83 per share in 1995.

Dividend Increased for 25th Consecutive Year

The company's 25th consecutive annual dividend increase was approved by the Board of Directors in May, 1996. The regular quarterly dividend on Class A and Class B common stock was raised from 20 to 21 cents per share, an increase of 5 percent.

Senior Management Promotions Announced

Several senior level executive changes were announced in 1996 and early 1997.

Carl T. Camden was named Executive Vice President, Marketing and Public Affairs. Tommi A. White was named Executive Vice President, Quality, Service Delivery, and Information Technology. These two executives have joined Executive Vice Presidents Robert G. Barranco and Robert E. Thompson in a new group called the President's Staff.

Seven new senior vice presidents and general managers were appointed in 1996 and early 1997. They are: Joan M. Brancheau, Office of the President Accounts; Clayton R. Bullock, Major Markets Division; James R. Conner, Kelly Staff Leasing; Arlene G. Grimsley, Partnered Staffing; Rolf E. Kleiner, Kelly Scientific Resources; Murem S. Sharpe, Kelly Management Services; and Andrew R. Watt, Middle Markets Division.

Serving Customers Worldwide

The company's international operations expanded to four additional countries in 1996.

In Luxembourg, we acquired Top Interim, now operating as Kelly Services Luxembourg S.A.R.L.

In Spain, we acquired two companies in Madrid, now Kelly Services Iberia, S.L.

In Italy we opened Kelly Services Italia S.R.L., in Milan.

In Russia we opened a branch office in Moscow, operating as Kelly Services, C.I.S.

Scientific Resources Expanded

In September, Kelly Services acquired the Oak Ridge Research Institute, specialists in health, safety and environmental scientists. ORRI has joined the Kelly Scientific Resources group, which now operates 16 offices across the country.

Web Site Honored

In 1996, our Web Site was named the "Best Recruitment Web Site" by Human Resource Executive magazine. During the year, Kelly's Web Site received over 2 million "hits" and nearly 10,000 resumes.

Quality Deployment Continues

All corporate departments and more than 150 Kelly Services branch offices in the United States have achieved "Enterprise Status" in the Kelly Quality Management System (KQMS). In 1996 our quality processes earned Ford Motor Company's

Q1 Preferred Quality Award, and recognition as a Xerox Corporation Certified Supplier.

50th Anniversary Featured in This Report

In 1996 the company observed its 50th anniversary. We are tremendously proud of this accomplishment, and of the employees and customers who made it possible. Fewer than one percent of American companies reach their 50th year. We invite you to review pages 6 through 9 of this Annual Report for an account of our first five decades.

Outlook

Kelly Services and the temporary staffing industry have been remarkably successful in constantly changing to meet the needs of employees, customers and even national economies.

Fifty years ago, temporary employment provided people with short-term jobs and extra money, and helped businesses fill in for vacations, illness and peak loads. Today, the industry founded by Russell Kelly touches the lives of millions of people.

For many people, temporary assignments are their introduction to the working world. Others want the flexibility to adjust the time and place of their employment. Our state- of-the-art-training and the development opportunities offered by Kelly offices open many doors to new careers.

Our customers have always enjoyed the benefits of flexible staffing. In the nineties, Kelly's staffing services have become important to many companies' long-term strategies, as well. Our largest customers rely upon us to meet complex requirements for thousands of employees with hundreds of specialized skills.

The national economies in which temporary services operate have been assisted by the creation of millions of new jobs and more efficient distribution of a wide range of skilled workers. Temporary and transitional jobs help to expand the national labor force and reduce unemployment.

The decades ahead will require continual change and innovation in the staffing services industry. Every day, Kelly Services recognizes new opportunities and responds creatively. On pages 11 through 13 you'll read about many of the exciting new ways we're meeting our customers' needs.