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    In) 11008308 a Ss LESSEE talent Is the bottom line.


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    Evolving afirm transforming an industry Korn/Ferry- International is on the move We believe our ongoing success is testament to compelling vision thats producing market-leading results Recognizing that great companies plan for the complete talent life cycle we continue to orient ourselves around the broader talent agenda of our clients Our diversified offerings attract deploy develop and reward the worlds leading talent promoting growth and competitive advantage for our clients As result we are not only evolving our Firm but also transforming an entire industry


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    year of market-leading results 76 2400 11850 offices worldwide employees new assignments opened 7375 22000 IWO placements million executives executives used our in our database assessment tools 86% 47% of Fortune 500 of top 50 clients used at least two companies senrice lines were clients All figures ebove include Futurestep


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    Dear Fellow Stockholders Fiscal 2011 was year for positive Korn/Ferry am proud of the success we have achieved and am grateful for the support of our stockholders and clients Korn/Ferry delivered strong operating performance leader is ultimately accountable for growth outside in that again puts us at the lead of an industry that we as well as inside out Much is talked about outside in are redefining top-line sales innovation new products But less is spoken -s Fee revenue increased 30o about inside-out leaders responsibility for engaging -s Operating margin was almost 12c stimulating and developing people This is precisely Cash and marketable securities at fiscal year-end the intersection of the worlds businesses and Korn/Ferrys was $369 million vision Helping leaders deliver change by linking an organizations purpose its reason for being to Based on report issued by the Association of Executive its employees longing to be part of something bigger Search Consultants since the worst days of the recent than themselves recession Korn/Ferry has grown at rate significantly faster than the industry For our clients talent is indeed the bottom line to deliver change and drive growth The Companys success continues to be driven by our differentiated strategy and exceptional service to our These same leaders and their organizations are increasingly clients delivered by who we believe to be the best recognizing that Korn/Ferry is there for all their talent colleagues in the industry During fiscal 2011 Korn/Ferry management needs This synergistic strategy utilizing all made significant progress in providing to clients of our solutions Executive Recruitment Leadership global enterprise-wide solution for how they manage and Talent Consulting and Futurestep is systematically their talent driving more integrated scalable client relationships while accelerating our evolution to consultative solutions- recently returned to the United States after living much based organization In fact 86% of our top fifty clients are of the summer in Shanghai visiting clients To state the now using at least two of our three service lines obvious Asia has been at the worlds epicenter of change India and Chinas glacial scale in particular makes Client awareness and recognition of our broader offerings the pace of change seem more startling was even more is increasing During the fiscal year more than quarter surprised however to observe the simple truths that seem of our revenues came from our non-executive recruitment to transcend both time and culture The most basic need services delivered by Leadership and Talent Consulting for human beings to belong to be part of something bigger and Futurestep than themselves Korn/Ferry also continues to scale its differentiating This inescapable fact of life whether in Budapest or industry-leading intellectual property within the talent Beijing is also directly applicable to leadership Leadership management processes of our global clients Our IP-driven still requires as it has for centuries making connections Lominger solutions are being utilized by clients for with others around their most basic human needs everything from organizational development to succession


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    Global fee revenue in fiscal 2011 racjon By industry North America 54% Industrial 29% Europe 24% Financial Services 19% Asia Pacific 16% Consumer 17% Latin America 6% Life Sciences Healthcare 16% Technology 15% 10 Education/Nonprofit 4% Includes Futurestep and unconsolidated Mexico subsidiary planning In addition our research-based assessment colleagues for their passion and commitment as well as capability currently utilized by more than 60% of our clients and stockholders for their continued support Korn/Ferry clients is improving client retention and would also like to acknowledge our leadership team our promotion of executives entire board of directors and particularly our Chairman Ken Whipple for their unwavering dedication and counsel This competitive advantage is enhanced and sustained by comprehensive marketing and branding strategy We have When look back over our fiscal year 2011 results am not maintained relentless focus on the highest organizational only proud of our absolute performance but equally proud levels of our clients led by our Board CEO Services of the organization for our relative performanceoutpacing Engagements for this service at organizations with more the industry once again than $1 billion in revenue grew 50% over the prior fiscal year More than simply anticipating navigating or defining The Korn/Ferry Institute the Companys think tank change leaders must deliver change through others by continnes to not only develop world-class intellectual linking self-interest with mutual shared interest aligned property on leadership but also be the leading voice to an organizations common purpose Korn/Ferry is on these matters in the global business community Its that bridge between our clients desires and outcomes signature quarterly periodical Briefings won numerous connecting their common purpose and business prestigious awards during the year One of the biggest strategy to their talent strategy shifts in todays talent marketplace the taking place is emergence of social networking and the movement of Korn/Ferry is an organization committed to accelerating candidates and careers online We are driving social our clients journey and in the process helping them networking and technology initiatives to access develop actualize their destination and aspirations look forward and engage executives Our goal is to incorporate this to accelerating Korn/Ferrys own transformation in the powerful new medium into both our recruiting and year ahead developmental offerings For our clients and for Korn/Ferry talent is indeed the As an organization Korn/Ferry advises leaders of the worlds bottom line foremost companies And while these leaders come from widely disparate backgrounds and cultures am struck by how our conversations always lead back to common theme that impacts their bottom line more than anything else Talent Gary Burnison President and Chief Executive Officer Certainly the same is true for Korn/Ferry The linchpin of our success continues to be our people wish to thank our


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    Extraordinary KornlFerrys solutions focus on attracting deploying developing and rewarding talent Attract Develop People make businesses successful Regardless of industry Development does not just happen Done right it is or location leading organizations seek experienced carefully planned and articulated process Development credible leaders with the vision and skills to individuals with and design winning provides appropriate challenges strategies and motivate others responsibilities as they progress within the organization Research shows that the successful development of people is key factor in retaining top talent Deploy Organizations need programmatic approach to integrating new or promoted leaders into role Doing so ensures Reward smooth and successful transition and helps new executives Many factors can drive compensation change efforts accelerate their contribution to the organization whether in strategy transaction it is change corporate or simply the need to re-align the compensation program as business evolves over time Maintaining an aligned compensation system helps organizations ensure they retain and reward the people who have the greatest chance for success long-term


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    Our vision Our mission Be the premier global provider Enhance the lives of our clients of talent management solutions candidates and colleagues by delivering unsurpassed leadership and talent solutions


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    Financial highlights Korn/Ferrys growth in fiscal 2011 was driven by the strength of our differentiated strategy and relentless focus on staying close to our clients Total fee revenue In millions fiscsl yesr 2009 $6382 -a- 2010 $5724/ 2011 Diluted earnings per share In dollars fiscal year 2009 $0.23 2010 2011 $.27i


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    UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C 20549 Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15d OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended April 30 2011 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15d OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 001-14505 KORN/FERRY INTERNATIONAL Ixact Name of Registrant as Specified in its Charter Delaware 95-2623879 State or Other Jurisdiction of I.R.S Employer or Organization Incorporation Identflcation Number 1900 Avenue of the Stars Suite 2600 90067 Los Angeles California Zip code Address executive offices of principal 310 552-1834 Registrants telephone numbe including area code Securities registered pursuant to Section 12b of the Act Title of Each Class Name of Each Exchange on Which Registered Common Stock par value $0.01 per share New York Stock Exchange Securities registered pursuant to Section 12g of the Act None Indicate by check mark if the registrant is well-known seasoned issuer as defined in Rule 405 of the Securities Act Yes t2 No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15d of the Act Yes No Indicate by check mark whether the registrant has filed all reports required to be filed by Section 13 or 15d 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 has been subject to such filing requirements for the past 90 days Yes E21 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-I 232.405 of this chapter during the preceding 12 months or for such shorter period that the registrant was required to submit and post such files Yes 21 No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 229.405 is not contained herein and will not be contained to the best of registrants 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 large accelerated filer an accelerated filer non-accelerated filer or smaller reporting company See the definitions of large accelerated filer accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act Check one t- Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Do not check if smaller reporting company Indicate by check mark whether the registrant is shell company as defined in Rule 12b-2 of the Act Yes No 21 The number of shares outstanding of our common stock as of June 27 2011 was 47083285 shares The aggregate market value of the registrants voting and non-voting common stock held by non-affiliates of the registrant on October 29 2010 the last business day of the registrants most recently completed second fiscal quarter assuming that the registrants only affiliates are its officers directors and 10% or greater stockholders was approximately $929025508 based upon the closing market price of $17.63 on that date of share of common stock as reported on the New York Stock Exchange DOCUMENTS INCORPORATED BY REFERENCE Portions of the registranes definitive Proxy Statement for its 2011 Annual Meeting of Stockholders scheduled to be held on September 28 2011 are incorporated by reference into Part III of this Form 10-K


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    KORN/FERRY INTERNATIONAL Index to Annual Report on Form 10-K for the Fiscal Year Ended April 30 2011 Item Description Page PART Item Business Item 1A Risk Factors 10 Item lB Unresolved Staff Comments 14 Item Properties 14 Item Legal Proceedings 14 Item Removed and Reserved 15 Executive Officers 15 PART II Item Market for Registrants Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities 16 Item Selected Financial Data 20 Item Managements Discussion and Analysis of Financial Condition and Results of Operations 21 Item 7A Quantitative and Qualitative Disclosures About Market Risk 35 Item Financial Statements and Supplementary Data 35 Item Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 35 Item 9A Controls and Procedures 35 Item 9B Other Information 36 Part III Item 10 Directors Executive Officers and Corporate Governance 36 Item 11 Executive Compensation 36 Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 36 Item 13 Certain Relationships and Related Transactions and Director Independence 36 Item 14 Principal Accountant Fees and Services 36 Part IV Item 15 Exhibit and Financial Statements Schedules 37 Signatures 40 Financial Statements and Financial Statement Schedules F-i


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    PART Item Business Business Overview Korn/Ferry International referred to herein as the Company Korn/Ferry or in the first person notations we our and us is premier global provider of talent management solutions that help clients to attract deploy develop and reward their talent We opened our first office in Los Angeles in 1969 and currently operate in 76 offices in 35 countries As of April 30 2011 we had 2463 full-time employees including 471 executive recruitment and 162 Futurestep consultants who are primarily responsible for client services Our clients include many of the worlds and most prestigious public and private companies middle market and emerging largest growth companies as well as govermnent and nonprofit organizations We have built strong client loyalty with 78% of our executive recruitment assignments performed during fiscal 2011 on behalf of clients for whom we had conducted assignments in the previous three fiscal years We were originally formed as California corporation in November 1969 and reincorporated as Delaware corporation in fiscal 2000 We provide the following talent management solutions Executive Recruitment Executive Recruitment our largest business focuses on recruiting board-level chief executive and other senior executive positions for clients predominantly in the consumer financial services industrial life scienceslhealthcare provider and technology industries The relationships that we develop through this business are valuable in introducing our complementary service offerings to clients Leadership and Talent Consulting LTC Our comprehensive blend of talent management offerings assists clients with theft ongoing assessment organizational and leadership development efforts Services address five fundamental needs board effectiveness Chief Executive Officer CEO senior manage ment effectiveness leadership development and enterprise learning organization transformation and talent portfolio management Each of Korn/Ferrys solutions is delivered by an experienced team of leadership consultants global network of top executive coaches and the intellectual property of research-based time- tested leadership assessment and developmental tools Talent Acquisition Solutions In 1998 we extended our market reach into middle management with the introduction of Futurestep our outsourced and mid-level recruiting subsidiary Futurestep thaws from Kornl Ferrys four decades of industry experience to create customized flexible talent acquisition solutions to meet specific workiorce needs of organizations around the world In addition to being pioneer in recruitment process outsourcing RPO the Companys multi-tiered portfolio of services includes talent acquisition consulting services project-based recruitment and mid-level recruitment We file annual quarterly and current reports proxy statements and other documents with the Securities and Exchange Commission the SEC pursuant to the Securities Exchange Act of 1934 the Exchange Act You may read and copy any materials that we file with the SEC at the SECs Public Reference Room at 100 Street N.E Washington D.C 20549 You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-732-0330 Our reports proxy statements and other documents filed electronically with the SEC are avallable at the website maintained by the SEC at wwwsec.gov We also make available free of charge on our website at www.kornferry.com our annual quarterly and current reports and if applicable amendments to those reports filed or fumished pursuant to Section 13a or 15d of the Exchange Act as soon as reasonably practicable after we electronically file such reports with or fumish them to the SEC Our Corporate Govemance Guidelines Code of Business Conduct and Ethics and the charters of the Audit Committee Compensation and Personnel Committee and Nominating and Corporate Governance Committee of our Board of Directors are also posted on our website at wwwkornfery.com Stockholders may request copies of these documents by writing to our Corporate Secretary at 1900 Avenue of the Stars Suite 2600 Los Angeles Califomia 90067


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    Industry Overview Executive Recruitment Services Our executive recruitment services concentrates on searches for positions with annual compensation of $250000 or more or comparable in foreign locations which may involve board-level chief executive and other senior executive positions The industry is comprised of retained and contingency recruitment firms Retained firms such as Korn/Ferry charge fee for their services equal to typically approx imately one-third of the first year annual cash compensation for the position being filled regardless of whether the position is filled Contingency firms generally work on non-exclusive basis and are compensated only upon successfully placing recommended candidate Leadership and Talent Consulting Services With an increasing amount of Korn/Ferrys revenue being generated by non-search engagements our LTC services are driving our transformation into broad-based talent management firm These diversified solutions help our clients to not only attract but to deploy develop and reward their best people in the context of their organization and talent strategy Talent Acquisition Solutions Futurestep KornfFeriy subsidiary offers talent acquisition solutions for mid- and high-level management with annual compensation generally in the $100000 to $150000 range Founded in 1998 Futurestep today has locations on four continents and record of success in helping clients achieve business impact through effective talent operations Industry Trends As the global economy continues to recover and expand we believe the business outlook for the talent management industry is positive Contributing to this is confluence of market trends that will continue to fuel job growth and hiring which include the following Consolidation of Talent Management Solution Providers In choosing recruitment and human resource service providers we believe Companies are actively in search of preferred providers in order to create efficiencies and consolidate vendor relationships Companies that can offer full suite of talent management solutions are becoming increasingly attractive and Clients seek trusted advisors who understand their business and unique organizational culture in order to manage the multiple needs of their business on global scale Aging Population In many major economic centers the workforce population is aging at rapid pace The number of retirees has more than doubled over the last decade Moreover the supply of available qualified candidates is limited making it more difficult for employers to secure executives We believe this trend will have positive impact on our business over the long-term as employers will increasingly seek service providers who can provide solutions for the impending talent shortage Globalization of Business As the world markets continue to integrate into one global economy many companies are strengthening their talent pool with experienced executives who can operate effectively in this global environment Emerging markets such as China India and Eastem Europe have executive talent demands that exceed the current available supply of executive talent in these geographies The rapidly changing competitive landscape challenges multinational and local companies to identify and recruit qualified executives with the right combination of skills experience and cultural compatibility Clients are turning to firms that combine proven expertise with specialized knowledge of both key industries and local markets enabling them to address their ongoing global talent needs Increased Outsourcing of Recruitment Functions More companies are focusing on core competencies and outsourcing non-core back-office functions to providers who can provide efficient high-quality services Third- party providers can apply immediate and long-term approaches for improving all aspects of talent acquisition Advantages to outsourcing part or all of the recruitment function include Access to diverse and highly qualified pool of candidates on an as-needed basis


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    Reduction or elimination of the costs required to maintain and train an in-house recruiting department in rapidly changing industry Access to the most updated industry and geographic market information Access to cutting-edge search technology software and Ability to maintain management focus on core strategic business issues Key Role of Technology At Korn/Ferry we are adding more regimen and scientific research into the recruitment process with emphasis shifting from candidate identification to candidate assessment and placement Driving this initiative is enhanced technology as the power of the Intemet search engines and databases make it possible to efficiently identify greater numbers of qualified candidates Innovative technology when combined with world-class intellectual property and thought leadership creates compelling set of tools to manage the of process identifying recruiting and assessing the most desirable candidates Other Industry Trends In addition to the industry trends mentioned above we believe the following factors will have long-term positive impact on the talent management industry Increasing demand for managers with broader qualifications Increasing desire by candidates to more actively manage their careers Increasing demand for senior executives with not just the right technical skills but also the right leadership characteristics to meet the specific requirements of the position and organizational culture Increasing demand for senior executives who can exceed the high standards of due diligence and public scrutiny as result of recent securities legislation Decreasing executive management tenure and more frequent job changes Inadequate succession planning and Increasing impact of Intemet-enabled social media on the role of HR and the recruitment process Growth Strategy Our objective is to expand our position as premier global provider of talent management solutions In order to meet this objective we will continue to pursue five strategic initiatives Drive an Integrated Solutions-Based Go-to-Market Strategy Differentiating Client Value Proposition Korn/Ferry offers its clients global integrated enterprise-wide talent management solution To that end we have made progress in helping clients more effectively and efficiently attract deploy develop and reward their workforce In analyzing talent management across the attract-deploy-develop-reward value chain KomlFerry has developed clear industry-differentiating strengths through its market leading position in Executive Recruitment and RPO solutions with distinct diversified capabilities along the rest of the value chain through the Companys LTC service line Our synergistic go-to-market strategy utilizing all three of our service lines is systematically driving more integrated scalable client relationships while accelerating our evolution to consultative solutions-based orga nization This is evidenced by the fact that nearly 86% of our top 50 clients utilize at least two of our service lines We are an increasingly diversified enterprise with unique presence in the world of human capital services and products which represents an estimated $400 billion global market opportunity In an effort to better coordinate global recruiting and to gain operational efficiencies we expect that multinational clients increasingly will flim to strategic partners who can manage their recruitment needs on centralized basis This will require vendors with global network of offices and technological support systems to


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    manage multiple hires across geographical regions In fiscal 2009 we established our Premier Client Partnership PCP program to act as catalyst for change as we transfonn our Company from individual operators to an integrated talent solutions provider in an effort to drive major global and regional strategic account development as well as to provide framework for all of our client development activities Today the PCP program consists of global colleagues from every line of business and geography Our goal is to cascade this methodology throughout every market country and office Deliver Unparalleled Client Excellence World-class Intellectual Property Korn/Ferry continues to scale and more deeply embed its industry- leading intellectual property within the talent management process of our global clients Our IP-driven Lominger tools and services are being utilized by our clients for everything from organizational development and job profiling to selection training individual and team development succession planning and more We have almost doubled the Lominger business since we acquired it in 2006 As product-focused offering Lominger teclmology helps us to generate long-term relationships with clients We continue to seek ways to scale the Lominger product offering to our global clients Global organizations our firms validated assessment capability are realizing the and benefits utilizing power of Kom/Ferry IP in their talent evaluation process Our assessment capability currently utilized by more than 60% of our clients can improve executive retention and prospects of promotion We believe companies that use Korn/ Ferrys assessments to choose executives are more likely to fmd candidates that they would not only retain but soon promote Technology Information technology has become critical element of the executive talent management business We have made significant investments in developing robust technology infrastructure and web-based executive recruitment platform e-KornlFerry In fiscal 2011 we continued to invest in enhanced tools and knowledge management to gain competitive advantage We introduced key enhancements to Searcher Express our state-of-the-art engagement execution platform and the comerstone of the Companys strategy to better share knowledge access data and improve the search process new client relationship management feature in Searcher Express provides global business development opportunity tracking system for all lines of business We also embarked on worldwide upgrade of our desktop and network infrastructure to provide best-in-class tools for our staff including the rollout of new intranet platform Inside K/F for enhanced information sharing and collaboration across markets and geographies The new intranet alsp includes project calendar function that organizes activities by individuals and lines of business and utilization management system to track client bookings via consultants Outlook calendars We also rolled out major enhancements to our client engagement collaboration portal the Talent Dashboard adding talent pipeline feature as well as voting tool to facilitate conmiittee-based candidate selection The technology supporting LTC continued to evolve in fiscal 2011 through the integration of Lomingers intellectual property into our assessment and talent management products Our newly-developed intellectual property platform consolidates rich set of assessment instruments and reports into common web portal for our -i LTC clients Usage of Korn/Ferry Advantage technology-based assessment process for our core executive recruitment business stands at 64% of all search engagements The Korn./Ferry Advantage When launched in 2007 the goal of the Korn/Ferry Advantage was to establish leadership framework to with clients as they think about their own plan and the candidate strategic engage strategic profiles that will be required to make their plans reality The Korn/Ferry Advantage offers distinct Korn/Ferry Way for conducting executive search and ensuring quality control globally Alter nearly four years of imple mentation the Korn/Ferry Advantage has become firmly embedded in our culture and serves as foundation of the Korn/Ferry search process It has also emerged as key competitive differentiator


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    Information technology is key driver of Futuresteps growth in RPO project-based and mid-level recruit ment Database technology and the Internet have greatly improved capabilities in identifying targeting and reaching potential candidates thereby reducing placement times Fiscal 2011 saw major system enhancements including the upgrade of Futurestep to our enterprise engagement management and customer relationship man agement platform Searcher Express and the integration of advanced Intemet-based sourcing assessment and selection technologies in the engagement workflow In fiscal 2011 we renewed our commitment to invest in technology across all lines of business extending the Companys brand through integration with social networks and delivering our unique intellectual property through smart phones and tablets We will continue to enhance our technology in order to strengthen our relationships with our existing clients attract new clients expand our markets through new delivery channels and maintain competitive advantage in offering the full of executive talent management services range Extend and Elevate the Korn/Feriy Brand Next to our people the Korn/Ferry brand is the strongest asset of the Company Since inception Korn/Ferry has always maintained an extremely aggressive stance in building our global presence and supporting our vision and ongoing growth through robust and comprehensive marketing approach At the highest level we will continue to extend and elevate the Kom/Ferry brand to raise awareness and drive higher market share within key segments Our leadership in executive recruitment enables us to grow our business by increasing the number of recruitment assigmnents we handle for existing clients We also believe that our strong relationships and well- recognized brand name will enable us to introduce new services to our existing client base and to potential new clients while allowing us to build communities of candidates to whom we can directly market our services For example we will leverage the work our Board CEO Services practice performs at the top of our clients organizations to promote awareness of our various solutions at the highest levels We believe these engagements will create significant trickle-down revenue opportunities across all of our lines of business and also lead to the expansion of other high-level consultative relationships within the board and CEO community Advance Korn/Ferry as Premier Career Destination As our business strategy evolves so should our talent strategy in order to drive the growth we need and the culture we want at pace we can absorb Our talent strategy is what we do to ensure that we attract deploy develop and reward the best talent for ourselves and by extension for our clients to achieve our business potential We believe that the recruitment and retention of key consultants will be an ongoing driver of long-term growth Our consultants bring with them diverse backgrounds and areas of expertise and were recruited based on their track records as in their top performers given industry Pursue Transformational Opportunities Along the Broad Human Resources Spec trum In addition to our heritage as leading provider of executive recruitment we also offer clients outsourced and mid-level recruitment strategic and organizational alignment leadership and executive development and talent and performance management through Futurestep and LTC We will continue to develop and add new products and services that our clients demand and continue to pursue disciplined acquisition strategy both of which are consistent with our strategic goals Our non-executive recruitment businesses generated 26% of our overall fee revenue in fiscal 2011 Our Services and Organization Organization The Company operates in two global business in the retained recruitment industry Executive segments Recruitment and Futurestep Our executive recruitment business is managed on geographic basis throughout our four regions North America EMEA Asia Pacific and South America Futurestep is managed on worldwide basis with operations in North America Europe and Asia Pacific We face risks associated with political instability legal


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    requirements and currency fluctuations in these international operations Examples of such risks include difficulties in staffing and managing global operations social and political instability fluctuation in currency exchange rates and potential adverse tax consequences We address the global recruitment needs of our clients at all levels of management by offering the following services Executive Recruitment Services Overview Our executive recruitment services are typically used to fill executive-level positions such as board directors chief executive officers CEO chief financial officers CFO chief operating officers COO chief information officers ClO and other senior executive officers Once we are retained by client to conduct search we assemble team comprised of consultants with appropriate geographic industry and functional expertise Our search consultants serve as management advisors who work closely with the client in identifying assessing and placing qualified candidates In fiscal 2011 we executed 11501 executive recruitment assignments We utilize unique standardized approach to placing talent that integrates scientific research with our practical experience Providing more complete view of the candidate than is otherwise possible our proprietary tools are statistically proven to generate better results in identifying the right person for the position We call our executive recruitment methodology The Korn/Ferry Advantage We emphasize close working relationship with the client and comprehensive understanding of the clients business issues strategy and culture as well as an in-depth knowledge of the skills necessary to succeed within clients organization Initially the search team consults with the client to better understand its history culture structure expectations challenges future direction and operations In these meetings the team identifies the specific needs of the client and develops profile of an ideal candidate for the position using our proprietary Leadership Sort System which allows clients to select the desired leadership characteristics for specific roles Early in the process the team also works with the client to develop the general parameters of compensation package that will attract highly qualified candidates Once the position is defined and outlined via an enhanced job specification that embodies the desired leadership characteristics research team identifies through the use of our proprietary databases and other information resources companies in related industries facing similar issues and with operating characteristics similar to those of the client In addition the team consults with its established network of resources and searches our databases containing profiles of approximately five million executives to assist in identifying individuals with the right background cultural fit and abilities These sources are critical element in assessing the marketplace An original list of candidates is carefully screened through phone interviews video conferences and in-person meetings using our proprietary behavioral interviewing approach Candidates also complete Search AssessmenM behavioral mapping tool that provides clients with insights into how candidates will lead how they will approach and solve complex problems what their emotional profile is likely to be and what motivates them to succeed The client is then presented final qualified candidates to interview We conduct due diligence and background verification of the candidate throughout the process at times with the assistance of an independent third party The finalist for the position will usually meet with the client for second and possibly third round of discussions At this point the compensation package will have been discussed in detail increasing the likelihood that an offer will be accepted Generally the search consultants will participate in the negotiations until final offer is made and accepted Throughout the process ongoing communication with the client is critical to keep client management apprised of progress Industry Specialization Consultants in our five global markets and one regional specialty practice groups bring an in-depth understanding of the market conditions and strategic management issues faced by clients within their specific industry and geography We are continually looking to expand our specialized expertise through internal development and strategic hiring in targeted growth areas


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    Percentage of Fiscal 2011 Assignments by Industry Specialization Global Markets Industrial 28% Financial Services 18% Consumer 18% Technology 15% Life SciencesIHealthcare Provider 16% Regional Specialties Education/Not-for-Profit 5% Functional Expertise We have organized executive recruitment centers of functional expertise composed of consultants who have extensive backgrounds in placing executives in certain functions such as board directors CEOs and other senior executive officers Our Board CEO Services group for example focuses exclusively on placing CEOs and board directors in organizations around the world This is dedicated team from the most senior ranks of the Company Their work is with CEOs and in the board room and their expertise is organizational leadership and governance They conduct hundreds of engagements every year tapping talent from every corner of the globe This work spans all ranges of organizational scale and purpose Members of functional groups are located throughout our regions and across our industry groups Percentage of Fiscal 2011 Assignments by Functional Expertise Board LevelJCEO/CFO/Senior Executive and General Management 72% Marketing and Sales 10% Human Resources and Administration 6% Manufacturing/Engineering/Research and Development/Technology 6% Finance and Control 4% Information Systems 2% Regions North America We opened our first office in Los Angeles in 1969 and currently have 23 offices throughout the United States and Canada In fiscal 2011 the region generated fee revenue of $376.0 million from 4846 assignments billed with an average of 229 consultants Europe the Middle East and Africa EMEA We opened our first European office in London in 1972 and currently have 19 offices in 17 countries throughout the region In fiscal 2011 the region generated fee revenue of $155.8 million from 3678 assignments billed with an of 136 consultants average Asia Pacific We opened our first Asia Pacific office in Tokyo in 1973 and currently have 18 offices in 10 countries throughout the region In fiscal 2011 the region generated fee revenue of $90.3 million from 2058 assignments billed with an average of 91 consultants South America We opened our first South America office in Brazil in 1974 As of April 30 2011 we network of seven offices in six countries covering the entire South American region The region generated operate fee revenue of $32.0 million in fiscal 2011 from 919 assignments billed with an of 18 consultants average Mexico We expanded our practice to Mexico through the 1977 acquisition of less than 50% interest in Mexico City company We currently conduct operations in two offices in Mexico through subsidiary in which we hold minority interest Our share of the net earnings from our Mexico subsidiary was $1.9 million and $0.1 million for the years ended April 30 2011 and 2010 respectively and is included in equity in earnings of unconsolidated subsidiaries on the consolidated statements of operations Client Base Our 4736 clients include many of the worlds largest and rnost prestigious public and private companies with 47% of the FORTUNE 500 companies being clients in fiscal 2011 In fiscal 2011 no single client


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    represented more than 2% of fee revenue We have established strong client loyalty with 78% of the executive recruitment assignments performed during fiscal 2011 on behalf of clients for whom we had conducted assignments in the previous three fiscal years Competition We are premier global provider of talent management solutions Other multinational executive recruitment finns include Egon Zehnder Intemational J4eidrick Struggles Intemational Inc Russell Reynolds Associates and Spencer Stuart Although these firms are our largest competitors we also compete with smaller boutique firms that specialize in specific regional industry or functional searches We believe our brand name differentiated business model systematic approach to client service cutting-edge technology global network prestigious clientele strong specialty practices and high-caliber colleagues are recognized worldwide We also believe that our long-term incentive compensation arrangements as well as other executive benefits distinguish us from most of our competitors and are important in attracting and retaining our key consultants Leadership and Talent Consulting Services In fiscal 2009 we consolidated our strategic management assessment and executive coaching and development services under the new name Leadership and Talent Consulting to more accurately reflect the array of solutions we now offer and to accommodate further growth We have made significant investments in these service areas with the acquisitions of Lominger Limited Inc and Lominger Consulting the Lominger Entities and LeaderSource in fiscal 2007 Lore Intemational in fiscal 2009 and SENSA Solutions in fiscal 2010 Our comprehensive blend of talent management offerings assists clients with the ongoing assessment and development of their senior executives and management teams and addresses five fundamental needs Board effectiveness Leadership development and enterprise learning Organization transformation Integrated talent management and CEO senior management effectiveness Each of Kom/Ferrys solutions is delivered by an experienced team of leadership consultants global network of top executive coaches and the intellectual property of research-based time-tested leadership assessment and developmental tools Talent Acquisition Solutions Futurestep Overview Founded in 1998 as Korn/Ferrys scalable outsourced recruitment subsidiary Futurestep offers clients portfolio of talent acquisition solutions including RPO talent acquisition consulting services project- based recruitment and mid-level recruitment Each Futurestep engagement leverages world-class global recruitment process and best-in-class technology to maximize and measure quality Futurestep combines traditional recruitment expertise with multi-tiered portfolio of talent acquisition solutions Futurestep consultants based in 15 countries have access to our databases of pre-screened mid-level professionals Our global candidate pool complements our intemational presence and multi-channel sourcing strategy to aid speed efficiency and quality service for clients worldwide Futurestep consulting services help companies reduce costs and boost efficiency for talent management processes evaluate and select service and technology vendors establish objectives and metrics for success and implement and optimize talent programs and systems Through our services and through the consulting expertise of The Newman Group acquired by Futurestep in fiscal 2008 we help companies align people processes and technology RPO solutions provide the expertise services and support to help clients address strategic and operational challenges related to talent acquisition Futurestep can act as or augment the clients recruitment function Project-based recruitment solutions offer proven outsourced approach for augmenting and optimizing companys talent acquisition strategy to manage multiple hires within specific timeframe Consultants use our


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    proprietary recruitment methodology to deliver seamless workflow-driven talent acquisition strategies that enable clients to secure the right talent quickly and effectively Futuresteps mid-level recruitment service uses multiple sourcing channels validated cultural assessments and our global database of more than two million pre-screened professionals to offer low overhead approach that accelerates the recruitment process and provides diverse qualified set of mid-level candidates matched with specific cultural and strategic requirements Regions We opened our first Futurestep office in Los Angeles in May 1998 In January 2000 we acquired the Executive Search Selection business of PA Consulting with operations in Europe and Asia Pacific As of April 30 2011 we had Futurestep operations in seven cities in North America eight in Europe and 12 in Asia Pacific Competition Futurestep primarily competes for business with other RPO providers such as Spherion Ke11yOCG and The RightThing and competes for search assignments with regional contingency recruitment firms and large national retained recruitment firms For talent acquisition and management consulting services Futurestep competes with boutique consulting providers such as HRchitect and Knowledge Infusion and larger consulting firms such as Accenture Aon Hewitt and Towers Watson Professional Staff and Employees As of April 30 2011 we had total of 2463 full-time employees Of this 1774 were executive recruitment employees consisting of 471 consultants 1131 associates researchers administrative and support staff and 172 LTC professionals In addition we had 15 consultants in our unconsolidated Mexico office Futurestep had 628 employees as of April 30 2011 consisting of 162 consultants and 466 administrative and support staff Corporate had 61 professionals at April 30 2011 We are not party to collective bargaining agreement and consider our relations with our employees to be good Korn/Ferry is an equal opportunity employer In Executive Recruitment senior associates associates and researchers support the efforts of our consultants with candidate sourcing and identification but do not generally lead assignments We have training and profes sional development programs Promotion to senior client partner is based on variety of factors including demonstrated superior execution and business development skills the ability to identify solutions to complex issues personal and professional ethics thorough understanding of the market and the ability to develop and help build effective teams In addition we have program for recruiting experienced professionals into our Company The following table provides information relating to each of our business segments for fiscal 2011 Financial information regarding our business segments for fiscal 2010 and 2009 and additional information for fiscal 2011 is contained in the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K Operating Number of Number of Fee Income Offices as of Consultants as of Revenue Loss April 30 2011 April 30 2011 Dollars in thousands Executive Recruitment North America $375971 80685 23 225 EMEA 155782 11628 19 132 Asia Pacific 90346 11611 18 95 South America 31959 7475 19 Total Executive Recruitment 654058 111399 67 471 Futurestep1 90191 4955 162 Corporate 30569 Total $744249 85785 76 633 19 of the executive recruitment offices in 15 countries Futurestep partially occupies globally


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    The following table provides infonnation on fee revenues for each of the last three fiscal years attributable to the geographical regions in which the Company operates Year Ended April 30 2011 2010 2009 In thousands Fee Revenue United States $365919 $270859 $305472 Canada 45313 32115 41861 EMEA 183373 157376 172899 Asia Pacific 117685 88004 93668 South America 31959 24026 24323 Total $744249 $572380 $638223 Item 1A Risk Factors The risks described below are the material risks facing our Company Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations Our business financial condition or results of operations could be materially adversely affected by any of these risks Competition in our industry could result in us losing market share and/or require us to charge lower prices for services which could reduce our revenue We compete for executive recruitment business with numerous executive recruitment firms and businesses that provide job placement services including other large global executive search firms smaller specialty firms and internet-based finns Traditional executive recruitment competitors include Egon Zehnder International Heidrick Struggles International Inc Russell Reynolds Associates and Spencer Stuart In each of our markets our competitors may possess greater resources greater name recognition and longer operating histories than we do which may give them an advantage in obtaining future clients and attracting qualified professionals in these markets Additionally specialty firms can focus on regional or functional markets or on particular industries There are no extensive barriers to entry into the executive recruitment industry and new recruiting firms continue to enter the market We believe the continuing development and increased availability of information technology will continue to attract new competitors especially Intemet-enabled professional and social networking website providers As these providers continue to evolve they may develop offerings similar to or more expansive than ours thereby increasing competition for our services or more broadly causing disruption in the executive recruitment industry Increased competition whether as result of these professional and social networking website providers or traditional executive recruitment firms may lead to pricing pressures that could negatively impact our business For example increased competition could require us to charge lower prices and/or cause us to lose market share each of which could reduce our fee revenue If we fail to attract and retain qualified and experienced consultants our revenue could decline and our business could be harmed We compete with other executive recruitment firms for qualified and experienced consultants Attracting and retaining consultants in our industry is particularly important because generally small number of consultants have primary responsibility for client relationship Because client responsibility is so concentrated the loss of key consultants may lead to the loss of client relationships In 2011 for example our top three executive search consultants had primary responsibility for generating business equal to approximately 3% of our net revenues and our top ten executive search consultants had primary responsibility for generating business equal to approximately 7% of our net revenues This risk is heightened due to the general portability of consultants business Any decrease the quality of our reputation reduction our relative our peers or restructuring of our in in compensation levels to compensation whether as result of insufficient revenue decline in the market price of our common program stock or for additional any other reason could impair our ability to retain existing consultants or attract qualified consultants with the requisite experience skills and established client relationships Our failure to retain our most 10


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    productive consultants or maintain the quality of service to which our clients are accustomed and the ability of departing consultant to move business to his or her new employer could result in loss of clients which could in turn cause our fee revenue to decline and our business to be harmed We may also lose clients if the departing executive search consultant has widespread name recognition or reputation as specialist in executing searches in specific industry or management function Although our employment contracts prohibit former executive search consultants from soliciting any of our employees for period of one year we may lose additional executive search consultants if they choose to join the departing executive search consultant at another executive search firm If we fail to limit departing executive search consultants from moving business or recruiting our executive search consultants to competitor our business fmancial condition and results of operations could be adversely affected Global economic developments and the conditions in the geographic regions and the industries from which we derive significant portion of our fee revenue could negatively affect our business financial condition and results of operations Demand for our services is affected by global economic conditions and the general level of economic activity in the geographic regions and industhes in which we operate When conditions in the global economy including the credit markets deteriorate or economic activity slows many companies hire fewer permanent employees and some companies as cost-saving measure choose to rely on their own human resources departments rather than third-party search firms to find talent which negatively affects our financial condition and results of operations as evidenced by our results of operations for 2009 and 2010 During the recent economic downturn our fee revenue significantly decreased from $790.6 million in fiscal 2008 to $572.4 million in fiscal 2010 While the economic activity in the regions and industries in which we operate has shown improvement recently economic conditions remain uncertain If such uncertainty persists or if the national or global economy or credit market conditions in general were to deteriorate such uncertainty or changes could put additional negative pressure on demand for our services resulting in lower cash flows and negative effect on our business financial condition and results of operations If we are unable to retain our executive officers and key personne4 or integrate new members of our senior management who are critical to our business we may not be able to successfully manage our business in the future Our future success depends upon the continued service of our executive officers and other key management personnel If we lose the services of one or more of our executives or key employees or if one or more of them decides to join competitor or otherwise compete directly or indirectly with us or if we are unable to integrate new members of our senior management who are critical to our business we may not be able to successfully manage our business or achieve our business objectives If we are unable to maintain our professional reputation and brand name our business will be harmed We depend on our overall reputation and brand name recognition to secure new engagements and to hire qualified professionals Our success also depends on the individual reputations of our professionals We obtain majority of our new engagements from existing clients or from referrals by those clients Any client who is dissatisfied with our assignments can adversely affect our ability to secure new engagements If any factor including poor performance hurts our reputation we may experience difficulties in competing successfully for both new engagements and qualified consultants Failing to maintain our professional reputation and the goodwill associated with our brand name could seriously harm our business We are subject to potential legal liability from clients employees and candidates for employment Insurance coverage may not be available to cover all of our potential liability and available coverage may not be sufficient to cover all claims that we may incur Our ability to obtain liability insurance its coverage levels deductibles and premiums are all dependent on market factors our loss history and insurers perception of our overall risk profile We are exposed to potential claims with respect to the executive recmitment process For example client could assert claim for matters such as breach of an off-limit agreement or recommending candidate who subsequently proves to be unsuitable for the 11


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    position filled Further the current employer of candidate whom we placed could file claim against us alleging interference with an employment contract In addition candidate could assert an action against us for failure to maintain the confidentiality of the candidates employment search or for alleged discrimination violations of employment law or other matters Further in various countries we are subject to data protection laws impacting the processing of candidate information We cannot ensure that our insurance will cover all claims or that insurance coverage will be available at economically acceptable rates Significant uninsured liabilities could have material adverse effect on our business financial condition and results of operations We rely heavily on our information systems and if we lose that technology or fail to further develop our technology our business could be harmed Our success depends in large part upon our ability to store retrieve process manage and protect substantial amounts of information To achieve our strategic objectives and to remain competitive we must continue to develop and enhance our information systems This may require the acquisition of equipment and software and the development of new proprietary software either intemally or through independent consultants If we are unable to design develop implement and utilize in cost-effective manner information systems that provide the capabilities necessary for us to compete effectively or for any reason any interruption or loss of our information processing capabilities occurs this could harm our business results of operations and financial condition We face risks associated with social and political instability legal requirements economic conditions and currency fluctuations in our international operations We operate in 35 countries and during the year ended April 30 2011 generated 45% of our fee revenue from operations outside of North America We are exposed to the risk of changes in social political legal and economic conditions inherent in intemational operations Examples of risks inherent in transacting business worldwide that we are exposed to include changes in and compliance with applicable laws and regulatory requirements difficulties in staffing and managing global operations social and political instability fluctuations in currency exchange rates statutory equity requirements repatriation controls and potential adverse tax consequences We have no hedging or similar foreign currency contracts and therefore fluctuations in the value of foreign currencies could impact our global operations We cannot ensure that one or more of these factors will not harm our business financial condition or results of operations We may be limited in our ability to recruit employees from our clients and we could lose those opportunities to our competition which could harm our business Either by agreement with clients or for client relations or marketing purposes we sometimes refrain from for specified period of time recruiting candidates from client when conducting searches on behalf of other clients These off-limit agreements can generally remain in effect for up to two years following completion of an assignment The duration and scope of the off-limit agreement including whether it covers all operations of the client and its affiliates or only certain divisions of client generally are subject to negotiation or intemal policies and may depend on factors such as the scope size and complexity of the clients business the length of the client relationship and the frequency with which we have been engaged to perform executive searches for the client If prospective client believes that we are overly resthcted by these off-limit agreements from recruiting employees of our existing clients these prospective clients may not engage us to perform theft executive searches Therefore our inability to recruit candidates from these clients may make it difficult for us to obtain search assignments from 12


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    or to fulfill search assignments for other companies in that clients industry We cannot ensure that off-limit agreements will not impede our growth or our ability to attract and serve new clients or otherwise harm our business We have provisions that make an acquisition of us more difficult and expensive Anti-takeover provisions in our Certificate of Incorporation our Bylaws and under Delaware law make it more difficult and expensive for us to be acquired in transaction that is not approved by our Board of Directors Some of the provisions in our Certificate of Incorporation and Bylaws include classified Board of Directors limitations on the removal of directors limitation on stockholder actions advance notification requirements for director nominations and actions to be taken at stockholder meetings and the ability to issue one or more series of preferred stock by action of our Board of Directors These provisions could discourage an acquisition attempt or other transaction in which stockholders could receive premium over the current market price for the common stock We have deferred tax assets that we may not be able to use under certain circumstances If we are unable to generate sufficient future taxable income in certain jurisdictions or if there is significant change in the time period within which the underlying temporary differences become taxable or deductible we could be required to increase our valuation allowances against our deferred tax assets This would result in an increase in our effective tax rate and an adverse effect on our future operating results In addition changes in statutory tax rates may also change our deferred tax assets or liability balances with either favorable or unfavorable impact on our effective tax rate Our deferred tax assets may also be impacted by new legislation or regulation An impairment in the carrying value of goodwill and other intangible assets could negatively impact our consolidated results of operations and net worth Goodwill is initially recorded at fair value and is not amortized but is reviewed for impairment at least annually or more frequently if impairment indicators are present In assessing the carrying value of goodwill we make estimates and assumptions about revenues operating margins growth rates and discount rates based on our business plans economic projections anticipated future cash flows and marketplace data There are inherent uncertainties related to these factors and managements judgment in applying these factors Goodwill valuations have been calculated using an income approach based on the present value of future cash flows of each reporting unit and market approach We could be required to evaluate the carrying value of goodwill prior to the annual assessment if we experience further unexpected significant declines in operating results or sustained market capitalization declines These types of events and the resulting analyses could result in goodwill impairment charges in the future Impairment charges could substantially affect our results of operations and net worth in the periods of such charges Acquisitions may have an adverse effect on our business While we may under certain circumstances pursue acquisitions in the future we may not be able to consummate such acquisitions on satisfactory terms or integrate the acquired businesses effectively and profitably into our existing operations To the extent we consummate any acquisitions our future success may depend in part on our ability to complete the integration of the acquisition target successfully into our operations Failure to successfully integrate new employees and complementary businesses may adversely affect our profitability by creating operating inefficiencies that could increase operating expenses as percentage of net revenues and reduce 13


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    operating income Further after any acquisition the acquired businesses clients may choose not to move their business to us causing an adverse affect on our business financial condition and results of operations We may not be able to align our cost structure with our revenue leveL We must ensure that our costs and workforce continue to be in proportion to demand for our services Any failure to maintain balance between our cost structure and headcount and our revenue could adversely affect our business financial condition and results of operations and lead to negative cash flows which in turn might require us to obtain additional financing to meet our capital needs We may require additional capital in the future which may not be available at all or may be available only on unfavorable terms Future adverse changes in the Companys revenue could require us to institute cost cutting measures To the extent our efforts are insufficient we may incur negative cash flows If such conditions persist over an extended period of time it might require us to obtain financing to meet our capital needs If we are unable to secure financing on favorable terms or at all our ability to fund our operations could be impaired which could have material adverse effect on our results of operations We invest in marketable securities classified as trading and available for sale and if the market value of these securities declines materially they could have an adverse affect on our earnings Marketable securities consist of mutual funds and investments in corporate bonds U.S Treasury and agency securities and conu-nercial The primary objectives of the mutual funds are to meet the obligations under paper certain of our deferred compensation plans while the other securities are available for general corporate If purposes the financial markets in which these securities trade were to materially decline in value the unrealized losses and potential realized losses could negatively impact the Companys reported financial results Item lB Unresolved Staff Comments Not applicable Item Properties Our corporate office is located in Los Angeles California We lease all 76 of our executive recruitment and Futurestep offices located in North America EMEA Asia Pacific and South America As of April 30 2011 we leased an aggregate of approximately 783681 square feet of office space The leases generally are for terms of one to 15 years and contain customary terms and conditions We believe that our facilities are adequate for our current needs and we do not anticipate any difficulty replacing such facilities or locating additional facilities to accom modate any future growth Item Legal Proceedings From time to time we are involved in litigation both as plaintiff and defendant relating to claims arising out of our operations As of the date of this report we are not engaged in any legal proceedings that are expected individually or in the aggregate to have material adverse effect on our business financial condition or results of operations 14


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    Item Removed and Reserved Executive Officers of the Registrant Name Age Position Gary Bumison 50 President and Chief Executive Officer Michael DiGregorio 56 Executive Vice President and Chief Financial Officer Ana Dutra 47 Executive Vice President and Chief Executive Officer of Leadership and Talent Consulting Byrne Mulrooney 50 Chief Executive Officer Futurestep Our executive officers serve at the discretion of our Board of Directors There is no family relationship between any executive officer or director The following information sets forth the business experience for at least the past five for each of our executive officers years Gary Burnison has been President and Chief Executive Officer since July 2007 He was Executive Vice President and Chief Financial Officer from March 2002 until June 30 2007 and Chief Operating Officer from November 2003 until June 30 2007 Prior to joining KornlFerry Mr Bumison was Principal and Chief Financial Officer of Guidance Solutions privately held consulting firm from 1999 to 2001 Prior to that he served as an executive officer and member of the board of directors of Jefferies and Company an investment bank and brokerage firm from 1995 to 1999 Earlier Mt Bumison was partner at KPMG Peat Marwick Michael DiGregorio joined the Company in June 2009 as our Executive Vice President and Chief Financial Officer Prior to joining Korn/Ferry he served as Executive Vice President and Chief Financial Officer of St John Knits International Inc luxury womens apparel company from 2006 to 2009 Prior to joining St John Knits International Inc Mt DiGregorio served in various capacities at Jafra Cosmetics International Inc multi-level direct sales Executive Vice President and Chief Financial Officer from 1999 2004 President company serving as to and Chief Operating Officer of U.S Operations from 1998 to 1999 and General Manager and Chief Operating Officer of the companys operations in Mexico from 1997 to 1998 He started his career at Touche Ross and Company public accounting firm Mr DiGregorio received both bachelors degree in accounting and masters degree in accounting from the Wharton School of the University of Pennsylvania Ana Dutra has been Executive Vice President of Korn/Ferry and Chief Executive Officer of Leadership and Talent Consulting since February 2008 She is responsible for driving the global growth of our Leadership and Talent Consulting services including our Lominger and LeaderSource companies Prior to joining KornlFerry Ms Dutra led the global organization and change strategy practice at Accenture global management consulting technology services and outsourcing company from 2005 to 2008 Before this role she led the organizational transformation practice at Mercer Management Consulting from 2001 to 2005 Earlier Ms Dutra was with Maralcon Associates CSC Index Booz Allen Hamilton and IBM Consulting Group Byrne Mulrooney joined the Company in April 2010 as Chief Executive Officer of Futurestep Prior to joining KornfFerry he was President and Chief Operating Officer of Flynn Transportation Services third party logistics company from 2007 to 2010 Prior to that he led Spherions workforce solutions business in North America which provides workforce solutions in professional services and general staffing including recruitment process out- sourcing and managed services from 2003 to 2007 Mr Mulrooney has held executive positions for almost 20 years at EDS and IBM in client services sales marketing and operations Mr Mulrooney is graduate of Villanova University in Pennsylvania He holds masters degree in management from Northwestern Universitys J.L Kellogg Graduate School of Management 15


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    PART II Item Market for Registrants Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Our common stock is listed on the New York Stock Exchange under the symbol KFY The following table sets forth the high and low sales price per share of the common stock for the periods indicated as reported on the New York Stock Exchange High Low Fiscal Year Ended April 30 2011 First Quarter $16.68 $12.99 Second Quarter $17.93 $12.78 Third Quarter $24.00 $16.85 Fourth Quarter $24.77 $19.34 Fiscal Year Ended April 30 2010 First Quarter $14.29 9.43 Second Quarter $17.28 $12.57 Third Quarter $18.00 $14.31 Fourth Quarter $18.62 $14.65 On June 27 2011 the last reported sales price on the New York Stock Exchange for the Companys common stock was $21.19 share and there were approximately 6200 beneficial holders of the Companys common stock per 16


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    Performance Graph We have presented below graph comparing the cumulative total stockholder return on the Companys shares with the cumulative total stockholder return on the Standard Poors 500 Stock Index and company- established peer group The following graph compares the monthly percentage change in the Companys cumu lative total stockholder return with the cumulative total return of the companies in the Standard Poors 500 Stock Index and peer group constructed by us Cumulative total return for each of the periods shown in the performance graph is measured assuming an initial investment of $100 on April 30 2006 and the reinvestment of any dividends paid by any company in the peer group on the date the dividends were declared In fiscal 2011 we established new peer group comprised of broad number of publicly traded companies which are principally or in significant part involved in either professional staffing or consulting The new peer group is comprised of the following 16 companies CBIZ Inc CBZ FIT Consulting Inc FCN Heidrick Struggles International Inc HSII Huron Consulting Group Inc HURN ICF International Inc ICR Insperity Inc NSP Kelly Services Inc KELYA Kiorce Inc KFRC Navigant Consulting Inc NCI Resources Connec tion Inc RECN Robert Half International Inc RHI SFN Group Inc SFN The Corporate Executive Board Company EXBD The Dun Bradsheet Corporation DNB Towers Watson Co TW and TrueBlue Inc TBI We believe this group of professional services firms is more reflective of similar sized companies in terms of our market capitalization revenue or profitability and therefore provides more meaningful comparison of stock performance The returns of each company have been weighted according to their respective stock market at the beginning of each measurement period for purposes of arriving at capitalization peer group average The old peer group presented for comparative purposes consists of Caldwell Partners International Inc CWL/A CN Heidrick Struggles International Inc HSII and Hudson Highland Group HHGP This smaller group consists of publicly traded companies primarily engaged in executive recruiting or professional level staffing and recruiting The stock price performance depicted in this graph is not necessarily indicative of future price performance This graph will not be deemed to be incorporated by reference by general statement incorporating this any Form 10-K into any filing by us under the Securities Act of 1933 or the Securities Exchange Act of 1934 except to the extent we specifically incorporate this information by reference and shall not otherwise be deemed soliciting material or deemed filed under the Securities Act of 1933 or the Securities Exchange Act of 1934 17


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    COMPARISON OF YEAR CUMULATiVE TOTAL RETURN AMONG KORN/FERRY INTERNATIONAL THE SP 500 INDEX AN OLD PEER GROUP AND NEW PEER GROUP $125- 100- $75 $50- $25 4/06 7/06 10/06 1/07 4/07 7/07 10/07 1/08 4/08 7/08 10/08 1/09 4/09 7/09 10/09 1/10 4/10 7/10 10/10 1/11 4/11 Kom/Ferry International Li sP 500 Old Peer Group New Peer Group $100 invested on 4/30/06 in stock or index-including reinvestment of dividends Fiscal year ending April 30 Copyright 2011 Standard Poors division of The McGraw-Hill Companies Inc All rights reserved www researchdata group con/SP htm Dividends and Stock Repurchases We have not paid any cash dividends on our common stock since April 30 1996 and do not currently intend to pay any cash dividends on our common stock in the foreseeable future The Board of Directors has authorized the Company to repurchase up to $175.0 million of the Companys outstanding shares of common stock pursuant to issuer repurchase programs Since the initial authorization on December 2005 through April 30 2011 we have repurchased approximately $150.6 million of the Companys common stock under these programs Our future dividend policy as well as any decision to execute our currently outstanding issuer repurchase programs will depend on our earnings capital requirements financial condition and other factors considered relevant by our Board of Directors Our credit facility does not restrict our ability to pay dividends Issuer Purchases of Equity Securities The following table summarizes common stock repurchased by us during the fourth quarter of fiscal 2011 Approximate Dollar Value of Shares Shares Purchased that may Yet be as Part of Publicly- Purchased Under Shares Average Price Announced Programs the Programs Purchased1 Paid per Share andS and February 12011 February 28 2011 951 $23.98 $24.4 million March 12011March 31 2011 16189 $22.47 $24.4 million April 2011 April 30 2011 1806 $22.31 $24.4 million Total 18946 $22.53 18


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    Represents withholding of portion of restricted shares to cover taxes upon vesting of restricted shares On December 2005 the Board of Directors approved the repurchase of up to $50 million of the Companys common stock in common stock repurchase program The shares can be repurchased in open market transactions or pnvately negotiated transactions at the Companys discretion On June 2006 the Board of Directors approved the repurchase of an additional $25 million of the Companys comnon stock in common stock repurchase program The shares can be repurchased in open market transactions or privately negotiated transactions at the Companys discretion On March 2007 the Board of Directors approved the repurchase of an additional $50 million of the Companys common stock in common stock repurchase program The shares can be repurchased in open market transactions or privately negotiated transactions at the Companys discretion On November 2007 the Board of Directors approved the repurchase of an additional $50 million of the Companys common stock in common stock repurchase program The shares can be repurchased in open market transactions or privately negotiated transactions at the Companys discretion 19


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    Item Selected Financial Data The following selected financial data are qualified by reference to and should be read together with our Audited Consolidated Financial Statements and Notes to Consolidated Financial Statements and Managements Discussion and Analysis of Financial Condition and Results of Operations appearing elsewhere in this Annual Report on Form 10-K The selected statement of operations data set forth below for the fiscal years ended April 30 2011 2010 and 2009 and the selected balance sheet data as of April 30 2011 and 2010 are derived from our consolidated financial statements audited by Ernst Young LLP appearing elsewhere in this Form 10-K The selected balance sheet data as of April 30 2009 2008 and 2007 and the selected statement of operations data set forth below for the fiscal years ended April 30 2008 and 2007 are derived from consolidated financial statements and notes thereto which are not included in this Form 10-K report and were audited by Emst Young LLP Year Ended April 30 2011 2010 2009 2008 2007 In thousands except per share data and other operating data Selected Statement of Operations Data Fee revenue $744249 $572380 $638223 $790570 $653422 Reimbursed out-of-pocket engagement 32002 27269 ________ 37905 45072 35779 expenses _______ _______ Total revenue 776251 599649 676128 835642 689201 Compensation and benefits 507405 413340 442632 540056 447692 General and administrative expenses 116494 115280 126882 134542 105312 Out-of-pocket engagement expenses 51766 41585 49388 58750 44662 Depreciation and amortization 12671 11493 11583 10441 9280 Restructuring charges netl 2130 20673 41915 ________ _______ _______ Total operating expenses 690466 602371 672400 ________ 743789 606946 _______ _______ Operating income loss 85785 2722 3728 91853 82255 Other income loss 6454 4656 2524 net 10066 14738 Interest expense income net 2535 2622 1063 2481 2280 Provision benefit for income taxes 32692 485 384 36081 30164 Equity in earnings of unconsolidated subsidiaries net 1862 91 2365 3163 3302 _______ _______ _______ Net income loss 58874 5298 $lO092$ 66211 55498 ________ ________ ________ Basic earning loss per share 1.30 0.12 0.23$ 1.50 1.40 Diluted earning loss per share 1.27 0.12 0.23$ 1.46 1.24 Basic weighted average common shares outstanding 45205 44413 43522 44012 39774 Diluted weighted average common shares outstanding 46280 45457 43522 45528 46938 Other Operating Data Fee revenue by business segment Executive recruitment North America $375971 $278746 $309514 $374891 $329065 EMEA 155782 137497 143184 183042 146155 Asia Pacifiº 90346 64132 66332 95915 74987 South America 31959 24026 24323 25556 17426 Total executive recruitment 654058 504401 543353 679404 567633 Futurestep 90191 67979 94870 111166 85789 Total fee revenue $744249 $572380 $638223 $790570 $653422 Number of offices at period end 76 76 78 89 82 Number of consultants at period end 633 627 615 684 601 Number of new engagements opened 11854 9794 9630 11106 10415 Selected Balance Sheet Data as of April 30 Cash and cash equivalents $246856 $219233 $255000 $305296 $226137 Marketable securities2 122231 77219 75255 83966 98130 Working capital3 207731 182781 198250 196259 193716 Total assets 971680 827098 740879 880214 761491 Total stockholders equity 578337 491342 459099 496134 432955 20


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    During fiscal 2011 we increased our previously recorded restructuring charges by $2.1 million which primarily relates to higher facility lease costs than originally estimated During fiscal 2010 our restructuring initiatives resulted in restructuring charges of $25.8 million against operations of which $16.0 million and $9.8 million related to severance costs and the consolidation of premises respectively These restructuring charges were partially offset by $5.1 million of reductions from previous restructuring charges resulting in net restructuring costs of $20.7 million during fiscal 2010 During fiscal 2009 the restructuring charges were comprised of severance charges of $26.9 million and facilities charges of $15.0 million As of April 30 2011 2010 2009 2008 and 2007 the Companys marketable securities included $71.4 million $69.0 million $60.8 million $63.5 million and $41.6 million respectively held in trust for settlement of the Companys obligations under certain of its deferred compensation plans The amounts reported have been conformed to current year presentation Item Managements Discussion and Analysis of Financial Condition and Results of Operations Forward-looking Statements This Annual Report on Form 10-K may contain certain statements that we believe are or may be considered to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 These forward-looking statements generally can be identjfied by use of statements that include phrases such as believe expect anticipate intend plan foresee may will likely estimates potential continue or other similar words or phrases Similarly statements that describe our objectives plans or goals also are forward-looking statements All of these forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from those contem plated by the relevant forward-looking statement The principal risk factors that could cause actual performance and future actions to differ materially from the forward-looking statements include but ure not limited to dependence on attracting and retaining qualified and experienced consultants maintaining our brand name and professional reputation potential legal liability portability of client relationships global and local political or economic developments in or affecting countries where we have operations currency fluctuations in our inter national operations risks related to growth restrictions imposed by off-limits agreements competition reliance on information processing systems our ability to enhance and develop new technology employment liability risk an impairment in the carrying value of goodwill and other intangible assets deferred tax assets that we may not be able to use our ability to develop new products and services alignment of our cost structure to our growth risks related to the integration of recently acquired businesses and the matters disclosed under the heading Risk Factors in the Companys Exchange Act reports including Item 1A included in this Annual Report Readers are urged to consider these factors carefully in evaluating the forward-looking statements The forward-looking statements included in this Annual Report on Form 10-K are made only as of the date of this Annual Report on Form 10-K and we undertake no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances The following presentation of managements discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included in this Annual Report on Form 10-K Executive Summary Korn/Ferry Intemational referred to herein as the Company Korn/Ferry or in the first person notations we our and us is premier global provider of talent management solutions that helps clients to attract deploy develop and reward their talent We are the premier provider of executive recruitment leadership and talent consulting and talent acquisition solutions with the broadest global presence in the recruitment industry Our services include Executive Recruitment middle-management recruitment through Futurestep Recruitment Process Outsourcing RPO Leadership and Talent Consulting LTC and executive coaching Approximately 72% of the executive recruitment searches we performed in fiscal 2011 were for board level chief executive and other senior executive and general management positions Our 4736 clients in fiscal 2011 included many of the worlds largest and most prestigious public and private companies including approximately 47% FORTUNE of the 500 middle market and emerging growth companies as well as govemment and nonprofit organizations We have 21


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    built strong client loyalty with 78% of the executive recruitment assignments performed during fiscal 2011 on behalf of clients for whom we had conducted assignments in the previous three fiscal years In an effort to maintain our long-term strategy of being the leading provider of talent management solutions our strategic focus for fiscal 2012 centers upon enhancing the integration of our multi-service strategy We plan to continue to address areas of increasing client demand including RPO and LTC We further plan to explore new products and services continue to pursue disciplined acquisition strategy enhance our technology and processes and aggressively leverage our brand through thought leadership and intellectual capital projects as means of delivering world-class service to our clients Fee revenue increased $171.9 million in fiscal 2011 to $744.3 million compared to $572.4 million fiscal 2010 with increases in fee revenue in all regions of Executive Recruitment and Futurestep The North America region in executive recruitment experienced the largest dollar increase in fee revenue During fiscal 2011 we recorded consolidated operating income of $85.8 million with the Executive Recruitment and Futurestep segments contributing $111.4 million and $5.0 million respectively offset by corporate of $30.6 million This expenses represents an increase of $88.5 million in fiscal 2011 from an operating loss of $2.7 million in fiscal 2010 Our cash cash equivalents and marketable securities increased by $72.6 million or 24% to $369.1 million at April 30 2011 compared to $296.5 million at April 30 2010 mainly due to cash provided by operating activities partially offset by bonuses earned in fiscal 2010 which were paid in fiscal 2011 As of April 30 2011 we held marketable securities to settle obligations under our Executive Capital Accumulation Plan ECAP with cost value of $64.7 million and fair value of $71.4 million Our working capital increased by $24.9 million in fiscal 2011 to $207.7 million We believe that cash on hand and funds from operations will be sufficient to meet our anticipated working capital capital expenditures and general corporate requirements in the next twelve months We had neither long-term debt nor any outstanding borrowings under our credit facility at April 30 2011 Under our credit facility we are required to maintain $10.0 million on account with the lender and provides collateral for the standby letters of credit and potential future borrowings As of April 30 2011 we had $2.9 million of standby letters of credit issued under our facility Critical Accounting Policies The following discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements Preparation of this Annual Report on Form 10-K requires us to make estimates and assumptions that affect the reported amount of assets and liabilities disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenue and expenses during the Actual results differ from those estimates and assumptions and changes in the estimates are reporting period may reported in current operations In preparing our consolidated financial statements and accounting for the underlying transactions and balances we apply our accounting policies as disclosed in the notes to our consolidated financial statements We consider the policies discussed below as critical to an understanding of our consolidated financial statements because their application places the most significant demands on managements judgment Specific risks for these critical accounting policies are described in the following paragraphs Senior management has discussed the development and selection of the critical accounting estimates with the Audit Committee of the Board of Directors Revenue Recognition Management is required to establish policies and procedures to ensure that revenue is recorded over the performance period for valid engagements and related costs are matched against such revenue We provide recruitment services on retained basis and generally bill clients in three monthly installments Fees earned in excess of the initial contract amount are billed upon completion of the engagement which reflects the final actual compensation of the placed executive Since the fees are generally not contingent upon placement of candidate our assumptions primarily relate to establishing the period over which such service is performed These assumptions determine the timing of revenue recognition and profitability for the reported period If these assumptions do not accurately reflect the period over which revenue is earned revenue and profit could differ Any services that are provided on contingent basis are recognized once the contingency is fulfilled Fee revenue from LTC services is recognized as earned Furthermore provision for doubtful accounts on recognized revenue is established with charge to general and administrative expenses based on historical loss experience assessment of 22


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    the collectability of specific accounts as well as expectations of future collections based upon trends and the type of work for which services are rendered Annual Incentive Compensation Each quarter management records its best estimate of its annual incentive compensation which on quarterly basis requires management to among other things project annual consultant productivity as measured by engagement fees billed and collected by that consultant our performance com forces and future economic conditions and their impact on our results At the end of each fiscal petitive year bonuses paid take into account final individual consultant productivity our results the achievement of strategic objectives and the results of individual performance appraisals as determined by management and the current economic landscape Changes in of the assumptions underlying bonus accrual may significantly the quarterly any impact the compensation and benefits liability on our balance sheet and related compensation and benefits cost on our statement of operations Differences between the assumptions used each quarter to estimate annual incentive compensation and actual cash payments made on an annual basis could materially impact the carrying amount of the liability and our operating results Deferred Compensation Estimating deferred compensation requires assumptions regarding the timing and probability of payments of benefits to participants and the discount rate Changes in these assumptions would significantly impact the liability and related cost on our balance sheet and statement of operations Management engages an independent actuary to periodically review these assumptions in order to ensure that they reflect the population and economics of our deferred compensation plans in all material respects and to assist us in estimating our deferred compensation liability and the related cost The actuarial assumptions we use may differ from actual results due to changing market conditions or changes in the participant population These differences could have significant impact on our deferred compensation liability and the related cost Carrying Values Valuations are required under U.S generally accepted accounting principles GAAP to determine the carrying value of various assets Our most significant assets for which management is required to valuations are goodwill intangible assets and deferred income taxes Management must identify whether prepare events have occurred that may impact the carrying value of these assets and make assumptions regarding future events such as cash flows and profitability Differences between the assumptions used to these valuations prepare and actual results could materially impact the carrying amount of these assets and our operating results Results of Operations The following table summarizes the results of our operations as of fee revenue percentage Year Ended April 30 2011 2010 2009 Fee revenue 100.0% 100.0% 100.0% Reimbursed out-of-pocket engagement expenses 4.3 4.8 5.9 Total revenue 104.3 104.8 105.9 Compensation and benefits 68.2 72.2 69.3 General and administrative expenses 15.7 20.2 19.9 Out-of-pocket engagement expenses 6.9 7.3 7.7 Depreciation and amortization 1.7 2.0 1.8 Restructuring charges 0.3 3.6 6.6 Operating income loss 11.5 0.5 0.6 Net income loss 7.9% 0.9% 1.6% 23


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    The following tables summarize the results of our operations by business segment Year Ended April 30 2011 2010 2009 Dollars Dollars Dollars Dollars in thousands Fee revenue Executive recruitment North America $375971 50.5% $278746 48.7% $309514 48.5% EMEA 155782 21.0 137497 24.0 143184 22.4 Asia Pacific 90346 12.1 64132 11.2 66332 10.4 South America 31959 4.3 24026 4.2 24323 3.8 Total executive recruitment 654058 87.9 504401 88.1 543353 85.1 Futurestep 90191 12.1 67979 11.9 94870 14.9 Total fee revenue 744249 100.0% 572380 100.0% 638223 100.0% Reimbursed out-of-pocket engagement expense 32002 27269 37905 Total revenue $776251 $599649 $676128 Year Ended April 30 2011 2010 2009 Dollars Margin1 Dollars Margin1 Dollars Margin1 Dollars in thousands Operating income loss Executive recruitment North America 80685 21.5% 42604 15.3% 37516 12.1% EMEA 11628 7.5 15511 11.3 2061 1.4 Asia Pacific 11611 12.9 7826 12.2 5396 8.1 South America 7475 23.4 3286 13.7 2441 10.0 Total executive recruitment 111399 17.0 38205 7.6 47414 8.7 Futurestep 4955 5.5 1291 1.9 12003 12.7 Corporate 30569 42218 31683 Total operating income loss 85785 11.5% 2722 0.5% 3728 0.6% Margin calculated as percentage of fee revenue by business segment Fiscal 2011 Compared to Fiscal 2010 Fee Revenue Fee Revenue Fee revenue increased $171.9 million or 30% to $744.3 million in fiscal 2011 compared to $572.4 million in fiscal 2010 Excluding fee revenue of $11.0 million and $3.7 million in fiscal 2011 and 2010 respectively from the acquisition of Sensa Solutions which we acquired on January 2010 fee revenue would have been $733.3 million in fiscal 2011 and $568.7 million in fiscal 2010 an increase of $164.6 million or 29% The increase in fee revenue excluding fee revenue from the acquisition of Sensa Solutions was primarily attributable to 24% increase in the number of engagements billed during fiscal 2011 as compared to fiscal 2010 and 4% increase in the weighted-average fees billed per engagement during the same period Exchange rates favorably impacted fee revenues by $4.1 million in fiscal 2011 Executive Recruitment Executive recruitment reported fee revenue of $654.1 million an increase of $149.7 million or 30% in fiscal 2011 compared to $504.4 million in fiscal 2010 The increase in executive 24


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    recruitment fee revenue was mainly due to 26% increase in the number of executive recruitment engagements billed in fiscal 2011 as compared to fiscal 2010 and 3% increase in the weighted-average fees billed per engagement during the same period Exchange rates favorably impacted fee revenues by $2.1 million in fiscal 2011 North America reported fee revenue of $376.0 million an increase of $97.2 million or 35% in fiscal 2011 compared to $278.8 million in fiscal 2010 Excluding fee revenue of $11.0 million and $3.7 million in fiscal 2011 and 2010 respectively from the acquisition of Sensa Solutions fee revenue would have been $365.0 million and $275.1 million during the same periods an increase of $89.9 million or 33% North Americas increase in fee revenue excluding fee revenue from the Sensa acquisition which is included in North Americas results from January 2010 the effective date of the acquisition was primarily due to 33% increase in the number of engagements billed The largest increase in fee revenue from fiscal 2010 to 2011 were in the industrial financial services and tecimology sectors Exchange rates favorably impacted North America fee revenue by $2.2 million in fiscal 2011 EMEA reported fee revenue of $155.8 million an increase of $18.3 million or 13% in fiscal 2011 compared to $137.5 million in fiscal 2010 EMEAs increase in fee revenue was primarily driven by 15% increase in the number of engagements billed in fiscal 2011 as compared to fiscal 2010 offset by 2% decrease in weighted- average fees billed per engagement during the same period The decrease in the weighted-average fees billed per engagement was mainly due to unfavorable exchange rates in EMIEA during fiscal 2011 which unfavorably impacted EIVIEA fee revenue by $4.8 million We acquired Whitehead Mann effective June 11 2009 which has been fully integrated within EMEA The performance in existing offices in the United Kingdom Italy and France were the primary contributors to the increase in fee revenue in fiscal 2011 compared to fiscal 2010 with the industrial fmancial services and life sciences/healthcare provider sectors experiencing the largest increases Asia Pacific reported fee revenue of $90.3 million an increase of $26.2 million or 41% in fiscal 2011 compared to $64.1 million in fiscal 2010 mainly due to 26% increase in the number of engagements billed and 12% increase in weighted-average fees billed per engagement The increase in performance in Hong Kong Singapore China and Australia were the primary contributors to the increase in fee revenue in fiscal 2011 compared to fiscal 2010 The largest increases in fee revenue were experienced in the financial services industrial and technology sectors Exchange rates favorably impacted fee revenue for Asia Pacific by $4.3 million in fiscal 2011 South America reported fee revenue of $32.0 million an increase of $8.0 million or 33% in fiscal 2011 compared to $24.0 million in fiscal 2010 mainly due to 30% increase in the number of engagements billed and 2% increase in the weighted-average fees billed per engagement The increase in performance in Brazil was the primary contributor to the increase in fee revenue in fiscal 2011 compared to fiscal 2010 The industrial technology and financial services sectors were the primary contributors to the increase in fee revenue Exchange rates favorably impacted fee revenue for South America by $0.4 million in fiscal 2011 Future step Futurestep reported fee revenue of $90.2 million an increase of $22.2 million or 33% in fiscal 2011 compared to $68.0 million in fiscal 2010 The increase in Futuresteps fee revenue was due to 21% increase in the number of engagements billed in fiscal 2011 as compared to fiscal 2010 coupled with 10% increase in the weighted-average fees billed per engagement The increase in Futuresteps fee revenue consisted of North America fee revenue increase of $1 1.1 million or 46% to $35.3 million Europe fee revenue increase of $7.7 million or 39% to $27.6 million and an increase in Asia Pacific fee revenue of $3.4 million or 14% to $27.3 million Improvement in Futurestep fee revenue is attributed to increases in middle-management recruitment and RPO Exchange rates favorably impacted fee revenue for Futurestep by $2.0 million in fiscal 2011 Compensation and Benefits Compensation and benefits expense increased $94.1 million or 23% to $507.4 million in fiscal 2011 from $413.3 million in fiscal 2010 The increase in compensation and benefits expenses is primarily due to an increase in the weighted-average compensation in fiscal 2011 as compared to fiscal 2010 including $53.0 million increase in the variable component of compensation and an increase in headcount of 12% This increase was partially offset by $2.0 million decrease of the bonus provision due to change in the estimate of bonus payouts Exchange rates unfavorably impacted compensation and benefits expenses by $2.9 million during fiscal 2011 25


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    Executive recruitment compensation and benefits expense increased $86.9 million or 26% to $424.9 million in fiscal 2011 compared to $338.0 million in fiscal 2010 primarily due to $50.3 million increase in the variable component of compensation and to lesser extent due to 7% increase in executive recruitment headcount Variable compensation was also lower during fiscal 2010 compared to fiscal 2011 due to the challenging economic conditions experienced during fiscal 2010 Executive recruitment compensation and benefits expenses as percentage of fee revenue were 65% in fiscal 2011 compared to 67% in fiscal 2010 Futurestep compensation and benefits expense increased $11.6 million or 22% to $64.3 million in fiscal 2011 from $52.7 million in fiscal 2010 primarily due to 29% increase in headcount $2.7 million increase in the variable component of compensation and $2.5 million for external contractors Futurestep compensation and benefits expense as percentage of fee revenue decreased to 71% in fiscal 2011 from 78% in fiscal 2010 Corporate compensation and benefits expense decreased $4.4 million or 20% to $18.2 million in fiscal 2011 compared to $22.6 million in fiscal 2010 primarily due to smaller increase in certain deferred compensation liabilities of $5.0 million during fiscal 2011 as compared to fiscal 2010 We hold marketable securities classified as trading securities in trust for settlement of these deferred compensation obligations The change in fair value of these marketable securities is included in other income net which substantially offsets the decrease in compen sation and benefits expense created by the change in these deferred compensation liabilities We have other deferred compensation retirement plans which increased compensation and benefits expense by $2.2 million in fiscal 2011 as compared to fiscal 2010 due to smaller increase in the cash surrender value CSV of company owned life insurance COLT during fiscal 2011 as compared to fiscal 2010 General and Administrative Expenses General and administrative expenses increased $1.2 million or 1% to $116.5 million in fiscal 2011 compared to $115.3 million in fiscal 2010 due to increases of $4.3 million in bad debt expense $3.1 million in travel and meetings expense and $2.1 million in other expenses including business development and premises and office expense Substantially offsetting these increases was $4.9 million reduction in the estimated fair value of acquisition-related contingent consideration and $3.4 million decrease in net foreign exchange losses Exchange rates unfavorably impacted general and administrative expenses by $0.3 million in fiscal 2011 General and administrative expenses as percentage of fee revenue was 16% in fiscal 2011 as compared to 20% in fiscal 2010 Executive recruitment general and administrative expenses increased by $5.2 million or 6% to $88.6 million in fiscal 2011 from $83.4 million in fiscal 2010 The increase in general and administrative was driven by expenses increases of $3.9 million in bad debt $2.4 million in travel and meetings and $1.4 million in expense expense business development which were offset by $1.8 million decrease in net foreign exchange losses and expenses $1.5 million in professional The increase in bad debt was in line with the increase in our expenses expense revenues Travel and meetings expense and business development expenses increased primarily due to the increase in our overall business activities Executive recruitment general and administrative expenses as percentage of fee revenue was 14% in fiscal 2011 compared to 17% in fiscal 2010 Futurestep general and administrative expenses increased $3.0 million or 21% to $17.4 million in fiscal 2011 compared to $14.4 million in fiscal 2010 primarily due to increases of $1.2 in other expenses including bad debt expense professional and busthess development $0.9 million in travel and meetings and expenses expense expense $0.6 million in premises and office These increased primarily due to the increase in the level of expense expenses our overall business activities and revenue Futurestep general and administrative as of fee expenses percentage revenue was 19% in fiscal 2011 compared to 21% in fiscal 2010 Corporate general and administrative expenses decreased $7.0 million or 40% to $10.5 million in fiscal 2011 compared to $17.5 million in fiscal 2010 primarily due to $4.9 million decrease in the estimated fair value of acquisition-related contingent consideration and $1.6 million increase in net foreign exchange gains Out-of-Pocket Engagement Expenses Out-of-pocket engagement expenses consist of expenses incurred by candidates and our consultants that are normally billed to clients Out-of-pocket engagement expenses increased $10.2 million or 25% to $51.8 million in 26


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    fiscal 2011 compared to $41.6 million in fiscal 2010 in line with the increase in fee revenue Out-of-pocket engagement expenses as percentage of fee revenue was 7% in both fiscal 2011 and 2010 Depreciation and Amortization Expenses Depreciation and amortization expenses were $12.7 million and $11.5 million in fiscal 2011 and 2010 respectively This relates mainly to equipment software furniture and fixtures and leasehold expense computer improvements Restructuring Reductions Charges Net Restructuring charges decreased by $18.6 million or 90% to $2.1 million in fiscal 2011 compared to $20.7 million in fiscal 2010 In fiscal 2011 our restructuring charges net of recoveries primarily relate to higher facility lease costs than originally estimated In fiscal 2010 we reorganized our go-to-market and operating structure in EMEA and in an effort to reduce redundancy attributed to the acquisition of Whitehead Mann we incurred restructuring charges of $25.8 million to reduce the combined workforce and to consolidate premises These restructuring charges were offset by $5.1 million of reductions from previous restructuring charges $2.8 million in premise and facilities costs and $2.3 million in severance costs Operating Income Loss Operating income increased by $88.5 million to $85.8 million in fiscal 2011 compared to an operating loss of $2.7 million in fiscal 2010 This increase in operating income resulted from $171.9 million increase in fee revenue and an $18.6 million decrease in net restructuring expenses which were partially offset by $94.1 million increase in compensation and benefits expense Executive recruitment operating income increased by $73.2 million to $111.4 million in fiscal 2011 compared to $38.2 million in fiscal 2010 The increase in executive recruitment operating income is attributable to $149.7 million increase in fee revenue and decrease in net restructuring expenses of $21.2 million These items positively impacting operating income were offset by an $86.9 million increase in compensation and benefits expense resulting primarily from an increase in the variable component of compensation and increased headcount In addition general and administrative costs increased $5.2 million primarily due to bad debt expense which increase is in line with our revenue increase Executive recruitment operating income during fiscal 2011 as percentage of fee revenue was 17% compared to 8% in fiscal 2010 Futurestep operating income increased by $3.7 million to $5.0 million in fiscal 2011 as compared to $1.3 million in fiscal 2010 The change in Futurestep operating income is primarily due to $22.2 million increase in fee revenue offset by increases of $11.6 million in compensation and benefits and $3.0 million in general and administrative expenses related to an increase in our overall business activities and $2.6 million restructuring charge due to higher facility lease costs than originally estimated Futurestep operating income as percentage of fee revenue was 5% in fiscal 2011 as compared to 2% in fiscal 2010 Other Income Net Other income net decreased by $3.7 million to $6.4 million in fiscal 2011 compared to $10.1 million in fiscal 2010 The decrease is primarily due to lower net gains on marketable securities classified as trading in fiscal 2011 as compared to fiscal 2010 The decrease in other income net includes $3.5 million decrease in gains in the market value of mutual funds held in trust for settlement of our obligations under certain deferred compensation plans see Note Marketable Securities in the Notes to our Consolidated Financial Statements Partially offsetting this decline in market value gains was decrease in the related deferred compensation retirement plan liabilities of $1.9 million which is included in compensation and benefit expense 27


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    Interest Expense Net Interest expense net primarily relates to borrowings under our COLI policies which is partially offset by interest earned on cash and cash equivalent balances Interest expense net was $2.5 million in fiscal 2011 as compared to $2.6 million in fiscal 2010 Income Taxes Provision Benefit The provision for income taxes was $32.7 million in fiscal 2011 compared to benefit for income taxes of $0.5 million in fiscal 2010 The provision for income taxes in fiscal 2011 reflects 36% effective tax rate compared to 10% tax benefit for fiscal 2010 The effective tax rate in fiscal 2011 is higher when compared to the effective tax rate in fiscal 2010 as we recorded higher income before provision for income taxes during fiscal 2011 compared to fiscal 2010 The effective tax rate for fiscal 2011 is lower when compared to normalized effective tax rate as we recorded $2.1 million reversal of liability related to state tax provision taken in 2004 due to the state statue expiring In addition in fiscal 2010 we recorded $10.3 million reversal of liability related to federal tax position talcen in fiscal 2004 offset by an additional provision of $7.5 million for the tax impact of future repatriations of cash dividends and additional valuation allowances on the Companys current inventoiy of foreign tax credit carryforwards Equity in Earnings of Unconsolidated Subsidiaries Net Equity in earnings of unconsolidated subsidiary net is comprised of our less than 50% interest in our Mexican subsidiary We report our interest in earnings or loss of our Mexican subsidiary on the equity basis as one-line adjustment to net income loss net of taxes Equity in earnings was $1.9 million in fiscal 2011 compared to $0.1 million in fiscal 2010 Fiscal 2010 Compared to Fiscal 2009 Fee Revenue Fee Revenue Fee revenue decreased $65.8 million or 10% to $572.4 million in fiscal 2010 compared to $638.2 million in fiscal 2009 Excluding fee revenue of approximately $40 million in fiscal 2010 from the acquisition of Whitehead Mann and Sensa Solutions fee revenue would have been $532.4 million in fiscal 2010 decreae of $105.8 million or 17% as compared to fiscal 2009 The decrease in fee revenue excluding fee revenue from these fiscal 2010 acquisitions was primarily attributable to an 8% decrease in the weighted-average fees billed per engagement during fiscal 2010 as compared to fiscal 2009 and an 8% decrease in the number of executive search engagements billed during the same period both of which were driven by the depressed global economic conditions in the second halt of fiscal 2009 and the first half of fiscal 2010 which continue to have an impact on many of our clients people initiatives Exchange rates favorably impacted fee revenues by $4.4 million in fiscal 2010 Executive Recruitment Executive recruitment reported fee revenue of $504.4 million decrease of $38.9 million or 7% in fiscal 2010 compared to $543.3 million in fiscal 2009 The decline in executive recruitment fee revenue was due to 7% decrease in the average fees billed per engagement in fiscal 2010 as compared to fiscal 2009 and 1% decrease in the number of engagements billed during the same period Exchange rates favorably impacted fee revenues by $2.7 million in fiscal 2010 North America reported fee revenue of $278.8 million decrease of $30.7 million or 10% in fiscal 2010 compared to $309.5 million in fiscal 2009 primarily due to 6% decrease in the average fees billed per engagement in the region during fiscal 2010 as compared to fiscal 2009 and 4% decrease in the number of engagements billed during the same period The overall decline in fee revenue was driven by declines in fee revenue in the industrial consumer goods and healthcare sectors Exchange rates favorably impacted North America fee revenue by $1.5 million in fiscal 2010 EMEA reported fee revenue of $137.5 million decrease of $5.7 million or 4% in fiscal 2010 compared to $143.2 million in fiscal 2009 EMEAs decrease in fee revenue was driven by 10% decrease in average fees billed per engagement in fiscal 2010 as compared to fiscal 2009 offset by 6% increase in the number of engagements billed during the seine period The performance in existing offices in the Netheriands Italy United Arab Emirates 28


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    and Germany were the primary contributors to the decrease in fee revenue in fiscal 2010 in comparison to fiscal 2009 The technology industrial and financial services sectors experienced the largest decrease in fee revenue in fiscal 2010 as compared to fiscal 2009 Exchange rates unfavorably impacted EMEA fee revenue by $2.0 million in fiscal 2010 The decline in EMEAs fee revenue as result of the global economic conditions was partially offset by the fee revenue from the acquisition of Whitehead Mann of approximately $36 million which is included in EMEAs results from June 11 2009 the effective date of the acquisition Asia Pacific reported fee revenue of $64.1 million decrease of $2.2 million or 3% in fiscal 2010 compared to $66.3 million in fiscal 2009 due to 3% decrease in average fees billed per engagement in fiscal 2010 compared to fiscal 2009 The decline in performance in Japan New Zealand and Singapore were the primary contributors to the decrease in fee revenue in fiscal 2010 over the period The largest decrease in fee revenue was year-ago experienced in the industrial and healthcare sectors Exchange rates favorably impacted fee revenue for Asia Pacific by $2.4 million in fiscal 2010 South America reported fee revenue of $24.0 million decrease of $0.3 million or 1% in fiscal 2010 compared to $24.3 million in fiscal 2009 The number of engagements billed decreased 10% within the region in fiscal 2010 compared to fiscal 2009 offset by 9% increase in the average fees billed per engagement in the region during the same period The decline in performance in the financial services consumer goods and industrial sectors were the primary contributor to the decrease in fee revenue in fiscal 2010 compared to fiscal 2009 Exchange rates favorably impacted fee revenue for South America by $0.8 million in fiscal 2010 Future step Futurestep reported fee revenue of $68.0 million decrease of $26.9 million or 28% in fiscal 2010 compared to $94.9 million in fiscal 2009 The decline in Futuresteps fee revenue is due to an 18% decrease in the number of engagements billed in fiscal 2010 as compared to fiscal 2009 and an 11% decrease in average fees billed per engagement during the same period Of the total decrease in fee revenue in fiscal 2010 compared to fiscal 2009 North America experienced the largest dollar decline with decrease in fee revenue of $116 million or 36% to $24.2 million Europe fee revenue decreased by $9.8 million or 33% to $19.9 million and Asia fee revenue decreased $3.5 million or 13% to $23.9 million Exchange rates favorably impacted fee revenue for Futurestep by $1.7 million in fiscal 2010 Compensation and Benefits Compensation and benefits expense decreased $29.3 million or 7% to $413.3 million in fiscal 2010 from $442.6 million in fiscal 2009 The decrease in compensation and benefits expenses is primarily due to decrease in the weighted-average compensation in fiscal 2010 as compared to fiscal 2009 primarily driven by 8% decrease in the average consultant headcount during the same period reduction in the bonus provision due to decrease in our revenue and profitability and $3.6 million decrease of the bonus provision due to change in the estimate of bonus payouts As discussed below in Restructuring Charges due to our acquisition of Wbitehead Mann and the reorganization of our go-to-market and operating structure in EMEA we implemented restructuring in fiscal 2010 which further reduced our workforce Exchange rates unfavorably impacted compensation and benefits expenses by $0.4 million during fiscal 2010 Executive recruitment compensation and benefits costs decreased $18.2 million or 5% to $338.0 million in fiscal 2010 compared to $356.2 million in fiscal 2009 primarily due to reduction in the bonus provision due to decrease in revenue and profitability and decrease in the weighted-average compensation in fiscal 2010 as compared to fiscal 2009 driven by 5% decrease in the average consultant headcount in fiscal 2010 as compared to fiscal 2009 Exchange rates impacted executive recruitment compensation and benefits expense favorably by $0.7 million Executive recruitment compensation and benefits expenses as percentage of fee revenue was 67% in fiscal 2010 compared to 66% in fiscal 2009 Compensation and benefits from the acquisition of Whitehead Mann are included in EMEAs results from June 11 2009 the effective date of the acquisition Futurestep compensation and benefits expense decreased $18.3 million or 26% to $52.7 million in fiscal 2010 from $71.0 million in fiscal 2009 primarily due to decline in Futurestep average consultant headcount of approximately 17% and to lesser extent decline in the weighted-average compensation in fiscal 2010 as compared to fiscal 2009 Exchange rates unfavorably impacted Futurestep compensation and benefits expense by 29


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    $1.1 million Futurestep compensation and benefits expense as percentage of fee revenue increased to 78% in fiscal 2010 from 75% in fiscal 2009 Corporate compensation and benefits expense increased $7.2 million or 47% to $22.6 million in fiscal 2010 compared to $15.4 million in fiscal 2009 primarily due to $14.1 million increase in certain deferred compensation liabilities during fiscal 2010 We hold marketable securities in trust for settlement of these deferred compensation obligations The change in marketable securities is included in other income loss net which offsets the increase in compensation and benefits expense created by the change in these deferred compensation liabilities We have other deferred compensation retirement plan liabilities which decreased compensation and benefits expense by $9.9 mil --- lion in fiscal 2010 as compared to fiscal 2009 due to an increase in CSV of COLI and reduction in salaries General and Administrative Expenses General and administrative expenses decreased $11.6 million or 9% to $115.3 million in fiscal 2010 compared to $126.9 million in fiscal 2009 Exchange rates unfavorably impacted general and administrative expenses by $0.3 million in fiscal 2010 Executive recruitment general and administrative expenses decreased $8.5 million or 9% to $83.4 million in fiscal 2010 from $91.9 million in fiscal 2009 The decrease in general and administrative expenses was driven by decreases in bad debt expense of $5.3 million business development and marketing expenses of $2.1 million and premises and office expense of $1.3 million The decrease in bad debt expense was due to higher than normal provision in fiscal 2009 due to the challenging macroeconomic conditions experienced that fiscal year followed by an improvement of economic conditions in fiscal 2010 As result our collection efforts and the aging of accounts receivable improved thereby reducing bad debt expense General expenses decreased primarily due to the decline in our overall business activities as result of the global economic crisis including lower premises and office expense due to the closure of offices in the second half of fiscal 2009 Executive recruitment general and administrative expenses as percentage of fee revenue was 17% in both fiscal 2010 and fiscal 2009 Futurestep general and administrative expenses decreased $6.1 million or 30% to $14.4 million in fiscal 2010 compared to $20.5 million in fiscal 2009 primarily due to decreases of $2.7 million in premises and office expense $2.0 million in miscellaneous expenses including professional services and travel and meeting expenses $0.9 million in business development expense and $0.4 million in bad debt expense Premises and office expense decreased due to the closure of offices in the second half of fiscal 2009 and miscellaneous expenses decreased primarily due to the decline in Futuresteps overall business activities Bad debt expense decreased due to an overall lower accounts receivable balance contributing to fewer bad debt write-offs during fiscal 2010 as compared to the year-ago period Futurestep general and administrative expenses as percentage of fee revenue was 21% in fiscal 2010 compared to 22% in fiscal 2009 Corporate general and administrative expenses increased $3.0 million or 21% to $17.5 million in fiscal 2010 compared to $14.5 million in fiscal 2009 primarily due to an increase in legal and professional fees primarily incurred in connection with the acquisition of Whitehead Mann and an increase in business development expense incurred during the last half of fiscal 2010 Out-of-Pocket Engagement Expenses Out-of-pocket engagement expenses consist of expenses incurred by candidates and our consultants that are generally billed to clients Out-of-pocket engagement expenses decreased $7.8 million or 16% to $41.6 million in fiscal 2010 compared to $49.4 million in fiscal 2009 Out-of-pocket engagement expenses as percentage of fee revenue was 7% in fiscal 2010 compared to 8% in fiscal 2009 Depreciation and Amortization Expenses Depreciation and amortization expenses decreased $0.1 million or 1% to $11.5 million in fiscal 2010 compared to $11.6 million in fiscal 2009 This expense relates mainly to computer equipment software fumiture and fixtures and leasehold improvements 30


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    Restructuring Charges We reorganized our go-to-market and operating structure in EMEA and in an effort to reduce redundancy attributed to the acquisition of Whitehead Mann we incurred restructuring charges in fiscal 2010 of $25.8 million to reduce the combined work force and to consolidate premises This restructuring was offset expense partially by $5.1 million of reductions from previously estimated restructuring charges $2.3 million in severance costs and $2.8 million in premise and facilities costs resulting in net restructuring costs of $20.7 million in fiscal 2010 During fiscal 2009 we incurred $41.9 million in restructuring charges with $26.9 million of severance costs related to reduction in our work force and $15.0 million relating to the consolidation of premises Operating Loss Income Operating income decreased $6.4 million to an operating loss of $2.7 million in fiscal 2010 compared to operating income of $3.7 million in fiscal 2009 This decrease in operating income resulted from decrease in revenue during fiscal 2010 as compared to fiscal 2009 which was partially offset by decrease in operating expenses during the same period The decrease in operating expenses is primarily attributable to decrease in compensation and benefits net restructuring charges and general and administrative expenses Executive recruitment operating income decreased $9.2 million to $38.2 million in fiscal 2010 compared to operating income of $47.4 million in fiscal 2009 The decline in executive recruitment operating income is attributable to decrease in revenues offset by reduction in compensation expenses relating to decrease in average consultant headcount and weighted-average compensation and to decrease in general and administrative and net restructuring charges Executive recruitment operating income as percentage of fee revenue was 8% during fiscal 2010 compared to 9% in fiscal 2009 Futurestep operating income increased by $13.3 million to $1.3 million in fiscal 2010 as compared to an operating loss of $12.0 million in fiscal 2009 The change in Futurestep operating income is primarily due to decrease in compensation and benefits general and administrative expenses and $2.8 million reductions of previously recorded restructuring expenses during fiscal 2010 relating to lower facility lease costs than originally recorded compared to $11.4 million of restructuring expenses recorded in fiscal 2009 The decrease in operating expenses was offset by decrease in fee revenue of $26.9 million as result of decline in the number of engagements billed during fiscal 2010 compared to fiscal 2009 Futurestep operating income as percentage of fee revenue was 2% in fiscal 2010 compared to operating loss as percentage of fee revenue of 13% in fiscal 2009 Other Income Loss Net Other income loss net increased by $24.8 million to income of $10.1 million in fiscal 2010 compared to loss of $14.7 million in fiscal 2009 Other income loss net is primarily due to $11.1 million of net trading gains on marketable securities in fiscal 2010 as compared to non-cash asset impairment of $15.9 million related to marketable securities offset by $5.9 million unrealized gains recorded in other income loss net upon transfer of marketable securities from available-for-sale to trading during fiscal 2009 There was no such impairment or transfer of marketable securities in fiscal 2010 Interest Expense Income Net Interest expense income net primarily relates to borrowings under our COLT policies which was partially offset by interest earned on cash and cash equivalent balances and marketable securities Interest expense net was $2.6 million in fiscal 2010 compared to $1.1 million in fiscal 2009 Interest expense net increased primarily due to lower interest income earned as result of lower average United States cash balances in fiscal 2010 compared to fiscal 2009 Income Tax Benefit Provision The benefit for income taxes was $0.5 million in fiscal 2010 compared to provision for income taxes of $0.4 million in fiscal 2009 The income taxes in fiscal 2010 reflects 10% tax benefit compared to 3% effective income tax rate for fiscal 2009 The effective income tax rate in fiscal 2010 is lower when compared to the effective 31


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    income tax rate in fiscal 2009 primarily due to $10.3 million reversal of liability related to tax position taken in fiscal 2004 offset by an additional provision of $7.5 million for the tax impact of future repatriations of cash dividends and additional valuation allowances on the Companys current inventory of foreign tax credit carryfor wards recorded during fiscal 2010 Equity in Earnings of Unconsolidated Subsidiary Equity in earnings of unconsolidated subsidiary is comprised of our less than 50% interest in our Mexican subsidiary We report our interest in earnings or loss of our Mexican subsidiary on the equity basis as one-line adjustment to net income loss net of taxes Equity in earnings was $0.1 million in fiscal 2010 compared to $2.4 million in fiscal 2009 Liquidity and Capital Resources Our performance is subject to the general level of economic activity in the geographic regions and industries in which we operate The economic activity in those regions and industries has shown improvement in 2011 but further recovery may be gradual If the national or global economy or credit market conditions in general were to further the future such could put additional pressure on demand deteriorate in it is that for possible changes negative our services and affect our cash flows Although global economic conditions and demand for our services continued to show signs of improvement during fiscal 2011 the demand for executive searches remains slightly below its peak level of 2008 In response to the uncertain economic environment and labor markets and in an effort to retain cash flows we took positive steps to align our cost structure with anticipated revenue levels in fiscal 2009 and fiscal 2010 Future adverse changes in our revenue could require us to institute cost cutting measures To the extent our efforts are insufficient we may incur negative cash flows and if such conditions were to persist over an extended of time period it might require us to obtain financing to meet our capital needs We believe that our cash on hand and funds from operations will be sufficient to meet anticipated working capital capital expenditures and general corporate requirements during the next twelve months Cash and cash equivalents and marketable securities were $369.1 million and $296.5 million as of April 30 2011 and 2010 respectively Cash and cash equivalents consisted of cash and highly liquid investments purchased with original maturities of three months or less Marketable securities consist of mutual funds and investments in corporate bonds U.S Treasury and agency securities and commercial paper The primary objectives of the mutual funds are to meet the obligations under certain of our deferred compensation plans while the other securities are available for general corporate purposes As of April 30 2011 and 2010 our marketable securities of $122.2 miffion and $77.2 million respectively included $71.4 million net of gross unrealized gains and losses of $6.8 million and $0.1 miffion respectively and $69.0 million net of gross unrealized gains and losses of $3.5 million and $1.5 million respectively respectively held in trust for settlement of our obligations under certain deferred compensation plans of which $66.3 million and $64.9 million respectively are classified as non-current Our obligations for which these assets were held in trust totaled $72.1 million and $69.0 million as of April 30 2011 and 2010 respectively As of April 30 2011 we had marketable securities classified as available-for-sale with balance of $50.9 million These securities represent excess cash invested under our investment policy with professional money manager and are available for general corporate purposes The net increase in our working capital of $24.9 million as of April 30 2011 compared to April 30 2010 is -- primarily attributable to an increase in cash and cash equivalents and accounts receivable partially offset by an increase in compensation and benefits payable Cash provided by operating activities was $95.6 million in fiscal 2011 an increase of $126.4 million from cash used in operating activities of $30.8 million in fiscal 2010 The increase in cash provided by operating activities is primarily due to an increase in net income of $53.6 million increases in accounts payable and accrued liabilities of $40.9 million which is net of bonuses earned in 2009 and paid in fiscal 2011 of $18.4 million decrease in deferred income taxes in fiscal 2011 versus an increase in fiscal 2010 resulting in net positive change of $26.8 million and an increase in receivables of $5.4 million The increase in net income accounts payable and accrued liabilities and receivables are due to an increase in fee revenue and engagements billed during fiscal 2011 as compared to fiscal 2010 32


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    In fiscal 2011 the Company accrued bonus expense of $126.3 million which the Company expects to pay in cash during fiscal 2012 In fiscal 2010 the Company accrued bonus expense of $73.3 million which includes amounts that were fully earned by recipients during that fiscal year but for which the payment of $5.4 million was delayed due to economic conditions These delayed payments were recorded to bonus liability and accrued because the underlying bonuses had been fully earned in such periods The delayed payment of $5.4 million in fiscal 2010 bonuses will result in an increase to cash used in operations when made Compensation and benefits payable on the Companys consolidated balance sheet as of April 30 2011 includes this $5.4 million of bonuses These bonuses will be paid in December 2011 regardless of whether the recipients continue to be employed by the Company on the relevant payment date and notwithstanding any earlier communications to the recipients to the contrary In addition $8.1 million in bonuses earned in fiscal 2009 the payment of which was deferred due to economic conditions were paid during fiscal 2011 resulting in corresponding decrease to cash provided by operating activities during fiscal 2011 Cash used in investing activities was $81.1 million in fiscal 2011 an increase of $57.7 million from cash used in investing activities of $23.4 million in fiscal 2010 This increase in cash used in investing activities is attributable to $46.6 million increase in net purchases of marketable securities $20.6 million increase in the purchase of property and equipment and an increase in restricted cash of $10.0 million These increases were partially offset by reduction of $18.7 million in cash used for acquisitions Cash provided by financing activities was $5.9 million in fiscal 2011 decrease of $2.2 million from cash provided by financing activities of $8.1 million in fiscal 2010 Cash used to repurchase shares of common stock increased by $10.7 million in fiscal 2011 compared to fiscal 2010 This cash used was partially offset by $3.6 million in proceeds from issuances of common stock related to employee stock options and our stock purchase plan $3.0 million proceeds from exercise of warrants and $1.9 million increase in tax benefit from exercise of stock options in fiscal 2011 as compared to fiscal 2010 As of April 30 2011 $24.4 million remained available for repurchase under our repurchase program approved by the Board of Directors on November 2007 Off-Balance Sheet Arrangements We have no off-balance sheet arrangements and have not entered into any transactions involving unconsol idated limited purpose entities Contractual Obligations Contractual obligations represent future cash commitments and liabilities under agreements with third parties and exclude contingent liabilities for which we cannot reasonably predict future payment The following table represents our contractual obligations as of April 30 2011 .- Payments Due in Less Than More Than Note Total Year 1-3 Years 3-5 Years Years In thousands Operating lease commitments 15 $219998 $35902 $60000 $44686 79410 Accrued restructuring charges1 4747 2313 1530 433 471 Interest payments on COLT loans2 11 57414 4405 8809 8804 35396 Total $282159 $42620 $70339 $53923 $115277 Represents rent payments net of sublease income on an undiscounted basis Assumes COLT loans remain outstanding until receipt of death benefits on COLT policies and applies current interest rates on COLT loans ranging from 5.45% to 8.00% In addition to the contractual obligations above we have liabilities related to certain employee benefit plans These liabilities are recorded in our Consolidated Balance Sheets The obligations related to these employee benefit plans are described in Note Deferred Compensation and Retirement Plans in the Notes to our Consolidated Financial Statements 33


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    -- Lastly we have contingent commitments under certain employment agreements that are payable upon termination of employment described in Note 15 Commitments and Contingencies in the Notes to our Consolidated Financial Statements Cash Surrender Value of Company Owned LVe Insurance Policies Net of Loans As of April 30 2011 and 2010 we held contracts with gross CSV of $143.9 million and $136.0 million respectively Generally we borrow under our COLT contracts to pay related premiums Such borrowings do not require annual principal repayments bear interest primarily at variable rates and are secured by the CSV of COLT contracts Total outstanding borrowings against the CSVof COLT contracts were $72.9 million and $66.9 million as of April 30 2011 and 2010 respectively At April 30 2011 the net cash value of these policies was $71.0 million of which $57.6 million was held in trust Long-Term Debt During March 2011 we replaced our existing credit facility which expired on March 14 2011 with new Senior Secured Revolving the Facility which provides an aggregate to $50 million with Facility availability up $10 million sub-limit for letters of credit subject to satisfaction of borrowing base requirements based on eligible domestic and foreign accounts receivable The new facility matures on March 14 2014 and prior to each anniversary date we can request one year extensions subject to lender consent Borrowings under the Facility bear interest at our election at the London Interbank Offered Rate LIBOR plus applicable margin or the base rate plus applicable margin The base rate is the highest of the published prime rate ii the federal funds rate plus 0.50% or iii one month LIBOR plus 2.0% The applicable margin is based on percentage per annum determined in accordance with specified pricing grid based on the total funded debt ratio of the Company and with respect to LIBOR loans whether such LIBOR loans are cash collateralized For cash collateralized LIBOR loans the applicable margin will range from 0.65% to 3.15% per annum For LIIBOR loans that are not cash collateralized and for base rate loans the applicable margin will range from 1.50% to 4.50% per annum if using LIBOR and from 1.50% to 4.75% per annum if using base rate We pay quarterly commitment fees of 0.25% to 0.50% on the Facilitys unused con-miitments based on our leverage ratio The Facility is secured by substantially all of the assets of our domestic subsidiaries and 65% of the equity interest in all the first tier foreign subsidiaries The financial covenants include maximum consolidated leverage ratio minimum consolidated fixed charge coverage ratio and minimum $30 million in unrestricted cash and/or marketable securities after taking into account the accrual for employee compensation and benefits As of April 30 2011 we had no borrowings under the Facility however we are required to maintain $10.0 million on account with the lender and provides collateral for the standby letters of credit and potential future borrowings At April 30 2011 there were $2.9 million standby letters of credit issued under this Facility As of April 30 2010 we had no borrowings under the previous credit facility however there were $8.2 million of standby letters of credit issued under the previous credit facility for which we pledged cash of $9.0 million We are not aware of any other trends demand or commitments that would materially affect liquidity or those that relate to our resources Accounting Developments Recently Adopted Accounting Standards In January 2010 the Financial Accounting Standards Board FASB issued guidance on Fair Value Measurements and Disclosures Improving Disclosures about Fair Value Measurements which amends the disclosure guidance with respect to fair value measurements Specifically the new guidance requires disclosure of amounts transferred in and out of Levels and fair value measurements reconciliation presented on gross basis rather than net basis of activity in Level fair value measurements greater disaggregation of the assets and liabilities for which fair value measurements are presented and more robust disclosure of the valuation techniques and inputs used to measure Level and fair value measurements The guidance is effective for interim and annual reporting periods beginning after December 15 2009 with the exception of the new guidance around the Level 34


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    activity reconciliation which is effective for fiscal years beginning after December 15 2010 The Company adopted the new guidance on February 2010 The adoption did not impact the Companys fmancial position results of operations or liquidity Item 7A Quantitative and Qualitative Disclosures About Market Risk As result of our global operating activities we are exposed to certain market risks including foreign currency exchange fluctuations and fluctuations in interest rates We manage our exposure to these risks in the normal course of our business as described below We have not utilized financial instruments for trading hedging or other speculative purposes nor do we trade in derivative financial instruments Foreign Currency Risk Substantially all our foreign subsidiaries operations are measured in their local currencies Assets and liabilities are translated into U.S dollars at the rates of exchange in effect at the end of each reporting period and revenue and expenses are translated at rates of exchange during the reporting period Resulting translation adjustments average are reported as component of accumulated other comprehensive income on our consolidated balance sheets Transactions denominated in currency other than the reporting entitys functional currency may give rise to transaction gains and losses that impact our results of operations Historically we have not realized significant foreign currency gains or losses on such transactions During fiscal 2011 we recognized foreign currency gains on an after tax basis of $0.1 million as compared to fiscal 2010 and 2009 in which we recognized foreign currency losses on an after tax basis of $2.0 million and $0.4 million respectively Our primary exposure to exchange losses is based on outstanding intercompany loan balances denominated in U.S dollars If the U.S dollar strengthened 15% 25% and 35% against the Pound Sterling the Euro the Canadian dollar the Australian dollar and the Yen our exchange loss would have been $1.1 million $1.9 million and $2.6 million respectively based on outstanding balances at April 302011 If the U.S dollar weakened by the same increments against the Pound Sterling the Euro the Canadian dollar the Australian dollar and the Yen corre spondingly our exchange gain would have been $1.1 million $1.9 million and $2.6 million respectively based on outstanding balances at April 30 2011 Interest Rate Risk We primarily manage our exposure to fluctuations in interest rates through our regular financing activities which generally are short term and provide for variable market rates As of April 30 2011 and 2010 we had no outstanding borrowings under our Facility We had $72.9 million and $66.9 million of borrowings against the CSV of COLI contracts as of April 30 2011 and 2010 respectively bearing interest primarily at variable rates The risk of fluctuations in these variable rates is minimized by the fact that we receive to our corresponding adjustment borrowed funds crediting rate on the CSV on our COLI contracts Item Financial Statements and Supplementary Data See Consolidated Financial Statements beginning on page F-i of this Annual Report on Form 10-K Supplemental Financial Information regarding quarterly results is contained in Note 16 Quarterly Results in the Notes to Consolidated Financial Statements our Item Changes in and Disagreements with Accountants on Accounting and Financial Disclosure No changes or disagreements were noted in the current fiscal year Item 9A Controls and Procedures Evaluation of Disclosure Controls and Procedures Based on their evaluation of our disclosure controls and procedures conducted as of the end of the period covered by this Annual Report on Form 10-K our Chief Executive Officer and Chief Financial Officer have 35


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    concluded that our disclosure controls and procedures as defined in Rules 13a-15e and lSd-15e under the Exchange Act of 1934 the Exchange Act are effective Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the fourth fiscal that have quarter materially affected or are reasonably likely to materially affect our internal control over financial reporting See Managements Report on Internal Control Over Financial Reporting and Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting on pages F-2 and F-3 respectively Item 98 Other Information None PART HI Item 10 Directors Executive Officers and Corporate Governance The information required by this Item will be included under the captions The Board of Directors and Section 16a Beneficial Ownership Reporting Compliance and elsewhere in our 2011 Proxy Statement and is incorporated herein by reference The information under the heading Executive Officers of the Registrant in Part of this Annual Report on Form 10-K is also incorporated by reference in this section We have adopted Code of Business Conduct and Ethics which is applicable to our directors chief executive officer and senior financial officers including our principal fmancial officer and principal accounting officer The Code of Business Conduct and Ethics is available on our website at www.komferry.com We intend to post amendments to or waivers to this Code of Business Conduct and Ethics on our website when adopted Upon written request we will provide copy of the Code of Business Conduct and Ethics free of charge Requests should be directed to Kom/Ferry International 1900 Avenue of the Stars Suite 2600 Los Angeles California 90067 Attention Peter Dunn Item 11 Executive Compensation The information required by this Item will be included in our 2011 Proxy Statement and is incorporated herein by this reference Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this Item will be included under the caption Security Ownership of Certain Beneficial Owners and Management and elsewhere in our 2011 Proxy Statement and is incorporated herein by reference Item 13 Certain Relationships and Related Transactions and Director Independence The information required by this Item will be included under the caption Certain Relationships and Related Transactions and elsewhere in our 2011 Proxy Statement and is incorporated herein by reference Item 14 Principal Accountant Fees and Services The information required by this Item will be included under the captions Audit Fees Audit-Related Fees Tax Fees and All Other Fees and elsewhere in our 2011 Proxy Statement and is incorporated herein by reference 36


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    PART IV Item 15 Exhibits and Financial Statement Schedules Financial Statements Page Index to Financial Statements See Consolidated Financial Statements included as part of this Form 10-K and Schedule II Valuation and Qualifying Accounts Pursuant to Rule 7-05 of Regulation S-X the other schedules have been omitted as the information to be set forth therein is included in the notes of the audited consolidated financial statements F-i Exhibits Exhibit Number Description 3.1 Certificate of Incorporation of the Company filed as Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q filed December 15 1999 3.2 Certificate of Designations of 7.5% Convertible Preferred Stock filed as Exhibit 3.1 to the Companys Current Report on Form 8-K filed June 18 2002 3.3 Second Amended and Restated Bylaws of the Company filed as Exhibit 3.1 to the Companys Current Report on Form 8-K filed April 29 2009 4.1 Form of Common Stock Certificate of the Company filed as Exhibit 4.1 to the Companys Registration Statement on Form S-3 No 333-49286 filed November 2000 4.2 Form of Stock Purchase Warrant filed as Exhibit 4.2 to the Companys Current Report on Form 8-K filed June 18 2002 10.1 Form of Indemnification Agreement between the Company and some of its executive officers and Directors filed as Exhibit 10.1 to the Companys Registration Statement on Form 5-1 No 333-61697 effective February 10 1999 iO.2 Form of U.S and Intemational Worldwide Executive Benefit Retirement Plan filed as Exhibit 10.3 to the Companys Registration Statement of Form S-i No 333-61697 effective February 10 1999 iO.3 Form of U.S and Intemational Worldwide Executive Benefit Life Insurance Plan filed as Exhibit 10.4 to the Companys Registration Statement on Form S-i No 333-61697 effective February 10 1999 l0.4 Worldwide Executive Benefit Disability Plan in the form of Long-Term Disability Insurance Policy filed as Exhibit 10.5 to the Companys Registration Statement on Form 5-1 No 333-61697 effective February 10 1999 Form of U.S and Intemational Enhanced Executive Benefit and Wealth Accumulation Plan filed as 10.6 to the Companys Registration Statement on Form S-i No 333-6 1697 effective February 10 i999 iO.6 Form of U.S and Intemational Senior Executive Incentive Plan filed as Exhibit 10.7 to the Companys Registration Statement on Form S-i No 333-61697 effective February 10 1999 i0.7 Executive Salary Continuation Plan filed as Exhibit 10.8 to the Companys Registration Statement on Form S-i No 333-61697 effective February 10 1999 10.8 Form of Amended and Restated Stock Repurchase Agreement filed as Exhibit 10.10 to the Companys Registration Statement on Form 5-1 No 333-61697 effective February 10 1999 iO.9 Form of Standard Employment Agreement filed as Exhibit 10.11 to the Companys Registration Statement on Form S-i No 333-61697 effective February 10 1999 10 10 Form of U.S and Foreign Executive Participation Program filed as Exhibit 10.27 to the Companys Registration Statement on Form S-i No 333-61697 effective February 10 1999 10.11 Korn/Ferry Intemational Special SeverancePay Policy dated January 2000 filed as Exhibit 10.2 to the Companys Quarterly Report on Form i0-Q filed March 19 2001 10 i2 KomlFerry Intemational Second Amended and Restated Performance Award Plan filed as Appendix to the Companys Definitive Proxy Statement filed August 12 2004 37 i0.5 Exhibit


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    Exhibit Number Description 10.1 Letter from Kom/Ferry International Futurestep Inc to Robert McNabb dated December 2001 filed as Exhibit 10.29 to the Companys Amended Annual Report on Form 10-K/A filed August 12 2002 10 14 from the Company to Robert Letter McNabb dated November 29 2001 filed as Exhibit 10.30 to the Companys Amended Annual Report on Form 10-K/A filed August 12 2002 10.1 5i Employment Agreement between the Company and Robert McNabb dated October 2003 filed as Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q filed December 12 2003 10.16 Employee Stock Purchase Plan filed as Exhibit 10.29 to the Companys Annual Report on Form 10-K filed July 22 2003 10 17 Employment Agreement between the Company and Gary Bumison dated October 2003 filed as Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q filed March 12 2004 10.18 LetterAgreement dated December31 2003 among the Company Friedman Fleischer Lowe Capital PartnersL.P and FFL Executive Partners L.P filed as Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q filed March 12 2004 10 19 Form of Indemnification Agreement between the Company and some of its executive officers and directors filed as Exhibit 10.4 to the Companys Quarterly Report on Form 10-Q filed March 122004 10.20 Summary of Non-Employee Director Compensation filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed January 12 2006 10.21 Form of Restricted Stock Award Agreement to Employees Under the Performance Award Plan filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed June 29 2006 10.22 Form of Restricted Stock Award Agreement to Non-Employee Directors Under the Performance Award Plan filed as Exhibit 10.2 to the Companys Current Report on Form 8-K filed June 29 2006 lO.23 Stock and Asset Purchase Agreement dated as of August 2006 by and among Lominger Limited Inc Lominger Consulting Inc Michael Lombardo Robert Eichinger and the Company filed as Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q filed September 2006 10.24 Letter Agreement between the Company and Robert McNabb dated as of September 29 2006 filed as Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q filed December 11 2006 10.25 from the Company Letter to Gary Bumison dated March 30 2007 filed as Exhibit 10.38 to the Companys Annual Report on Form 10-K filed June 29 2007 10.26 Employment Agreement between the Company and Gary Bumison dated April 24 2007 filed as Exhibit 10.41 to the Companys Annual Report on Form 10-K filed June 29 2007 10.27 Employment Agreement between the Company and Stephen Giusto dated October 10 2007 filed as Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q filed December 10 2007 10.28 Form of Resiricted Stock Unit Award Agreement to Directors Under the Performance Award Plan filed as Exhibit 10.2 to the Companys Quarterly Report on Form lO-Q filed December 10 2007 10.29 Letter from the Company to Ana Dutra dated January16 2008 filed as Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q filed March Il 2008 10.30 Employment Agreement between the Company and Michael DiGregorio dated April 30 2009 10.31 Korn/Ferry Amended and Restated 2008 Stock Incentive Plan filed as Exhibit 99.1 to the Companys Registration Statement on Form S-8 No 333-161844 filed September 10 2009 10.32 Form of Restricted Stock Award Agreement to Employees and Non-Employee Directors Under the Korn/Ferry International 2008 Stock Incentive Plan filed as Exhibit 10.2 to the Companys Current Report on Form 8-K filed June 12 2009 10.33 Form of Stock Option Agreement to Employees and Non-Employee Directors Under the Korn/Ferry Intemational 2008 Stock Incentive Plan filed as Exhibit 10.3 to the Companys Current Report on Form 8-K filed June 12 2009 lO.34 Korn/Ferry International Executive Capital Accumulation Plan filed as Exhibit 4.1 to the Companys Registration Statement on Form S-8 No 333-111038 filed December 10 2003 10.35 Letter Agreement dated June 25 2009 by and among the Company and Robert McNabb modifying the terms of Mr McNabbs Employment Agreement dated October 2003 as renewed and amended on September on September 29 2006 38


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    Exhibit Number Description 10.36 Letter Agreement between the Company and Gary Bumison dated June 25 2009 10.37 Employment Agreement between the Company and Byrne Muirooney dated March 2010 21.1 Subsidiaries of Korn/Ferry International 23.1 Consent of Ernst Young LLP Independent Registered Public Accounting Firm 24.1 Power of Attorney contained on signature page 31.1 Chief Executive Officer Certification pursuant to Rule 3a- 14a under the Exchange Act 31.2 Chief Financial Officer Certification pursuant to Rule 3a- 14a under the Exchange Act 32.1 Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C Section 1350 101.114S XBRL Instance Document 101 .SCH XBRL Taxonomy Extension Schema Document 101 CAL XBRL Taxonomy Extension Calculation Linkbase Document 101 .LAB XBRL Taxonomy Extension Label Linkbase Document 101 .PRE XBRL Taxonomy Extension Presentation Linkbase Document Management contract compensatory plan or arrangement Incorporated herein by reference 39


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    SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 as amended the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized KORN/FERRY INTERNATIONAL By Is Michael DiGregorio Michael DiGregorio Executive Vice President and Chief Financial Officer Date June 29 2011 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that each of the undersigned officers and directors of the registrant hereby constitutes and appoints Peter Dunn and Gary Burnison and each of them as lawful attorney-in-fact and agent for each of the undersigned with full power of substitution and resubstitution for and in the name place and stead of each of the undersigned officers and directors to sign and file with the Securities and Exchange Conmæssion under the Securities Exchange Act of 1934 as amended any and all amendments supplements and exhibits to this report and any and all other documents in connection therewith hereby granting unto said attorneys-in-fact and each of them full power and authority to do and perform each and every act and thing necessary or desirable to be done in order to effectuate the same as fully and to all intents and purposes as each of the undersigned might or could do if personally present hereby ratifying and confirming all that said attorneys- in-fact and agents or any of them or any of their substitutes may do or cause to be done by virtue hereof Pursuant to the requirements of the Securities Exchange Act of 1934 as amended this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated Signature Title Date Is KENNETH WI-HPPLE Chairman of the Board and Director June 29 2011 Kenneth Whipple Is GARY BuanIsoN President Chief Executive Officer June 29 2011 Principal Executive Officer and Director Gary Burnison /s MICHAEL DiGitucomo Executive Vice President and Chief June 29 2011 Financial Officer Principal Financial Michael DiGregorio Officer /5/ MARK NEAL Senior Vice President Finance Principal June 29 2011 Mark Neal Accounting Officer Is DEM5E KJNG5MILL Director June 29 2011 Denise Kingsmill Is EDWARD MILLER Director June 29 2011 Edward Miller 40

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