Annual Report 2006 ISS Global A/S

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NOTES TO THE FINANCIAL STATEMENTS OF THE PARENT COMPANY 1 January - 31 December. Amounts in DKK millions 3. Share-based payments (continued) Valuation 2000 warrant programme Taking into consideration that the exercise price of all outstanding warrants under the 2000 warrant programme is above DKK 465, which is equal to the share price paid by FS Funding A/S when it acquired ISS A/S in 2005 the exercise price of outstanding warrants, according to their terms, will not be adjusted for dividends ISS A/S has subsequently paid interim dividends in excess of DKK 8 billion ISS Global A/S believes that the value of the outstanding warrants under the 2000 warrant programme was insignificant at 31 December 2006. FS Invest warrant programme The estimated value of warrants issued by FS Invest is measured by the Black-Scholes option pricing model based on the following assumptions and exercise restrictions: Assumptions Series A Series B Share price (DKK) 1,019 1,019 Exercise price 2,039 2,549 Volatility 20% 20% Risk free interest rate (8 year swap rate) 3.60% 3.60% Dividend per share (DKK) 0 0 Time to maturity (years) 8 8 Number of FS Invest shares outstanding 7,686,537 7,686,537 Number of FS Invest warrants outstanding 2,202,812 2,202,812 Exercise restrictions The warrants are subject to exercise restrictions depending on the share price at the time of exercise (the “Exercise Share Price”): If the Exercise Share Price is equal to or above DKK 6,114, 100% of the granted warrants can be exercised; If the Exercise Share Price is equal to or above DKK 4,076 and below DKK 6,114, 90% of the granted warrants can be exercised; If the Exercise Share Price is equal to or above DKK 3,312 and below DKK 4,076, 85% of the granted warrants can be exercised; If the Exercise Share Price is equal to or above DKK 3,057 and below DKK 3,312, 80% of the granted warrants can be exercised; If the Exercise Share Price is equal to or above DKK 2,803 and below DKK 3,057, 75% of the granted warrants can be exercised; If the Exercise Share Price is equal to or above DKK 2,547 and below DKK 2,803, 65% of the granted warrants can be exercised; If the Exercise Share Price is equal to or above DKK 2,293 and below DKK 2,547, 45% of the granted warrants can be exercised; If the Exercise Share Price is equal to or above DKK 2,038 and below DKK 2,293, 10% of the granted warrants can be exercised. FS Invest and ISS Global A/S are privately held companies and therefore it is not possible to apply market data to measure the volatility of the underlying share. A volatility of 20% has been applied in the Black-Scholes valuation. This is on level with the volatility, which can be measured for the period January 2004 to the de-listing of the ISS share in June 2005 using weekly observations of market data. The risk free interest rate applied in the Black-Scholes model is the Euro swap rate with a duration matching the time to maturity of the warrants. At the time of the grant, an eight year swap rate of 3.6% was used to estimate the Black-Scholes value. Applying these assumptions, ISS Global A/S estimates that the value of the warrants granted under the FS Invest warrant programme was DKK 5 million at the time of the grant in July 2006. In accordance with IFRS 2, these warrants will be expensed in the income statement over the vesting period from July 2006 to June 2014. _____________________________________________________________________________________________________________ ANNUAL REPORT 2006 / Parent Company Financial Statements 112
NOTES TO THE FINANCIAL STATEMENTS OF THE PARENT COMPANY 1 January - 31 December. Amounts in DKK millions 4. Fees to auditors 2006 KPMG Audit fees 1) 1 Other services 0 Total KPMG 1 1) Audit fees comprised statutory audit of the Annual Report for the Parent Company. 5. Other expenses ISS Global A/S has as part of its outsourcing of the operation and maintenance of certain of its information technology incurred rescoping costs of DKK 100 million (2005: DKK 0 million), primarily as a result of change in the IT-outsourcing agreement from a centralised to a decentralised solution. 6. Net finance costs 2006 Interest income etc. 11 Amortised gain from settlement of interest rate swaps 1) 86 Interest income from affiliates 1,058 Financial income 1,155 Interest expenses etc. (975) Interest expenses to affiliates (236) Foreign exchange loss (33) Amortisation of financing fees (15) Financial expenses (1,259) Net finance costs (104) 1) The interest rate swaps hedging ISS Global's Medium Term Notes were partially settled in June 2005 and the remaining part was settled in June 2006 resulting in a net gain of DKK 474 million, which will be recognised in the income statement over the remaining term of the Medium Term Notes. The remaining unrecognised net gain of DKK 343 million at 31 December 2006 (DKK 469 million at 31 December 2005) will be recognised in the income statement in the financial years 2007 - 2014 corresponding to the remaining term of the Medium Term Notes (see note 12, Long-term debt). _____________________________________________________________________________________________________________ ANNUAL REPORT 2006 / Parent Company Financial Statements 113 2005 0 0 0 2005 50 45 375 470 (506) (34) (19) - (559) (89)
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ISS Global A/S Bredgade 30 DK - 126
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Key Figures Amounts in DKK millions
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growth. Furthermore, the effect of
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In 2006, ISS Global continued the p
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to costs related to a turnaround pl
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structure, ISS established an Opera
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Strategy ISS Global is a fully owne
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Geography ISS intends to increasing
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Openness and transparency In additi
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tors. The controllers perform follo
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Risk Factors ISS Global is a fully
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tual obligations could harm ISS’s
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If ISS fails to manage growth and i
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ISS may incur substantial liabiliti
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thus reduce or prevent dividend pay
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Independent Auditor’s Report To t
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Organic growth ISS Global uses esti
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2006 primarily related to redundanc
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Tempo as well as a number of smalle
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including non-interest-bearing debt
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CONSOLIDATED CASH FLOW STATEMENT 1
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CONSOLIDATED STATEMENT OF TOTAL REC
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NOTES TO THE CONSOLIDATED FINANCIAL
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Page 61 and 62: NOTES TO THE CONSOLIDATED FINANCIAL
Page 103 and 104: CASH FLOW STATEMENT OF THE PARENT C
Page 105 and 106: STATEMENT OF TOTAL RECOGNISED INCOM
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Page 111: NOTES TO THE FINANCIAL STATEMENTS O
Page 123: Definitions EBITDA = Operating prof
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Annual Report 2006 ISS Global A/S

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