Annual Report 2006 ISS Global A/S

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Group Structure 1) As described in note 32 to the consolidated financial statements, the Managing Directors, the current Board of Directors, certain members of the former Board of Directors and a number of senior officers of ISS Global have invested, directly or indirectly, in shares in FS Invest S.à r.l. The total number of share held by these officers is equal to approximately 2% of the total share capital. Board of Directors of ISS Global A/S Jørgen Lindegaard (1948) Chairman ANNUAL REPORT 2006 / Group Structure Jeff Olsen Gravenhorst (1962) Managing Directors of ISS Global A/S Flemming Schandorff (1948) Group Chief Operating Officer Bjørn Raasteen (1962) Group General Counsel Note: The ultimate parent company for which consolidated financial statements are prepared is FS Equity A/S. Flemming Schandorff (1948) Christian K. Jakobsen (1970) Group Treasurer 20
Risk Factors ISS Global is a fully owned subsidiary of ISS A/S (“ISS” or the “Group”) and is therefore affected by the same risk factors as ISS. The following section describes the risk factors identified by ISS. The description of risk factors set out below relates to ISS A/S, its operating subsidiaries and its parents FS Funding A/S (“FS Funding”) and FS Equity A/S (“FS Equity”), together referred to as “ISS” or the “Group”. The Group strives to counter and reduce the risks, which the Group is able to impact. However, ISS wishes to emphasise that any investment in securities will be subject to risk. Such factors as developments in the financial markets, in the Group’s operating performance etc. could cause an investment to be loss making. An investor could lose all or part of his or her investment. In addition to the financial market risk, ISS’s risk profile reflects both the Group’s day-to-day operations and its continued expansion. Other stakeholders having relations with ISS should also consider that the risks of ISS could adversely impact their interests. Some of the risk factors, which may adversely affect the Group’s future growth, activities, financial position and results, are described below. This is not an exhaustive description of the risk factors to which the Group or an investment in ISS’s securities is subject, nor are they listed in any order of priority. Demand for ISS’s services is subject to changes in economic conditions in its markets, as well as outsourcing trends and other factors beyond ISS’s control ISS believes that the potential growth in demand for its services generally correlates with economic conditions, including growth in gross domestic product, in the countries in which it operates. Although the Facility Services industry is normally considered to be less sensitive to economic cycles than a number of other industries, macroeconomic cyclicality – both weak and strong economic activity – presents a challenge for ISS. Periods of recession or deflation may have an adverse impact on prices and on the demand for services, particularly if customers downsize their businesses or reduce their demand for services. If ISS is not able to reduce its costs in line with price declines, then its margins will be reduced. In addition, in periods of rapid economic growth, ISS may encounter problems in recruiting qualified employees or generally experience increasing staff costs. Although ISS generally seeks to include inflation adjustment clauses in its contracts in order to pass on wage increases to its customers, it may not be able to effectively pass on these increases or manage its costs, in which case its margins would be reduced. As a result of these factors, fluctuations in economic conditions may have a material adverse effect on ISS’s business, results of operations and financial condition. In addition, growth in demand for Facility Services is also influenced by general outsourcing trends. The development of outsourced Facility Services is expected to be more volatile than the Facility Services market as a whole as outsourced Facility Services may be affected by political decisions, public opinion, positive and negative experiences with outsourcing, demand by public institutions and individual users, as well as media coverage of isolated ANNUAL REPORT 2006 / Risk Factors events. These factors may dampen growth in outsourcing, cause contracts to be discontinued or reduce ISS’s ability to achieve satisfactory growth rates in the future. ISS’s business is subject to governmental regulation, which may constrain its operations, and its compliance costs may increase in the future ISS’s operations are subject to a variety of laws and regulations. In particular, because of ISS’s large work force, laws and regulations relating to labour, employment and immigration affect ISS’s operations. ISS’s failure to comply with applicable regulations could result in substantial fines, claims relating to violations of social and working environment legislation or revocation of licenses. In addition, changes in such laws and regulations may constrain ISS’s ability to provide services to customers or increase the costs of providing such services. For instance, under certain circumstances current EU law allows ISS, in the event that it loses a customer contract, to transfer employees working under the contract to the new provider of the services, and any restriction on ISS’s ability to transfer employees under such circumstances could substantially increase ISS’s employment costs and restrict its operational flexibility. Changes which result in Facility Services companies employing a greater proportion of workers from traditionally lower wage countries could reduce prices for Facility Services and negatively affect ISS’s results. In addition, changes in tax legislation may cause ISS to incur higher costs or reduce ISS’s competitiveness relative to in-house service providers. For example, tax regulations in certain countries may discourage the outsourcing of Facility Services. In some countries, tax laws are structured such that if entities in certain sectors outsource their Facility Services, they cannot deduct value added tax, or VAT. In first quarter 2007, the Danish Minister for Taxation has published a draft bill for public hearing. The 21
Page 1 and 2: ISS Global A/S Bredgade 30 DK - 126
Page 3 and 4: Key Figures Amounts in DKK millions
Page 5 and 6: growth. Furthermore, the effect of
Page 7 and 8: In 2006, ISS Global continued the p
Page 9 and 10: to costs related to a turnaround pl
Page 11 and 12: structure, ISS established an Opera
Page 13 and 14: Strategy ISS Global is a fully owne
Page 15 and 16: Geography ISS intends to increasing
Page 17 and 18: Openness and transparency In additi
Page 19: tors. The controllers perform follo
Page 23 and 24: tual obligations could harm ISS’s
Page 25 and 26: If ISS fails to manage growth and i
Page 27 and 28: ISS may incur substantial liabiliti
Page 29 and 30: thus reduce or prevent dividend pay
Page 31 and 32: Independent Auditor’s Report To t
Page 33 and 34: Organic growth ISS Global uses esti
Page 35 and 36: 2006 primarily related to redundanc
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Page 39 and 40: including non-interest-bearing debt
Page 41 and 42: CONSOLIDATED CASH FLOW STATEMENT 1
Page 43 and 44: CONSOLIDATED STATEMENT OF TOTAL REC
Page 45 and 46: NOTES TO THE CONSOLIDATED FINANCIAL
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NOTES TO THE CONSOLIDATED FINANCIAL
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CASH FLOW STATEMENT OF THE PARENT C
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STATEMENT OF TOTAL RECOGNISED INCOM
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NOTES TO THE FINANCIAL STATEMENTS O
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Definitions EBITDA = Operating prof
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Annual Report 2006 ISS Global A/S

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