Annual Report 2006 ISS Global A/S

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 January – 31 December. Amounts in DKK millions
4. 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 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 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 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 estimates that the value of the warrants granted under the FS Invest warrant programme was
DKK 25 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. In 2006, expenses of DKK 1 million were recognised in the
consolidated financial statements under Other income and expenses, net.
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ANNUAL REPORT 2006 / Consolidated Financial Statements
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